STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the 25th day of October 2004 (the "Agreement")
between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the
"Investor"), and TRANSAX INTERNATIONAL, LTD., a corporation organized and
existing under the laws of the State of Colorado (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time
to time as provided herein, and the Investor shall purchase from the Company up
to Five Million U.S. Dollars ($5,000,000) of the Company's common stock, par
value $0.00001 per share (the "Common Stock"); and
WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and
the 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 to be made
hereunder.
WHEREAS, the Company has engaged Monitor Capital, Inc. (the "Placement Agent"),
to act as the Company's exclusive placement agent in connection with the sale
of the Company's Common Stock to the Investor hereunder pursuant to the
Placement Agent Agreement dated the date hereof by and among the Company, the
Placement Agent and the Investor (the "Placement Agent Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
SECTION 1.1 "ADVANCE" SHALL MEAN THE PORTION OF THE COMMITMENT AMOUNT REQUESTED
BY THE COMPANY IN THE ADVANCE NOTICE.
SECTION 1.2 "ADVANCE DATE" SHALL MEAN THE DATE XXXXX XXXXXXXX PC ESCROW ACCOUNT
IS IN RECEIPT OF THE FUNDS FROM THE INVESTOR AND XXXXX XXXXXXXX PC, AS THE
INVESTOR'S COUNSEL, IS IN POSSESSION OF FREE TRADING SHARES FROM THE COMPANY
AND THEREFORE AN ADVANCE BY THE INVESTOR TO THE COMPANY CAN BE MADE AND XXXXX
XXXXXXXX PC CAN RELEASE THE FREE TRADING SHARES TO THE INVESTOR. THE ADVANCE
DATE SHALL BE THE FIRST (1ST) TRADING DAY AFTER EXPIRATION OF THE APPLICABLE
PRICING PERIOD FOR EACH ADVANCE.
SECTION 1.3 "ADVANCE NOTICE" SHALL MEAN A WRITTEN NOTICE TO THE INVESTOR
SETTING FORTH THE ADVANCE AMOUNT THAT THE COMPANY REQUESTS FROM THE INVESTOR
AND THE ADVANCE DATE.
SECTION 1.4 "ADVANCE NOTICE DATE" SHALL MEAN EACH DATE THE COMPANY DELIVERS TO
THE INVESTOR AN ADVANCE NOTICE REQUIRING THE INVESTOR TO ADVANCE FUNDS TO THE
COMPANY, SUBJECT TO THE TERMS OF THIS AGREEMENT. NO ADVANCE NOTICE DATE SHALL
BE LESS THAN FIVE (5) TRADING DAYS AFTER THE PRIOR ADVANCE NOTICE DATE.
SECTION 1.5 "BID PRICE" SHALL MEAN, ON ANY DATE, THE CLOSING BID PRICE (AS
REPORTED BY BLOOMBERG L.P.) OF THE COMMON STOCK ON THE PRINCIPAL MARKET OR IF
THE COMMON STOCK IS NOT TRADED ON A PRINCIPAL MARKET, THE HIGHEST REPORTED BID
PRICE FOR THE COMMON STOCK, AS FURNISHED BY THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
SECTION 1.6 "CLOSING" SHALL MEAN ONE OF THE CLOSINGS OF A PURCHASE AND SALE OF
COMMON STOCK PURSUANT TO SECTION 2.3.
SECTION 1.7 "COMMITMENT AMOUNT" SHALL MEAN THE AGGREGATE AMOUNT OF UP TO FIVE
MILLION U.S. DOLLARS ($5,000,000) WHICH THE INVESTOR HAS AGREED TO PROVIDE TO
THE COMPANY IN ORDER TO PURCHASE THE COMPANY'S COMMON STOCK PURSUANT TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT.
SECTION 1.8 "COMMITMENT PERIOD" SHALL MEAN THE PERIOD COMMENCING ON THE EARLIER
TO OCCUR OF (I) THE EFFECTIVE DATE, OR (II) SUCH EARLIER DATE AS THE COMPANY
AND THE INVESTOR MAY MUTUALLY AGREE IN WRITING, AND EXPIRING ON THE EARLIEST TO
OCCUR OF (X) THE DATE ON WHICH THE INVESTOR SHALL HAVE MADE PAYMENT OF ADVANCES
PURSUANT TO THIS AGREEMENT IN THE AGGREGATE AMOUNT OF FIVE MILLION U.S. DOLLARS
($5,000,000), (Y) THE DATE THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION
2.5, OR (Z) THE DATE OCCURRING TWENTY-FOUR (24) MONTHS AFTER THE EFFECTIVE
DATE.
SECTION 1.9 "COMMON STOCK" SHALL MEAN THE COMPANY'S COMMON STOCK, PAR VALUE
$0.00001 PER SHARE.
SECTION 1.10"CONDITION SATISFACTION DATE" SHALL HAVE THE MEANING SET FORTH IN
SECTION 7.2.
SECTION 1.11"DAMAGES" SHALL MEAN ANY LOSS, CLAIM, DAMAGE, LIABILITY, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY'S FEES AND
DISBURSEMENTS AND COSTS AND EXPENSES OF EXPERT WITNESSES AND INVESTIGATION).
SECTION 1.12"EFFECTIVE DATE" SHALL MEAN THE DATE ON WHICH THE SEC FIRST
DECLARES EFFECTIVE A REGISTRATION STATEMENT REGISTERING THE RESALE OF THE
REGISTRABLE SECURITIES AS SET FORTH IN SECTION 7.2(A).
SECTION 1.13"ESCROW AGREEMENT" SHALL MEAN THE ESCROW AGREEMENT AMONG THE
COMPANY, THE INVESTOR, AND XXXXX XXXXXXXX PC, DATED THE DATE HEREOF.
SECTION 1.14"EXCHANGE ACT" SHALL MEAN THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
SECTION 1.15"MATERIAL ADVERSE EFFECT" SHALL MEAN ANY CONDITION, CIRCUMSTANCE,
OR SITUATION THAT WOULD PROHIBIT OR OTHERWISE MATERIALLY INTERFERE WITH THE
ABILITY OF THE COMPANY TO ENTER INTO AND PERFORM ANY OF ITS OBLIGATIONS UNDER
THIS AGREEMENT OR THE REGISTRATION RIGHTS AGREEMENT IN ANY MATERIAL RESPECT.
SECTION 1.16"MARKET PRICE" SHALL MEAN THE LOWEST VWAP OF THE COMMON STOCK
DURING THE PRICING PERIOD.
SECTION 1.17"MAXIMUM ADVANCE AMOUNT" SHALL BE TWO HUNDRED FIFTY THOUSAND U.S.
DOLLARS (US$250,000) PER ADVANCE NOTICE, PROVIDED THAT AGGREGATE ADVANCES IN
ANY THIRTY (30) DAY PERIOD SHALL NOT EXCEED ONE MILLION DOLLARS ($1,000,000).
SECTION 1.18"NASD" SHALL MEAN THE NATIONAL ASSOCIATION OF SECURITIES DEALERS,
INC.
SECTION 1.19"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.
SECTION 1.20"PLACEMENT AGENT" SHALL MEAN MONITOR CAPITAL, INC., A REGISTERED
BROKER-DEALER.
SECTION 1.21"PRICING PERIOD" SHALL MEAN THE FIVE (5) CONSECUTIVE TRADING DAYS
AFTER THE ADVANCE NOTICE DATE.
SECTION 1.22"PRINCIPAL MARKET" SHALL MEAN THE NASDAQ NATIONAL MARKET, THE
NASDAQ SMALLCAP MARKET, THE AMERICAN STOCK EXCHANGE, THE OTC BULLETIN BOARD OR
THE NEW YORK STOCK EXCHANGE, WHICHEVER IS AT THE TIME THE PRINCIPAL TRADING
EXCHANGE OR MARKET FOR THE COMMON STOCK.
SECTION 1.23"PURCHASE PRICE" SHALL BE SET AT NINETY SEVEN PERCENT (97%) OF THE
MARKET PRICE DURING THE PRICING PERIOD.
SECTION 1.24"REGISTRABLE SECURITIES" SHALL MEAN THE SHARES OF COMMON STOCK TO
BE ISSUED HEREUNDER (I) IN RESPECT OF WHICH THE REGISTRATION STATEMENT HAS NOT
BEEN DECLARED EFFECTIVE BY THE SEC, (II) WHICH HAVE NOT BEEN SOLD UNDER
CIRCUMSTANCES MEETING ALL OF THE APPLICABLE CONDITIONS OF RULE 144 (OR ANY
SIMILAR PROVISION THEN IN FORCE) UNDER THE SECURITIES ACT ("RULE 144") OR (III)
WHICH HAVE NOT BEEN OTHERWISE TRANSFERRED TO A HOLDER 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.
SECTION 1.25"REGISTRATION RIGHTS AGREEMENT" SHALL MEAN THE REGISTRATION RIGHTS
AGREEMENT DATED THE DATE HEREOF, REGARDING THE FILING OF THE REGISTRATION
STATEMENT FOR THE RESALE OF THE REGISTRABLE SECURITIES, ENTERED INTO BETWEEN
THE COMPANY AND THE INVESTOR.
SECTION 1.26"REGISTRATION STATEMENT" SHALL MEAN A REGISTRATION STATEMENT ON
FORM S-1 OR SB-2 (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 THE INVESTOR OF THE REGISTRABLE SECURITIES
UNDER THE SECURITIES ACT.
SECTION 1.27"REGULATION D" SHALL HAVE THE MEANING SET FORTH IN THE RECITALS OF
THIS AGREEMENT.
SECTION 1.28"SEC" SHALL MEAN THE SECURITIES AND EXCHANGE COMMISSION.
SECTION 1.29"SECURITIES ACT" SHALL HAVE THE MEANING SET FORTH IN THE RECITALS
OF THIS AGREEMENT.
SECTION 1.30"SEC DOCUMENTS" SHALL MEAN ANNUAL REPORTS ON FORM 10-KSB, QUARTERLY
REPORTS ON FORM 10-QSB, CURRENT REPORTS ON FORM 8-K AND PROXY STATEMENTS OF THE
COMPANY AS SUPPLEMENTED TO THE DATE HEREOF, FILED BY THE COMPANY FOR A PERIOD
OF AT LEAST TWELVE (12) MONTHS IMMEDIATELY PRECEDING THE DATE HEREOF OR THE
ADVANCE DATE, AS THE CASE MAY BE, UNTIL SUCH TIME AS THE COMPANY NO LONGER HAS
AN OBLIGATION TO MAINTAIN THE EFFECTIVENESS OF A REGISTRATION STATEMENT AS SET
FORTH IN THE REGISTRATION RIGHTS AGREEMENT.
SECTION 1.31"TRADING DAY" SHALL MEAN ANY DAY DURING WHICH THE NEW YORK STOCK
EXCHANGE SHALL BE OPEN FOR BUSINESS.
SECTION 1.32"VWAP" SHALL MEAN THE VOLUME WEIGHTED AVERAGE PRICE OF THE
COMPANY'S COMMON STOCK AS QUOTED BY BLOOMBERG, LP.
ARTICLE II.
ADVANCES
SECTION 2.1 INVESTMENTS.
(a) Advances. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Advance
Notice Date the Company may request an Advance by the Investor by the delivery
of an Advance Notice. The number of shares of Common Stock that the Investor
shall receive for each Advance shall be determined by dividing the amount of
the Advance by the Purchase Price. No fractional shares shall be issued.
Fractional shares shall be rounded to the next higher whole number of shares.
The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.
SECTION 2.2 MECHANICS.
(a) Advance Notice. At any time during the Commitment Period, the Company
may deliver an Advance Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, the amount for each Advance as
designated by the Company in the applicable Advance Notice, shall not be more
than the Maximum Advance Amount. The aggregate amount of the Advances pursuant
to this Agreement shall not exceed the Commitment Amount. The Company
acknowledges that the Investor may sell shares of the Company's Common Stock
corresponding with a particular Advance Notice on the day the Advance Notice is
received by the Investor. There shall be a minimum of five (5) Trading Days
between each Advance Notice Date.
(b) Date of Delivery of Advance Notice. An Advance Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by
the Investor if such notice is received prior to 12:00 noon Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a
day which is not a Trading Day. No Advance Notice may be deemed delivered on a
day that is not a Trading Day.
(c) Pre-Closing Share Credit. Within two (2) business days after the Advance
Notice Date, the Company shall credit shares of the Company's Common Stock to
the Investor's counsel's balance account with The Depository Trust Company
through its Deposit Withdrawal At Custodian system, in an amount equal to the
amount of the requested Advance divided by the closing Bid Price of the
Company's Common Stock as of the Advance Notice Date multiplied by one point
one (1.1). Any adjustments to the number of shares to be delivered to the
Investor at the Closing as a result of fluctuations in the closing Bid Price of
the Company's Common Stock shall be made as of the date of the Closing. Any
excess shares shall be credited to the next Advance. In no event shall the
number of shares issuable to the Investor pursuant to an Advance cause the
Investor to own in excess of nine and 9/10 percent (9.9%) of the then
outstanding Common Stock of the Company.
(d) Hardship. In the event the Investor sells the Company's Common Stock
pursuant to subsection (c) above and the Company fails to perform its
obligations as mandated in Section 2.5 and 2.2 (c), and specifically fails to
provide the Investor with the shares of Common Stock for the applicable
Advance, the Company acknowledges that the Investor shall suffer financial
hardship and therefore shall be liable for any and all losses, commissions,
fees, or financial hardship caused to the Investor.
SECTION 2.3 CLOSINGS. ON EACH ADVANCE DATE, WHICH SHALL BE THE FIRST (1ST)
TRADING DAY AFTER EXPIRATION OF THE APPLICABLE PRICING PERIOD FOR EACH ADVANCE,
(I) THE COMPANY SHALL DELIVER TO THE INVESTOR'S COUNSEL, AS DEFINED PURSUANT TO
THE ESCROW AGREEMENT, SHARES OF THE COMPANY'S COMMON STOCK, REPRESENTING THE
AMOUNT OF THE ADVANCE BY THE INVESTOR PURSUANT TO SECTION 2.1 HEREIN,
REGISTERED IN THE NAME OF THE INVESTOR WHICH SHALL BE DELIVERED TO THE
INVESTOR, OR OTHERWISE IN ACCORDANCE WITH THE ESCROW AGREEMENT AND (II) THE
INVESTOR SHALL DELIVER TO XXXXX XXXXXXXX PC (THE "ESCROW AGENT") THE AMOUNT OF
THE ADVANCE SPECIFIED IN THE ADVANCE NOTICE BY WIRE TRANSFER OF IMMEDIATELY
AVAILABLE FUNDS WHICH SHALL BE DELIVERED TO THE COMPANY, OR OTHERWISE IN
ACCORDANCE WITH THE ESCROW AGREEMENT. IN ADDITION, ON OR PRIOR TO THE ADVANCE
DATE, EACH OF THE COMPANY AND THE INVESTOR SHALL DELIVER TO THE OTHER THROUGH
THE INVESTOR'S COUNSEL, ALL DOCUMENTS, INSTRUMENTS AND WRITINGS REQUIRED TO BE
DELIVERED BY EITHER OF THEM PURSUANT TO THIS AGREEMENT IN ORDER TO IMPLEMENT
AND EFFECT THE TRANSACTIONS CONTEMPLATED HEREIN. PAYMENT OF FUNDS TO THE
COMPANY AND DELIVERY OF THE COMPANY'S COMMON STOCK TO THE INVESTOR SHALL OCCUR
IN ACCORDANCE WITH THE CONDITIONS SET FORTH ABOVE AND THOSE CONTAINED IN THE
ESCROW AGREEMENT; PROVIDED, HOWEVER, THAT TO THE EXTENT THE COMPANY HAS NOT
PAID THE FEES, EXPENSES, AND DISBURSEMENTS OF THE INVESTOR, THE INVESTOR'S
COUNSEL, XXXXXXXXXXX & XXXXXXXX LLP, IN ACCORDANCE WITH SECTION 12.4, THE
AMOUNT OF SUCH FEES, EXPENSES, AND DISBURSEMENTS MAY BE DEDUCTED BY THE
INVESTOR (AND SHALL BE PAID TO THE RELEVANT PARTY) FROM THE AMOUNT OF THE
ADVANCE WITH NO REDUCTION IN THE AMOUNT OF SHARES OF THE COMPANY'S COMMON STOCK
TO BE DELIVERED ON SUCH ADVANCE DATE.
SECTION 2.4 TERMINATION OF INVESTMENT. THE OBLIGATION OF THE INVESTOR TO MAKE
AN ADVANCE TO THE COMPANY PURSUANT TO THIS AGREEMENT SHALL TERMINATE
PERMANENTLY (INCLUDING WITH RESPECT TO AN ADVANCE DATE THAT HAS NOT YET
OCCURRED) IN THE EVENT THAT (I) THERE SHALL OCCUR ANY STOP ORDER OR SUSPENSION
OF THE EFFECTIVENESS OF THE REGISTRATION STATEMENT FOR AN AGGREGATE OF FIFTY
(50) TRADING DAYS, OTHER THAN DUE TO THE ACTS OF THE INVESTOR, DURING THE
COMMITMENT PERIOD, AND (II) THE COMPANY SHALL AT ANY TIME FAIL MATERIALLY TO
COMPLY WITH THE REQUIREMENTS OF ARTICLE VI AND SUCH FAILURE IS NOT CURED WITHIN
THIRTY (30) DAYS AFTER RECEIPT OF WRITTEN NOTICE FROM THE INVESTOR, PROVIDED,
HOWEVER, THAT THIS TERMINATION PROVISION SHALL NOT APPLY TO ANY PERIOD
COMMENCING UPON THE FILING OF A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION
STATEMENT AND ENDING UPON THE DATE ON WHICH SUCH POST EFFECTIVE AMENDMENT IS
DECLARED EFFECTIVE BY THE SEC.
SECTION 2.5 AGREEMENT TO ADVANCE FUNDS.
(a) The Investor agrees to advance the amount specified in the Advance Notice
to the Company after the completion of each of the following conditions and the
other conditions set forth in this Agreement:
(i) the execution and delivery by the Company, and the Investor, of this
Agreement and the Exhibits hereto;
(ii) Investor's Counsel shall have received the shares of Common Stock
applicable to the Advance in accordance with Section 2.2(c) hereof;
(iii) the Company's Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement shall have been declared effective by the SEC;
(iv) the Company shall have obtained all material permits and qualifications
required by any applicable state for the offer and sale of the Registrable
Securities, or shall have the availability of exemptions therefrom. The sale
and issuance of the Registrable Securities shall be legally permitted by all
laws and regulations to which the Company is subject;
(v) the Company shall have filed with the Commission in a timely manner all
reports, notices and other documents required of a "reporting company" under
the Exchange Act and applicable Commission regulations;
(vi) the fees as set forth in Section 12.4 below shall have been paid or can
be withheld as provided in Section 2.3; and
(vii) the conditions set forth in Section 7.2 shall have been satisfied.
(viii)the Company shall have provided to the Investor an acknowledgement, from
Xxxxxx Xxxxxxxx P.C, as to its ability to provide all consents required in
order to file a registration statement in connection with this transaction;
(ix) The Company's transfer agent shall be DWAC eligible.
SECTION 2.6 LOCK UP PERIOD.
(i) During the Commitment Period, the Company shall not issue or sell (i) any
Common Stock or Preferred Stock without consideration or for a consideration
per share less than the Bid Price on the date of issuance or (ii) issue or sell
any warrant, option, right, contract, call, or other security or instrument
granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than the Bid Price on the
date of issuance.
(ii) On the date hereof, the Company shall obtain from each officer and
director a lock-up agreement, as defined below, in the form annexed hereto as
Schedule 2.6 agreeing to only sell in compliance with the volume limitation of
Rule 144.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and as of the date hereof and as of each Advance Date:
SECTION 3.1 ORGANIZATION AND AUTHORIZATION. THE INVESTOR IS DULY INCORPORATED
OR ORGANIZED AND VALIDLY EXISTING IN THE JURISDICTION OF ITS INCORPORATION OR
ORGANIZATION AND HAS ALL REQUISITE POWER AND AUTHORITY TO PURCHASE AND HOLD THE
SECURITIES ISSUABLE HEREUNDER. THE DECISION TO INVEST AND THE EXECUTION AND
DELIVERY OF THIS AGREEMENT BY SUCH INVESTOR, THE PERFORMANCE BY SUCH INVESTOR
OF ITS OBLIGATIONS HEREUNDER AND THE CONSUMMATION BY SUCH INVESTOR OF THE
TRANSACTIONS CONTEMPLATED HEREBY HAVE BEEN DULY AUTHORIZED AND REQUIRES NO
OTHER PROCEEDINGS ON THE PART OF THE INVESTOR. THE UNDERSIGNED HAS THE RIGHT,
POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT AND ALL OTHER
INSTRUMENTS (INCLUDING, WITHOUT LIMITATIONS, THE REGISTRATION RIGHTS
AGREEMENT), ON BEHALF OF THE INVESTOR. THIS AGREEMENT HAS BEEN DULY EXECUTED
AND DELIVERED BY THE INVESTOR AND, ASSUMING THE EXECUTION AND DELIVERY HEREOF
AND ACCEPTANCE THEREOF BY THE COMPANY, WILL CONSTITUTE THE LEGAL, VALID AND
BINDING OBLIGATIONS OF THE INVESTOR, ENFORCEABLE AGAINST THE INVESTOR IN
ACCORDANCE WITH ITS TERMS.
SECTION 3.2 EVALUATION OF RISKS. THE INVESTOR HAS SUCH KNOWLEDGE AND
EXPERIENCE IN FINANCIAL TAX AND BUSINESS MATTERS AS TO BE CAPABLE OF EVALUATING
THE MERITS AND RISKS OF, AND BEARING THE ECONOMIC RISKS ENTAILED BY, AN
INVESTMENT IN THE COMPANY AND OF PROTECTING ITS INTERESTS IN CONNECTION WITH
THIS TRANSACTION. IT RECOGNIZES THAT ITS INVESTMENT IN THE COMPANY INVOLVES A
HIGH DEGREE OF RISK.
SECTION 3.3 NO LEGAL ADVICE FROM THE COMPANY. THE INVESTOR ACKNOWLEDGES THAT
IT HAD THE OPPORTUNITY TO REVIEW THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT WITH HIS OR ITS OWN LEGAL COUNSEL AND INVESTMENT
AND TAX ADVISORS. THE INVESTOR IS RELYING SOLELY ON SUCH COUNSEL AND ADVISORS
AND NOT ON ANY STATEMENTS OR REPRESENTATIONS OF THE COMPANY OR ANY OF ITS
REPRESENTATIVES OR AGENTS FOR LEGAL, TAX OR INVESTMENT ADVICE WITH RESPECT TO
THIS INVESTMENT, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
SECURITIES LAWS OF ANY JURISDICTION.
SECTION 3.4 INVESTMENT PURPOSE. THE SECURITIES ARE BEING PURCHASED BY THE
INVESTOR FOR ITS OWN ACCOUNT, FOR INVESTMENT AND WITHOUT ANY VIEW TO THE
DISTRIBUTION, ASSIGNMENT OR RESALE TO OTHERS OR FRACTIONALIZATION IN WHOLE OR
IN PART. THE INVESTOR AGREES NOT TO ASSIGN OR IN ANY WAY TRANSFER THE
INVESTOR'S RIGHTS TO THE SECURITIES OR ANY INTEREST THEREIN AND ACKNOWLEDGES
THAT THE COMPANY WILL NOT RECOGNIZE ANY PURPORTED ASSIGNMENT OR TRANSFER EXCEPT
IN ACCORDANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS. NO OTHER
PERSON HAS OR WILL HAVE A DIRECT OR INDIRECT BENEFICIAL INTEREST IN THE
SECURITIES. THE INVESTOR AGREES NOT TO SELL, HYPOTHECATE OR OTHERWISE TRANSFER
THE INVESTOR'S SECURITIES UNLESS THE SECURITIES ARE REGISTERED UNDER FEDERAL
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM SUCH LAWS IS AVAILABLE.
SECTION 3.5 ACCREDITED INVESTOR. THE INVESTOR IS AN "ACCREDITED INVESTOR" AS
THAT TERM IS DEFINED IN RULE 501(A)(3) OF REGULATION D OF THE SECURITIES ACT.
SECTION 3.6 INFORMATION. THE INVESTOR AND ITS ADVISORS (AND ITS COUNSEL), IF
ANY, HAVE BEEN FURNISHED WITH ALL MATERIALS RELATING TO THE BUSINESS, FINANCES
AND OPERATIONS OF THE COMPANY AND INFORMATION IT DEEMED MATERIAL TO MAKING AN
INFORMED INVESTMENT DECISION. THE INVESTOR AND ITS ADVISORS, IF ANY, HAVE BEEN
AFFORDED THE OPPORTUNITY TO ASK QUESTIONS OF THE COMPANY AND ITS MANAGEMENT.
NEITHER SUCH INQUIRIES NOR ANY OTHER DUE DILIGENCE INVESTIGATIONS CONDUCTED BY
SUCH INVESTOR OR ITS ADVISORS, IF ANY, OR ITS REPRESENTATIVES SHALL MODIFY,
AMEND OR AFFECT THE INVESTOR'S RIGHT TO RELY ON THE COMPANY'S REPRESENTATIONS
AND WARRANTIES CONTAINED IN THIS AGREEMENT. THE INVESTOR UNDERSTANDS THAT ITS
INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THE INVESTOR IS IN A POSITION
REGARDING THE COMPANY, WHICH, BASED UPON EMPLOYMENT, FAMILY RELATIONSHIP OR
ECONOMIC BARGAINING POWER, ENABLED AND ENABLES SUCH INVESTOR TO OBTAIN
INFORMATION FROM THE COMPANY IN ORDER TO EVALUATE THE MERITS AND RISKS OF THIS
INVESTMENT. THE INVESTOR HAS SOUGHT SUCH ACCOUNTING, LEGAL AND TAX ADVICE, AS
IT HAS CONSIDERED NECESSARY TO MAKE AN INFORMED INVESTMENT DECISION WITH
RESPECT TO THIS TRANSACTION.
SECTION 3.7 RECEIPT OF DOCUMENTS. THE INVESTOR AND ITS COUNSEL HAVE RECEIVED
AND READ IN THEIR ENTIRETY: (I) THIS AGREEMENT AND THE EXHIBITS ANNEXED
HERETO; (II) ALL DUE DILIGENCE AND OTHER INFORMATION NECESSARY TO VERIFY THE
ACCURACY AND COMPLETENESS OF SUCH REPRESENTATIONS, WARRANTIES AND COVENANTS;
(III) THE COMPANY'S FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2003 AND FORM
10-QSB FOR THE PERIOD ENDED JUNE 30, 2004; AND (IV) ANSWERS TO ALL QUESTIONS
THE INVESTOR SUBMITTED TO THE COMPANY REGARDING AN INVESTMENT IN THE COMPANY;
AND THE INVESTOR HAS RELIED ON THE INFORMATION CONTAINED THEREIN AND HAS NOT
BEEN FURNISHED ANY OTHER DOCUMENTS, LITERATURE, MEMORANDUM OR PROSPECTUS.
SECTION 3.8 REGISTRATION RIGHTS AGREEMENT AND ESCROW AGREEMENT. THE PARTIES
HAVE ENTERED INTO THE REGISTRATION RIGHTS AGREEMENT AND THE ESCROW AGREEMENT,
EACH DATED THE DATE HEREOF.
SECTION 3.9 NO GENERAL SOLICITATION. NEITHER THE COMPANY, NOR ANY OF ITS
AFFILIATES, NOR ANY PERSON ACTING ON ITS OR THEIR BEHALF, HAS ENGAGED IN ANY
FORM OF GENERAL SOLICITATION OR GENERAL ADVERTISING (WITHIN THE MEANING OF
REGULATION D UNDER THE SECURITIES ACT) IN CONNECTION WITH THE OFFER OR SALE OF
THE SHARES OF COMMON STOCK OFFERED HEREBY.
SECTION 3.10NOT AN AFFILIATE. THE INVESTOR IS NOT AN OFFICER, DIRECTOR OR A
PERSON THAT DIRECTLY, OR INDIRECTLY THROUGH ONE OR MORE INTERMEDIARIES,
CONTROLS OR IS CONTROLLED BY, OR IS UNDER COMMON CONTROL WITH THE COMPANY OR
ANY "AFFILIATE" OF THE COMPANY (AS THAT TERM IS DEFINED IN RULE 405 OF THE
SECURITIES ACT). NEITHER THE INVESTOR NOR ITS AFFILIATES HAS AN OPEN SHORT
POSITION IN THE COMMON STOCK OF THE COMPANY, AND THE INVESTOR AGREES THAT IT
WILL NOT, AND THAT IT WILL CAUSE ITS AFFILIATES NOT TO, ENGAGE IN ANY SHORT
SALES OF OR HEDGING TRANSACTIONS WITH RESPECT TO THE COMMON STOCK, PROVIDED
THAT THE COMPANY ACKNOWLEDGES AND AGREES THAT UPON RECEIPT OF AN ADVANCE NOTICE
THE INVESTOR WILL SELL THE SHARES TO BE ISSUED TO THE INVESTOR PURSUANT TO THE
ADVANCE NOTICE, EVEN IF THE SHARES HAVE NOT BEEN DELIVERED TO THE INVESTOR.
SECTION 3.11Trading Activities. The Investor's trading activities with respect
to the Company's Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company's Common Stock is
listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company and, except as set forth below, the
Investor shall not and will cause its affiliates not to engage in any short
sale as defined in any applicable SEC or National Association of Securities
Dealers rules on any hedging transactions with respect to the Common Stock.
Without limiting the foregoing, the Investor agrees not to engage in any naked
short transactions in excess of the amount of shares owned (or an offsetting
long position) during the Commitment Period. The Investor shall be entitled to
sell Common Stock during the applicable Pricing Period.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents (as defined herein), the Company hereby represents and warrants
to, and covenants with, the Investor that the following are true and correct as
of the date hereof:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. THE COMPANY IS DULY INCORPORATED
OR ORGANIZED AND VALIDLY EXISTING IN THE JURISDICTION OF ITS INCORPORATION OR
ORGANIZATION AND HAS ALL REQUISITE POWER AND AUTHORITY CORPORATE POWER TO OWN
ITS PROPERTIES AND TO CARRY ON ITS BUSINESS AS NOW BEING CONDUCTED. EACH OF
THE COMPANY AND ITS SUBSIDIARIES IS DULY QUALIFIED AS A FOREIGN CORPORATION TO
DO BUSINESS AND IS IN GOOD STANDING IN EVERY JURISDICTION IN WHICH THE NATURE
OF THE BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION NECESSARY, EXCEPT TO
THE EXTENT THAT THE FAILURE TO BE SO QUALIFIED OR BE IN GOOD STANDING WOULD NOT
HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY AND ITS SUBSIDIARIES TAKEN AS A
WHOLE.
SECTION 4.2 AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER INSTRUMENTS. (I)
THE COMPANY HAS THE REQUISITE CORPORATE POWER AND AUTHORITY TO ENTER INTO AND
PERFORM THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE ESCROW
AGREEMENT, THE PLACEMENT AGENT AGREEMENT AND ANY RELATED AGREEMENTS, IN
ACCORDANCE WITH THE TERMS HEREOF AND THEREOF, (II) THE EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE ESCROW AGREEMENT, THE
PLACEMENT AGENT AGREEMENT AND ANY RELATED AGREEMENTS BY THE COMPANY AND THE
CONSUMMATION BY IT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, HAVE
BEEN DULY AUTHORIZED BY THE COMPANY'S BOARD OF DIRECTORS AND NO FURTHER CONSENT
OR AUTHORIZATION IS REQUIRED BY THE COMPANY, ITS BOARD OF DIRECTORS OR ITS
STOCKHOLDERS, (III) THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE
ESCROW AGREEMENT, THE PLACEMENT AGENT AGREEMENT AND ANY RELATED AGREEMENTS HAVE
BEEN DULY EXECUTED AND DELIVERED BY THE COMPANY, (IV) THIS AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT, THE ESCROW AGREEMENT, THE PLACEMENT AGENT
AGREEMENT AND ASSUMING THE EXECUTION AND DELIVERY THEREOF AND ACCEPTANCE BY THE
INVESTOR AND ANY RELATED AGREEMENTS CONSTITUTE THE VALID AND BINDING
OBLIGATIONS OF THE COMPANY ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH
THEIR TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL PRINCIPLES
OF EQUITY OR APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM,
LIQUIDATION OR SIMILAR LAWS RELATING TO, OR AFFECTING GENERALLY, THE
ENFORCEMENT OF CREDITORS' RIGHTS AND REMEDIES.
SECTION 4.3 CAPITALIZATION. AS OF THE DATE HEREOF, THE AUTHORIZED CAPITAL
STOCK OF THE COMPANY CONSISTS OF 100,000,000 SHARES OF COMMON STOCK, PAR VALUE
$0.00001 PER SHARE AND 20,000,000 SHARES OF PREFERRED STOCK OF WHICH 23,546,523
SHARES OF COMMON STOCK AND NO SHARES OF PREFERRED STOCK WERE ISSUED AND
OUTSTANDING. ALL OF SUCH OUTSTANDING SHARES HAVE BEEN VALIDLY ISSUED AND ARE
FULLY PAID AND NONASSESSABLE. EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, NO
SHARES OF COMMON STOCK ARE SUBJECT TO PREEMPTIVE RIGHTS OR ANY OTHER SIMILAR
RIGHTS OR ANY LIENS OR ENCUMBRANCES SUFFERED OR PERMITTED BY THE COMPANY.
EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, AS OF THE DATE HEREOF, (I) THERE ARE
NO OUTSTANDING OPTIONS, WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE TO, CALLS OR
COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS
CONVERTIBLE INTO, ANY SHARES OF CAPITAL STOCK OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, OR CONTRACTS, COMMITMENTS, UNDERSTANDINGS OR ARRANGEMENTS BY
WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR MAY BECOME BOUND TO ISSUE
ADDITIONAL SHARES OF CAPITAL STOCK OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR
OPTIONS, WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY
CHARACTER WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS CONVERTIBLE INTO, ANY
SHARES OF CAPITAL STOCK OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) THERE
ARE NO OUTSTANDING DEBT SECURITIES (III) THERE ARE NO OUTSTANDING REGISTRATION
STATEMENTS OTHER THAN ON FORM S-8 AND (IV) THERE ARE NO AGREEMENTS OR
ARRANGEMENTS UNDER WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OBLIGATED TO
REGISTER THE SALE OF ANY OF THEIR SECURITIES UNDER THE SECURITIES ACT (EXCEPT
PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT). THERE ARE NO SECURITIES OR
INSTRUMENTS CONTAINING ANTI-DILUTION OR SIMILAR PROVISIONS THAT WILL BE
TRIGGERED BY THIS AGREEMENT OR ANY RELATED AGREEMENT OR THE CONSUMMATION OF THE
TRANSACTIONS DESCRIBED HEREIN OR THEREIN. THE COMPANY HAS FURNISHED TO THE
INVESTOR TRUE AND CORRECT COPIES OF THE COMPANY'S CERTIFICATE OF INCORPORATION,
AS AMENDED AND AS IN EFFECT ON THE DATE HEREOF (THE "CERTIFICATE OF
INCORPORATION"), AND THE COMPANY'S BY-LAWS, AS IN EFFECT ON THE DATE HEREOF
(THE "BY-LAWS"), AND THE TERMS OF ALL SECURITIES CONVERTIBLE INTO OR
EXERCISABLE FOR COMMON STOCK AND THE MATERIAL RIGHTS OF THE HOLDERS THEREOF IN
RESPECT THERETO.
SECTION 4.4 NO CONFLICT. THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS
AGREEMENT BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY WILL NOT (I) RESULT IN A VIOLATION OF THE
CERTIFICATE OF INCORPORATION, ANY CERTIFICATE OF DESIGNATIONS OF ANY
OUTSTANDING SERIES OF PREFERRED STOCK OF THE COMPANY OR BY-LAWS OR (II)
CONFLICT WITH OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH WITH NOTICE OR LAPSE
OF TIME OR BOTH WOULD BECOME A DEFAULT) UNDER, OR GIVE TO OTHERS ANY RIGHTS OF
TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION OF, ANY AGREEMENT,
INDENTURE OR INSTRUMENT TO WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS A
PARTY, OR RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT
OR DECREE (INCLUDING FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS AND THE
RULES AND REGULATIONS OF THE PRINCIPAL MARKET ON WHICH THE COMMON STOCK IS
QUOTED) APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR BY WHICH ANY
MATERIAL PROPERTY OR ASSET OF THE COMPANY OR ANY OF ITS SUBSIDIARIES IS BOUND
OR AFFECTED AND WHICH WOULD CAUSE A MATERIAL ADVERSE EFFECT. EXCEPT AS
DISCLOSED IN THE SEC DOCUMENTS, NEITHER THE COMPANY NOR ITS SUBSIDIARIES IS IN
VIOLATION OF ANY TERM OF OR IN DEFAULT UNDER ITS ARTICLES OF INCORPORATION OR
BY-LAWS OR THEIR ORGANIZATIONAL CHARTER OR BY-LAWS, RESPECTIVELY, OR ANY
MATERIAL CONTRACT, AGREEMENT, MORTGAGE, INDEBTEDNESS, INDENTURE, INSTRUMENT,
JUDGMENT, DECREE OR ORDER OR ANY STATUTE, RULE OR REGULATION APPLICABLE TO THE
COMPANY OR ITS SUBSIDIARIES. THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES
IS NOT BEING CONDUCTED IN VIOLATION OF ANY MATERIAL LAW, ORDINANCE, REGULATION
OF ANY GOVERNMENTAL ENTITY. EXCEPT AS SPECIFICALLY CONTEMPLATED BY THIS
AGREEMENT AND AS REQUIRED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, THE COMPANY IS NOT REQUIRED TO OBTAIN ANY CONSENT,
AUTHORIZATION OR ORDER OF, OR MAKE ANY FILING OR REGISTRATION WITH, ANY COURT
OR GOVERNMENTAL AGENCY IN ORDER FOR IT TO EXECUTE, DELIVER OR PERFORM ANY OF
ITS OBLIGATIONS UNDER OR CONTEMPLATED BY THIS AGREEMENT OR THE REGISTRATION
RIGHTS AGREEMENT IN ACCORDANCE WITH THE TERMS HEREOF OR THEREOF. ALL CONSENTS,
AUTHORIZATIONS, ORDERS, FILINGS AND REGISTRATIONS WHICH THE COMPANY IS REQUIRED
TO OBTAIN PURSUANT TO THE PRECEDING SENTENCE HAVE BEEN OBTAINED OR EFFECTED ON
OR PRIOR TO THE DATE HEREOF. THE COMPANY AND ITS SUBSIDIARIES ARE UNAWARE OF
ANY FACT OR CIRCUMSTANCE WHICH MIGHT GIVE RISE TO ANY OF THE FOREGOING.
SECTION 4.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. SINCE JANUARY 1, 2002, THE
COMPANY HAS FILED ALL REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS
REQUIRED TO BE FILED BY IT WITH THE SEC UNDER OF THE EXCHANGE ACT. THE COMPANY
HAS DELIVERED TO THE INVESTOR OR ITS REPRESENTATIVES, OR MADE AVAILABLE THROUGH
THE SEC'S WEBSITE AT XXXX://XXX.XXX.XXX, TRUE AND COMPLETE COPIES OF THE SEC
DOCUMENTS. AS OF THEIR RESPECTIVE DATES, THE FINANCIAL STATEMENTS OF THE
COMPANY DISCLOSED IN THE SEC DOCUMENTS (THE "FINANCIAL STATEMENTS") COMPLIED AS
TO FORM IN ALL MATERIAL RESPECTS WITH APPLICABLE ACCOUNTING REQUIREMENTS AND
THE PUBLISHED RULES AND REGULATIONS OF THE SEC WITH RESPECT THERETO. SUCH
FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED, DURING THE PERIODS INVOLVED
(EXCEPT (I) AS MAY BE OTHERWISE INDICATED IN SUCH FINANCIAL STATEMENTS OR THE
NOTES THERETO, OR (II) IN THE CASE OF UNAUDITED INTERIM STATEMENTS, TO THE
EXTENT THEY MAY EXCLUDE FOOTNOTES OR MAY BE CONDENSED OR SUMMARY STATEMENTS)
AND, FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE FINANCIAL POSITION OF THE
COMPANY AS OF THE DATES THEREOF AND THE RESULTS OF ITS OPERATIONS AND CASH
FLOWS FOR THE PERIODS THEN ENDED (SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS,
TO NORMAL YEAR-END AUDIT ADJUSTMENTS). NO OTHER INFORMATION PROVIDED BY OR ON
BEHALF OF THE COMPANY TO THE INVESTOR WHICH IS NOT INCLUDED IN THE SEC
DOCUMENTS CONTAINS ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS TO STATE
ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN THE
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.
SECTION 4.6 10B-5. THE SEC DOCUMENTS DO NOT INCLUDE ANY UNTRUE STATEMENTS OF
MATERIAL FACT, NOR DO THEY OMIT TO STATE ANY MATERIAL FACT REQUIRED TO BE
STATED THEREIN NECESSARY TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.
SECTION 4.7 NO DEFAULT. EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, THE COMPANY
IS NOT IN DEFAULT IN THE PERFORMANCE OR OBSERVANCE OF ANY MATERIAL OBLIGATION,
AGREEMENT, COVENANT OR CONDITION CONTAINED IN ANY INDENTURE, MORTGAGE, DEED OF
TRUST OR OTHER MATERIAL INSTRUMENT OR AGREEMENT TO WHICH IT IS A PARTY OR BY
WHICH IT IS OR ITS PROPERTY IS BOUND AND NEITHER THE EXECUTION, NOR THE
DELIVERY BY THE COMPANY, NOR THE PERFORMANCE BY THE COMPANY OF ITS OBLIGATIONS
UNDER THIS AGREEMENT OR ANY OF THE EXHIBITS OR ATTACHMENTS HERETO WILL CONFLICT
WITH OR RESULT IN THE BREACH OR VIOLATION OF ANY OF THE TERMS OR PROVISIONS OF,
OR CONSTITUTE A DEFAULT OR RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN OR
CHARGE ON ANY ASSETS OR PROPERTIES OF THE COMPANY UNDER ITS CERTIFICATE OF
INCORPORATION, BY-LAWS, ANY MATERIAL INDENTURE, MORTGAGE, DEED OF TRUST OR
OTHER MATERIAL AGREEMENT APPLICABLE TO THE COMPANY OR INSTRUMENT TO WHICH THE
COMPANY IS A PARTY OR BY WHICH IT IS BOUND, OR ANY STATUTE, OR ANY DECREE,
JUDGMENT, ORDER, RULES OR REGULATION OF ANY COURT OR GOVERNMENTAL AGENCY OR
BODY HAVING JURISDICTION OVER THE COMPANY OR ITS PROPERTIES, IN EACH CASE WHICH
DEFAULT, LIEN OR CHARGE IS LIKELY TO CAUSE A MATERIAL ADVERSE EFFECT ON THE
COMPANY'S BUSINESS OR FINANCIAL CONDITION.
SECTION 4.8 ABSENCE OF EVENTS OF DEFAULT. EXCEPT FOR MATTERS DESCRIBED IN THE
SEC DOCUMENTS AND/OR THIS AGREEMENT, NO EVENT OF DEFAULT, AS DEFINED IN THE
RESPECTIVE AGREEMENT TO WHICH THE COMPANY IS A PARTY, AND NO EVENT WHICH, WITH
THE GIVING OF NOTICE OR THE PASSAGE OF TIME OR BOTH, WOULD BECOME AN EVENT OF
DEFAULT (AS SO DEFINED), HAS OCCURRED AND IS CONTINUING, WHICH WOULD HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS, PROPERTIES, PROSPECTS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
SECTION 4.9 INTELLECTUAL PROPERTY RIGHTS. THE COMPANY AND ITS SUBSIDIARIES OWN
OR POSSESS ADEQUATE RIGHTS OR LICENSES TO USE ALL MATERIAL TRADEMARKS, TRADE
NAMES, SERVICE MARKS, SERVICE XXXX REGISTRATIONS, SERVICE NAMES, PATENTS,
PATENT RIGHTS, COPYRIGHTS, INVENTIONS, LICENSES, APPROVALS, GOVERNMENTAL
AUTHORIZATIONS, TRADE SECRETS AND RIGHTS NECESSARY TO CONDUCT THEIR RESPECTIVE
BUSINESSES AS NOW CONDUCTED. THE COMPANY AND ITS SUBSIDIARIES DO NOT HAVE ANY
KNOWLEDGE OF ANY INFRINGEMENT BY THE COMPANY OR ITS SUBSIDIARIES OF TRADEMARK,
TRADE NAME RIGHTS, PATENTS, PATENT RIGHTS, COPYRIGHTS, INVENTIONS, LICENSES,
SERVICE NAMES, SERVICE MARKS, SERVICE XXXX REGISTRATIONS, TRADE SECRET OR OTHER
SIMILAR RIGHTS OF OTHERS, AND, TO THE KNOWLEDGE OF THE COMPANY, THERE IS NO
CLAIM, ACTION OR PROCEEDING BEING MADE OR BROUGHT AGAINST, OR TO THE COMPANY'S
KNOWLEDGE, BEING THREATENED AGAINST, THE COMPANY OR ITS SUBSIDIARIES REGARDING
TRADEMARK, TRADE NAME, PATENTS, PATENT RIGHTS, INVENTION, COPYRIGHT, LICENSE,
SERVICE NAMES, SERVICE MARKS, SERVICE XXXX REGISTRATIONS, TRADE SECRET OR OTHER
INFRINGEMENT; AND THE COMPANY AND ITS SUBSIDIARIES ARE UNAWARE OF ANY FACTS OR
CIRCUMSTANCES WHICH MIGHT GIVE RISE TO ANY OF THE FOREGOING.
SECTION 4.10EMPLOYEE RELATIONS. NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES IS INVOLVED IN ANY LABOR DISPUTE NOR, TO THE KNOWLEDGE OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES, IS ANY SUCH DISPUTE THREATENED. NONE OF
THE COMPANY'S OR ITS SUBSIDIARIES' EMPLOYEES IS A MEMBER OF A UNION AND THE
COMPANY AND ITS SUBSIDIARIES BELIEVE THAT THEIR RELATIONS WITH THEIR EMPLOYEES
ARE GOOD.
SECTION 4.11ENVIRONMENTAL LAWS. THE COMPANY AND ITS SUBSIDIARIES ARE (I) IN
COMPLIANCE WITH ANY AND ALL APPLICABLE MATERIAL FOREIGN, FEDERAL, STATE AND
LOCAL LAWS AND REGULATIONS RELATING TO THE PROTECTION OF HUMAN HEALTH AND
SAFETY, THE ENVIRONMENT OR HAZARDOUS OR TOXIC SUBSTANCES OR WASTES, POLLUTANTS
OR CONTAMINANTS ("ENVIRONMENTAL LAWS"), (II) HAVE RECEIVED ALL PERMITS,
LICENSES OR OTHER APPROVALS REQUIRED OF THEM UNDER APPLICABLE ENVIRONMENTAL
LAWS TO CONDUCT THEIR RESPECTIVE BUSINESSES AND (III) ARE IN COMPLIANCE WITH
ALL TERMS AND CONDITIONS OF ANY SUCH PERMIT, LICENSE OR APPROVAL.
SECTION 4.12TITLE. EXCEPT AS SET FORTH IN THE SEC DOCUMENTS, THE COMPANY HAS
GOOD AND MARKETABLE TITLE TO ITS PROPERTIES AND MATERIAL ASSETS OWNED BY IT,
FREE AND CLEAR OF ANY PLEDGE, LIEN, SECURITY INTEREST, ENCUMBRANCE, CLAIM OR
EQUITABLE INTEREST OTHER THAN SUCH AS ARE NOT MATERIAL TO THE BUSINESS OF THE
COMPANY. ANY REAL PROPERTY AND FACILITIES HELD UNDER LEASE BY THE COMPANY AND
ITS SUBSIDIARIES ARE HELD BY THEM UNDER VALID, SUBSISTING AND ENFORCEABLE
LEASES WITH SUCH EXCEPTIONS AS ARE NOT MATERIAL AND DO NOT INTERFERE WITH THE
USE MADE AND PROPOSED TO BE MADE OF SUCH PROPERTY AND BUILDINGS BY THE COMPANY
AND ITS SUBSIDIARIES.
SECTION 4.13INSURANCE. THE COMPANY AND EACH OF ITS SUBSIDIARIES ARE INSURED BY
INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS
AND IN SUCH AMOUNTS AS MANAGEMENT OF THE COMPANY BELIEVES TO BE PRUDENT AND
CUSTOMARY IN THE BUSINESSES IN WHICH THE COMPANY AND ITS SUBSIDIARIES ARE
ENGAGED. NEITHER THE COMPANY NOR ANY SUCH SUBSIDIARY HAS BEEN REFUSED ANY
INSURANCE COVERAGE SOUGHT OR APPLIED FOR AND NEITHER THE COMPANY NOR ANY SUCH
SUBSIDIARY HAS ANY REASON TO BELIEVE THAT IT WILL NOT BE ABLE TO RENEW ITS
EXISTING INSURANCE COVERAGE AS AND WHEN SUCH COVERAGE EXPIRES OR TO OBTAIN
SIMILAR COVERAGE FROM SIMILAR INSURERS AS MAY BE NECESSARY TO CONTINUE ITS
BUSINESS AT A COST THAT WOULD NOT MATERIALLY AND ADVERSELY AFFECT THE
CONDITION, FINANCIAL OR OTHERWISE, OR THE EARNINGS, BUSINESS OR OPERATIONS OF
THE COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE.
SECTION 4.14REGULATORY PERMITS. THE COMPANY AND ITS SUBSIDIARIES POSSESS ALL
MATERIAL CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE APPROPRIATE
FEDERAL, STATE OR FOREIGN REGULATORY AUTHORITIES NECESSARY TO CONDUCT THEIR
RESPECTIVE BUSINESSES, AND NEITHER THE COMPANY NOR ANY SUCH SUBSIDIARY HAS
RECEIVED ANY NOTICE OF PROCEEDINGS RELATING TO THE REVOCATION OR MODIFICATION
OF ANY SUCH CERTIFICATE, AUTHORIZATION OR PERMIT.
SECTION 4.15INTERNAL ACCOUNTING CONTROLS. THE COMPANY AND EACH OF ITS
SUBSIDIARIES MAINTAIN A SYSTEM OF INTERNAL ACCOUNTING CONTROLS SUFFICIENT TO
PROVIDE REASONABLE ASSURANCE THAT (I) TRANSACTIONS ARE EXECUTED IN ACCORDANCE
WITH MANAGEMENT'S GENERAL OR SPECIFIC AUTHORIZATIONS, (II) TRANSACTIONS ARE
RECORDED AS NECESSARY TO PERMIT PREPARATION OF FINANCIAL STATEMENTS IN
CONFORMITY WITH 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.
SECTION 4.16NO MATERIAL ADVERSE BREACHES, ETC. EXCEPT AS SET FORTH IN THE SEC
DOCUMENTS, NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS SUBJECT TO ANY
CHARTER, CORPORATE OR OTHER LEGAL RESTRICTION, OR ANY JUDGMENT, DECREE, ORDER,
RULE OR REGULATION WHICH IN THE JUDGMENT OF THE COMPANY'S OFFICERS HAS OR IS
EXPECTED IN THE FUTURE TO HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS,
PROPERTIES, OPERATIONS, FINANCIAL CONDITION, RESULTS OF OPERATIONS OR PROSPECTS
OF THE COMPANY OR ITS SUBSIDIARIES. EXCEPT AS SET FORTH IN THE SEC DOCUMENTS,
NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS IN BREACH OF ANY CONTRACT OR
AGREEMENT WHICH BREACH, IN THE JUDGMENT OF THE COMPANY'S OFFICERS, HAS OR IS
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS, PROPERTIES,
OPERATIONS, FINANCIAL CONDITION, RESULTS OF OPERATIONS OR PROSPECTS OF THE
COMPANY OR ITS SUBSIDIARIES.
SECTION 4.17ABSENCE OF LITIGATION. EXCEPT AS SET FORTH IN THE SEC DOCUMENTS,
THERE IS NO ACTION, SUIT, PROCEEDING, INQUIRY OR INVESTIGATION BEFORE OR BY ANY
COURT, PUBLIC BOARD, GOVERNMENT AGENCY, SELF-REGULATORY ORGANIZATION OR BODY
PENDING AGAINST OR AFFECTING THE COMPANY, THE COMMON STOCK OR ANY OF THE
COMPANY'S SUBSIDIARIES, WHEREIN AN UNFAVORABLE DECISION, RULING OR FINDING
WOULD (I) HAVE A MATERIAL ADVERSE EFFECT ON THE TRANSACTIONS CONTEMPLATED
HEREBY (II) ADVERSELY AFFECT THE VALIDITY OR ENFORCEABILITY OF, OR THE
AUTHORITY OR ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS UNDER, THIS
AGREEMENT OR ANY OF THE DOCUMENTS CONTEMPLATED HEREIN, OR (III) EXCEPT AS
EXPRESSLY DISCLOSED IN THE SEC DOCUMENTS, HAVE A MATERIAL ADVERSE EFFECT ON THE
BUSINESS, OPERATIONS, PROPERTIES, FINANCIAL CONDITION OR RESULTS OF OPERATION
OF THE COMPANY AND ITS SUBSIDIARIES TAKEN AS A WHOLE.
SECTION 4.18SUBSIDIARIES. EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, THE
COMPANY DOES NOT PRESENTLY OWN OR CONTROL, DIRECTLY OR INDIRECTLY, ANY INTEREST
IN ANY OTHER CORPORATION, PARTNERSHIP, ASSOCIATION OR OTHER BUSINESS ENTITY.
SECTION 4.19TAX STATUS. EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, THE COMPANY
AND EACH OF ITS SUBSIDIARIES HAS MADE OR FILED ALL FEDERAL AND STATE INCOME AND
ALL OTHER TAX RETURNS, REPORTS AND DECLARATIONS REQUIRED BY ANY JURISDICTION TO
WHICH IT IS SUBJECT AND (UNLESS AND ONLY TO THE EXTENT THAT THE COMPANY AND
EACH OF ITS SUBSIDIARIES HAS SET ASIDE ON ITS BOOKS PROVISIONS REASONABLY
ADEQUATE FOR THE PAYMENT OF ALL UNPAID AND UNREPORTED TAXES) HAS PAID ALL TAXES
AND OTHER GOVERNMENTAL ASSESSMENTS AND CHARGES THAT ARE MATERIAL IN AMOUNT,
SHOWN OR DETERMINED TO BE DUE ON SUCH RETURNS, REPORTS AND DECLARATIONS, EXCEPT
THOSE BEING CONTESTED IN GOOD FAITH AND HAS SET ASIDE ON ITS BOOKS PROVISION
REASONABLY ADEQUATE FOR THE PAYMENT OF ALL TAXES FOR PERIODS SUBSEQUENT TO THE
PERIODS TO WHICH SUCH RETURNS, REPORTS OR DECLARATIONS APPLY. THERE ARE NO
UNPAID TAXES IN ANY MATERIAL AMOUNT CLAIMED TO BE DUE BY THE TAXING AUTHORITY
OF ANY JURISDICTION, AND THE OFFICERS OF THE COMPANY KNOW OF NO BASIS FOR ANY
SUCH CLAIM.
SECTION 4.20CERTAIN TRANSACTIONS. EXCEPT AS SET FORTH IN THE SEC DOCUMENTS
NONE OF THE OFFICERS, DIRECTORS, OR EMPLOYEES OF THE COMPANY IS PRESENTLY A
PARTY TO ANY TRANSACTION WITH THE COMPANY (OTHER THAN FOR SERVICES AS
EMPLOYEES, OFFICERS AND DIRECTORS), INCLUDING ANY CONTRACT, AGREEMENT OR OTHER
ARRANGEMENT PROVIDING FOR THE FURNISHING OF SERVICES TO OR BY, PROVIDING FOR
RENTAL OF REAL OR PERSONAL PROPERTY TO OR FROM, OR OTHERWISE REQUIRING PAYMENTS
TO OR FROM ANY OFFICER, DIRECTOR OR SUCH EMPLOYEE OR, TO THE KNOWLEDGE OF THE
COMPANY, ANY CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY IN WHICH ANY
OFFICER, DIRECTOR, OR ANY SUCH EMPLOYEE HAS A SUBSTANTIAL INTEREST OR IS AN
OFFICER, DIRECTOR, TRUSTEE OR PARTNER.
SECTION 4.21FEES AND RIGHTS OF FIRST REFUSAL. THE COMPANY IS NOT OBLIGATED TO
OFFER THE SECURITIES OFFERED HEREUNDER ON A RIGHT OF FIRST REFUSAL BASIS OR
OTHERWISE TO ANY THIRD PARTIES INCLUDING, BUT NOT LIMITED TO, CURRENT OR FORMER
SHAREHOLDERS OF THE COMPANY, UNDERWRITERS, BROKERS, AGENTS OR OTHER THIRD
PARTIES.
SECTION 4.22USE OF PROCEEDS. THE COMPANY REPRESENTS THAT THE NET PROCEEDS FROM
THIS OFFERING WILL BE USED FOR GENERAL CORPORATE PURPOSES. HOWEVER, IN NO
EVENT SHALL THE NET PROCEEDS FROM THIS OFFERING BE USED BY THE COMPANY FOR THE
PAYMENT (OR LOANED TO ANY SUCH PERSON FOR THE PAYMENT) OF ANY JUDGMENT, OR
OTHER LIABILITY, INCURRED BY ANY EXECUTIVE OFFICER, OFFICER, DIRECTOR OR
EMPLOYEE OF THE COMPANY, EXCEPT FOR ANY LIABILITY OWED TO SUCH PERSON FOR
SERVICES RENDERED, OR IF ANY JUDGMENT OR OTHER LIABILITY IS INCURRED BY SUCH
PERSON ORIGINATING FROM SERVICES RENDERED TO THE COMPANY, OR THE COMPANY HAS
INDEMNIFIED SUCH PERSON FROM LIABILITY.
SECTION 4.23FURTHER REPRESENTATION AND WARRANTIES OF THE COMPANY. FOR SO LONG
AS ANY SECURITIES ISSUABLE HEREUNDER HELD BY THE INVESTOR REMAIN OUTSTANDING,
THE COMPANY ACKNOWLEDGES, REPRESENTS, WARRANTS AND AGREES THAT IT WILL MAINTAIN
THE LISTING OF ITS COMMON STOCK ON THE PRINCIPAL MARKET.
SECTION 4.24OPINION OF COUNSEL. INVESTOR SHALL RECEIVE AN OPINION LETTER FROM
XXXXXXXXX & ASSOCIATES, COUNSEL TO THE COMPANY, ON THE DATE HEREOF.
SECTION 4.25OPINION OF COUNSEL. THE COMPANY WILL OBTAIN FOR THE INVESTOR, AT
THE COMPANY'S EXPENSE, ANY AND ALL OPINIONS OF COUNSEL WHICH MAY BE REASONABLY
REQUIRED IN ORDER TO SELL THE SECURITIES ISSUABLE HEREUNDER WITHOUT
RESTRICTION.
SECTION 4.26DILUTION. THE COMPANY IS AWARE AND ACKNOWLEDGES THAT ISSUANCE OF
SHARES OF THE COMPANY'S COMMON STOCK COULD CAUSE DILUTION TO EXISTING
SHAREHOLDERS AND COULD SIGNIFICANTLY INCREASE THE OUTSTANDING NUMBER OF SHARES
OF COMMON STOCK.
ARTICLE V.
INDEMNIFICATION
The Investor and the Company represent to the other the following with respect
to itself:
SECTION 5.1 INDEMNIFICATION.
(a) In consideration of the Investor's execution and delivery of this
Agreement, and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investor, and all of its officers, directors, partners, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Investor
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses
in connection therewith (irrespective of whether any such Investor Indemnitee
is a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Investor Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of
any representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim brought or made
against such Investor Indemnitee not arising out of any action or inaction of
an Investor Indemnitee, and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Investor
Indemnitees. To the extent that the foregoing undertaking by the Company may
be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations under
this Agreement, the Investor shall defend, protect, indemnify and hold harmless
the Company and all of its officers, directors, shareholders, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Company
Indemnitees") from and against any and all Indemnified Liabilities incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Investor in this Agreement, the Registration Rights
Agreement, or any instrument or document contemplated hereby or thereby
executed by the Investor, (b) any breach of any covenant, agreement or
obligation of the Investor(s) contained in this Agreement, the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby executed by the Investor, or (c) any cause of action, suit or
claim brought or made against such Company Indemnitee based on
misrepresentations or due to a breach by the Investor and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Company Indemnitees. To the extent that the foregoing
undertaking by the Investor may be unenforceable for any reason, the Investor
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.
(c) The obligations of the parties to indemnify or make
contribution under this Section 5.1 shall survive termination.
ARTICLE VI.
COVENANTS OF THE COMPANY
SECTION 6.1 REGISTRATION RIGHTS. THE COMPANY SHALL CAUSE THE REGISTRATION
RIGHTS AGREEMENT TO REMAIN IN FULL FORCE AND EFFECT AND THE COMPANY SHALL
COMPLY IN ALL MATERIAL RESPECTS WITH THE TERMS THEREOF.
SECTION 6.2 LISTING OF COMMON STOCK. THE COMPANY SHALL MAINTAIN THE COMMON
STOCK'S AUTHORIZATION FOR QUOTATION ON THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS INC.'S OVER THE COUNTER BULLETIN BOARD.
SECTION 6.3 EXCHANGE ACT REGISTRATION. THE COMPANY WILL CAUSE ITS COMMON STOCK
TO CONTINUE TO BE REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT, WILL FILE
IN A TIMELY MANNER ALL REPORTS AND OTHER DOCUMENTS REQUIRED OF IT AS A
REPORTING COMPANY UNDER THE EXCHANGE ACT AND WILL NOT TAKE ANY ACTION OR FILE
ANY DOCUMENT (WHETHER OR NOT PERMITTED BY EXCHANGE ACT OR THE RULES THEREUNDER)
TO TERMINATE OR SUSPEND SUCH REGISTRATION OR TO TERMINATE OR SUSPEND ITS
REPORTING AND FILING OBLIGATIONS UNDER SAID EXCHANGE ACT.
SECTION 6.4 TRANSFER AGENT INSTRUCTIONS. NOT LATER THAN TWO (2) BUSINESS DAYS
AFTER EACH ADVANCE NOTICE DATE AND PRIOR TO EACH CLOSING AND THE EFFECTIVENESS
OF THE REGISTRATION STATEMENT AND RESALE OF THE COMMON STOCK BY THE INVESTOR,
THE COMPANY WILL DELIVER INSTRUCTIONS TO ITS TRANSFER AGENT TO ISSUE SHARES OF
COMMON STOCK FREE OF RESTRICTIVE LEGENDS.
SECTION 6.5 CORPORATE EXISTENCE. THE COMPANY WILL TAKE ALL STEPS NECESSARY TO
PRESERVE AND CONTINUE THE CORPORATE EXISTENCE OF THE COMPANY.
SECTION 6.6 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE AN ADVANCE. THE COMPANY WILL IMMEDIATELY NOTIFY THE INVESTOR
UPON ITS BECOMING AWARE OF THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS IN
RESPECT OF A REGISTRATION STATEMENT OR RELATED PROSPECTUS RELATING TO AN
OFFERING OF REGISTRABLE SECURITIES: (I) 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; (II) THE
ISSUANCE BY THE SEC OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL AUTHORITY OF
ANY STOP ORDER SUSPENDING THE EFFECTIVENESS OF THE REGISTRATION STATEMENT OR
THE INITIATION OF ANY PROCEEDINGS FOR THAT PURPOSE; (III) 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; (IV) THE HAPPENING OF ANY EVENT THAT MAKES ANY STATEMENT MADE IN THE
REGISTRATION STATEMENT OR RELATED PROSPECTUS OF 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 THE 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 (V) THE COMPANY'S REASONABLE DETERMINATION THAT A
POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT WOULD BE APPROPRIATE;
AND THE COMPANY WILL PROMPTLY MAKE AVAILABLE TO THE INVESTOR ANY SUCH
SUPPLEMENT OR AMENDMENT TO THE RELATED PROSPECTUS. THE COMPANY SHALL NOT
DELIVER TO THE INVESTOR ANY ADVANCE NOTICE DURING THE CONTINUATION OF ANY OF
THE FOREGOING EVENTS.
SECTION 6.7 EXPECTATIONS REGARDING ADVANCE NOTICES. WITHIN TEN (10) DAYS AFTER
THE COMMENCEMENT OF EACH CALENDAR QUARTER OCCURRING SUBSEQUENT TO THE
COMMENCEMENT OF THE COMMITMENT PERIOD, THE COMPANY MUST NOTIFY THE INVESTOR, IN
WRITING, AS TO ITS REASONABLE EXPECTATIONS AS TO THE DOLLAR AMOUNT IT INTENDS
TO RAISE DURING SUCH CALENDAR QUARTER, IF ANY, THROUGH THE ISSUANCE OF ADVANCE
NOTICES. SUCH NOTIFICATION SHALL CONSTITUTE ONLY THE COMPANY'S GOOD FAITH
ESTIMATE AND SHALL IN NO WAY OBLIGATE THE COMPANY TO RAISE SUCH AMOUNT, OR ANY
AMOUNT, OR OTHERWISE LIMIT ITS ABILITY TO DELIVER ADVANCE NOTICES. THE FAILURE
BY THE COMPANY TO COMPLY WITH THIS PROVISION CAN BE CURED BY THE COMPANY'S
NOTIFYING THE INVESTOR, IN WRITING, AT ANY TIME AS TO ITS REASONABLE
EXPECTATIONS WITH RESPECT TO THE CURRENT CALENDAR QUARTER.
SECTION 6.8 RESTRICTION ON SALE OF CAPITAL STOCK. DURING THE COMMITMENT
PERIOD, THE COMPANY SHALL NOT ISSUE OR SELL (I) ANY COMMON STOCK OR PREFERRED
STOCK WITHOUT CONSIDERATION OR FOR A CONSIDERATION PER SHARE LESS THAN THE BID
PRICE OF THE COMMON STOCK DETERMINED IMMEDIATELY PRIOR TO ITS ISSUANCE,
(II) ISSUE OR SELL ANY PREFERRED STOCK WARRANT, OPTION, RIGHT, CONTRACT, CALL,
OR OTHER SECURITY OR INSTRUMENT GRANTING THE HOLDER THEREOF THE RIGHT TO
ACQUIRE COMMON STOCK WITHOUT CONSIDERATION OR FOR A CONSIDERATION PER SHARE
LESS THAN SUCH COMMON STOCK'S BID PRICE DETERMINED IMMEDIATELY PRIOR TO ITS
ISSUANCE, OR (III) FILE ANY REGISTRATION STATEMENT ON FORM S-8.
NOTWITHSTANDING THE FOREGOING RESTRICTION, THE COMPANY MAY FILE ONE (1)
REGISTRATION STATEMENT ON FORM S-8 FOR UP TO TWO MILLION FIVE HUNDRED THOUSAND
(2,500,000) SHARES OF COMMON STOCK (THE "PERMITTED FORM S-8"), PROVIDED
HOWEVER, ANY PERSON RECEIVING SHARES PURSUANT TO THE PERMITTED FORM S-8
REGISTRATION SHALL BE RESTRICTED FROM SELLING SUCH SHARES FOR A PERIOD OF
NINETY (90) DAYS AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
SECTION 6.9 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 THE ASSETS OF THE COMPANY TO
ANOTHER ENTITY (A "CONSOLIDATION EVENT") UNLESS THE RESULTING SUCCESSOR OR
ACQUIRING ENTITY (IF NOT THE COMPANY) ASSUMES BY WRITTEN INSTRUMENT THE
OBLIGATION TO DELIVER TO THE INVESTOR SUCH SHARES OF STOCK AND/OR SECURITIES AS
THE INVESTOR IS ENTITLED TO RECEIVE PURSUANT TO THIS AGREEMENT.
SECTION 6.10ISSUANCE OF THE COMPANY'S COMMON STOCK. THE SALE OF THE SHARES OF
COMMON STOCK SHALL BE MADE IN ACCORDANCE WITH THE PROVISIONS AND REQUIREMENTS
OF REGULATION D AND ANY APPLICABLE STATE SECURITIES LAW.
ARTICLE VII.
CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING
SECTION 7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. THE
OBLIGATION HEREUNDER OF THE COMPANY TO ISSUE AND SELL THE SHARES OF COMMON
STOCK TO THE INVESTOR INCIDENT TO EACH CLOSING IS SUBJECT TO THE SATISFACTION,
OR WAIVER BY THE COMPANY, AT OR BEFORE EACH SUCH CLOSING, OF EACH OF THE
CONDITIONS SET FORTH BELOW.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all 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 Investor at or prior to such
Closing.
SECTION 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER AN
ADVANCE NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE SHARES OF COMMON
STOCK. THE RIGHT OF THE COMPANY TO DELIVER AN ADVANCE NOTICE AND THE
OBLIGATION OF THE INVESTOR HEREUNDER TO ACQUIRE AND PAY FOR SHARES OF THE
COMPANY'S COMMON STOCK INCIDENT TO A CLOSING IS SUBJECT TO THE FULFILLMENT BY
THE COMPANY, ON (I) THE DATE OF DELIVERY OF SUCH ADVANCE NOTICE AND (II) THE
APPLICABLE ADVANCE DATE (EACH A "CONDITION SATISFACTION DATE"), OF EACH OF THE
FOLLOWING CONDITIONS:
(a) Registration of the Common Stock with the SEC. The Company shall have
filed with the SEC a Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement. As set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective on
each Condition Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop
order with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and the 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 the
Registration Statement or related prospectus shall exist. The Registration
Statement must have been declared effective by the SEC prior to the first
Advance Notice Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom. The sale and
issuance of the shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.
(c) Fundamental Changes. There shall not exist any fundamental changes to the
information set forth in the Registration Statement which would require the
Company to file a post-effective amendment to the Registration Statement.
(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 (including, without limitation, the
conditions specified in Section 2.5 hereof) 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 endorsed
by any court or governmental authority of competent jurisdiction that prohibits
or directly and 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 adversely affecting any of the transactions contemplated by
this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock. The trading of
the Common Stock is not suspended by the SEC or the Principal Market (if the
Common Stock is traded on a Principal Market). 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 (if the Common
Stock is traded on a Principal Market). The Company shall not have received
any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).
(g) Maximum Advance Amount. The amount of an Advance requested by the
Company shall not exceed the Maximum Advance Amount. In addition, in no event
shall the number of shares issuable to the Investor pursuant to an Advance
cause the Investor to own in excess of nine and 9/10 percent (9.9%) of the then
outstanding Common Stock of the Company.
(h) No Knowledge. The Company has no knowledge of any event which would be
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective.
(i) Other. On each Condition Satisfaction Date, the Investor shall have
received the certificate executed by an officer of the Company in the form of
Exhibit A attached hereto.
ARTICLE VIII.
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
SECTION 8.1 DUE DILIGENCE REVIEW. PRIOR TO THE FILING OF THE REGISTRATION
STATEMENT THE COMPANY SHALL MAKE AVAILABLE FOR INSPECTION AND REVIEW BY THE
INVESTOR, ITS ADVISORS AND REPRESENTATIVES, AND ANY UNDERWRITER PARTICIPATING
IN ANY DISPOSITION OF THE REGISTRABLE SECURITIES ON BEHALF OF THE INVESTOR
PURSUANT TO THE REGISTRATION STATEMENT, ANY SUCH 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 THE 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 THE REGISTRATION STATEMENT FOR THE SOLE PURPOSE OF ENABLING THE INVESTOR AND
SUCH REPRESENTATIVES, ADVISORS AND UNDERWRITERS AND THEIR RESPECTIVE
ACCOUNTANTS AND ATTORNEYS TO CONDUCT INITIAL AND ONGOING DUE DILIGENCE WITH
RESPECT TO THE COMPANY AND THE ACCURACY OF THE REGISTRATION STATEMENT.
SECTION 8.2 NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose non-public information to the Investor,
its advisors, or its representatives, unless prior to disclosure of such
information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public
information hereunder, require the Investor's advisors and representatives to
enter into a confidentiality agreement in form reasonably satisfactory to the
Company and the Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to the 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 will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if 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 the 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 8.2 shall be construed to mean
that such persons or entities other than the Investor (without the written
consent of the 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 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, that the Registration Statement
contains an untrue statement of material fact or omits a material fact required
to be stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX.
CHOICE OF LAW/JURISDICTION
SECTION 9.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES FURTHER AGREE THAT ANY ACTION
BETWEEN THEM SHALL BE HEARD IN XXXXXX COUNTY, NEW JERSEY, AND EXPRESSLY CONSENT
TO THE JURISDICTION AND VENUE OF THE SUPERIOR COURT OF NEW JERSEY, SITTING IN
XXXXXX COUNTY, NEW JERSEY AND THE UNITED STATES DISTRICT COURT OF NEW JERSEY,
SITTING IN NEWARK, NEW JERSEY, FOR THE ADJUDICATION OF ANY CIVIL ACTION
ASSERTED PURSUANT TO THIS PARAGRAPH.
ARTICLE X.
ASSIGNMENT; TERMINATION
SECTION 10.1ASSIGNMENT. NEITHER THIS AGREEMENT NOR ANY RIGHTS OF THE COMPANY
HEREUNDER MAY BE ASSIGNED TO ANY OTHER PERSON.
SECTION 10.2TERMINATION. THE OBLIGATIONS OF THE INVESTOR TO MAKE ADVANCES
UNDER ARTICLE II HEREOF SHALL TERMINATE TWENTY-FOUR (24) MONTHS AFTER THE
EFFECTIVE DATE. THE COMPANY MAY TERMINATE THIS AGREEMENT, AT ANY TIME, BY
PROVIDING THE INVESTOR TEN (10) DAYS WRITTEN NOTICE OF ITS INTENT TO TERMINATE
THE AGREEMENT, PROVIDED, HOWEVER, THE AGREEMENT SHALL NOT BE TERMINATED IN THE
EVENT THAT (I) THERE ARE ANY DEBTS OUTSTANDING, WHICH ARE DUE AND OWING TO THE
INVESTOR BY THE COMPANY, WHETHER EXISTING ON THE DATE HEREOF OR INCURRED BY THE
COMPANY AT ANY TIME AFTER THE DATE HEREOF OR (II) THERE ARE ANY OUTSTANDING
ADVANCE NOTICES UNDER THE AGREEMENT.
ARTICLE XI.
NOTICES
SECTION 11.1NOTICES. ANY NOTICES, CONSENTS, WAIVERS, OR OTHER COMMUNICATIONS
REQUIRED OR PERMITTED TO BE GIVEN UNDER THE TERMS OF THIS AGREEMENT MUST BE IN
WRITING AND WILL BE DEEMED TO HAVE BEEN DELIVERED (I) UPON RECEIPT, WHEN
DELIVERED PERSONALLY; (II) UPON RECEIPT, WHEN SENT BY FACSIMILE, PROVIDED A
COPY IS MAILED BY U.S. CERTIFIED MAIL, RETURN RECEIPT REQUESTED; (III) THREE
(3) DAYS AFTER BEING SENT BY U.S. CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR
(IV) ONE (1) DAY AFTER DEPOSIT WITH A NATIONALLY RECOGNIZED OVERNIGHT DELIVERY
SERVICE, IN EACH CASE PROPERLY ADDRESSED TO THE PARTY TO RECEIVE THE SAME. THE
ADDRESSES AND FACSIMILE NUMBERS FOR SUCH COMMUNICATIONS SHALL BE:
If to the Company, to:Transax International, Ltd.
0000 Xxxxxx Xxxxxx Xxxxx - Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Investor(s):Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx -Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy to: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx -Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Senior Vice-President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.1COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
IDENTICAL COUNTERPARTS, ALL OF WHICH SHALL BE CONSIDERED ONE AND THE SAME
AGREEMENT AND SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH
PARTY AND DELIVERED TO THE OTHER PARTY. IN THE EVENT ANY SIGNATURE PAGE IS
DELIVERED BY FACSIMILE TRANSMISSION, THE PARTY USING SUCH MEANS OF DELIVERY
SHALL CAUSE FOUR (4) ADDITIONAL ORIGINAL EXECUTED SIGNATURE PAGES TO BE
PHYSICALLY DELIVERED TO THE OTHER PARTY WITHIN FIVE (5) DAYS OF THE EXECUTION
AND DELIVERY HEREOF, THOUGH FAILURE TO DELIVER SUCH COPIES SHALL NOT AFFECT THE
VALIDITY OF THIS AGREEMENT.
SECTION 12.2ENTIRE AGREEMENT; AMENDMENTS. THIS AGREEMENT SUPERSEDES ALL OTHER
PRIOR ORAL OR WRITTEN AGREEMENTS BETWEEN THE INVESTOR, THE COMPANY, THEIR
AFFILIATES AND PERSONS ACTING ON THEIR BEHALF WITH RESPECT TO THE MATTERS
DISCUSSED HEREIN, AND THIS AGREEMENT AND THE INSTRUMENTS REFERENCED HEREIN
CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE MATTERS
COVERED HEREIN AND THEREIN AND, EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR
THEREIN, NEITHER THE COMPANY NOR THE 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 12.3REPORTING ENTITY FOR THE COMMON STOCK. THE REPORTING ENTITY RELIED
UPON FOR THE DETERMINATION OF THE TRADING PRICE OR TRADING VOLUME 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 THE
INVESTOR AND THE COMPANY SHALL BE REQUIRED TO EMPLOY ANY OTHER REPORTING
ENTITY.
SECTION 12.4FEES AND EXPENSES. THE COMPANY HEREBY AGREES TO PAY THE FOLLOWING
FEES:
(a) Structuring and Legal Fees. Each of the parties shall pay its own fees
and expenses (including the fees of any attorneys, accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company will pay Ten Thousand
Dollars ($10,000) to Yorkville Advisors Management, LLC as a structuring fee,
of which Five Thousand Dollars ($5,000) shall be paid on the date hereof and
the remaining balance of Five Thousand Dollars ($5,000) shall be paid directly
upon the first (1st) Advance Notice (as defined herein) submitted by the
Company pursuant to this Agreement. This structuring fee shall be deemed fully
earned on the date hereof. Subsequently on each advance date, the Company will
pay Xxxxx Xxxxxxxx PC, the sum of Five Hundred Dollars ($500) for legal,
administrative and escrow fees and any outstanding fees of Xxxxxxxxxxx &
Xxxxxxxx LLP directly out of the proceeds of any Advances hereunder.
In addition, on the date hereof, the Company shall pay to the Investor a non-
refundable due diligence fee of Two Thousand Five Hundred Dollars ($2,500).
(b) Commitment Fees.
(i) On each Advance Date the Company shall pay to the Investor, directly from
the gross proceeds held in escrow, an amount equal to five percent (5%) of the
amount of each Advance. The Company hereby agrees that if such payment, as is
described above, is not made by the Company on the Advance Date, such payment
will be made at the direction of the Investor as outlined and mandated by
Section 2.3 of this Agreement.
(ii) Upon the execution of this Agreement the Company shall issue to the
Investor a Compensation Debenture (the "Compensation Debenture") in the amount
of Two Hundred Thousand Dollars ($200,000), which shall be convertible into
shares of the Company's Common Stock valued at the lowest closing bid price, as
quoted by Bloomberg, LP, during the three (3) trading days immediately
preceding the Conversion Date (as such term is defined in the Compensation
Debenture of even date herewith) (the "Investor's Shares").
(iii) Fully Earned. The Investor's Shares shall be deemed fully earned as of
the date hereof.
(iv) Registration Rights. The Investor's Shares will have "piggy-back"
registration rights.
SECTION 12.5BROKERAGE. EACH OF THE PARTIES HERETO 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
ON THE ONE HAND, AND THE INVESTOR, ON THE OTHER HAND, AGREE TO INDEMNIFY THE
OTHER AGAINST AND HOLD THE OTHER HARMLESS FROM ANY AND ALL LIABILITIES TO ANY
PERSON 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 12.6CONFIDENTIALITY. IF FOR ANY REASON THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT ARE NOT CONSUMMATED, EACH OF THE PARTIES HERETO SHALL KEEP
CONFIDENTIAL ANY INFORMATION OBTAINED FROM ANY OTHER PARTY (EXCEPT INFORMATION
PUBLICLY AVAILABLE OR IN SUCH PARTY'S DOMAIN PRIOR TO THE DATE HEREOF, AND
EXCEPT AS REQUIRED BY COURT ORDER) AND SHALL PROMPTLY RETURN TO THE OTHER
PARTIES ALL SCHEDULES, DOCUMENTS, INSTRUMENTS, WORK PAPERS OR OTHER WRITTEN
INFORMATION WITHOUT RETAINING COPIES THEREOF, PREVIOUSLY FURNISHED BY IT AS A
RESULT OF THIS AGREEMENT OR IN CONNECTION HEREIN.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
COMPANY:
TRANSAX INTERNATIONAL, LTD.
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title:President & CEO
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
BY: YORKVILLE ADVISORS, LLC
ITS: GENERAL PARTNER
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title:Portfolio Manager
EXHIBIT A
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
TRANSAX INTERNATIONAL, LTD.
The undersigned, Xxxxxxx Xxxxxxx hereby certifies, with respect to the sale of
shares of Common Stock of TRANSAX INTERNATIONAL, LTD. (the "Company"), issuable
in connection with this Advance Notice and Compliance Certificate dated
___________________ (the "Notice"), delivered pursuant to the Standby Equity
Distribution Agreement (the "Agreement"), as follows:
1. The undersigned is the duly elected President and CEO of the Company.
2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Advance Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in the Agreement.
4. The undersigned hereby represents, warrants and covenants that it has
made all filings ("SEC Filings") required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings required
under the Securities Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K,
etc. All SEC Filings and other public disclosures made by the Company,
including, without limitation, all press releases, analysts meetings and calls,
etc. (collectively, the "Public Disclosures"), have been reviewed and approved
for release by the Company's attorneys and, if containing financial
information, the Company's independent certified public accountants. None of
the Company's Public Disclosures 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.
5. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
_________________.
[COMPANY NAME]
By:
Name: Xxxxxxx Xxxxxxx
Title: President & CEO
SCHEDULE 2.6
TRANSAX INTERNATIONAL, LTD.
The undersigned hereby agrees that for a period commencing on the date hereof
and expiring on the termination of the Agreement dated October __, 2004
between Transax International, Ltd., (the "Company"), and Cornell Capital
Partners, LP, (the "Investor") (the "Lock-up Period"), he, she or it will not,
directly or indirectly, without the prior written consent of the Investor,
issue, offer, agree or offer to sell, sell, grant an option for the purchase or
sale of, transfer, pledge, assign, hypothecate, distribute or otherwise
encumber or dispose of except pursuant to Rule 144 of the General Rules and
Regulations under the Securities Act of 1933, any securities of the Company,
including common stock or options, rights, warrants or other securities
underlying, convertible into, exchangeable or exercisable for or evidencing any
right to purchase or subscribe for any common stock (whether or not
beneficially owned by the undersigned), or any beneficial interest therein
(collectively, the "Securities").
In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
transfer agent of the Company's securities with respect to any of the
Securities registered in the name of the undersigned or beneficially owned by
the undersigned, and the undersigned hereby confirms the undersigned's
investment in the Company.
Dated: _______________, 2004
Signature
Address:
City, State, Zip Code:
Print Social Security Number
or Taxpayer I.D. Number
