Exhibit 99.7
PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
WATER CHEF, INC.
AND
BRITTANY CAPITAL MANAGEMENT LIMITED
Dated
September 7, 2007
THIS PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 7th day of
September, 2007 (this "AGREEMENT"), by and between BRITTANY CAPITAL MANAGEMENT
LIMITED, a corporation organized and existing under the laws of the Bahamas
("INVESTOR"), and WATER CHEF, INC., a Delaware corporation (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, up to Five Million
Dollars ($5,000,000) of the Common Stock (as defined below) and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933, Regulation D, and
the rules and regulations promulgated thereunder (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 in Common
Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS as used in this Agreement, the following terms
shall have the following meanings specified or indicated (such meanings to be
equally applicable to both the singular and plural forms of the terms defined)
"AGREEMENT" shall have the meaning specified in the preamble hereof.
"AVERAGE DAILY VOLUME" shall mean the Average of the Daily Volume
for the relevant days.
"BLACKOUT NOTICE" shall have the meaning specified in the
Registration Rights Agreement.
"BLACKOUT SHARES" shall have the meaning specified in Section 2.6.
"BYLAWS" shall have the meaning specified in Section 4.8.
"CERTIFICATE" shall have the meaning specified in Section 4.8.
"CLOSING" shall mean one of the closings of a purchase and sale of
shares of Common Stock pursuant to Section 2.3.
"CLOSING BID PRICE" shall mean the closing bid price of the Common
Stock on the Principal Market.
"CLOSING DATE" shall mean, with respect to a Closing, the [twelfth
(12h)] Trading Day following the Put Date related to a Closing, or such earlier
date as the Company and Investor shall agree, provided all conditions to a
Closing have been satisfied on or before such Trading Day.
"COMMITMENT PERIOD" shall mean the period commencing on the
Effective Date, and ending on the earlier of (i) the date on which Investor
shall have purchased Put Shares pursuant to this Agreement for an aggregate
Purchase Price of the Maximum Commitment Amount, (ii) the date this Agreement is
terminated pursuant to Section 2.5, or (iii) the date occurring thirty-six (36)
months from the Effective Date.
"COMMON STOCK" shall mean the Company's common stock, $0.001 par
value per share, and any shares of any other class of common stock whether now
or hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are
convertible into or exchangeable for Common Stock or any options or other rights
to subscribe for or purchase Common Stock or any such convertible or
exchangeable securities.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"CONDITION SATISFACTION DATE" shall have the meaning specified in
Section 7.2.
"DAMAGES" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
"DISCOUNT" shall mean six percent (6%).
"DTC" shall have the meaning specified in Section 2.3.
"DWAC" shall have the meaning specified in Section 2.3.
"EFFECTIVE DATE" shall mean the date on which the SEC first declares
effective a Registration Statement registering resale of the Registrable
Securities as set forth in Section 7.2(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
"FAST" shall have the meaning specified in Section 2.3.
"INVESTMENT AMOUNT" shall mean the aggregate dollar amount (within
the range specified in Section 2.2) to be invested by Investor to purchase
Interim Put Shares and Put Shares with respect to any Put as notified by the
Company to Investor in accordance with Section 2.2.
"INVESTOR" shall have the meaning specified in the preamble to this
Agreement.
"LEGEND" shall have the meaning specified in Section 8.1.
"MARKET PRICE" in respect of given Put shall mean the average of the
three lowest Closing Bid Prices (not necessarily consecutive) during the
Valuation Period.
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company to enter into and perform its obligations under any of (a) this
Agreement and (b) the Registration Rights Agreement.
"MAXIMUM COMMITMENT AMOUNT" shall mean Five Million Dollars
($5,000,000).
"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the lesser
of (a) $250,000.00, or (b) Two Hundred Fifty (250%) percent of the product of
(i) Average Daily Volume, and (ii) the average of Closing Bid Price for the
three (3) trading days immediately preceding the Put Date.
"MINIMUM PUT AMOUNT" shall mean, with respect to any Put, Fifty
Thousand Dollars ($50,000).
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"NEW BID PRICE" shall have the meaning specified in Section 2.6.
"OLD BID PRICE" shall have the meaning specified in Section 2.6.
"OUTSTANDING" shall mean, with respect to the Common Stock, at any
date as of which the number of shares of Common Stock is to be determined, all
issued and outstanding shares of Common Stock, including all shares of Common
Stock issuable in respect of outstanding convertible securities, scrip or any
certificates representing fractional interests in shares of Common Stock;
provided, however, that Outstanding shall not include any shares of Common Stock
then directly or indirectly owned or held by or for the account of the Company.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"PRINCIPAL MARKET" shall mean the Nasdaq Global Select Market, the
Nasdaq Global Market, the Nasdaq Capital Market, the Over the Counter Bulletin
Board, the American Stock Exchange or the New York Stock Exchange, whichever is
at the time the principal trading exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean the Market Price less the product of the
Discount and the Market Price.
"PUT" shall mean each occasion that the Company elects to exercise
its right to tender a Put Notice requiring Investor to purchase shares of Common
Stock, subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean the Trading Day during the Commitment Period
that a Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the form
of Exhibit B hereto, to Investor setting forth the Investment Amount with
respect to which the Company intends to require Investor to purchase shares of
Common Stock pursuant to the terms of this Agreement.
"PUT SHARES" shall be the number of Put Shares deliverable on a
Closing Date equal to the Investment Amount divided by the Purchase Price.
"REGISTRABLE SECURITIES" shall mean the (a) Put Shares, (b) the
Blackout Shares and (c) any securities issued or issuable with respect to any of
the foregoing by way of exchange, stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to a Registration
Statement, (ii) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 are met, (iii) such
time as such Registrable Securities have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) in the opinion of counsel to
the Company, which counsel shall be reasonably acceptable to Investor, such
Registrable Securities may be sold without registration under the Securities
Act, without the need for an exemption from any such registration requirements
or without any time, volume or manner limitations pursuant to Rule 144(k) (or
any similar provision then in effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement in the form of Exhibit A hereto.
"REGISTRATION STATEMENT" shall mean a registration statement on Form
S-1 (if use of such form is then available to the Company pursuant to the rules
of the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement and in accordance with the intended method
of distribution of such securities), for the registration of the resale by
Investor of the Registrable Securities under the Securities Act.
"REGULATION D" shall have the meaning specified in the recitals of
this Agreement.
"RULE 144" shall mean Rule 144 under the Securities Act or any
similar provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECTION 4(2)" shall have the meaning specified in the recitals of
this Agreement.
"SECURITIES ACT" shall have the meaning specified in the recitals of
this Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all reports and
other documents file by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since the beginning of the Company's then most recently completed
fiscal year as of the time in question (provided that if the date in question is
within ninety days of the beginning of the Company's fiscal year, the term shall
include all documents filed since the beginning of the second preceding fiscal
year).
"SUBSCRIPTION DATE" shall mean the date on which this Agreement is
executed and delivered by the Company and Investor.
"TRADING CUSHION" shall mean a minimum of five (5) Trading Days
between Put Dates.
"TRADING DAY" shall mean any day during which the Principal Market
shall be open for business.
"TRANSACTION DOCUMENTS" means the Private Equity Credit Agreement,
the Registration Rights Agreement, and the Closing Certificate.
"TRANSFER AGENT" shall mean the transfer agent for the Common Stock
(and to any substitute or replacement transfer agent for the Common Stock upon
the Company's appointment of any such substitute or replacement transfer agent).
"UNDERWRITER" shall mean any underwriter participating in any
disposition of the Registrable Securities on behalf of Investor pursuant to a
Registration Statement.
"VALUATION EVENT" shall mean an event in which the Company at any
time during a Valuation Period takes any of the following actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common Stock or makes any other
distribution of shares of Common Stock, except for dividends paid
with respect to the Preferred Stock;
(c) issues any options or other rights to subscribe for or purchase
shares of Common Stock other than pursuant to this Agreement and the
price per share for which shares of Common Stock may at any time
thereafter be issuable pursuant to such options or other rights
shall be less than the Bid Price in effect immediately prior to such
issuance;
(d) issues any securities convertible into or exchangeable for shares of
Common Stock and the consideration per share for which shares of
Common Stock may at any time thereafter be issuable pursuant to the
terms of such convertible or exchangeable securities shall be less
than the Bid Price in effect immediately prior to such issuance;
(e) issues shares of Common Stock otherwise than as provided in the
foregoing subsections (a) through (d), at a price per share less, or
for other consideration lower, than the Bid Price in effect
immediately prior to such issuance, or without consideration;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of Common Stock as a dividend in liquidation or by
way of return of capital or other than as a dividend payable out
of earnings or surplus legally available for dividends under
applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the
foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding Common Stock,
other than an action described in any of the foregoing subsections
(a) through (f) hereof, inclusive, which in the opinion of the
Company's Board of Directors, determined in good faith, would have a
materially adverse effect upon the rights of Investor at the time of
a Put.
"VALUATION PERIOD" shall mean the period of five (5) Trading Days
immediately following the date on which the applicable Put Notice is deemed to
be delivered and during which the Purchase Price of the Common Stock is valued;
provided, however, that if a Valuation Event occurs during any Valuation Period,
a new Valuation Period shall begin on the Trading Day immediately after the
occurrence of such Valuation Event and end on the fifth (5th) Trading Day
thereafter.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein (including, without
limitation, the provisions of Article VII), on any Put Date the Company may
exercise a Put by the delivery of a Put Notice.
(b) FLOOR PRICE. In the event that during a Valuation Period, the Closing Bid
Price on any Trading Day falls below [seventy-five percent (75%)] of the Bid
Price for the three (3) Trading Days immediately prior to a Put Date (a "Low Bid
Price"), for each such Trading Day the Company shall be under no obligation to
sell one-tenth (1/10) of the Investment Amount specified in the Put Notice, and
the Investment Amount shall accordingly be deemed reduced by such amount. In the
event that during a Valuation Period there exists Low Bid Prices for any three
(3) Trading Days--not necessarily consecutive--then the balance of each party's
obligation for the Investment Amount under such Put Notice shall terminate on
such third Trading Day ("Termination Day"), and the Investment Amount shall be
adjusted to include only one-tenth of the initial Investment Amount for each
Trading Day during the Valuation Period prior to the Termination Day that the
Closing Bid Price equals or exceeds the Low Bid Price.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period (and with respect to
any Put Notice other than the first Put Notice after the prior Closing Date),
the Company may deliver a Put Notice to Investor, subject to the conditions set
forth in Section 7.2; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall be neither less
than the Minimum Put Amount nor more than the Maximum Put Amount.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on
(i) the Trading Day it is received by facsimile or otherwise by Investor if such
notice is received on or prior to 12:00 noon New York time, or (ii) the
immediately succeeding Trading Day if it is received by facsimile or otherwise
after 12:00 noon New York time on a Trading Day or at anytime on a day which is
not a Trading Day.
Section 2.3 CLOSINGS. On or prior to each Closing Date for a Put, (a) the
Company shall deliver to the Investor one or more certificates representing the
Put Shares to be purchased by Investor pursuant to Section 2.1 herein,
registered in the name of Investor and (b) Investor shall deliver to the Company
the Investment Amount by wire transfer of immediately available funds to an
account designated by the Company. In lieu of delivering physical certificates
representing the Common Stock issuable in accordance with clause (a) of this
Section 2.3, and provided that the Transfer Agent then is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of Investor, the Company shall use its commercially
reasonable efforts to cause the Transfer Agent to electronically transmit, prior
to the applicable Closing Date the applicable Put Shares by crediting the
Investor's account of the Investor's prime broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system, and provide proof satisfactory to
the Investor of such delivery. In addition, on or prior to such Closing Date,
each of the Company and Investor shall deliver to the each other all documents,
instruments and writings required to be delivered or reasonably requested by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein.
Section 2.4 [INTENTIONALLY OMITTED]
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of Investor
pursuant to this Agreement to purchase shares of Common Stock shall, at
Investor's option, terminate (including with respect to a Closing Date that has
not yet occurred) in the event that (a) there shall occur any stop order or
suspension of the effectiveness of any Registration Statement for an aggregate
of thirty (30)Trading Days during the Commitment Period, for any reason other
than deferrals or suspension during a Blackout Period in accordance with the
Registration Rights Agreement, as a result of corporate developments subsequent
to the Subscription Date that would require such Registration Statement to be
amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act, or (b) the Company shall at any
time fail to comply with the requirements of Section 6.3, 6.4, or 6.6 and such
failure shall continue for more than thirty (30) days.
Section 2.6 BLACKOUT SHARES. In the event that, (a) within fifteen (15) Trading
Days following any Closing Date, the Company gives a Blackout Notice to Investor
of a Blackout Period in accordance with the Registration Rights Agreement, and
(b) the Closing Bid Price on the Trading Day immediately preceding such Blackout
Period ("OLD BID PRICE") is greater than the Closing Bid Price on the first
Trading Day following such Blackout Period that Investor may sell its
Registrable Securities pursuant to an effective Registration Statement ("NEW BID
PRICE"), then the Company shall issue to Investor the number of additional
shares of Registrable Securities (the "BLACKOUT SHARES") equal to the difference
between (i) the product of the number of Put Shares held by Investor immediately
prior to the Blackout Period that were issued on the most recent Closing
Date(the "REMAINING PUT SHARES") multiplied by the Old Bid Price, divided by the
New Bid Price, and (ii) the Remaining Put Shares.
Section 2.7 [INTENTIONALLY OMITTED]
Section 2.8 LIQUIDATED DAMAGES. Each of the Company and Investor acknowledge and
agree that the requirement to issue Blackout Shares under Section 2.6 shall give
rise to liquidated damages and not penalties. Each of the Company and Investor
further acknowledge that (a) the amount of loss or damages likely to be incurred
is incapable or is difficult to precisely estimate, (b) the amounts specified in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by Investor in
connection with a Blackout Period under the Registration Rights Agreement, and
(c) each of the Company and Investor are sophisticated business parties and have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for its own account
and Investor has no present arrangement (whether or not legally binding) at any
time to sell the Common Stock to or through any person or entity; provided,
however, Investor reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 SOPHISTICATED INVESTOR. Investor is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as
defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Common Stock. Investor acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.
Section 3.3 AUTHORITY. (a) Investor has the requisite power and authority to
enter into and perform its obligations under this Agreement and the transactions
contemplated hereby in accordance with its terms; (b) the execution and delivery
of this Agreement and the Registration Rights Agreement, and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary action and no further consent or authorization of Investor or
its partners is required; and (c) this Agreement has been duly authorized and
validly executed and delivered by Investor and is a valid and binding agreement
of Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.4 NOT AN AFFILIATE. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 ORGANIZATION AND STANDING. Investor is a corporation duly organized,
validly existing and in good standing under the laws of the Bahamas, and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Investor is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a material adverse effect on Investor.
Section 3.6 ABSENCE OF CONFLICTS. The execution and delivery of this Agreement
and any other document or instrument contemplated hereby, and the consummation
of the transactions contemplated hereby and thereby, and compliance with the
requirements hereof and thereof, will not (a) violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, (b)
violate any provision of any indenture, instrument or agreement to which
Investor is a party or is subject, or by which Investor or any of its assets is
bound, or conflict with or constitute a material default thereunder, (c) result
in the creation or imposition of any lien pursuant to the terms of any such
indenture, instrument or agreement, or constitute a breach of any fiduciary duty
owed by Investor to any third party, or (d) require the approval of any
third-party (that has not been obtained) pursuant to any material contract,
instrument, agreement, relationship or legal obligation to which Investor is
subject or to which any of its assets, operations or management may be subject.
Section 3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that has been requested by Investor. Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 MANNER OF SALE. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
Section 3.9 FINANCIAL CAPABILITY. Investor presently has the financial capacity
and the necessary capital to perform its obligations hereunder.
Section 3.10 Investor shall be identified as an "Underwriter" in the
Registration Statement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that, except as disclosed in the
SEC Documents:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware, and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, other than those in
which the failure so to qualify would not have a Material Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and the
Registration Rights Agreement and to issue the Put Shares and the Blackout
Shares, if any; (b) the execution and delivery of this Agreement and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (c) each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
Section 4.3 CAPITALIZATION. The authorized capital stock of the Company consists
of (x) 340,000,000 shares of Common Stock, $0.001 par value per share, of which
approximately 190,191,843 shares are outstanding as of August 7, 2007, and (y)
10,000,000 shares of Preferred Stock, $.001 par value, of which (1) 400,000
shares of the Series A Preferred Stock, par value $0.001 per share and having a
State Value of $10.00 per share, are authorized and approximately 52,500 shares
are outstanding as of such date; and (2) 400,000 shares of the Series D
Preferred Stock, par value $0.001, are authorized and approximately 93,000
shares are outstanding as of such date, and (3) 1,000,000 shares of Series F
Convertible Preferred Stock, par value $0.001 per share, are authorized and
approximately 40,319 shares, convertible into 1,612,760 shares of common stock,
are outstanding as of such date. Of the outstanding shares of Common Stock,
approximately 3,881,700 shares are, to the best knowledge of the Company,
beneficially owned by Affiliates of the Company.
Section 4.4 COMMON STOCK. The Company has registered the Common Stock pursuant
to Section 12(b) or 12(g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company has maintained all
requirements for the continued listing or quotation of the Common Stock, and
such Common Stock is currently listed or quoted on the Principal Market. As of
the date of this Agreement, the Principal Market is the OTCBB.
Section 4.5 SEC DOCUMENTS. The Company has delivered or made available to
Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). To the best of
Company's knowledge, the Company has not provided to Investor any information
that, according to applicable law, rule or regulation, should have been
disclosed publicly prior to the date hereof by the Company, but which has not
been so disclosed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. In the opinion of
management, the financial statements of the Company included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of 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
year-end audit adjustments).
Section 4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. To the best of
Company's knowledge, the sale and issuance of the Put Shares and the Blackout
Shares, if any, in accordance with the terms and on the bases of the
representations and warranties set forth in this Agreement, may and shall be
properly issued by the Company to Investor pursuant to Section 4(2), Regulation
D and/or any applicable state law. When issued and paid for as herein provided,
the Put Shares, and the Blackout Shares, if any, shall be duly and validly
issued, fully paid, and nonassessable. Neither the sales of the Put Shares or
the Blackout Shares, if any, pursuant to, nor the Company's performance of its
obligations under, this Agreement or the Registration Rights Agreement shall (a)
result in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Put Shares or the Blackout Shares, if any, or any of the
assets of the Company, or (b) entitle the holders of Outstanding Common Stock to
preemptive or other rights to subscribe to or acquire the Common Stock or other
securities of the Company. The Put Shares and the Blackout Shares, if any, shall
not subject Investor to personal liability for obligations of the Company by
reason of the ownership thereof.
Section 4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (a) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Put Shares or the Blackout Shares, if
any, or (b) made any offers or sales of any security or solicited any offers to
buy any security under any circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.8 CORPORATE DOCUMENTS. The Company has furnished or made available to
Investor true and correct copies of the Company's Certificate of Incorporation,
as amended and in effect on the date hereof (the "CERTIFICATE"), and the
Company's Bylaws, as amended and in effect on the date hereof (the "BYLAWS").
Section 4.9 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put Shares
and the Blackout Shares, if any, do not and will not (a) result in a violation
of the Certificate or Bylaws or (b) conflict with, or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, or (c) result in a violation of any federal,
state, or local law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate do
not and will not have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Common Stock in
accordance with the terms hereof (other than any SEC, NASD or state securities
filings that may be required to be made by the Company subsequent to any
Closing, any registration statement that may be filed pursuant hereto, and any
shareholder approval required by the rules applicable to companies whose common
stock trades on the American Stock Exchange); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of Investor herein.
Section 4.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 2006, no event has
occurred that would have a Material Adverse Effect on the Company, except as
disclosed in the SEC Documents.
Section 4.11 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those incurred in the ordinary course of the Company's businesses since August
31, 2006 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31, 2006, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.13 NO INTEGRATED OFFERING. 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, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may beset forth in the
SEC Documents, there are no lawsuits or proceedings pending or to the best
knowledge of the Company threatened, against the Company, nor has the Company
received any written or oral notice of any such action, suit, proceeding or
investigation, which would have a Material Adverse Effect. Except as set forth
in the SEC Documents, no judgment, order, writ, injunction or decree or award
has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which would have a Material Adverse
Effect.
Section 4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company, and any Person
representing the Company, in connection with the transactions contemplated by
this Agreement, have not made, at any time, any oral communication in connection
with the offer or sale of the same which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section 4.16 MATERIAL NON-PUBLIC INFORMATION. The Company is not in possession
of, nor has the Company or its agents disclosed to Investor, any material
non-public information that (a) if disclosed, would reasonably be expected to
have a materially adverse effect on the price of the Common Stock or(b)
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities with respect to
shares of the Common Stock will be in compliance with all applicable state and
federal securities laws, rules and regulations and the rules and regulations of
the NASD and the Principal Market on which the Common Stock is listed.
Section 5.2 TRADING IN SECURITIES. The Company specifically acknowledges that,
except to the extent specifically provided herein or in any of the other
Transaction Agreements (but limited in each instance to the extent so
specified), the Investor retains the right (but is not otherwise obligated) to
buy, sell, engage in hedging transactions or otherwise trade in the securities
of the Company, including, but not necessarily limited to, the Securities, at
any time before, contemporaneous with or after the execution of this Agreement
or from time to time and in any manner whatsoever permitted by applicable
federal and state securities laws
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 REGISTRATION RIGHTS. The Company shall use its best efforts to cause
the Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
available and the Company shall reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue the Put Shares and the Blackout
Shares, if any; such amount of shares of Common Stock to be reserved shall be
80,000,000 for the Put Shares under the terms and conditions of this Agreement
and a good faith estimate by the Company in consultation with Investor of the
number of Blackout Shares, if any, that will need to be issued. The number of
shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder.
Section 6.3 LISTING OF COMMON STOCK. The Company shall use its best efforts to
maintain the listing of the Common Stock on a Principal Market, and will cause
the Put Shares and the Blackout Shares, if any, to be listed on the Principal
Market. The Company further shall, if the Company applies to have the Common
Stock traded on any other Principal Market, include in such application the Put
Shares and the Blackout Shares, if any, and shall take such other action as is
necessary or desirable in the reasonable opinion of Investor to use its best
efforts to cause the Common Stock to be listed on such other Principal Market as
promptly as possible. The Company shall use its commercially reasonable efforts
to continue the listing and trading of the Common Stock on the Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company shall take all commercially
reasonable steps to cause the Common Stock to continue to be registered under
Section 12(g) or 12(b) of the Exchange Act, will use its commercially reasonable
efforts to comply in all material respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act.
Section 6.5 [INTENTIONALLY OMITTED]
Section 6.6 CORPORATE EXISTENCE. The Company shall take all commercially
reasonable steps necessary to preserve and continue the corporate existence of
the Company.
Section 6.7 ADDITIONAL SEC DOCUMENTS. The Company shall deliver to Investor,
promptly after the originals thereof are submitted to the SEC for filing, copies
of all SEC Documents so furnished or submitted to the SEC, unless an SEC
document is filed using the XXXXX system in which case the Company shall not be
required to deliver such SEC Document to the Investor.
Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT
TO MAKE A PUT. The Company shall promptly notify Investor upon the occurrence of
any of the following events in respect of a registration statement or related
prospectus in respect of an offering of Registrable Securities: (a) receipt of
any request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the registration
statement for amendments or supplements to the registration statement or related
prospectus; (b) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that purpose;
(c) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (d) the happening of any event that makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
registration statement, related prospectus or documents so that, in the case of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the related prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (e) the Company's reasonable
determination that a post-effective amendment to the registration statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of the
foregoing events.
Section 6.9 EXPECTATIONS REGARDING PUT NOTICES. Within ten (10) days after the
commencement of each calendar quarter occurring subsequent to the commencement
of the Commitment Period, the Company undertakes to notify Investor as to its
reasonable expectations as to the dollar amount it intends to raise during such
calendar quarter, if any, through the issuance of Put Notices. Such notification
shall constitute only the Company's good faith estimate with respect to such
calendar quarter and shall in no way obligate the Company to raise such amount
during such calendar quarter or otherwise limit its ability to deliver Put
Notices during such calendar quarter. The failure by the Company to comply with
this provision can be cured by the Company's notifying Investor at any time as
to its reasonable expectations with respect to the current calendar quarter.
Section 6.10 CONSOLIDATION; MERGER. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to Investor such shares
of Common Stock and/or securities as Investor is entitled to receive pursuant to
this Agreement.
Section 6.11 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of the Put
Shares and the issuance of the Blackout Shares, if any, shall be made in
accordance with the provisions and requirements of Regulation D and any
applicable state law.
Section 6.12 [INTENTIONALLY OMITTED]
Section 6.13 DILUTION. The number of shares of Common Stock issuable as Put
Shares may increase substantially in certain circumstances, including, but not
necessarily limited to, the circumstance wherein the trading price of the Common
Stock declines during the period between the Effective Date and the end of the
Commitment Period. The Company's executive officers and directors have studied
and fully understand the nature of the transactions contemplated by this
Agreement and recognize that they have a potential dilutive effect. The board of
directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Put Shares is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
Section 6.14 USE OF PROCEEDS. The Company will use the proceeds received
hereunder for internal working capital purposes, and, unless specifically
consented to in advance in each instance by the Investor, the Company shall not,
directly or indirectly, use such proceeds for any loan to or investment in any
other affiliated corporation, partnership enterprise or other affiliated person.
Section 6.15 CERTAIN AGREEMENTS. (a) (i) The Company covenants and agrees that
it will not, without the prior written consent of the Investor, enter into any
subsequent or further offer or sale of Common Stock or Common Stock Equivalents
(collectively, "New Common Stock") with any third party pursuant to a
transaction which in any manner permits the sale of the New Common Stock on any
date which is thirty (30) days prior or subsequent to any Additional Closing
Date.
(ii) The provisions of subparagraph 6.15 (a)(i) will not apply to (v) an
underwritten public offering of shares of Common Stock or Preferred Stock; (w)
an offering of convertible Preferred Stock at market or above; or (x) the
issuance of securities (other than for cash) in connection with an acquisition,
merger, consolidation, sale of assets, disposition or the exchange of the
capital stock for assets, stock or other joint venture interests; (y) the
issuance of up to $100,000 of securities of the Company per annum to one or more
investors in satisfaction of bona fide obligations of the company; or (z) the
issuance through private placements by the Company of restricted securities that
will not be available for resale for a period of at least one year from the date
of issuance.
(iii) In the event the Company breaches the provisions of this Section , the
Discount (as defined in Section 1.1) shall be amended to be equal to (x)10%, and
the Investor may terminate its obligations under this Agreement.
(b) The Company covenants and agrees that it will not, without the prior written
consent of the Investor, enter into any subsequent or further Credit Line
Agreement (however denominated) with any third party during the Commitment
Period.
Section 6.16. LOCK-UP. The Company agrees that it shall cause any and all of its
officers, insiders, Affiliates or other related parties to refrain from selling
any Common Stock during any Valuation Period, excluding Common Stock sold
pursuant to a Rule 10b5-1 trading plan, which was executed prior to the
commencement of the Valuation Period.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND
SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell the
Put Shares to Investor incident to each Closing is subject to the satisfaction,
at or before each such Closing, of each of the conditions set forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Investor shall be true and correct in all material respects as
of the date of this Agreement and as of the date of each such Closing as though
made at each such time, except for changes which have not had a Material Adverse
Effect.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by Investor at or
prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT
NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right of the
Company to deliver a Put Notice and the obligation of Investor hereunder to
acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on (a) the date of delivery of such Put Notice and (b) the
applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of the
following conditions:
(a) REGISTRATION OF REGISTRABLE SECURITIES WITH THE SEC. As set forth in the
Registration Rights Agreement, the Company shall have filed with the SEC the
Registration Statement with respect to the resale of the Registrable Securities
by Investor and such Registration Statement shall have been declared effective
by the SEC prior to the first Put Date. For the purposes of any Put Notice with
respect to the Registrable Securities other than the Registrable Securities, the
Company shall have filed with the SEC a Registration Statement with respect to
the resale of such Registrable Securities by Investor which shall have been
declared effective by the SEC prior to the Put Date therefore.
(b) EFFECTIVE REGISTRATION STATEMENT. As set forth in the Registration Rights
Agreement, a Registration Statement shall have previously become effective for
the resale by Investor of the Registrable Securities subject to such Put Notice
and such Registration Statement shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor Investor shall have received
notice that the SEC has issued or intends to issue a stop order with respect to
such Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of such Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC's concerns
have been addressed and Investor is reasonably satisfied that the SEC no longer
is considering or intends to take such action),and (ii) no other suspension of
the use or withdrawal of the effectiveness of such Registration Statement or
related prospectus shall exist.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement and the Registration Rights Agreement to be
performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or adopted by any
court or governmental authority of competent jurisdiction that prohibits or
directly and materially adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's most recent SEC
Document, no event that had or is reasonably likely to have a Material Adverse
Effect has occurred.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the
Common Stock shall not have been suspended by the SEC, the Principal Market or
the NASD and the Common Stock shall have been approved for listing or quotation
on and shall not have been delisted from the Principal Market.
(h) LEGAL OPINION. The Company shall have caused to be delivered to Investor and
to the Company's transfer agent, the first Put Notice, and an opinion of the
Company's legal counsel in the form of Exhibit C hereto, addressed to Investor.
(i) [INTENTIONALLY OMITTED]
(j) FIVE PERCENT LIMITATION. On each Closing Date, the number of Put Shares then
to be purchased by Investor shall not exceed the number of such shares that,
when aggregated with all other shares of Registrable Securities then owned by
Investor beneficially or deemed beneficially owned by Investor, would result in
Investor owning more than 4.99% of all of such Common Stock as would be
outstanding on such Closing Date, as determined in accordance with Section 16 of
the Exchange Act and the regulations promulgated thereunder. For purposes of
this Section 7.2(j), in the event that the amount of Common Stock outstanding as
determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder is greater on a Closing Date than on the date upon which
the Put Notice associated with such Closing Date is given, the amount of Common
Stock outstanding on such Closing Date shall govern for purposes of determining
whether Investor, when aggregating all purchases of Common Stock made pursuant
to this Agreement and Blackout Shares, if any, would own more than 4.99% of the
Common Stock following such Closing Date.
(k) TWENTY PERCENT LIMITATION. Notwithstanding any other provision of this
Agreement, the maximum aggregate number of Put Shares and Blackout Shares
issuable to Investor under this Agreement shall not exceed the number of such
shares that, when aggregated with all other shares of Registrable Securities
then owned by Investor beneficially or deemed beneficially owned by Investor,
would result in Investor owning more than 19.99% of all of such Common Stock as
would be outstanding immediately prior to the execution and delivery of this
Agreement by both parties, unless the Company has obtained all necessary
approvals in accordance with the rules and requirements of the Principal Market,
which the Company may or may not seek in its discretion. Failure to seek or
obtain such approval(s) will not change any other term or condition of this
Agreement.
(l) NO KNOWLEDGE. The Company shall have no knowledge of any event more likely
than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen Trading Days following the Trading Day on which such Notice
is deemed delivered).
(m) TRADING CUSHION. The Trading Cushion shall have elapsed since the
immediately preceding Put Date
(n) SHAREHOLDER VOTE. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(o) NO VALUATION EVENT. No Valuation Event shall have occurred since the Put
Date.
(p) OTHER. On each Condition Satisfaction Date, Investor shall have received and
been reasonably satisfied with such other certificates and documents as shall
have been reasonably requested by Investor in order for Investor to confirm the
Company's satisfaction of the conditions set forth in this Section 7.2,
including, without limitation, a certificate in substantially the form and
substance of Exhibit D hereto, executed by an executive officer of the Company
and to the effect that all the conditions to such Closing shall have been
satisfied as at the date of each such certificate.
Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall make available for inspection and review by Investor,
advisors to and representatives of Investor (who may or may not be affiliated
with Investor and who are reasonably acceptable to the Company), any
Underwriter, any Registration Statement or amendment or supplement thereto or
any blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers, directors and employees to supply all
such information reasonably requested by Investor or any such representative,
advisor or Underwriter in connection with such Registration Statement
(including, without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to time
after the filing and effectiveness of such Registration.
(b) Each of the Company, its officers, directors, employees and agents shall in
no event disclose non-public information to Investor, advisors to or
representatives of Investor.
(c) Nothing herein shall require the Company to disclose non-public information
to Investor or its advisors or representatives, and the Company represents that
it does not disseminate non-public information to any investors who purchase
stock in the Company in a public offering, to money managers or to securities
analysts; provided, however, that notwithstanding anything herein to the
contrary, the Company shall, as hereinabove provided, immediately notify the
advisors and representatives of Investor and any Underwriters of any event or
the existence of any circumstance(without any obligation to disclose the
specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in a Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 7.3 shall be construed to mean that such
persons or entities other than Investor (without the written consent of Investor
prior to disclosure of such information) may not obtain non-public information
in the course of conducting due diligence in accordance with the terms and
conditions of this Agreement and nothing herein shall prevent any such persons
or entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, any Registration Statement contains an
untrue statement of a material fact or omits a material fact required to be
stated in such Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE VIII
LEGENDS
Section 8.1 LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend (the
"LEGEND"):
"The securities represented by this certificate have not been registered under
the Securities Act of 1933 (the "Securities Act") or qualified under applicable
state securities laws. These securities may not be offered, sold, pledged,
hypothecated, transferred or otherwise disposed of except pursuant to (I) an
effective registration statement and qualification in effect with respect
thereto under the Securities Act and under any applicable state securities law,
(ii) to the extent applicable, Rule 144 under the Securities Act, or (iii) an
opinion of counsel reasonably acceptable to the Company that such registration
and qualification is not required under applicable federal and state securities
laws."
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other than
the one specified in Section 8.1, shall be placed on the share certificates
representing the Common Stock and no instructions or "stop transfers orders," so
called, "stock transfer restrictions," or other restrictions have been or shall
be given to the Company's transfer agent with respect thereto other than as
expressly set forth in this Article VIII.
Section 8.3 COVER. If the Company fails for any reason to deliver the Put Shares
on such Closing Date and the holder of the Put Shares (a "Investor") purchases,
in an open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by such Investor (the "Sold Shares"), which delivery such Investor
anticipated to make using the Put Shares (a "Buy-In"), then the Company shall
pay to such Investor, in addition to all other amounts contemplated in other
provisions of the Transaction Documents, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) such Investor's total purchase price
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds (after brokerage commissions, if any) received by such Investor
from the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment
Amount to such Investor in immediately available funds immediately upon demand
by such Investor. By way of illustration and not in limitation of the foregoing,
if such Investor purchases Covering Shares having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock that it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount that the Company will be required to pay to such Investor will
be $1,000.
Section 8.4 INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall affect in
any way Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Common Stock.
ARTICLE IX
NOTICES
Section 9.1 NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (a) personally served, (b) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(c) delivered by reputable air courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice given in accordance herewith. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company: Water Chef, Inc.
00 Xxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Attn: President
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx Xxxxxxxxx, Esq.
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx, LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Investor: Brittany Capital Management Limited
x/x Xxxxxxxxxx Xxxxx
00 Xxxxxxxxxx Xxxxxx
PO Box N-10818
Nassau, New Providence
Bahamas
with a copy (which shall not constitute notice) to:
Xxxxxxx & Xxxxxx, LLP
00 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Xx. Xxxxx Xxxxxxx
Southridge Capital Management LLC
00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 9.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 9.2 INDEMNIFICATION. The Company agrees to indemnify and hold harmless
Investor and its officers, directors, employees, and agents, and each Person or
entity, if any, who controls Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with the Controlling
Persons (as defined in the Registration Rights Agreement) from and against any
Damages, joint or several, and any action in respect thereof to which Investor,
its partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, except to the
extent such Damages result primarily from Investor's failure to perform any
covenant or agreement contained in this Agreement or Investor's or its
officer's, director's, employee's, agent's or Controlling Person's negligence,
recklessness or bad faith in performing its obligations under this Agreement.
Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.2
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person claiming
indemnification under any provision of Section 9.2 (an "INDEMNIFIED PARTY")
might seek indemnity under Section 9.2 is asserted against or sought to be
collected from such Indemnified Party by a person other than a party hereto or
an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim for indemnification that is being asserted under any
provision of Section 9.2 against any person (the "INDEMNIFYING PARTY"), together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such Third Party Claim (a "CLAIM NOTICE") with
reasonable promptness to the Indemnifying Party. If the Indemnified Party fails
to provide the Claim Notice with reasonable promptness after the Indemnified
Party receives notice of such Third Party Claim, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with respect to such Third
Party Claim to the extent that the Indemnifying Party's ability to defend has
been prejudiced by such failure of the Indemnified Party. The Indemnifying Party
shall notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying Party of
either a Claim Notice or an Indemnity Notice (as defined below) (the "DISPUTE
PERIOD") whether the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party under Section 9.2 and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.(i)If the Indemnifying Party
notifies the Indemnified Party within the Dispute Period that the Indemnifying
Party desires to defend the Indemnified Party with respect to the Third Party
Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall have
the right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third Party
Claim by all appropriate proceedings, which proceedings shall be vigorously and
diligently prosecuted by the Indemnifying Party to a final conclusion or will be
settled at the discretion of the Indemnifying Party (but only with the consent
of the Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for the
payment of monetary damages as to which the Indemnified Party shall not be
indemnified in full pursuant to Section 9.2). The Indemnifying Party shall have
full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the first sentence of
this clause (i), file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if requested by
the Indemnifying Party, the Indemnified Party will, at the sole cost and expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this clause (i), and except as provided in the preceding sentence,
the Indemnified Party shall bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified Party may takeover
the control of the defense or settlement of a Third Party Claim at any time if
it irrevocably waives its right to indemnity under Section 9.2 with respect to
such Third Party Claim. (ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 9.3(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of the Indemnified
Party(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in
clause(iii) below, the Indemnifying Party will not be required to bear the costs
and expenses of the Indemnified Party's defense pursuant to this clause (ii) or
of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to this clause (ii), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation. (iii) If the Indemnifying
Party notifies the Indemnified Party that it does not dispute its liability or
the amount of its liability to the Indemnified Party with respect to the Third
Party Claim under Section 9.2 or fails to notify the Indemnified Party within
the Dispute Period whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party with respect to such Third
Party Claim, the amount of Damages specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under Section 9.2 and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
(b) In the event any Indemnified Party should have a claim under Section 9.2
against the Indemnifying Party that does not involve a Third Party Claim, the
Indemnified Party shall deliver a written notification of a claim for indemnity
under Section 9.2 specifying the nature of and basis for such claim, together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "INDEMNITY NOTICE") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(c) The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar rights of the Indemnified Party against the
Indemnifying Party or others, and (ii)any liabilities the Indemnifying Party may
be subject to.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York without
regard to the principles of conflicts of law. Each of the Company and Investor
hereby submit to the exclusive jurisdiction of the United States Federal and
state courts located in New York with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section 10.2 JURY TRIAL WAIVER. The Company and the Investor hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter arising out of or in
connection with the Transaction Documents.
Section 10.3 SPECIFIC ENFORCEMENT. The Company and the Investor acknowledge and
agree that irreparable damage would occur to the Investor in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Investor shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 10.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the Company and Investor and their respective successors. Neither
this Agreement nor any rights of Investor or the Company hereunder may be
assigned by either party to any other person. Notwithstanding the foregoing, (a)
the provisions of this Agreement shall inure to the benefit of, and be
enforceable by, any transferee of any of the Common Stock purchased or acquired
by Investor hereunder with respect to the Common Stock held by such person, and
(b) Investor's interest in this Agreement may be assigned at any time, in whole
but not in part, to any affiliate of Investor.
Section 10.5 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the Company and Investor 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, other than as contemplated under Section 6.10.
Section 10.6 TERMINATION. This Agreement shall terminate: (a) at the end of
Commitment Period, (b) at the option of the Company at any time, or (c) as
otherwise provided herein (unless extended by the agreement of the Company and
Investor); provided, however, that the provisions of Article VI, VIII, and
Sections 9.2, 10.1, 10.2, and 10.3 shall survive the termination of this
Agreement.
Section 10.7 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and the
instruments referenced herein contain the entire understanding of the Company
and Investor with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company nor Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
Section 10.8 FEES AND EXPENSES. Each of the Company and Investor agrees to pay
its own expenses in connection with the preparation of this Agreement and
performance of its obligations hereunder. Any legal fees and expenses incurred
by either the Company or by the Investor in connection with the preparation,
negotiation, execution and delivery of any amendments to this Agreement or
relating to the enforcement of the rights of any party, after the occurrence of
any breach of the terms of this Agreement by the other party or any default by
the other party in respect of the transactions contemplated hereunder, shall be
paid on demand by the party which breached the Agreement and/or defaulted, as
the case may be. The Company shall pay all fees of any unaffiliated
broker/dealer, and Underwriter, if required, pursuant to rules of the SEC. The
Company shall pay all transfer agent fees, stamp or other similar taxes and
duties levied in connection with issuance of the Shares pursuant hereto.
Section 10.9 NO BROKERS. Each of the Company and Investor represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company agrees to indemnify the Investor against and hold the other harmless
from any and all liabilities to any persons claiming brokerage commissions or
finder's fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 10.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the Company and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 10.11 SURVIVAL; SEVERABILITY. The representations, warranties, covenants
and agreements of the Company hereto shall survive each Closing hereunder for a
period of one (1) year thereafter. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 10.12 FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 10.13 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 10.14 EQUITABLE RELIEF. The Company recognizes that in the event that it
fails to perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to Investor. The
Company therefore agrees that Investor shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
Section 10.15 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.16 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied
upon for the determination of the trading price of the Common Stock on any given
Trading Day for the purposes of this Agreement shall be Bloomberg L.P. or any
successor thereto. The written mutual consent of Investor and the Company shall
be required to employ any other reporting entity.
Section 10.17 PUBLICITY. The Company and Investor shall consult with each other
in issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
parties with prior notice of such public statement. Investor acknowledges that
this Agreement and all or part of the Transaction Documents may be deemed to be
"material contracts" as that term is defined by Item 601(b)(10) of Regulation
S-K, and that the Company may therefore be required to file such documents as
exhibits to reports or registration statements filed under the Securities Act or
the Exchange Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
WATER CHEF, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
BRITTANY CAPITAL MANAGEMENT LIMITED
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Director
EXHIBITS
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EXHIBIT A Registration Rights Agreement
EXHIBIT B Put Notice
EXHIBIT C Opinion
EXHIBIT D Closing Certificate
EXHIBIT E [Intentionally omitted]
EXHIBIT F [Intentionally omitted]
Schedule 4.3 Options, Warrants
