EXHIBIT 10.11
SECURITIES PURCHASE AGREEMENT, dated as of April 14, 2004 (this
"AGREEMENT"), between VisiJet, Inc., a Delaware corporation with principal
executive offices at 000 Xxxxxxxxxx, Xxxxx X, Xxxxxx, XX 00000 (the "Company"),
and SBI Brightline II, LLC, a Delaware limited liability company with its
principal offices at 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000 (the "PURCHASER").
INTRODUCTION
Subject to the terms and conditions of this Agreement, the Company may
issue and sell to the Purchaser and the Purchaser shall purchase from the
Company the following: (i) up to an aggregate of 2,375,000 shares of the Common
Stock (the "SHARES"), par value $ .001 per share (the "COMMON STOCK"); (ii)
warrants (the "$1.50 WARRANTS") exercisable for an aggregate of 633,333 shares
of Common Stock at the exercise price of $1.50 per share, in the form attached
hereto as Exhibit A-1 hereto; (iii) warrants (the "$2.00 WARRANTS", exercisable
for an aggregate of 633,333 shares of Common Stock at the exercise price of
$2.00 per share, in the form of Exhibit A-2 hereto, and (iv) warrants (the
"$2.50 WARRANTS", exercisable for an aggregate of 633,334 shares of Common Stock
at the exercise price of $2.50 per share, in the form of Exhibit A-3 hereto (the
$1.50 Warrants, the $2.00 Warrants and the $2.50 Warrants are collectively
referred to herein as the "WARRANTS");
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Purchaser hereby agree as follows:
ARTICLE I
ACQUISITION OF SECURITIES
SECTION 1.01 PURCHASE AND SALE.
(a) Section 1.02 defines three tranches of Shares that the Purchaser
has agreed to purchase from the Company (each, a "TRANCHE") and, with respect to
each Tranche, sets forth the number of Shares constituting such Tranche (the
"TRANCHE SHARES"), the purchase price per share for the Tranche Shares in such
Tranche (the "TRANCHE PURCHASE PRICE") and the Warrants to be included in each
Tranche. The number of shares and Warrants in each Tranche, and the purchase
price for each share, shall be adjusted for any stock split, stock dividend,
reverse stock split, or capital reorganization occurring after the date hereof
and prior to the closing of a Tranche.
(b) The Company may, in its sole discretion, on the date (the
"EFFECTIVE DATE") on which the Registration Statement (as defined in Section
3.01(a)) of the Company covering the resale of the Tranche Shares is declared
effective under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
or at any time or times reasonably promptly following the Effective Date, but in
no event more than seven Business Days following the Effective Date, elect to
sell the Tranche Shares of any Tranche to the Purchaser, provided, however, (i)
the Company must elect to sell all of the Tranche Shares included in a Tranche
if it elects to sell any of the Tranche Shares in such Tranche; (ii) the Company
must elect to sell the Tranche Shares in the order that the Tranches are listed
on Schedule 1.01(a) and (iii) the total beneficial ownership of the Purchaser of
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shares of Common Stock shall not exceed 9.8% of the Common Stock, giving effect
to the acquisition of the Tranche or Tranches in question. Subject to the
immediately preceding sentence, the Company may elect to sell Tranche Shares
included in more than one Tranche at the same time. To effect its election to
sell Shares, the Company must give written notice thereof (an "ELECTION NOTICE")
to the Purchaser. The Election Notice shall specify the Tranche or Tranches with
respect to which the election is being made and the date on which the closing of
the sale and purchase of the Tranche Shares shall occur; provided, such date
shall be a Business Day (as hereinafter defined) and shall not be earlier than
five days after the date such Election Notice is given to the Purchaser. An
Election Notice shall be irrevocable except as provided in Section 1.02(c). For
purposes hereof, the term "BUSINESS DAY" shall mean any day which is not (i) a
Saturday or a Sunday or (ii) a day on which banking institutions are generally
authorized or obligated to close in the City of Los Angeles, California. Subject
to the foregoing and provided that the representations and warranties of the
Company set forth herein are true and correct as of the date of an Election
Notice and that all conditions to the respective obligations of the parties
hereto set forth herein have either been satisfied or waived, in the event that
the Company gives an Election Notice, the Purchaser shall be obligated to
purchase the Tranche Shares, covered by such notice.
(c) Simultaneous with the purchase of the Tranche Shares, the Company
shall deliver to the Purchaser the Warrants applicable to such Tranche.
SECTION 1.02. PURCHASE PRICE AND TRANCHES.
The purchase price for the Securities (the "PURCHASE PRICE") shall be
an aggregate of $4,750,000. The Securities shall be issued and purchased in
three tranches (the "TRANCHES"), as follows:
(i) The First Tranche shall be 775,000 shares at a purchase
price of $1.50 per share, plus 633,333 $1.50 Warrants;
(ii) The Second Tranche shall be 825,000 shares at a purchase
price of $2.00 per share, plus 633,333 $2.00 Warrants (the "Second Tranche
Securities"); and
(iii) The Third Tranche shall be 775,000 shares at a purchase
price of $2.50 per share, plus 633,334 $2.50 Warrants (the "THIRD TRANCHE
SECURITIES").
SECTION 1.03 CLOSING PROCEDURES; THE CLOSINGS.
(a) Subject to the satisfaction or waiver of the conditions precedent
set forth in Article IV hereof, the closing of a purchase of Tranche Shares by
the Purchaser pursuant to this Agreement (each, a "Closing") shall occur at
10:00 a.m. on the date specified in the Election Notice delivered by the Company
with respect to such Tranche Shares unless the Company and the Purchaser have
mutually agreed on a different time or date (the "CLOSING DATE"). Unless
otherwise agreed by the Company and the Purchaser, the Closing shall occur at
the offices of Reitler Xxxxx LLC, New York, New York, counsel to the Purchaser.
(b) At each Closing, (i) each of the Company and the Purchaser shall
deliver to the other, as applicable, any documents required to be delivered by
Sections 4.01 and 4.02 hereof which have not been delivered prior to such
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Closing, (ii) the Purchaser shall deliver to the Company an acknowledgement of
the applicable Tranche Purchase Price for the Tranche Shares being purchased at
the Closing and state the date, not to exceed five days following the Tranche
Closing Date (which shall be a Business Day), on or prior to which the Tranche
Purchase Price shall be delivered by the Purchaser to the Company by wire
transfer of immediately available funds to an account designated in writing by
the Company at or prior to the Closing, and (iii) the Company shall deliver to
the Purchaser one or more stock certificates, determined in accordance with the
instructions of the Purchaser, representing the Tranche Shares being purchased
or shall cause the Tranche Shares being purchased to be electronically
transferred to the Purchaser. The payment of the Tranche Purchase Price
referenced in clause (ii) shall be deemed to have been delivered at the Closing
for the purposes hereof.
(c) If a Closing does not occur on a proposed Tranche Closing Date
because the conditions specified in Section 1.03(b) to be fulfilled by the
Company and/or Section 4.01 were not satisfied at the time of the applicable
proposed Tranche Closing Date, the Election Notice with respect to any Tranche
or Tranches proposed to be sold on such proposed Tranche Closing Date shall
automatically be revoked and the Purchaser's obligations under this Article I
(for such Tranche and subsequent Tranches) shall terminate.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser as follows:
(a) The Common Stock has been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the Company
is subject to the periodic reporting requirements of Section 13 of the Exchange
Act. The Company has heretofore provided to the Purchaser true, complete, and
correct copies of all forms, reports, schedules, statements, and other documents
required to be filed by it with the Securities and Exchange Commission (the
"COMMISSION") under the Exchange Act since at least January 1, 2001, as such
documents have been amended since the time of the filing thereof and a copy of
the Registration Statement (collectively, including all forms, reports,
schedules, statements, and other documents filed by the Company therewith, the
"SEC DOCUMENTS"). The SEC Documents, including, without limitation, any
financial statements and schedules included therein, at the time filed or, if
subsequently amended, as so amended, (i) did not contain any untrue statement of
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading and (ii) complied in all respects with the
applicable requirements of the Exchange Act and the applicable rules and
regulations thereunder.
(b) At the date hereof and at the Closing Date:
(i) the Common Stock is and shall be traded and quoted in the
over-the-counter Bulletin Board market (the "OTCBB");
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(ii) the Company has and shall have performed or satisfied all
of its undertakings to, and of its obligations and requirements with, the
Commission; and
(iii) the Company has not, and shall not have taken any action
that would preclude, or otherwise jeopardize, the inclusion of the Common Stock
for quotation on the OTCBB.
(c) The Company has no subsidiaries or affiliated corporation or owns
any interest in any other enterprise (whether or not such enterprise is a
corporation). The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware with full
power and authority (corporate and other) to own, lease and operate its
properties and conduct its business as described in the SEC Documents; the
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the business, prospects, condition (financial or
otherwise), and results of operations of the Company taken as a whole; 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; the Company is in possession of, and operating in compliance
with, all authorizations, licenses, certificates, consents, orders and permits
from state, federal, foreign and other regulatory authorities that are material
to the conduct of its business, all of which are valid and in full force and
effect; The Company is not in violation of its charter or bylaws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
it is a party or by which it or its properties or assets may be bound, which
violation or default would have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company taken as
a whole; and the Company is not in violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or over its properties or assets, which violation would have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company taken as a whole. The SEC Documents accurately
describe any corporation, association or other entity owned or controlled,
directly or indirectly, by the Company.
(d) The Company has full legal right, power and authority to enter into
this Agreement and the Warrants ( the "TRANSACTION AGREEMENTS") and to perform
the transactions contemplated hereby and thereby. Each of the Transaction
Agreements has been duly authorized, executed and delivered by the Company and
is a valid and binding agreement on the part of the Company, enforceable in
accordance with its respective terms; the performance of each of the Transaction
Agreements and the consummation of the transactions herein or therein
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) any bond, debenture, note or
other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company is a party or by which its properties or assets
may be bound, (ii) the charter or bylaws of the Company, or (iii) any law,
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order, rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its properties or assets, which violation
or default would have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company taken as a whole. No
consent, approval, authorization or order of, or qualification with, any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its properties or assets is required for
the execution and delivery of any Transaction Agreement and the consummation by
the Company of the transactions herein and therein contemplated, except such as
may be required under the Securities Act of 1933, as amended (the "SECURITIES
ACT") or under state or other securities or blue sky laws, all of which
requirements have been, or in accordance therewith will be, satisfied in all
material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened, action, suit, claim or proceeding against the Company, or
any of its respective officers or any of its properties, assets or rights,
before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its officers or properties
or otherwise that (i) is reasonably likely to result in any material adverse
change in the business, prospects, financial condition or results of operations
of the Company taken as a whole or might materially and adversely affect their
properties, assets or rights taken as a whole, (ii) might prevent consummation
of the transactions contemplated by the Transaction Agreements, (iii) will be
required to be disclosed in the Registration Statement, except to the extent
heretofore disclosed in the SEC Documents, or (iv) alleging violation of any
Federal or state securities laws.
(f) The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, of which approximately 22,689,663 shares are
outstanding, and 10,000,000 shares of Preferred Stock, none of which are
outstanding. Each of such outstanding shares of Common Stock is duly and validly
authorized, validly issued, fully paid, and nonassessable, has not been issued
and is not owned or held in violation of any preemptive or similar right of
stockholders. Except as disclosed in the SEC Documents, (i) there is no
commitment, plan, or arrangement to issue, and no outstanding option, warrant,
or other right calling for the issuance of, any share of capital stock of or any
security or other instrument convertible into, exercisable for, or exchangeable
for capital stock of the Company, except for an aggregate of approximately
14,017,480 options and/or warrants currently outstanding to acquire shares of
Common Stock, and (ii) there is outstanding no security or other instrument
convertible into or exchangeable for capital stock of the Company. The Shares
and the Warrant Shares (as hereinafter defined) have been duly authorized for
issuance and sale to the Purchaser pursuant hereto and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of this Agreement and the relevant Warrant or Warrants, respectively, will be
duly and validly issued and fully paid and nonassessable, and will be sold free
and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest of any kind; and no preemptive or similar right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Shares or Warrant Shares or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will automatically expire upon the execution
hereof. No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale or
transfer of the Shares, the Warrants, or the Warrant Shares, except as may be
required under the Securities Act, the rules and regulations promulgated
thereunder or under state or other securities or blue sky laws. The description
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of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the SEC Documents accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights under the Securities Act, the Exchange Act, and the rules and regulations
promulgated thereunder. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized, but
unissued, shares of its Common Stock to cover the Shares and the shares of
Common Stock issuable upon the exercise of the Warrants (the "WARRANT SHARES").
(g) Xxxxxxxx & Company (the "AUDITORS"), which has examined the
consolidated financial statements of the Company, together with the related
schedules and notes, for the two years ended December 31, 2003, filed with the
Commission as a part of the SEC Documents, and which, pursuant to the rules and
regulations of the Commission are to be included in the Registration Statement,
are independent accountants within the meaning of the Securities Act, the
Exchange Act, and the rules and regulations promulgated thereunder; the audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited financial information, forming part of
the SEC Documents, fairly present and will fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and all audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, filed with the Commission as
part of the SEC Documents, complied and will comply as to form in all material
respects with applicable accounting requirements and with the rules and
regulations of the Commission with respect hereto when filed, have been and will
be prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be otherwise
stated therein (except as may be indicated in the notes thereto or as permitted
by the rules and regulations of the Commission) and fairly present and will
fairly present, subject in the case of the unaudited consolidated financial
statements, to customary year end audit adjustments, the financial position of
the Company as at the dates thereof and the results of its operations and cash
flows. The procedures pursuant to which the aforementioned consolidated
financial statements have been audited are compliant with generally accepted
auditing standards. The selected and summary consolidated financial and
statistical data included in the SEC Documents present and will present fairly
the information shown therein and have been compiled on a basis consistent with
the audited consolidated financial statements presented therein. No other
financial statements or schedules are required to be included in the SEC
Documents.
(h) Subsequent to the respective dates as of which information is given
in the SEC Documents, there has not been (i) any material adverse change in the
business, prospects, financial condition or results of operations of the Company
taken as a whole, (ii) any transaction committed to or consummated that is
material to the Company taken as a whole, (iii) any obligation, direct or
contingent, that is material to the Company taken as a whole incurred by the
Company , except such obligations as have been incurred in the ordinary course
of business, (iv) any change in the capital stock or outstanding indebtedness of
the Company that is material to the Company taken as whole, (v) any dividend or
distribution of any kind declared, paid, or made on the capital stock of the
Company, or (vi) any loss or damage (whether or not insured) to the property of
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the Company which has a material adverse effect on the business, prospects,
condition (financial or otherwise), or results of operations of the Company
taken as a whole.
(i) Except as set forth in the SEC Documents, (i) the Company has good
and marketable title to all properties and assets described in the SEC Documents
as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than such as would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company taken as a whole, (ii) the agreements to
which the Company is a party described in the SEC Documents are legal, valid and
binding agreements, enforceable by the Company, as applicable, in accordance
with their terms, and, to the best of the Company's knowledge, the other
contracting party or parties thereto are not in breach or default under any of
such agreements, and (iii) the Company has valid and enforceable leases for all
properties described in the SEC Documents as leased by it. Except as set forth
in the SEC Documents, the Company owns or leases all such properties as are
necessary to its respective operations as now conducted and as described in the
SEC Documents.
(j) The Company has timely filed all respective federal, state, local
and foreign tax returns required to be filed by it and has paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best of
the Company's knowledge, is likely to be asserted against the Company if
audited, which might have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company taken as a whole,
and all tax liabilities are adequately provided for on the books of the Company.
(k) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for its business including, but not limited to, insurance covering real
and personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism, and all other risks customarily insured against,
all of which insurance is in full force and effect; the Company has not been
refused any insurance coverage sought or applied for; and the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the business, prospects, condition ,
or results of operations of the Company taken as a whole.
(l) No labor disturbance by the employees of the Company exists or, to
the best of the Company's knowledge, is imminent. The Company is not aware of
any existing or imminent labor disturbance by the employees of any principal
suppliers or customers of the Company that might be expected to result in any
material adverse change in the business, prospects, condition (financial or
otherwise), or results of operations of the Company taken as a whole. No
collective bargaining agreement exists with any of the Company's employees and,
to the best of the Company's knowledge, no such agreement is imminent.
(m) The Company owns or possesses adequate rights to use all patents,
patent rights, inventions, trade secrets, know-how, trademarks, service marks,
trade names, logos, and copyrights described or referred to in the SEC Documents
as owned by or used by it or that are necessary to conduct its respective
businesses as described in the SEC Documents; the Company has not received any
notice of, or has knowledge of, any infringement of or conflict with asserted
rights of the Company by others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names,
logos, or copyrights described or referred to in the SEC Documents as owned by
or used by it; and the Company has not received any notice of, or has knowledge
of, any infringement of, or conflict with, asserted rights of others with
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respect to any patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names, logos, or copyrights described or
referred to in the SEC Documents as owned by or used by it or which,
individually or in the aggregate, in the event of an unfavorable decision,
ruling or finding, would have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company taken as
a whole.
(n) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "INVESTMENT COMPANY ACT"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future, to conduct its affairs in such a manner as to ensure that it is not and
will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act and such
rules and regulations.
(o) Neither the Company nor any person or entity acting on behalf or at
the request of the Company has, at any time during the last five years (i) made
any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any other applicable jurisdiction.
(p) Neither the Company nor any person acting on behalf of the Company
has taken or will take, directly or indirectly, any action designed to, or that
might reasonably be expected to cause or result in, stabilization in violation
of law, or manipulation, of the price of the Common Stock to facilitate the sale
or resale of the Shares or the Warrant Shares.
(q) Except as set forth in the SEC Documents, (i) the Company is in
compliance in all material respects with all rules, laws and regulations
relating to the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("ENVIRONMENTAL LAWS") that are
applicable to its business, (ii) the Company has not has received notice from
any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the SEC
Documents, (iii) to the best knowledge of the Company, the Company is not likely
to be required to make future material capital expenditures to comply with
Environmental Laws (iv) no property which is owned, leased or occupied by the
Company has been designated as a Superfund site pursuant to the Comprehensive
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss.
9601, ET SEQ.), or otherwise designated as a contaminated site under applicable
state or local law, and (v) the Company is not in violation of any federal or
state law or regulation relating to occupational safety or health.
(s) The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions in, and dispositions of,
the assets of, and the results of operations of, the Company, all to the extent
required by generally accepted accounting principles. The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
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general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally
accepted accounting principles 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.
(t) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to, or for the benefit of, any of the officers,
directors, or director-nominees of the Company or any of the members of the
families of any of them, except as disclosed in the SEC Documents.
(u) The Company has not incurred any liability, direct or indirect, for
finders' or similar fees on behalf of or payable by the Company or the Purchaser
in connection with the Transaction Agreements or any other transaction involving
the Company and the Purchaser.
(v) Except for stockholders whose shares are included in the
Registration Statement, no stockholder of the Company has any right (which has
not been waived or has not expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement) to
request or require the Company to register the sale of any shares owned by such
stockholder under the Securities Act in the Registration Statement.
(w) Neither the Company nor, to the best knowledge of the Company, any
director, officer, agent, employee, or other person associated with, or acting
on behalf of, the Company has, directly or indirectly: used any corporate funds
for unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
respects with the Foreign Corrupt Practices Act of 1977, as amended.
(x) No director, officer, or employee of the Company has any interest,
whether as an employee, officer, director, shareholder, agent, independent
contractor, security holder, creditor, consultant, or otherwise (other than as
less than 1% shareholder of a publicly traded company), either directly or
indirectly, in any person (whether a corporation, partnership, limited
partnership, limited liability company, limited liability partnership, business
trust, sole proprietorship, or otherwise) that presently (i) provides any
services or designs, produces and/or sells any products or product lines, or
engages in any activity which is the same, similar to or competitive with any
activity or business in which the Company is now engaged; (ii) is a supplier of,
customer of, creditor of, or has an existing contractual relationship with the
Company ; or (iii) has any direct or indirect interest in any asset or property
used by the Company or any property, real or personal, tangible or intangible,
that is necessary or desirable for the conduct of the business of the Company.
No director, officer or employee of the Company or any affiliate thereof, is at
present, or since the inception of the Company has been, directly or indirectly
through his affiliation with any other person, a party to any transaction (other
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than as an employee) with the Company providing for the furnishing of services
by, or rental of real or personal property from, or otherwise requiring cash
payments to any such person.
SECTION 2.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser represents and warrants to the Company as follows:
(a) The Purchaser is a limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation.
(b) The Purchaser has full legal right, power and authority to enter
into this Agreement and to perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Purchaser. The
execution, delivery and performance of this Agreement by the Purchaser and the
consummation of the transactions herein contemplated will not violate any
provision of the organizational documents of the Purchaser and will not result
in the creation of any lien, charge, security interest or encumbrance upon any
assets or property of the Purchaser pursuant to the terms or provisions of, or
will not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under
any agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Purchaser is a party or by which the
Purchaser or any of its assets or properties may be bound or affected or any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to the Purchaser or any of its properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution, delivery and
performance by the Purchaser of this Agreement or the consummation by the
Purchaser of the transactions contemplated hereby. Assuming the valid execution
hereof by the Company, this Agreement will constitute the legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Purchaser
in Section 3.03 hereof may be legally unenforceable.
(c) There are no legal or governmental actions, suits or proceedings
pending or, to the Purchaser's knowledge, threatened to which the Purchaser is
or may be a party which seeks to prevent or restrain the transactions
contemplated by this Agreement or to recover damages as a result of the
consummation of such transactions. To the knowledge of the Purchaser, the
Purchaser has not been and is not currently the subject of an investigation or
inquiry by the Commission, National Association of Securities Dealers, Inc.,
NASD Regulation, Inc., or any state securities commission.
(d) The Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Shares, the Warrants, and the Warrant Shares, including investments in
securities issued by the Company. The Purchaser is an "accredited investor"
10
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act. The Purchaser is not a "dealer" within the meaning of the
Securities Act or a "broker" or "dealer" within the meaning of the Exchange Act.
The Purchaser is able to bear the economic risk of loss of the Purchaser's
entire investment in the Shares, the Warrants, and the Warrant Shares.
(e) The Purchaser has requested, received, reviewed and considered all
information it deems relevant in making an informed decision to purchase the
Shares and the Warrants. The Purchaser understands that the Company is still in
the development stage and does not have operating revenues.
(f) The Purchaser is acquiring the Shares and the Warrants in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Shares in violation of the
Securities Act or entering into any arrangement or understanding with any other
person regarding the distribution of such Shares in violation of the Securities
Act (it being understood that the foregoing does not limit the Purchaser's right
to sell Shares pursuant to the Registration Statement).
(g) Except for the representations and warranties contained in this
Section 2.02, the Purchaser makes no representation or warranty to the Company,
express or implied, in connection with the transactions contemplated by this
Agreement.
SECTION 2.03 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates delivered pursuant hereto shall
survive the execution of this Agreement, the termination of Purchaser's
obligations to purchase the Shares, and the delivery to the Purchaser of the
Shares and the Warrants being purchased and the payment therefor.
ARTICLE III
COVENANTS
SECTION 3.01 COVENANTS OF THE COMPANY.
(a) (i) As soon as practicable, but in any event no later than 30 days
following the date of this Agreement, the Company shall prepare and file with
the Commission a registration statement on Form SB-2 or other applicable form as
determined by the Company (the "REGISTRATION STATEMENT") for the purpose of
registering the sale of the Shares by the Purchaser from time to time on the
facilities of any securities exchange or trading system on which the Common
Stock is then traded or in privately-negotiated transactions, which Registration
Statement shall contain all material non-public information disclosed to the
Purchasers by the Company in connection with the issuance and sale of the
Shares. For purposes of this Section 3.01(a), the term "SHARES" shall include
any other securities of the Company issued in exchange for the Shares, as a
dividend on the Shares or in connection with a stock split or other
reorganization transaction affecting the Shares. The Company shall use its
commercially reasonable efforts to cause the Registration Statement to become
effective as soon as practicable.
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(ii) The Company shall prepare and file with the Commission
such amendments and supplements to the Registration Statement and the prospectus
forming a part thereof as may be necessary to keep the Registration Statement
effective until the earliest date, after the date on which all of the Shares
have been purchased pursuant to this Agreement or the obligation of the
Purchaser to purchase the Shares pursuant to this Agreement has been terminated,
on which (i) all the Shares have been disposed of pursuant to the Registration
Statement, (ii) all of the Shares then held by the Purchaser may be sold under
the provisions of Rule 144 without limitation as to volume, whether pursuant to
Rule 144(k) or otherwise, or (iii) the Company has determined that all Shares
then held by the Purchaser may be sold without restriction under the Securities
Act and has removed any stop transfer instructions relating to such Shares and
offered to cause to be removed any restrictive legends on the certificates, if
any representing such Shares (the period between the Effective Date and the
earliest of such dates is referred to herein as the "REGISTRATION PERIOD"). At
any time after the end of the Registration Period, the Company may withdraw the
Registration Statement and its obligations under this Section 3.01(a) shall
automatically terminate.
(iii) The Company shall not be obligated to prepare and to
file a post-effective amendment or supplement to the Registration Statement or
the prospectus constituting a part thereof during the continuance of a Blackout
Event; provided, however, that no Blackout Event may be deemed to exist for more
than 60 days. A "BLACKOUT EVENT" means any of the following: (a) the possession
by the Company of material information that is not ripe for disclosure in a
registration statement or prospectus, as determined reasonably and in good faith
by the Chief Executive Officer or the Board of Directors of the Company or that
disclosure of such information in the Registration Statement or the prospectus
constituting a part thereof would be materially detrimental to the business and
affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the reasonable and good faith determination of the Chief
Executive Officer or the Board of Directors of the Company, be materially
adversely affected by disclosure in a registration statement or prospectus at
such time. Without the express written consent of the Purchaser, if required to
permit the continued sale of Shares by the Purchaser, a post-effective amendment
or supplement to Registration Statement or the prospectus constituting a part
thereof must be filed no later than the 61st day following commencement of a
Blackout Event.
(iv) At least five (5) Business Days prior to the filing with
the Commission of the Registration Statement (or any amendment thereto) or the
prospectus forming a part thereof (or any supplement thereto), the Company shall
provide draft copies thereof to the Purchaser and shall consider incorporating
into such documents such comments as the Purchaser (and its counsel) may propose
to be incorporated therein. Notwithstanding the foregoing, no prospectus
supplement, the form of which has previously been provided to the Purchaser,
need be delivered in draft form to the Purchaser.
(v) The Company shall promptly notify the Purchaser upon the
occurrence of any of the following events in respect of the Registration
Statement or the prospectus forming a part thereof: (i) receipt of any request
for additional information from the Commission or any other federal or state
governmental authority during the Registration Period, the response to which
would require any amendments or supplements to the Registration Statement or
related prospectus; (ii) the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the effectiveness of
12
the Registration Statement or the initiation of any proceedings for that
purpose; or (iii) receipt of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Shares for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(vi) The Company shall furnish to the Purchaser with respect
to the Shares registered under the Registration Statement (and to each
underwriter, if any, of such Shares) such number of copies of prospectuses and
such other documents as the Purchaser may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the Shares by
the Purchaser pursuant to the Registration Statement.
(vii) The Company shall file or cause to be filed such
documents as are required to be filed by the Company for normal state securities
law or "blue sky" clearance in states specified in writing by the Purchaser;
PROVIDED, HOWEVER, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented.
(viii) With a view to making available to the Purchaser the
benefits of Rule 144, the Company agrees, from the date hereof and throughout
the Registration Period and so long as the Purchaser owns Shares purchased
pursuant to this Agreement, to:
(A) comply with the provisions of paragraph (c)(1) of
Rule 144; and
(B) file with the Commission in a timely manner all
reports and other documents required to be filed by the Company pursuant to
Section 13, 14 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or did file
such reports, it will, upon the request of the Purchaser, make available other
information as required by, and so long as necessary to permit sales of its
Shares pursuant to, Rule 144.
(ix) The Company shall bear all expenses incurred by it in
connection with the procedures in paragraphs (i) through (viii) of this Section
3.01(a) and the registration of the Shares pursuant to the Registration
Statement and qualification of the shares under applicable state securities
laws. The Company shall not be responsible for any expenses incurred by the
Purchaser in connection with its sale of the Shares or its participation in the
procedures in paragraphs (i) through (viii) of this Section 3.01(a), including,
without limitation, any fees and expenses of counsel or other advisers to the
Purchaser and any underwriting discounts, brokerage fees and commissions
incurred by the Purchaser.
(b) (i) The Company may refuse to register (or permit its transfer
agent to register) any transfer of any Shares not made in compliance with the
Securities Act and for such purpose may place stop order instructions with its
transfer agent with respect to the Shares.
(c) So long as the Registration Statement is effective covering the
resale of Shares then still owned by the Purchaser, the Company shall furnish to
the Purchaser, upon written request:
13
(i) as soon as practicable after available, one copy of (A)
its Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a firm of certified public accountants), (B) its Annual Report on Form
10-KSB, (C) its Quarterly Reports on Form 10-QSB, (D) its Current Reports on
Form 8-K, and (E) a full copy of the Registration Statement (the foregoing, in
each case, excluding exhibits); and
(ii) all exhibits excluded by the parenthetical to
subparagraph (i)(E) of this Section 3.01(c).
(d) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock, which transfer agent
and registration shall be reasonably satisfactory to the Purchaser.
(e) If at any time prior to the termination of the Registration Period,
any rumor, publication or event relating to or affecting the Company shall occur
as a result of which, in the reasonable opinion of the Purchaser, the market
price of the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to, or amendment of, the Prospectus), the Company will, if reasonably
requested by the Purchaser, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to the Purchaser, responding to or commenting on such rumor, publication or
event.
(f) The Company agrees to comply with the Xxxxxxxx-Xxxxx Act of 2002
and the regulations promulgated pursuant thereto if it is not in compliance at
the date hereof.
(g) Until the earlier of the termination of this Agreement and the
Closing (the earlier of such events, the "RELEASE TIME"), no amendment will be
made in the certificate of incorporation or by-laws (or, in each case, the
comparable charter documents, if any, under applicable law) of the Company.
(h) Until the Release Time, without the prior written consent of the
Purchaser, no share of capital stock of the Company, option or warrant for any
such share, right to subscribe to or purchase any such share, or security
convertible into, or exchangeable or exercisable for, any such share, shall be
issued or sold by the Company, otherwise than as contemplated by, or in
connection with, this Agreement or upon the exercise or conversion of
outstanding options, warrants or convertible securities outstanding at the date
hereof or pursuant hereto.
(i) Until the Release Time, no dividend or liquidating or other
distribution or stock split shall be authorized, declared, paid, or effected by
the Company in respect of the outstanding shares of capital stock of the
Company. Until the Release Time, no direct or indirect redemption, purchase, or
other acquisition shall be made by the Company or any affiliate thereof of
shares of capital stock of the Company.
14
(j) Until the Release Time, the Company will afford the officers,
directors, employees, counsel, agents, investment bankers, accountants, and
other representatives of the Purchaser free and full access to the plants,
properties, books, and records of the Company, will permit them to make extracts
from and copies of such books and records, and will from time to time furnish
the Purchaser with such additional financial and operating data and other
information as to the business, prospects, financial condition, and results of
operations of the Company as the Purchaser from time to time may request;
provided, however, that the Company may require any such person to execute a
nondisclosure agreement in customary form. Until the Release Time, the Company
will cause its independent certified public accountants to make available to the
Purchaser and its independent certified public accountants the work papers
relating to the audits of the Company referenced in this Agreement.
(k) Until the Release Time, the Company will conduct its affairs so
that at the Closing, no representation or warranty of the Company will be
inaccurate in any material respect, no covenant or agreement of the Company will
be breached, and no condition in this Agreement will remain unfulfilled by
reason of the actions or omissions of the Company. Except as otherwise consented
to by the Purchaser in writing, until the Release Time, the Company will use its
best efforts to preserve the business operations of the Company intact, to keep
available the services of its present personnel, to preserve in full force and
effect the contracts, agreements, instruments, leases, licenses, arrangements,
and understandings of the Company, and to preserve the good will of its
suppliers, customers, and others having business relations with any of them.
Until the Release Time, the Company will conduct its affairs in all respects
only in the ordinary course, other than in connection with the matters
referenced herein.
(l) Until the Release Time, the Company will immediately advise the
Purchaser in a detailed written notice of any material fact or occurrence or any
pending or threatened material occurrence of which it obtains knowledge and
which (if existing and known at the date of the execution of this Agreement)
would have been required to be set forth or disclosed in or pursuant to this
Agreement, which (if existing and known at any time prior to or at the Closing)
would make the performance by any party of a covenant contained in this
Agreement impossible or make such performance materially more difficult than in
the absence of such fact or occurrence, or which (if existing and known at the
time of the Closing) would cause a condition to any party's obligations under
this Agreement not to be fully satisfied.
(m) Before the Company releases any information concerning this
Agreement or any of the transactions contemplated by this Agreement which is
intended for, or may result in, public dissemination thereof, the Company shall
cooperate with the Purchaser, shall furnish drafts of all documents or proposed
oral statements to the Purchaser for comment, and shall not release any such
information without the written consent of Purchaser, which consent shall not be
unreasonably withheld. Nothing contained herein shall prevent the Company from
releasing any information if required to do so by law.
(n) The Company shall timely prepare and file any declaration or filing
necessary to comply with any transfer tax statutes that require any such filing
before the Closing.
15
(o) The Company shall obtain make such state securities law or "blue
sky" filings and obtain such state securities law or "blue sky" filings as shall
be reasonably requested by the Purchaser, provided, however, that the Company
shall not be required to qualify to do business or to become subject to general
service of process in any such jurisdiction.
SECTION 3.02 COVENANTS OF THE PURCHASER.
(a) The Purchaser agrees to comply in all material respects with all
federal and state securities laws and the rules and regulations promulgated
thereunder in connection with any sale by it of the Shares, the Warrants and the
Warrant Shares, whether or not such sale is pursuant to the Registration
Statement. In connection with the sale of any Shares pursuant to the
Registration Statement, but without limiting the generality of the foregoing
sentence, the Purchaser shall (i) comply with the provisions of Regulation M
promulgated under the Exchange Act, and (ii) deliver to the purchaser of Shares
the prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date.
(b) The Purchaser will cooperate with the Company in all material
respects in connection with the performance by the Company of its obligations
under Section 3.01(a), including timely supplying all information reasonably
requested by the Company (which shall include all information regarding the
Purchaser, and any person who beneficially owns Shares held by the Purchaser
within the meaning of Rule 13d-3 promulgated under the Exchange Act, and the
proposed manner of sale of the Shares required to be disclosed in the
Registration Statement) and executing and returning all documents reasonably
requested in connection with the registration and sale of the Shares. The
Purchaser hereby consents to be named as an underwriter in the Registration
Statement, if applicable, in accordance with current Commission policy and, if
necessary, to join in the request of the Company for the acceleration of the
effectiveness of the Registration Statement.
(c) Neither the Purchaser nor any entity controlling it, under its
control or under common control with it has, prior to the execution of this
Agreement, and will not, for a period of 18 months following the execution of
this Agreement, carry a net short position in the Common Stock of the Company,
participate in any short selling activities, recommendations, or collusion,
directly or indirectly, as such activities relate to the Common Stock. A net
short position will include any derivative instruments such as a put option,
collar, swap or any other instrument which would result in a net short position.
(d) In connection with the sale of any Shares pursuant to the
Registration Statement, the Purchaser shall deliver to the purchaser thereof the
prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date, all in accordance with the
requirements of the Securities Act and the rules and regulations promulgated
thereunder and any applicable blue sky laws. Unless such untrue statement or
omission relates to a Blackout Event, the Purchaser shall file a post-effective
amendment or prospectus supplement as promptly as practicable, but in no event
later than five Business Days following the discovery of such untrue statement
or omission.
16
(e) If at any time or from time to time after the Effective Date, the
Company notifies the Purchaser in writing that the Registration Statement or the
prospectus forming a part thereof (taking into account any prior amendments or
supplements thereto) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, the Purchaser shall
not offer or sell any Shares or engage in any other transaction involving or
relating to the Shares (other than purchases of Shares pursuant to this
Agreement), from the time of the giving of notice with respect to such untrue
statement or omission until the Purchaser receives written notice from the
Company that such untrue statement or omission no longer exists or has been
corrected or disclosed in an effective post-effective amendment to the
Registration Statement or a valid prospectus supplement to the prospectus
forming a part thereof.
(f) The Purchaser acknowledges and understands that the Shares, the
Warrants, and the Warrant Shares are (or upon the issuance thereof will be)
"restricted securities" as defined in Rule 144. The Purchaser hereby agrees not
to offer or sell (as such terms are defined in the Securities Act and the rules
and regulations promulgated thereunder) any Shares, Warrants, or Warrant Shares
unless such offer or sale is made (a) pursuant to an effective registration of
such securities under the Securities Act, or (b) pursuant to an available
exemption from the registration requirements of the Securities Act. The
Purchaser agrees that it will not engage in hedging transactions with regard to
the Shares, the Warrants, and the Warrant Shares other than in compliance with
the Securities Act. A proposed transfer shall be deemed to comply with this
Section 3.02(f) if the Purchaser delivers to the Company a legal opinion in form
and substance reasonably satisfactory to the Company from counsel reasonably
satisfactory to the Company to the effect that such transfer complies with this
Section 3.02(f).
SECTION 3.03 INDEMNIFICATION.
(a) For the purpose of this Section 3.03: (i) the term "PURCHASER
AFFILIATE" shall mean any person who controls the Purchaser within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act; and (ii)
the term "REGISTRATION STATEMENT" shall include any final prospectus, exhibit,
supplement or amendment included in or relating to the Registration Statement
referred to in Section 3.01(a).
(i) The Company agrees to indemnify and hold harmless the
Purchaser and each Purchaser Affiliate, against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Purchaser or such
Purchaser Affiliate may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon (A) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, as amended as of the
Effective Date, including any information deemed to be a part thereof as of the
time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to
Rule 434 promulgated under the Securities Act, or the prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations, or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required (the "PROSPECTUS"), or any amendment or
17
supplement thereto, (B) the omission or alleged omission to state in the
Registration Statement as of the Effective Date a material fact required to be
stated therein or necessary to make the statements in the Registration Statement
or any post-effective amendment or supplement thereto, or in the Prospectus or
any amendment or supplement thereto, not misleading, in each case in the light
of the circumstances under which the statements contained therein were made, or
(C) any inaccuracy in the representations and warranties of the Company
contained in this Agreement, or any failure of the Company to perform its
obligations hereunder, and will reimburse the Purchaser and each such Purchaser
Affiliate for any legal and other expenses as such expenses which are reasonably
incurred by the Purchaser or such Purchaser Affiliate in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; PROVIDED, HOWEVER, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (A) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the prospectus included therein, or any amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Purchaser expressly for use therein, or (B) the
failure of the Purchaser to comply with the covenants and agreements contained
in Section 3.02 hereof, or (C) the inaccuracy of any representations made by the
Purchaser herein or (D) any statement or omission in any Prospectus that is
corrected or disclosed in any subsequent Prospectus that was delivered to the
Purchaser prior to the pertinent sale or sales by the Purchaser.
(ii) The Purchaser agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act and the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (A) any failure to comply with the covenants and agreements
contained in Section 3.02 hereof, (B) the inaccuracy of any representation made
by the Purchaser herein, or (C) any (I) untrue or alleged untrue statement of
any material fact contained in the Registration Statement, the Prospectus, or
any amendment or supplement thereto, or (II) omission or alleged omission to
state in the Registration Statement, the Prospectus or any amendment or
supplement thereto a material fact required to be stated therein or necessary to
make the statements in the Registration Statement or any amendment or supplement
thereto, in the prospectus included therein, or any amendment or supplement
thereto, not misleading, in each case in the light of the circumstances under
which they were made; provided, that the Purchaser's indemnification obligation
under this clause (C) shall apply to the extent, and only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, such prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by the Purchaser expressly for use therein,
and will reimburse the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person for any legal and other
expense reasonably incurred by the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person in
18
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action.
(iii) Promptly after receipt by an indemnified party under
this Section 3.03 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 3.03, promptly notify the indemnifying
party in writing thereof; provided, that the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party for indemnification and contribution (except as provided
in paragraph (iv)) or otherwise than under the indemnity agreement contained in
this Section 3.03 or to the extent it is not materially prejudiced as a result
of such failure. In case any such action is brought against any indemnified
party and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with all other indemnifying parties
similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 3.03 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of commencement of action, in which case the reasonable fees and expenses of
counsel shall be at the expense of the indemnifying party or both the Company
and Purchaser, in the reasonable opinion of counsel to the Purchaser, have
defenses distinct from, or contradictory to, the defenses available to the
other.
(iv) If the indemnification provided for in this Section 3.03
is required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(i) or (ii) of this Section 3.03 in respect to any losses, claims, damages,
liabilities or expenses referred to herein (subject to the limitation of
paragraph (iii) of this Section 3.03), then each applicable indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of any losses, claims, damages, liabilities or expenses referred to
herein (I) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the sale of the Common Stock
contemplated by this Agreement or (II) if the allocation provided by clause (I)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (I) above but
the relative fault of the Company and the Purchaser in connection with the
statements or omissions or inaccuracies in the representations and warranties in
this Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Purchaser on the other
shall be deemed to be in the same proportion as the amount paid by the Purchaser
to the Company pursuant to this Agreement for the Shares purchased by the
Purchaser that were sold pursuant to the Registration Statement bears to the
difference (the "DIFFERENCE") between the amount such Purchaser paid for the
Shares that were sold pursuant to the Registration Statement and the amount
received by such Purchaser from such sale. The relative fault of the Company on
the one hand and the Purchaser on the other shall be determined by reference to,
among other things, whether the untrue or alleged statement of a material fact
19
or the omission or alleged omission to state a material fact or the inaccurate
or the alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by the Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, omission or inaccuracy. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (iii) of this Section 3.03, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (iii) of this Section
3.03 with respect to the notice of the threat or commencement of any threat or
action shall apply if a claim for contribution is to be made under this
paragraph (iv); PROVIDED, HOWEVER, that no additional notice shall be required
with respect to any threat or action for which notice has been given under
paragraph (iii) for purposes of indemnification. The Company and each Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 3.03 were determined solely by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding the provisions of this Section
3.03, the Purchaser shall not be required to contribute any amount in excess of
the amount by which the Difference exceeds the amount of any damages that such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
ARTICLE IV
CONDITIONS TO CLOSING
SECTION 4.01 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to purchase the Shares at the Closing shall be
subject to the satisfaction of the following conditions, or the waiver of such
conditions by the Purchaser, at or prior to the Closing Date:
(a) the representations and warranties of the Company set
forth in Section 2.01 of this Agreement shall be true and correct with the same
force and effect as though expressly made on every date during the term of this
Agreement, including the Closing Date, except for representations or warranties
made as of a particular date which representations and warranties shall be true
and correct as of such date;
(b) the Company shall have complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(c) the Company shall have delivered to the Purchaser a
certificate executed by the Chairman of the Board or President and the chief
financial or accounting officer of the Company, dated the Closing Date, to the
effect that the conditions in Section 4.01(a), (b), (h), (i), and (j) have been
satisfied;
(d) the Registration Statement shall have been declared by the
Commission to be effective under the Securities Act on or prior to August 15,
20
2004, and shall not have been withdrawn, no stop order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceedings for the suspension of the effectiveness of the Registration
Statement shall have been instituted or threatened by the Commission;
(e) Xxxxxx & Xxxxxx LLP, counsel to the Company, shall have
delivered its legal opinion to the Purchaser in form and substance satisfactory
to the Purchaser;
(f) the Company shall retain, and through the term of this
Agreement shall continue to retain, an investor relations firm satisfactory to
the Purchaser, in its sole and absolute discretion;
(g) there shall not have been (i) any domestic or
international event, act, or occurrence, including, without limitation, event,
act, or occurrence of terrorism, that shall have materially and adversely
disrupted, or, in the opinion of the Purchaser, will in the immediate future
materially and adversely disrupt, the securities markets; or (ii) a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange or the American Stock Exchange or in the
over-the-counter market; or (iii) an outbreak or increase in the level of major
hostilities or other national or international calamity; or (iv) a banking
moratorium declared by any state or federal authority; or (v) a moratorium in
foreign exchange trading by major international banks or persons declared; or
(vi) a material interruption in the mail service or other means of communication
within the United States; or (vii) a material or substantial loss suffered by
the Company by fire, flood, accident, hurricane, earthquake, theft, sabotage, or
other calamity or malicious act, whether or not such loss shall have been
insured, or from any labor dispute or court or government action, order, or
decree, which will, in the discretion of the Purchaser, make it inadvisable to
proceed with any portion of the transactions contemplated hereby; or (viii) any
material adverse change in the business, prospects, financial condition, or
results of operations of the Company; or (ix) any material governmental
restrictions shall have been imposed on trading in securities in general, which
restrictions are not in effect on the date hereof; or (x) passed by the Congress
of the United States or by any state legislature any act or measure, or adopted
by any governmental body or authoritative accounting institute or board, or any
governmental executive, any orders, rules, or regulations, which the Purchaser
believes likely to have a material adverse effect on the business, financial
condition, or financial statements of the Company or the market for the Common
Stock; or (xi) such material and adverse change in the market for the Company's
securities or securities in general or in political, financial, or economic
conditions as in the judgment of the Purchaser makes it inadvisable to proceed
with the transactions contemplated hereby;
(h) The Company shall have received state securities law or
"blue sky" clearance for the sale of the Shares in states specified in writing
by the Purchaser, other than states in which such clearance shall have required
the Company to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(i) Each director and executive officer of the Company shall
have entered into an agreement, in form and substance satisfactory to the
Purchaser, to the effect that without the consent of the Purchaser, which
consent may be withheld for any reason, such Person will not sell publicly any
21
shares of the Common Stock until the earlier of: (i) ten Business Days following
the date Purchaser has advised them that it has publicly sold all the Shares and
(ii) six months following the final Tranche Closing (the "LOCK-UP Agreements");
and
(j) A Blackout Period shall not be in effect at the Closing
Date.
SECTION 4.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to sell the Shares at the Closing shall be subject to
the satisfaction of the following conditions, or the waiver of such conditions
by the Company, at or prior to the Closing Date:
(a) the representations and warranties of the Purchaser set
forth in Section 2.02 of this Agreement shall be true and correct with the same
force and effect as though expressly made on and as of the Closing Date, except
for representations or warranties made as of a particular date which
representations and warranties shall be true and correct as of such date;
(b) the Purchaser shall have complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(c) the Purchaser shall have delivered to the Company a
certificate executed by a duly authorized officer of the Purchaser, dated the
applicable Tranche Closing Date, to the effect that the conditions in clauses
(a) and (b) of this Section 4.02 have been satisfied; and
(d) no stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for the suspension
of the effectiveness of the Registration Statement shall have been instituted or
threatened by the Commission.
ARTICLE V
TERMINATION
SECTION 5.01 TERMINATION BY PURCHASER. The Purchaser may terminate its
obligations under Article I of this Agreement by oral or written notice to the
Company following the occurrence of one or more of the following:
(a) the Company shall default in any material respect in the
performance of any covenant or agreement under this Agreement, which default
shall continue for more than three business days following written notice
thereof from the Purchaser;
(b) the representations and warranties of the Company set
forth in Section 2.01 of this Agreement shall not be true and correct in all
material respects as of the date of this Agreement, and on each day thereafter,
except for the representations and warranties made as of a particular date which
representations and warranties need be true and correct only as of such date;
(c) the Company shall merge or consolidate with any Person,
shall effect any reorganization, or shall sell or substantially all of its
assets, or shall enter into any agreement contemplating the same;
22
(d) the Closing of the purchase and sale of the Shares shall
not have been completed by August 30, 2004;
(e) except pursuant to Stock Equivalents (as hereinafter
defined) outstanding on the date of this Agreement and disclosed in the SEC
Documents, the Company issues, or agrees to issue: (i) shares of Common Stock at
a purchase price per share less than the Purchase Price per share of the First
Tranche Shares; (ii) shares of capital stock convertible into Common Stock; or
(iii) Stock Equivalents with an exercise or conversion price less than the
Purchase Price per share of the First Tranche Shares. For purposes hereof,
"STOCK EQUIVALENTS" shall mean options, warrants, calls, rights, commitments,
convertible securities and other securities pursuant to which the holder,
directly or indirectly, has the right to acquire (with or without additional
consideration) capital stock or equity of the Company; or
(g) the Company declares or pays any dividend or distribution
to its shareholders, or purchases or redeems any Common Stock.
SECTION 5.02 LIABILITY. The termination by the Purchaser of its
obligations under Article I of this Agreement shall not terminate any liability
for any breach or default by any party in any representation, warranty, covenant
or agreement occurring prior to the date of such termination. In addition, such
termination shall not terminate any of the obligations or agreements of either
party under Section 3.03 of this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:
(a) if to the Company, to:
000 Xxxxxxxxxx, Xxxxx X
Xxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxxxx
Phone: 000.000.0000
Facsimile: 949.453.9652
with a copy to:
Xxxxxx & Xxxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
23
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(b) if to the Purchaser, to:
SBI Brightline II LLC
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Reitler Xxxxx LLC
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx Xxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
SECTION 6.02 ASSIGNMENT. Neither party hereto may assign or delegate
any of such party's rights or obligations under or in connection with this
Agreement, and any attempted assignment or delegation of such rights or
obligations shall be void. Except as expressly provided in Section 3.03 with
respect to Purchaser Affiliates, directors and controlling persons of the
Company and officers of the Company who signed the Registration Statement, no
person, including without limitation any person who purchases or otherwise
acquires or receives any Shares from the Purchaser, is an intended third party
beneficiary of this Agreement, and no party to this Agreement shall have any
obligation arising under this Agreement to any person other than the other party
hereto and, to the extent expressly provided in Section 3.03, Purchaser
Affiliates, directors and controlling persons of the Company and officers of the
Company who signed the Registration Statement.
SECTION 6.03 CHANGES. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 6.04 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 6.05 SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
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SECTION 6.06 GOVERNING LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to its conflicts of law principles, and the federal law of the United
States of America. The Company irrevocably consents to the jurisdiction of the
courts of the State of California and of any federal court, in each case located
in Los Angeles or Orange County, California in connection with any action or
proceeding arising out of, or relating to, this Agreement, any document or
instrument delivered pursuant to, in connection with, or simultaneously with
this Agreement, or a breach of this Agreement or any such document or
instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint, or other process and agrees that service
thereof may be made in accordance with Section 6.01. Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, the Company shall appear
or answer such summons, complaint, or other process. Should the Company fail to
appear or answer within such 30-day period or such extended period, as the case
may be, the Company shall be deemed in default and judgment may be entered
against the Company for the amount as demanded in any summons, complaint, or
other process so served.
SECTION 6.07 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
VISIJET, INC.
BY: /S/ XXXXXX X. XXXXXX
NAME: XXXXXX X. XXXXXX
TITLE: PRESIDENT
BY: /S/ XXXXXXXX X. XXXXXXXXX
XXXXXXXX X. XXXXXXXXX
TITLE: VICE PRESIDENT/ CHIEF
OPERATING OFFICER AND SECRETARY
SBI BRIGHTLINE II, LLC
BY: /S/ XXXXXX XXXXXXX
NAME: XXXXXX XXXXXXX
TITLE: MANAGING MEMBER
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