EXHIBIT 10.4
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
April 15, 2002 by and between X X International Inc., a British Virgin Islands
corporation (the "Company") and Navigator Investments Holding IX Limited, a
Nevis corporation (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "Applicable Discount" shall mean 10%.
(b) "Average Daily Price" shall be the price based on the VWAP
of the Company on the Principal Market.
(c) "Commencement Date" shall mean the first day of a Draw
Down Pricing Period.
(d) "Daily Purchase Price" shall mean the price paid per Share
during each applicable Draw Down Pricing Period calculated on a daily basis and
determined by subtracting the Applicable Discount from one and multiplying the
result by the corresponding VWAP. A pro-rata portion equal to 1/x of the Draw
Down amount (where x equals the number of Trading Days in the Draw Down Pricing
Period) will be allocated to purchase whole shares of Common Stock at the Daily
Purchase Price for the corresponding Trading Day.
(e) "Disclosure Schedule" shall mean the schedule provided by
the Company to the Purchaser to disclose exceptions to the representations and
warranties of the Company contained in Article III hereof. The Disclosure
Schedule shall specifically identify the Section number(s) of the
representation(s) and warranty(ies) to which each exception relates.
(f) "Draw Down" shall have the meaning assigned to such term
in Section 6.1(a) hereof.
(g) "Draw Down Notice" shall have the meaning assigned to such
term in Section 6.1(e) hereof.
(h) "Draw Down Pricing Period" shall mean the period of five,
ten, fifteen or twenty consecutive Trading Days designated by the Company, and
beginning on the date specified, in the Draw Down Notice (as defined in Section
6.1(e) hereof); provided, however, the Draw Down Pricing Period shall not begin
before the day on which receipt of such notice is deemed effective pursuant to
Section 9.4 hereof; provided, further, that if the Commencement
Date is to be the date of the Draw Down Notice, the Draw Down Notice must be
delivered to and receipt confirmed by the Purchaser at least one hour before
trading commences on such date.
(i) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares is declared effective.
(j) "Investment Amount" shall have the meaning assigned to
such term in Section 6.1(e) hereof.
(k) "Material Adverse Effect" shall mean any adverse effect on
the business, operations, properties or financial condition of the Company that
is material and adverse to the Company and affiliates, taken as a whole and/or
any condition, circumstance, or situation that could prohibit or otherwise
materially interfere with the ability of the Company to perform any of its
obligations under this Agreement or the Registration Rights Agreement or to
perform its obligations under any other material agreement.
(l) "Placement Agent" shall mean The Xxxxx Partnership, Inc.
(m) "Principal Market" shall mean initially the Nasdaq
National Market and shall include the Nasdaq SmallCap Market, OTC Bulletin
Board, American Stock Exchange and the New York Stock Exchange, at such time, if
any, as the Company is listed and trades on such market or exchange.
(n) "Registration Statement" shall mean the registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
to be filed with the United States Securities and Exchange Commission ("SEC")
for the registration of the Shares pursuant to the Registration Rights Agreement
attached hereto as Exhibit A (the "Registration Rights Agreement).
(o) "SEC Documents" shall mean, as of a particular date, all
reports and other documents filed by the Company via the XXXXX system
established by the SEC, pursuant to the Securities Act and/or the Exchange Act
since January 1, 1998.
(p) "Settlement Period" shall have the meaning assigned to
such term in Section 6.1(b).
(q) "Shares" shall mean, collectively, the shares of Common
Stock of the Company being subscribed for hereunder and those shares of Common
Stock issuable to the Purchaser upon exercise of the Warrants.
(r) "Threshold Price" is the lowest Average Daily Price during
any Draw Down Pricing Period at which the Company will sell its Common Stock
with respect to this Agreement. The Threshold Price shall be identified in the
Draw Down Notice, but shall, in no event, be less than $0.50 per share.
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(s) "Trading Day" shall mean any day on which the Principal
Market is open for business.
(t) "VWAP" shall mean the daily volume weighted average price
of the Company's Common Stock on the Principal Market as reported by Bloomberg
Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm EST) using
the AQR function.
(u) "Warrants" shall mean the Warrants as that term is defined
in Section 5.2(f) hereof.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Purchase and Sale of Stock. 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 up to $10,000,000 of the
Company's Common Stock (the "Commitment Amount"), $.01 par value (the "Common
Stock").
Section 2.2. The Shares. 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 to be
issued in connection with all Draw Downs requested under this Agreement.
Anything in this Agreement to the contrary notwithstanding, (a) at no time will
the Company request a Draw Down which would result in the issuance of an
aggregate number of Shares pursuant to this Agreement which exceeds 19.9% of the
number of shares of Common Stock issued and outstanding on the Initial Closing
Date without obtaining stockholder approval of such issuance, and (b) the
Company may not make a Draw Down to the extent that, after such purchase by the
Purchaser and assuming the Purchaser does not have beneficial ownership of any
shares of Common Stock other than the Warrant shares, the aggregate number of
shares of Common Stock beneficially owned by the Purchaser and its affiliates
would result in beneficial ownership by the Purchaser and its affiliates of more
than 9.9% of the Company's then outstanding shares of Common Stock. For purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act").
Section 2.3. Purchase Price and Initial Closing. The Company agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations, warranties and covenants of the Company and the terms
and conditions of this Agreement, the Purchaser agrees to purchase that number
of the Shares to be issued in connection with each Draw Down. The delivery of
executed documents under this Agreement and the other agreements referred to
herein and the payment of such portion, if any, of the fees set forth in Section
9.1 hereof as remain unpaid (the "Initial Closing"), shall take place at the
offices of Atlas Xxxxxxxx, P.A., 000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000, Xxxx
Xxxxxxxxxx, Xxxxxxx 00000, at such time and place as the Purchaser and the
Company may agree upon (the "Initial Closing
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Date"). Each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representation and Warranties of the Company. Except as
set forth in the SEC Documents or on the Disclosure Schedule, the Company hereby
makes the following representations and warranties to the Purchaser. Unless the
context otherwise requires, references to the "Company" include the Company and
each of its subsidiaries.
(a) Organization, Good Standing and Power. The Company and
each subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted. The Company and each
subsidiary is duly qualified to do business and is in good standing as a foreign
corporation in every jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, other than those in
which the failure so to qualify would not have a Material Adverse Effect.
(b) Authorization, Enforcement. (i) The Company has the
requisite corporate power and corporate authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the Escrow
Agreement and to issue the Draw Down Shares pursuant to their respective terms,
(ii) the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement and the Escrow Agreement by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or, subject to Section 2.2(a) above,
stockholders, is required, and (iii) this Agreement, the Registration Rights
Agreement and the Escrow Agreement have been duly executed and delivered by the
Company and at the Initial Closing shall constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application. The Company has, or on the Initial
Closing Date will have, duly and validly authorized and reserved for issuance
shares of Common Stock sufficient to permit the issuance of all Shares that may
be issued pursuant to this Agreement.
(c) Capitalization. The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, $.01 par value, of which
8,671,615 shares are issued and outstanding. All of the outstanding shares of
the Company's Common Stock have been duly and validly authorized and are fully
paid and non-assessable. Except as contemplated by this Agreement or disclosed
in the Disclosure Schedule, no shares of Common Stock are entitled to preemptive
rights or registration rights and there are no outstanding options, warrants,
scrip,
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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, and there are no contracts, commitments, understandings,
or arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except as set forth in
the Disclosure Schedule, the Company is not a party to any agreement granting
registration rights to any person with respect to any of its equity or debt
securities, and the Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Initial Closing
complied with all applicable federal and state securities laws, and no
stockholder has a right of rescission or damages with respect thereto which
could have a Material Adverse Effect. The Company has made available to the
Purchaser true and correct copies of the Company's Memorandum of Association as
in effect on the date hereof (the "Charter"), and the Company's Articles of
Association as in effect on the date hereof (the "Bylaws"). The Company has not
received any notice from the Principal Market questioning or threatening the
continued inclusion of the Common Stock on such market.
(d) Issuance of Shares. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and non-assessable, will not be
subject to the preemptive or similar rights of any person, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated herein do not and will not (i) violate any provision
of the Company's Charter or Bylaws, (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, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party, (iii) create or impose a lien, charge or encumbrance on any property of
the Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or other foreign statute, rule, regulation, order, judgment or
decree (including any federal or state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries are bound or affected, except,
in all cases, for such conflicts, defaults, termination, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under any federal, state or local law, rule
or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its
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obligations under this Agreement, or issue and sell the Shares in accordance
with the terms hereof [other than any filings which may be required to be made
by the Company with Nasdaq, the SEC or state securities administrators
subsequent to the Initial Closing and any registration statement which may be
filed pursuant hereto]; provided that, for purpose of the representation made in
this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Purchaser herein.
(f) SEC Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Exchange Act, and,
except as disclosed in the SEC Documents, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act.
The Company has delivered or made available to the Purchaser true and complete
copies of the SEC Documents filed with the SEC since December 31, 1998 (which
availability is deemed to have been made to the extent such SEC Document appears
in the XXXXX archives of the SEC on the Internet). As of their respective filing
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to such documents, and, as of their respective filing
dates, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis 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 not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of the Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The SEC Documents set forth each subsidiary
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each person's ownership of the outstanding stock
or other interests of such subsidiary. For the purposes of this Agreement,
"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interests having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and non-assessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
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subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is a party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.
(h) No Material Adverse Effect. Since April 30, 2001 no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC
Documents, neither the Company nor any of its subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP which are not disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since such date and which, individually
or in the aggregate, do not or would not have a Material Adverse Effect on the
Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. To the Company's
knowledge no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
(k) Indebtedness. The SEC Documents set forth as of the date
thereof all outstanding secured and unsecured Indebtedness of the Company or any
subsidiary, or for which the Company or any subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (i) any liabilities for
borrowed money or amounts owed in excess of $50,000 (other than trade accounts
payable incurred in the ordinary course of business and payroll consistent with
past practice), (ii) all guaranties, endorsements and contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (iii) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries
has good and marketable title to all of its real and personal property reflected
in the SEC Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except those that would not have a Material
Adverse Effect. All said leases of the Company and each of its subsidiaries are
valid and subsisting and in full force and effect.
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(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the Disclosure
Schedule, there is no action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Company, threatened, against or involving the
Company, any subsidiary or any of their respective properties or assets. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
subsidiary.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except such that would not cause a Material Adverse Effect. The
Company and each of its subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of their respective businesses as now being conducted
by them unless the failure to possess such franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(o) Taxes. The Company and each subsidiary has filed all Tax
Returns which it is required to file under applicable laws; all such Tax Returns
are true and accurate in all material respects and have been prepared in
compliance with all applicable laws; the Company has paid all Taxes due and
owing by it or any subsidiary (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which it is required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties; and since
December 31, 1999, the charges, accruals and reserves for Taxes with respect to
the Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that the Company or any
subsidiary is or may be subject to taxation by that jurisdiction. There are no
foreign, federal, state or local tax audits or administrative or judicial
proceedings pending or being conducted with respect to the Company or any
subsidiary; no information related to Tax matters has been requested by any
foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other review
has been received by the Company or any subsidiary from any foreign, federal,
state or local taxing authority. There are no material unresolved questions or
claims concerning the Company's Tax liability. The Company (A) has not executed
or entered into a closing agreement pursuant to Section 7121 of the Internal
Revenue Code or any predecessor provision thereof or any similar provision of
state, local or foreign law; and (B) has not agreed to or is required to make
any adjustments pursuant to Section 481(a) of the Internal Revenue Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its subsidiaries or has any
knowledge that
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the IRS has proposed any such adjustment or change in accounting method, or has
any application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Internal Revenue Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Internal Revenue Code.
The Company has not made an election under Section 341(f)
of the Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (A) Treas. Reg. Section
1.1502-6 (or comparable provisions of state, local or foreign law), (B) as a
transferee or successor, (C) by contract or indemnity or (D) otherwise. The
Company is not a party to any tax sharing agreement. The Company has not made
any payments, is not obligated to make payments nor is it a party to an
agreement that could obligate it to make any payments that would not be
deductible under Section 280G of the Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or
filing with respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
(p) Certain Fees. No brokers, finders or financial advisory
fees or commissions will be payable by the Company or any subsidiary with
respect to the transactions contemplated by this Agreement, except to the extent
of any such payment to the Placement Agent.
(q) Disclosure. To the best of the Company's knowledge,
neither this Agreement, nor any other documents, certificates or instruments
furnished to the Purchaser by or on behalf of the Company or any subsidiary in
connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omit to state a material fact or omit any
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made, not misleading.
(r) Operation of Business. The Company operates its business
substantially in the manner set forth in the SEC Documents. The Company and each
of the subsidiaries owns or has acquired the requisite legal right to use all
patents, trademarks, service marks, trade names,
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copyrights, licenses and other authorizations (collectively, "Intellectual
Property") as set forth in the SEC Documents, which are necessary for the
conduct of its business as now conducted. To the knowledge of the Company, the
present business and activities of the Company do not infringe any Intellectual
Property rights of any other person, except where such infringement would not
have a Material Adverse Effect.
(s) Regulatory Compliance. The Company has all necessary
licenses, registrations and permits to conduct its business as now being
conducted in all states where the Company conducts its business, except where
the failure to so comply would not have a Material Adverse Effect.
(t) Books and Records. The records and documents of the
Company and its subsidiaries accurately reflect in all material respects the
information relating to the business of the Company, the location and collection
of their assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company. The Company (i) maintains
books and records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of its assets, and (ii) has devised and maintains
a system of accounting controls sufficient to provide reasonable assurances that
transactions are recorded so as to permit financial statements to be prepared in
accordance with GAAP and maintain accountability for assets (including cash).
(u) Material Agreements. Except as set forth in the SEC
Documents, neither the Company nor any subsidiary is a party to any written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the SEC as an
exhibit to a registration statement on Form F-1 or other applicable form
(collectively, "Material Agreements") if the Company or any subsidiary were
registering securities under the Securities Act. The Company and each of its
subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received no
notice of default and, to the best of the Company's knowledge are not in default
under any Material Agreement now in effect, the result of which would cause a
Material Adverse Effect. No written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement of the Company or of any subsidiary
limits or shall limit the payment of dividends on the Company's Common Stock.
(v) Transactions with Affiliates. Except as set forth in the
SEC Documents, to the Company's knowledge, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $50,000 between (i) the Company, any
subsidiary or any of their respective customers or suppliers on the one hand,
and (ii) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person owning any capital stock of
the Company or any subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.
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(w) Securities Laws. The outstanding securities of the Company
were not issued in violation of applicable securities laws. The Company has
complied and will comply with all applicable federal and state securities laws
in connection with the offer, issuance and sale of the Shares hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy the Shares or similar securities
to, or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other than the
Purchaser), so as to bring the issuance and sale of the Shares and/or Warrants
under the registration provisions of the Securities Act and applicable state
securities laws. 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.
(x) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the SEC Documents. Except as set forth in the SEC
Documents, neither the Company nor any subsidiary is in breach of any employment
contract, agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such subsidiary. Since
the date of filing the April 30, 2001 Form 20-F, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, would have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company or any subsidiary.
(y) Absence of Certain Developments. Except as provided in SEC
Documents, since April 30, 2001, neither the Company nor any subsidiary has:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) except current liabilities incurred in
the ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
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(v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, except in the ordinary course of
business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights;
(vii) suffered any substantial losses or waived any rights
of material value, whether or not in the ordinary course of business;
(viii) made any changes in employee compensation except in
the ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $100,000;
(x) entered into any other material transaction, whether
or not in the ordinary course of business;
(xi) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance; or
(xii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;
(z) Governmental Approvals. Except as set forth in the SEC
Documents, and except for the filing of any notice prior or subsequent to the
Closing that may be required under applicable federal or state securities laws
(which if required, shall be filed on a timely basis), including the filing of a
registration statement or statements pursuant to this Agreement, no
authorization, consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution of this Agreement, or delivery of the Shares, or
for the performance by the Company of its obligations under this Agreement.
(aa) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes.
(bb) Acknowledgment Regarding Purchaser's Purchase of Shares.
The Company acknowledges and agrees that Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares. The Company further represents to the Purchaser that the Company's
decision to enter into this Agreement has been based solely on the
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independent evaluation by the Company, following consultation with its
representatives, including counsel.
(cc) DWAC Eligibility. The Company's Common Stock, and its
transfer agent, are eligible to participate in the DWAC system, and there are no
impediments to use of the DWAC system that could adversely affect consummation
of the transactions contemplated hereby and by the Escrow Agreement.
Section 3.2. Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser
is a corporation duly incorporated, validly existing and in good standing under
the laws of Nevis.
(b) Authorization, Power and Enforcement. (i) The Purchaser
has the requisite power and authority to enter into and perform this Agreement
and to purchase the Shares being sold to it hereunder; (ii) the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action; and (iii) this Agreement has been duly executed and
delivered by the Purchaser and at the Initial Closing shall constitute valid and
binding obligations of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of Purchaser's charter or bylaws 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 Purchaser is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to the Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser). The Purchaser 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 this Agreement or to purchase the Shares in
accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, the Purchaser is assuming and relying upon
the accuracy of the relevant representations and agreements of the Company
herein.
(d) Financial Risks. The Purchaser acknowledges that it is
able to bear the financial risks associated with an investment in the Shares and
that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the
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subsidiaries as it has deemed necessary or appropriate to conduct its due
diligence investigation. The Purchaser is capable of evaluating the risks and
merits of an investment in the Shares by virtue of its experience as an investor
and its knowledge, experience, and sophistication in financial and business
matters and the Purchaser is capable of bearing the entire loss of its
investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act.
(f) General. The Purchaser understands that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the suitability of the Purchaser to acquire the Shares.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1 Securities Compliance. If applicable, the Company shall
notify the Principal Market, in accordance with their rules and regulations, of
the transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Shares to the
Purchaser or subsequent holders.
Section 4.2 Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement, and will not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all
commercially reasonable action necessary to continue the listing or trading of
its Common Stock on the Principal Market and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market and shall provide the Purchasers with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three Trading Days of the Company's
receipt thereof, until the Purchasers have disposed of all of their Registrable
Securities.
Section 4.3 Registration Statement. The Company shall cause the
Registration Statement to be filed with the SEC in accordance with the
Registration Rights Agreement. The Purchaser shall not be obligated to accept a
Draw Down request from the Company, unless the
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Registration Statement is effective and the prospectus included in the
Registration Statement is current.
Section 4.4 Registration Rights Agreement. The Company and the
Purchaser shall enter into the Registration Rights Agreement in the Form of
Exhibit A hereto.
Section 4.5 Escrow Arrangement. The Company and the Purchaser shall
enter into an escrow agreement with Atlas Xxxxxxxx, P.A. (the "Escrow Agent") in
the Form of Exhibit B hereto (the "Escrow Agreement") respecting payment against
delivery of the Shares.
Section 4.6 Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 4.7 Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.8 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligations to the Purchaser under this Agreement.
Section 4.9 Limitation on Future Financing. The Company agrees that it
will not enter into any agreement for the sale of its securities in an equity
line financing or substantial equivalent until the earlier of (i) 24 months from
the effective date of the Registration Statement or (ii) 60 days after the
entire $10,000,000 of Common Stock has been purchased by the Purchaser
hereunder. For purposes hereof, an "equity line financing or substantial
equivalent" shall mean equity line financings similar in scope to the financing
contemplated hereby, wherein the Company has the right to "put" its securities
to an investor, at the Company's sole discretion, at a purchase price calculated
pursuant to a formula that applies a discount to the market price for the
Company's Common Stock.
The Purchaser covenants with the Company as follows:
Section 4.10 Limitation on Activities.
(a) Neither (i) the Purchaser, (ii) any officer, director or
affiliate of the Purchaser, nor (iii) any other person for the account or
benefit of, or upon the order or instruction of, any officer, director or
affiliate of the Purchaser, either alone or in combination with any other such
person, will have, during the period beginning 30 days prior to commencement of
the
15
Commitment Period and continuing until the end of the Commitment Period or the
earlier termination of this Agreement, a Net Put Equivalent Position (as
hereinafter defined) with respect to any security issued by the Company.
(b) For purposes of this Section 4.10, "Net Put Equivalent
Position" shall mean any security position, including but not limited to any
derivative security position, that on a net basis increases in value as the
value of the security issued by the Company decreases, including but not limited
to, a net short position, a net long put option position and a net short call
option position.
(c) Notwithstanding the foregoing, the Purchaser shall be
permitted to sell shares of the Company's common stock and otherwise be in a Net
Put Equivalent Position, solely to the extent of the Purchaser's entitlement to
shares of the Company's common stock that are the subject of a Draw Down Notice
tendered by the Company to the Purchaser.
ARTICLE V
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 5.1. Conditions Precedent to the Obligation of the Company to
Sell the Shares. The obligation hereunder of the Company to issue and sell the
Shares to the Purchaser is subject to the satisfaction or waiver, at or before
the Initial Closing, and as of each Settlement Date of each of the conditions
set forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Initial Closing and as of each Settlement Date as though made at that time,
except for representations and warranties that speak as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Initial Closing and as of
each Settlement Date.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 5.2. Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to perform its obligations
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time prior to the Initial Closing in its sole
discretion.
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(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Initial
Closing as though made at that time (except for representations and warranties
that speak as of a particular date).
(b) 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 to be performed, satisfied
or complied with by the Company at or prior to the Initial Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Purchaser or the Company or any subsidiary, or any of
the officers, directors or affiliates of the Company or any subsidiary seeking
to restrain, prevent or change the transactions contemplated by this Agreement,
or seeking damages in connection with such transactions.
(e) Opinion of Counsel, Etc. At the Initial Closing, the
Purchaser shall have received an opinion of outside counsel to the Company,
dated the date of the Initial Closing, in the form of Exhibit C hereto, and such
other certificates as the Purchaser may reasonably request.
(f) Commitment Fee. The Company shall have delivered to the
Purchaser or its designee(s), common stock purchase warrants (the "Warrants") to
purchase up to 150,000 shares of the Company's Common Stock, in the form of
Exhibit E hereto.
Section 5.3. Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction at or before each Settlement Date, of each of the
conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company
shall have satisfied, or the Purchaser shall have waived, at or prior to the
Initial Closing, the conditions set forth in Section 5.2 hereof
(b) Effective Registration Statement. The Registration
Statement registering the Shares shall have been declared effective by the SEC
and shall remain effective on such Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the SEC or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the
17
delivery of each Draw Down Notice), and, at any time prior to such Draw Down
Notice, trading in securities generally as reported on the Principal Market
shall not have been suspended or limited.
(d) Material Adverse Effect. No event shall have occurred that
could reasonably be likely to have a Material Adverse Effect.
(e) Opinion of Counsel. The Purchaser shall have received a
"down-to-date" letter from the Company's outside counsel in the form of Exhibit
C hereto confirming that, among other things, there is no change from the
counsel's previously delivered opinion, or specifying with particularity the
reason for any change.
ARTICLE VI
DRAW DOWN TERMS
Section 6.1. Draw Down Terms. Subject to the terms and conditions set
forth in this Agreement, the parties agree as follows:
(a) The Company may, in its sole discretion, issue and
exercise a draw down (a "Draw Down") during each Draw Down Pricing Period, which
Draw Down the Purchaser will be obligated to accept for a period of 24 months
commencing immediately after the Effective Date (the "Commitment Period").
Subject to the terms and conditions hereof, the Company may issue and exercise
an unlimited number of Draw Downs during the Commitment Period.
(b) Only one Draw Down shall be allowed in each Draw Down
Pricing Period. The number of shares of Common Stock purchased by the Purchaser
with respect to each Draw Down shall be determined as set forth in Section
6.1(d) herein and settled (i) as to the 1st through the 5th Trading Days after
the applicable Commencement Date (the "First Settlement Period"), on the 7th
Trading Day after such Commencement Date and (ii) as to the 6th through the 10th
Trading Days after the applicable Commencement Date (the "Second Settlement
Period"), on the 12th Trading Day after such Commencement Date, (iii) as to the
11th through the 15th Trading Days after the applicable Commencement Date (the
"Third Settlement Period"), on the 17th Trading Day after such Commencement Date
and (iv) as to the 16th through the 20th Trading Days after the applicable
Commencement Date (the "Fourth Settlement Period"), on the 22nd Trading Day
after such Commencement Date (each, a "Settlement Date" and the First, Second,
Third and Fourth Settlement Periods collectively referred to as "Settlement
Periods"). In connection with each Draw Down Pricing Period, the Company may set
the Threshold Price. If the Average Daily Price on any day within the Draw Down
Pricing Period is less than the Threshold Price, the Company shall not sell and
the Purchaser shall not be obligated to purchase the Shares otherwise to be
purchased for such day. A pro-rata portion equal to 1/x of the Draw Down amount
(where x equals the number of Trading Days in the Draw Down Pricing Period) will
be allocated to purchase whole shares of Common Stock at the Daily Purchase
Price for the corresponding Trading Day.
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(c) The minimum Investment Amount shall be $50,000 and the
maximum Investment Amount during any Draw Down Pricing Period shall not be
greater than the product obtained by multiplying (i) the average daily trading
volume for the Company's Common Stock on the Principal Market, for the number of
consecutive Trading Days as is equal to the number of days in the Draw Down
Notice (the "Trading Day Measurement Period"), ending on the day prior to the
Draw Down Notice, times (ii) the number of trading days in the Draw Down Pricing
Period, times (iii) the average VWAP during the Trading Day Measurement Period,
times (iv) 20%.
(d) The number of Shares of Common Stock to be issued on each
Settlement Date shall be a number of shares equal to (for each Trading Day
within the Settlement Period) (x) 1/x of the Investment Amount, divided by (y)
the Daily Purchase Price on each Trading Day within the Settlement Period,
subject to the following adjustments:
(i) if the Average Daily Price on a given Trading Day is
less than the Threshold Price, then the Investment Amount will be reduced by 1/x
and that day shall be withdrawn from the Settlement Period;
(ii) if trading of the Common Stock on the Principal
Market is suspended for more than three hours, in the aggregate, on any Trading
Day during the Settlement Period, the Investment Amount shall be reduced by 1/x
and that day shall be withdrawn from the applicable Settlement Period; and
(iii) if the trading volume for the Common Stock on the
Principal Market on any Trading Day is less than 50% of the rolling average
trading volume for the immediately preceding 20 consecutive Trading Days, the
Investment Amount shall be reduced by 1/x and that day shall be withdrawn from
the applicable Settlement Period.
(e) The Company must inform the Purchaser by delivering before
the Commencement Date a draw down notice, in the form of Exhibit D hereto (the
"Draw Down Notice"), via facsimile transmission in accordance with Section 9.4
as to the amount of the Draw Down (the "Investment Amount") the Company wishes
to exercise. If the Commencement Date is to be the date of the Draw Down Notice,
the Draw Down Notice must be delivered to and receipt confirmed by the Purchaser
at least one hour before trading commences on such date. The Company may not
deliver a new Draw Down Notice until the Trading Day following the final
Settlement Date for the preceding Draw Down Pricing Period. At no time shall the
Purchaser be required to purchase more than the maximum Draw Down amount for a
given Draw Down Pricing Period so that if the Company chooses not to exercise
the maximum permitted Draw Down in a given Draw Down Pricing Period the
Purchaser is not obligated to and shall not purchase more than the scheduled
maximum amount in a subsequent Draw Down Pricing Period.
(f) On the Trading Day following the end of each Settlement
Period (i) the Company and the Purchaser shall each execute and deliver to the
other and to the Escrow Agent via facsimile transmission, a settlement
certificate in the form of Exhibit A to the Escrow Agreement (the "Settlement
Certificate") quantifying the amount of the Draw Down and the
19
number of Shares of Common Stock to be purchased, (ii) the Company will file a
prospectus supplement to the prospectus forming a part of the Registration
Statement and deliver a copy of the prospectus and prospectus supplement to the
Purchaser prior to the release of funds by the Escrow Agent, (iii) the Company
shall cause the delivery of that number of whole shares of Common Stock of the
Company designated in the Settlement Certificate (the "Settlement Shares"), in
the manner required by the Escrow Agreement, and (iv) the Purchaser shall
transmit payment in an amount equal to the payment designated as "Net Proceeds
to the Company" in the Settlement Certificate (the "Settlement Payment"), to the
Escrow Agent in the manner required by the Escrow Agreement.
(g) On the Settlement Date, and provided that the provisions
of Section 6.1(f) have been complied with (i) the Escrow Agent shall transmit
the Settlement Payment to the Company in the manner required by the Escrow
Agreement and (ii) the Escrow Agent shall cause the delivery of the Settlement
Shares to the Purchaser in the manner required by the Escrow Agreement.
Notwithstanding the foregoing, in the event the Settlement Shares are not
received by the Escrow Agent on or prior to 12:00 noon on the Settlement Date,
transmission of the Settlement Payment to the Company will be made by next day
available funds. The Settlement Payment shall reflect deduction of the Escrow
Agent fee of $1,500, as well as any fee due to the Placement Agent. The process
of delivery of the Shares against payment therefor is herein referred to as
"Settlement".
(h) In the event the Company fails to deliver the Shares of
Common Stock purchased by the Purchaser within five business days of the
applicable Settlement Date, then (i) the Company shall pay to the Purchaser or
its designee(s), in cash or restricted shares of the Company's Common Stock, at
the option of the Company, as liquidated damages and not as a penalty, an amount
equal to two percent of the Draw Down amount for the initial 30 day period in
which such failure occurs, and a pro-rated amount for each 30 day period
thereafter until such failure has been cured, and (ii) the Purchaser shall not
be obligated to purchase any additional shares of Common Stock for the remainder
of the applicable Draw Down Pricing Period.
ARTICLE VII
TERMINATION
Section 7.1. Termination. The term of this Agreement shall be 24 months
from the Effective Date.
Section 7.2. Other Termination.
(a) The Purchaser may terminate this Agreement upon one
Trading Day's notice if (i) a Material Adverse Effect has occurred and has not
been resolved to the satisfaction of the Purchaser, (ii) the Common Stock is
de-listed from the Principal Market unless such de-listing is in connection with
the listing of the Common Stock on the OTC Bulletin Board, Nasdaq SmallCap
Market, the American Stock Exchange or the New York Stock Exchange or (iii) the
Company files for protection from creditors under any applicable law.
20
(b) The Company may terminate this Agreement upon one Trading
Day's notice if the Purchaser shall fail to fund a properly noticed Draw Down
within three Trading Days of a Settlement Date.
Section 7.3. Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 9.1 and 9.2, and
Article VIII herein. Nothing in this Section 7.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights of the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. General Indemnity. The Company agrees to indemnify and
hold harmless the Purchaser (and its directors, officers, affiliates, agents,
principals, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorney's fees, charges and disbursements) incurred by
the Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. The Purchaser agrees to
indemnify and hold harmless the Company and its directors, officers, affiliates,
agents, successors and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys fees, charges and disbursements) incurred by the Company as
result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Purchaser herein. Notwithstanding anything to the contrary
herein, the Purchaser shall be liable under this Section 8.1 for only that
amount as does not exceed the net proceeds to such Purchaser as a result of the
sale of Shares pursuant to the Registration Statement.
Section 8.2. Indemnification Procedure. Any party entitled to
indemnification under this Article VIII (an "Indemnified Party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to
21
notify, in writing, such person of its election to defend, settle or compromise,
at its sole cost and expense, any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the Indemnified
Party may, at its option, defend, settle or otherwise compromise or pay such
action or claim. In any event, unless and until the indemnifying party elects in
writing to assume and does so assume the defense of any such claim, proceeding
or action, the Indemnified Party's costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or proceeding shall
be losses subject to indemnification hereunder. The Indemnified Party shall
cooperate fully with the indemnifying party in connection with any settlement
negotiations or defense of any such action or claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably available
to the Indemnified Party, which relates to such action or claim. The
indemnifying party shall keep the Indemnified Party fully apprised at all times
as to the status of the defense or any settlement negotiations with respect
thereto. If the indemnifying party elects to defend any such action or claim,
then the Indemnified Party shall be entitled to participate in such defense with
counsel of its choice at its sole cost and expense. The indemnifying party shall
not be liable for any settlement of any action, claim or proceeding effected
without its prior written consent. Notwithstanding anything in this Article VIII
to the contrary, the indemnifying party shall not, without the Indemnified
Party's prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future obligation on
the Indemnified Party or which does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the Indemnified Party of
a release from all liability in respect of such claim. The indemnification
required by this Article VIII shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, within ten Trading
Days of written notice thereof to the indemnifying party so long as the
Indemnified Party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the Indemnified Party
against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fees and Expenses. The Company shall pay all fees and
expenses related to the transactions contemplated by this Agreement, other than
legal fees and expenses of the Purchaser; provided, that, upon execution of this
Agreement, the Company shall pay all attorneys fees and expenses (inclusive of
disbursements and out-of-pocket expenses) incurred by the Purchaser of $45,000
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the transactions contemplated hereunder, the receipt of $20,000 of
which is hereby acknowledged. The Company shall pay all stamp or other similar
taxes and duties levied in connection with issuance of the Shares pursuant
hereto. The Company shall also pay the Placement Agent an amount equal to 4% of
each Investment Amount, payable at the time of
22
Settlement, pursuant to the terms of an agreement dated March 12, 2002, by and
between the Company and the Placement Agent.
Section 9.2. Specific Enforcement. The Company and the Purchaser
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 9.3. Entire Agreement; Amendment. This Agreement, together with
the Registration Rights Agreement and the Escrow Agreement and the documents
contemplated hereby and thereby, contains the entire understanding of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein, neither the Company nor the Purchaser makes any
representations, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such amendment or
waiver is sought.
Section 9.4. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile with electronic
confirmation of transmission, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: X X International Inc.
Xxxx #00, 00/X, Xxxxx X
Xxxxx Xxxxxxxxxx Xxxxxx
00 Xxx Xxx Xxxxxx
Xxxx Xxx, Xxxxxxx, Xxxx Xxxx
Attn: Yu Xxxxx Xxx, CEO
Tel: 000 000 0000 0000
Fax: 000 000 0000 0000
23
With copies to: Xxxxxx X. Xxxxxxxxx, P.C.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchaser: Navigator Investments Holding IX Limited
P.O. Box 556, Xxxxxxx Plaza
Charlestown
Nevis, British West Indies
Attn: Xxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Navigator Asset Management Advisers, Ltd.
00 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx XXX 0XX
Xxxxxx Xxxxxxx
Attn: Xxxxx Xxxxxx
Tel: 00 00 0000 0000
Fax: 00 00 0000 0000
and: Atlas Xxxxxxxx, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto in
accordance herewith.
Section 9.5. Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 9.6. Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
24
Section 9.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto. The rights and obligations
of the parties may not be assigned.
Section 9.8. No Third Party Beneficiaries.This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 9.9. Governing Law/Arbitration.This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Florida,
without giving effect to the choice of law provisions. Any dispute arising under
this Agreement (other than the Escrow Agreement) shall be submitted to
arbitration under the rules of the American Arbitration Association (the "AAA"),
shall be heard in Palm Beach or Broward County, Florida, and shall be finally
and conclusively determined by the decision of a board of arbitration consisting
of three members (hereinafter referred to as the "Board of Arbitration")
selected according to the rules of the AAA. The Board of Arbitration shall meet
on consecutive business days, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of Arbitration) with
respect to the amount, if any, which the losing party is required to pay to the
other party in respect of a claim filed. In connection with rendering its
decisions, the Board of Arbitration shall adopt and follow the laws of the State
of Florida. To the extent practical, decisions of the Board of Arbitration shall
be rendered no more than 30 calendar days following commencement of proceedings
with respect thereto. The Board of Arbitration shall cause its written decision
to be delivered to all parties involved in the dispute. The Board of Arbitration
shall be authorized and is directed to enter a default judgment against any
party refusing to participate in the arbitration proceeding within thirty days
of any deadline for such participation. Any decision made by the Board of
Arbitration (either prior to or after the expiration of such 30 calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
Section 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. Execution may be made by
delivery by facsimile.
Section 9.11. Publicity. Prior to the Initial Closing, neither the
Company nor the Purchaser shall issue any press release or otherwise make any
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement. After the
Initial Closing, the Company may issue a press release or otherwise make a
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided,
however, that prior to issuing any such press release, making any such public
statement or announcement, the Company obtains
25
the prior consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed; and, further provided, that the Purchaser's consent shall
not be necessary with respect to any press release or public statement that
contains no information that differs materially from the substance of a press
release or public statement theretofore approved by the Purchaser.
Section 9.12. Severability. The provisions of this Agreement are
severable and, in the event that any court or officials of any regulatory agency
of competent jurisdiction shall determine that any one or more of the provisions
or part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible, so long as such
construction does not materially adversely affect the economic rights of either
party hereto.
Section 9.13. Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
X X INTERNATIONAL INC.
By:
-----------------------------------
Name: Yu Xxxxx Xxx
Title: Chairman
NAVIGATOR INVESTMENTS
HOLDING IX LIMITED
By:
-----------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
27
