EXHIBIT 10.16
SECURITIES PURCHASE AGREEMENT
Integral Technologies, Inc.
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Ladies & Gentlemen:
Each undersigned investor, as set forth on the attached Schedule A
(individually, the "Investor"; collectively, the "Investors"), hereby confirms
its agreement with you as follows:
1. This Securities Purchase Agreement (the "Agreement") is made as of
December 26, 2003, between Integral Technologies, Inc., a Nevada corporation
(the "Company"), and each Investor.
2. The Company has authorized the sale and issuance, to the Investors in a
private placement (the "Offering"), of up to 57,115 units (the "Units"). Each
Unit consists of 100 shares of common stock of the Company, $.001 par value per
share (the "Common Stock"), and one warrant (the "Warrant") convertible into 30
shares of Common Stock. The Warrant is immediately detachable and is
convertible upon presentment of the executed Form of Exercise, for no additional
consideration, at any time beginning on April 30, 2004 and ending on December
31, 2009, provided that the Investors may not convert the Warrant if doing so
will cause the Investors, in the aggregate, to own more than 15% of the total
number of shares of Common Stock outstanding at that time.
3. The Company and each Investor agree that the Investors will purchase from
the Company and the Company will issue and sell to the Investors, in the
aggregate, 57,115 Units for a purchase price of $100.00 per Unit, or an
aggregate purchase price of $5,711,500, pursuant to the Terms and Conditions for
Purchase of Units attached hereto as Annex I and incorporated herein by
reference as if fully set forth herein (the "Terms and Conditions"). This
Securities Purchase Agreement, together with the Terms and Conditions which are
incorporated herein by reference as if fully set forth herein, may hereinafter
be referred to as the "Agreement."
4. Each Investor represents that, except as set forth below, (a) it has had
no position, office or other material relationship within the past three years
with the Company or persons known to it to be affiliates of the Company, (b)
neither it, nor any group of which it is a member or to which it is related,
beneficially owns (including the right to acquire or vote) any securities of the
Company and (c) it has no direct or indirect affiliation or association with any
NASD member as of the date hereof. Exceptions:
____________________________________None_______________________________________
(If no exceptions, write "none." If left blank, response will be deemed to
be "none.")
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose. By
executing this Agreement, each Investor acknowledges that the Company may use
the information in paragraph 4 above and the name and address information below
in preparation of the Registration Statement (as defined in Annex I). This
Agreement may be executed in separate counterparts, each of which shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
AGREED AND ACCEPTED: Investor:
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Integral Technologies, Inc. By: Wellington Management Company, llp as investment adviser
on behalf of the client accounts listed on the attached Schedule A
______________________________
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By_______________________________________
Title: Chief Executive Officer
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Counsel
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇ ▇▇▇▇▇
Tax ID No.: See Attached Schedule A
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. Authorization and Sale of the Units. Subject to these Terms and
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Conditions, the Company has authorized the sale of up to 57,115 Units. The
Company reserves the right to increase or decrease this number.
2. Agreement to Sell and Purchase the Units; Subscription Date.
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2.1 At the Closing (as defined in Section 3), the Company will
sell to the Investors, and the Investors, in the aggregate, will purchase from
the Company, upon the terms and conditions hereinafter set forth, the number of
Units set forth in Section 3 of the Securities Purchase Agreement to which these
Terms and Conditions are attached at the purchase price set forth thereon.
2.2 The Company may enter into the same form of Securities
Purchase Agreement, including these Terms and Conditions, with other investors
(the "Other Investors") and expects to complete sales of Units to them. (The
Investors and the Other Investors are hereinafter sometimes collectively
referred to as the "Total Investors," and the Securities Purchase Agreement to
which these Terms and Conditions are attached and the Securities Purchase
Agreements (including attached Terms and Conditions) executed by the Other
Investors are hereinafter sometimes collectively referred to as the
"Agreements.") The Company may accept executed Agreements from the Total
Investors for the purchase of Units commencing upon the date on which the
Company provides the Total Investors with the proposed purchase price per Unit
and concluding upon the date (the "Subscription Date") on which the Company has
(i) executed Agreements with Investors, in the aggregate, for the purchase of at
least 57,115 Units, and (ii) notified ▇▇▇▇▇ Fargo Securities, LLC, in its
capacity as placement agent for this transaction, in writing that it is no
longer accepting additional Agreements from the Total Investors for the purchase
of Units.
2.3 The obligations of each Total Investor under any Agreement are
several and not joint with the obligations of any Other Investor, and no
Investor or Other Investor shall be responsible in any way for the performance
of the obligations of any other Total Investor under any Agreement. Nothing
contained herein, and no action taken by any Investor hereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Investors are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated hereby, provided that such obligations or the
transactions contemplated hereby may be modified, amended or waived in
accordance with Section 9 below. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement (provided, that such rights may be
modified, amended or waived in accordance with Section 9 below), and it shall
not be necessary for any Other Investor to be joined as an additional party in
any proceeding for such purpose.
2.4 As used in this Agreement, the term "Shares" refers only to
the shares of Common Stock that are included in the Units and the shares of
Common Stock underlying the Warrants that are include in the Units.
2.5 The Company agrees that it will not offer to sell equity
securities in an amount totaling more than $5,000,000 in the 12 months following
the date of this Agreement, without the prior written consent of the Investors.
If the Company does offer to sell such equity securities, then the Investors
shall have the right, but not the obligation, to participate in such offering,
so that the Investors' percentage ownership of the Company, in the aggregate,
shall remain the same as it will be after the Closing.
3. Delivery of the Units at Closing. The completion of the purchase
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and sale of the Units (the "Closing") shall occur on December 30, 2003 (the
"Closing Date"), at the offices of the Company's counsel, or at such other time
as the Investors and the Company may mutually agree. On the Closing Date, the
Company shall deliver to each Investor (or its agent) one or more certificates
representing the shares of Common Stock and the Warrants underlying the number
of Units set forth pursuant to Section 3 of the Securities Purchase Agreement
and the attached Schedule A, each such certificate to be registered in the name
of the Investor or, if so indicated on the signature page of the Securities
Purchase Agreement, in the name of a nominee designated by the Investor.
The Company's obligation to issue the Units to each Investor shall be
subject to the following conditions, any one or more of which may be waived by
the Company: (a) completion of the purchases and sales under the Agreements
with the Other
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Investors; and (b) the accuracy of the representations and warranties made by
the Investors and the fulfillment of those undertakings of the Investors to be
fulfilled prior to the Closing. After each Investor (or its agent) receives the
certificates representing the shares of Common Stock and the Warrants underlying
the number of Units set forth pursuant to Section 3 of the Securities Purchase
Agreement and the attached Schedule A on the Closing Date, each investor shall
provide the Company (or its agent) with a certified or official bank check or
wire transfer of funds in the full amount of the purchase price for the Units
being purchased hereunder as set forth in Section 3 of the Securities Purchase
Agreement.
Each Investor's obligation to purchase the Units shall be subject to the
following conditions, any one or more of which may be waived by each Investor:
(a) each Investor shall have executed Agreements, in the aggregate, for the
purchase of at least 57,115 Units; (b) the representations and warranties of the
Company set forth herein shall be true and correct as of the Closing Date in all
material respects (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date); and (c) each Investor shall have received such documents as such
Investor shall reasonably have requested, including, a standard opinion of the
Company's counsel as to the matters set forth in Section 4.2 and as to exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), of the sale of the Units.
4. Representations, Warranties and Covenants of the Company. The
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Company hereby represents and warrants to, and covenants with, each Investor, as
follows:
4.1 Organization. The Company is duly organized and validly
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existing in good standing under the laws of the jurisdiction of its
organization. Each of the Company and its Subsidiaries (as defined in Rule 405
under the Securities Act) has full power and authority to own, operate and
occupy its properties and to conduct its business as presently conducted and as
described in the documents filed by the Company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), since the end of its most recently
completed fiscal year through the date hereof, including, without limitation,
its most recent report on Form 10-KSB (the "Exchange Act Documents") and is
registered or qualified to do business and in good standing in each jurisdiction
in which the nature of the business conducted by it or the location of the
properties owned or leased by it requires such qualification and where the
failure to be so qualified would have a material adverse effect upon the
condition (financial or otherwise), earnings, business, properties or operations
of the Company and its Subsidiaries, considered as one enterprise (a "Material
Adverse Effect"), and no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
4.2 Due Authorization and Valid Issuance. The Company has all
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requisite power and authority to execute, deliver and perform its obligations
under the Agreements, and the Agreements have been duly authorized and validly
executed and delivered by the Company and constitute legal, valid and binding
agreements of the Company enforceable against the Company in accordance with
their terms, except as rights to indemnity and contribution may be limited by
state or federal securities laws or the public policy underlying such laws,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Units being purchased by the Investor
hereunder will, upon issuance and payment therefore pursuant to the terms
hereof, be duly authorized, validly issued, fully-paid and nonassessable.
4.3 Non-Contravention. The execution and delivery of the
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Agreements, the issuance and sale of the Units under the Agreements, the
fulfillment of the terms of the Agreements and the consummation of the
transactions contemplated thereby will not (A) conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any
material bond, debenture, note or other evidence of indebtedness, lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or any Subsidiary is a party
or by which it or any of its Subsidiaries or their respective properties are
bound, (ii) the charter, by-laws or other organizational documents of the
Company or any Subsidiary, or (iii) any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company or any Subsidiary or their respective
properties, except in the case of clauses (i) and (iii) for any such conflicts,
violations or defaults which are not reasonably likely to have a Material
Adverse Effect or (B) result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of the
material properties or assets of the Company or any Subsidiary or an
acceleration of indebtedness pursuant to any obligation, agreement or condition
contained in any material bond, debenture, note or any other evidence of
indebtedness or any material indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company or any Subsidiary is a party or by
which any of them is bound or to which any of the material property or assets of
the Company or any Subsidiary is subject. No consent, approval, authorization
or other order of, or registration, qualification or filing with, any regulatory
body, administrative
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agency, or other governmental body in the United States or any other person is
required for the execution and delivery of the Agreements and the valid issuance
and sale of the Units to be sold pursuant to the Agreements, other than such as
have been made or obtained, and except for any post-closing securities filings
or notifications required to be made under federal or state securities laws.
4.4 Capitalization. The capitalization of the Company as of the
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Closing Date is as set forth in the most recent applicable Exchange Act
Documents, increased as set forth in the next sentence. The Company has not
issued any capital stock since that date other than pursuant to (i) employee
benefit plans disclosed in the Exchange Act Documents, or (ii) outstanding
warrants, options or other securities disclosed in the Exchange Act Documents.
The Units to be sold pursuant to the Agreements have been duly authorized, and
when issued and paid for in accordance with the terms of the Agreements will be
duly and validly issued, fully paid and nonassessable. The outstanding shares
of capital stock of the Company have been duly and validly issued and are fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws. Except as set forth in or contemplated by the Exchange
Act Documents, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or other equity
interest in the Company or any Subsidiary, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the Company is a
party or of which the Company has knowledge and relating to the issuance or sale
of any capital stock of the Company or any Subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing, no preemptive right, co-sale right, right of first
refusal, or other similar right exists with respect to the Units or the issuance
and sale thereof. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Units. The Company owns the entire equity interest in each of its
Subsidiaries, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than as described in the
Exchange Act Documents. Except as disclosed in the Exchange Act Documents,
there are no stockholders agreements, voting agreements or other similar
agreements with respect to the Common Stock to which the Company is a party or,
to the knowledge of the Company, between or among any of the Company's
stockholders.
4.5 Legal Proceedings. There is no material legal or governmental
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proceeding pending or, to the knowledge of the Company, threatened to which the
Company or any Subsidiary is or may be a party or of which the business or
property of the Company or any Subsidiary is subject that is not disclosed in
the Exchange Act Documents.
4.6 No Violations. Neither the Company nor any Subsidiary is in
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violation of its charter, bylaws, or other organizational document, or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, or is in default (and there
exists no condition which, with the passage of time or otherwise, would
constitute a default) in any material respect in the performance of any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or by which the properties of the Company or any Subsidiary
are bound, which would be reasonably likely to have a Material Adverse Effect.
4.7 Governmental Permits, Etc. With the exception of the matters
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which are dealt with separately in Sections 4.1, 4.12, 4.13 and 4.14, each of
the Company and its Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department, or body that are currently
necessary for the operation of the business of the Company and its Subsidiaries
as currently conducted and as described in the Exchange Act Documents except
where the failure to currently possess could not reasonably be expected to have
a Material Adverse Effect.
4.8 Intellectual Property. Except as specifically disclosed in
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the Exchange Act Documents (i) each of the Company and its Subsidiaries owns or
possesses sufficient rights to conduct its business in the ordinary course,
including, without limitation, rights to use all material patents, patent
rights, industry standards, trademarks, copyrights, licenses, inventions, trade
secrets, trade names and know-how (collectively, "Intellectual Property")
described or referred to in the Exchange Act Documents as owned or possessed by
it or that are necessary for the conduct of its business as now conducted or as
proposed to be conducted except where the failure to currently own or possess
would not have a Material Adverse Effect ("Company Intellectual Property"), (ii)
neither the Company nor any of its Subsidiaries is infringing, or has received
any notice of, or has any knowledge of, any asserted infringement by the Company
or any of its Subsidiaries of, any rights of a third party with respect to any
Intellectual Property that, individually or in the aggregate, would have a
Material Adverse Effect and (iii) neither the Company nor any of its
Subsidiaries has received any notice of, or has any knowledge of, infringement
by a third party with respect to any Intellectual Property rights of the Company
or of any Subsidiary that, individually or in the aggregate, would have a
Material Adverse Effect.
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Company Intellectual Property does not include any Publicly Available Software
and the Company has not used Publicly Available Software in whole or in part in
the development of any part of Company Intellectual Property in a manner that
may subject the Company or Company Intellectual Property in whole or in part, to
all or part of the license obligations of any Publicly Available Software.
"Publicly Available Software" means each of (i) any software that contains, or
is derived in any manner (in whole or in part) from, any software that is
distributed as free software, open source software (e.g. Linux), or similar
licensing and distribution models; and (ii) any software that requires as a
condition of use, modification, and/or distribution of such software that such
software or other software incorporated into, derived from, or distributed with
such software (a) be disclosed or distributed in source code form; (b) be
licensed for the purpose of making derivative works; or (c) be redistributable
at no or minimal charge.
4.9 Financial Statements. The financial statements of the Company
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and the related notes contained in the Exchange Act Documents present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company and its Subsidiaries as of the dates indicated, and the results
of its operations and cash flows for the periods therein specified consistent
with the books and records of the Company and its Subsidiaries except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which are not expected to be material in amount.
Such financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, except as may be disclosed in
the notes to such financial statements, or in the case of unaudited statements,
as may be permitted by the Securities and Exchange Commission (the "SEC") on
Form 10-QSB under the Exchange Act and except as disclosed in the Exchange Act
Documents. The other financial information contained in the Exchange Act
Documents has been prepared on a basis consistent with the financial statements
of the Company.
4.10 No Material Adverse Change. Except as disclosed in the
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Exchange Act Documents, since September 30, 2003, there has not been (i) any
material adverse change in the financial condition or earnings of the Company
and its Subsidiaries considered as one enterprise, (ii) any material adverse
event affecting the Company or its Subsidiaries, (iii) any obligation, direct or
contingent, that is material to the Company and its Subsidiaries considered as
one enterprise, incurred by the Company, except obligations incurred in the
ordinary course of business, (iv) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
Subsidiaries, or (v) any loss or damage (whether or not insured) to the physical
property of the Company or any of its Subsidiaries which has been sustained
which has a Material Adverse Effect.
4.11 Disclosure. The representations and warranties of the Company
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contained in this Section 4 as of the date hereof and as of the Closing Date, do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Except
with respect to the material terms and conditions of the transaction
contemplated by the Agreements, which shall be publicly disclosed by the Company
pursuant to Section 16 hereof, the Company confirms that neither it nor any
person acting on its behalf has provided Investor with any information that the
Company believes constitutes material, non-public information. The Company
understands and confirms that each Investor will rely on the foregoing
representations in effecting transactions in securities of the Company.
4.12 Secondary Market. The Company's Common Stock is registered
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pursuant to Section 12(g) of the Exchange Act and is traded on the OTC Bulletin
Board, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or disqualifying the Common Stock from eligibility on the OTC Bulletin
Board, nor has the Company received any notification that the SEC or the
National Association of Securities Dealers, Inc. ("NASD") is contemplating
terminating such registration or listing.
4.13 Reporting Status. The Company has filed in a timely manner
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all documents that the Company was required to file under the Exchange Act
during the 12 months preceding the date of this Agreement. The Company is
eligible to use Form SB-2 to register the Shares to be offered for the account
of the Investors. The following documents complied in all material respects
with the SEC's requirements as of their respective filing dates, and the
information contained therein as of the date thereof did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading:
(a) Annual Report on Form 10-KSB for the year ended June 30,
2003, and Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2003; and
(b) all other documents, if any, filed by the Company with
the SEC during the one-year period preceding the date of this
Agreement pursuant to the reporting requirements of the Exchange
Act.
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4.14 Listing. The Company shall comply with all requirements of
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the NASD with respect to the issuance of the Units and the listing of the Shares
on a Principal Market. "Principal Market" shall mean the OTC Bulletin Board,
the American Stock Exchange, the New York Stock Exchange, the NASDAQ National
Market, or the NASDAQ Small-Cap Market, whichever is at the time the principal
trading exchange or market for the Common Stock.
4.15 No Manipulation of Stock. The Company has not taken and will
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not, in violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock.
4.16 Company not an "Investment Company". The Company has been
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advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). To the best knowledge of the
Company, the Company is not, and immediately after receipt of payment for the
Units will not be, an "investment company" or an entity "controlled" by an
"investment company" within the meaning of the Investment Company Act and shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.17 Foreign Corrupt Practices. Neither the Company, nor to the
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best knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
4.18 Accountants. To the Company's knowledge, ▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇, who the Company expects will consent to the incorporation by reference
of its report dated September 3, 2003 with respect to the consolidated financial
statements of the Company included in the Company's Annual Report on Form 10-KSB
for the year ended June 30, 2003, into the Registration Statement (as defined
below) and the prospectus which forms a part thereof, are independent
accountants as required by the Securities Act and the rules and regulations
promulgated thereunder.
4.19 Contracts. The contracts described in the Exchange Act
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Documents that are material to the Company are in full force and effect on the
date hereof, and neither the Company nor, to the Company's knowledge, any other
party to such contracts is in breach of or default under any of such contracts
which would have a Material Adverse Effect.
4.20 Taxes. The Company has filed all necessary federal, state
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and foreign income and franchise tax returns when due (or obtained appropriate
extensions for filing) and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been or might be
asserted or threatened against it which would have a Material Adverse Effect.
4.21 Transfer Taxes. On the Closing Date, all stock transfer or
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other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Units to be sold to the Investor
hereunder will be, or will have been, fully paid or provided for by the Company
and all laws imposing such taxes will be or will have been fully complied with.
4.22 Private Offering. Assuming the correctness of the
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representations and warranties of the Investors set forth in Section 5 hereof,
the offer and sale of Units hereunder is exempt from registration under the
Securities Act. The Company has not distributed and will not distribute prior
to the Closing Date any offering material in connection with this Offering and
sale of the Units other than the documents of which this Agreement is a part or
the Exchange Act Documents. The Company has not in the past nor will it
hereafter take any action independent of the placement agent to sell, offer for
sale or solicit offers to buy any securities of the Company which would bring
the offer, issuance or sale of the Units as contemplated by this Agreement,
within the provisions of Section 5 of the Securities Act, unless such offer,
issuance or sale was or shall be within the exemptions of Section 4 of the
Securities Act.
4.23 Disclosure Controls and Procedures; Internal Controls. At
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all times since first required by all applicable Exchange Act rules, the Company
has established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which the Form
10-KSB or Form 10-QSB, as the case may be, is being prepared. The
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Company's certifying officers have evaluated the effectiveness of the Company's
disclosure controls and procedures as of the end of the period covered by each
Form 10-KSB or Form 10-QSB for which such evaluation was required by applicable
Exchange Act rules, as the case may be (each such date, the "Evaluation Date").
The Company presented in each such Form 10-KSB or Form 10-QSB, as the case may
be, the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the most recent Evaluation Date, there have been no
significant changes in the Company's internal controls (as such term is used in
Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the Company's
internal controls.
4.24 Transactions With Affiliates. Except as disclosed in the
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Exchange Act Documents, none of the officers or directors of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer or director or, to the knowledge of
the Company, any entity in which any officer or director has a substantial
interest or is an officer, director, trustee or partner.
5. Representations, Warranties and Covenants of each Investor.
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5.1 Each Investor represents and warrants to, and covenants with,
the Company that: (i) either (A) such Investor is an "accredited investor" as
defined in Regulation D under the Securities Act and such Investor is also
knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Units, including investments
in securities issued by the Company and investments in comparable companies, and
has requested, received, reviewed and considered all information it deemed
relevant in making an informed decision to purchase the Units or (B) the Company
has made available to each Investor, prior to the date hereof, the opportunity
to ask questions of and receive complete and correct answers from
representatives of the Company concerning the terms and conditions of the Units
and to obtain any additional information relating to the financial condition and
business of the Company and such Investor has such knowledge and experience in
financial and business matters that the Investor is capable of evaluating the
merits and risks of the investment in the Units; (ii) each Investor is acquiring
the number of Units set forth in Section 3 of the Securities Purchase Agreement
in the ordinary course of its business and for its own account for investment
only and with no present intention of distributing any of such Units or any
arrangement or understanding with any other persons regarding the distribution
of such Units; (iii) each Investor will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Units except in
compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder; (iv) each Investor has
answered all questions on the Investor Questionnaire for use in preparation of
the Registration Statement and the answers thereto are true, correct and
complete as of the date hereof and will be true, correct and complete as of the
Closing Date; (v) each Investor will notify the Company immediately of any
change in any of such information until such time as such Investor has sold all
of its Units or until the Company is no longer required to keep the Registration
Statement effective; and (vi) each Investor has, in connection with its decision
to purchase the number of Units set forth in Section 3 of the Securities
Purchase Agreement, relied only upon the Exchange Act Documents and the
representations and warranties of the Company contained herein. Such Investor
understands that its acquisition of the Units has not been registered under the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of such Investor's investment intent as
expressed herein. Subject to compliance with the Securities Act, applicable
securities laws and the respective rules and regulations promulgated thereunder,
nothing contained herein shall be deemed a representation or warranty by such
Investor to hold the Units for any period of time. Each Investor has completed
or caused to be completed and delivered to the Company the Investor
Questionnaire, which questionnaire is true, correct and complete in all material
respects.
5.2 Each Investor acknowledges, represents and agrees that no
action has been or will be taken in any jurisdiction outside the United States
by the Company that would permit an offering of the Units, or possession or
distribution of offering materials in connection with the issue of the Units, in
any jurisdiction outside the United States where legal action by the Company for
that purpose is required. Each Investor outside the United States will comply
with all applicable laws and regulations in each foreign jurisdiction in which
it purchases, offers, sells or delivers Units or has in its possession or
distributes any offering material, in all cases at its own expense.
5.3 Each Investor hereby covenants with the Company not to make
any sale of the Units, or the securities underlying the Units, without complying
with the provisions of this Agreement and without causing the prospectus
delivery requirement under the Securities Act to be satisfied (whether by
delivery of the Prospectus or pursuant to and in compliance with
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an exemption from such requirement), and such Investor acknowledges that the
certificates evidencing the securities underlying the Units will be imprinted
with a legend that prohibits their transfer except in accordance therewith. Each
Investor acknowledges that there may occasionally be times when the Company
determines that it must suspend the use of the Prospectus forming a part of the
Registration Statement, as set forth in Section 7.2(c).
5.4 Each Investor further represents and warrants to, and
covenants with, the Company that (i) such Investor has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, and (ii) this
Agreement constitutes a valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.
5.5 Each Investor will not use any of the restricted Units
acquired pursuant to this Agreement to cover any short position in the Common
Stock of the Company if doing so would be in violation of applicable securities
laws and otherwise will comply with federal securities laws in the holding and
sale of the Units.
5.6 Each Investor understands that nothing in the Exchange Act
Documents, this Agreement or any other materials presented to the Investor in
connection with the purchase and sale of the Units constitutes legal, tax or
investment advice. Each Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Units.
5.7 The Company acknowledges and agrees that each Investor does
not make or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Sections 5 and 16(a) of this Agreement, or in the Investor Questionnaire.
6. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Investors herein shall survive the execution of this Agreement, the delivery
to each Investor of the Units being purchased and the payment therefor.
7. Registration of the Shares; Compliance with the Securities Act.
--------------------------------------------------------------
7.1 Registration Procedures and Other Matters. The Company shall:
-----------------------------------------
(a) subject to receipt of necessary information from each
Investor after prompt request from the Company to the Investors to provide such
information, prepare and file with the SEC, within 30 days after the Closing
Date, a registration statement on Form SB-2, or on such other appropriate form
as may be determined by counsel for the Company (the "Registration Statement")
to enable the resale of the Shares by each Investor from time to time on the
Principal Market or in privately-negotiated transactions;
(b) subject to receipt of necessary information from the
Investors after prompt request from the Company to the Investors to provide such
information, use its reasonable commercial efforts to cause the Registration
Statement to become effective on or prior to the 90th day after the Closing
Date;
(c) use its reasonable commercial efforts to prepare and file
with the SEC such amendments and supplements to the Registration Statement and
the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement current, effective and free from any material
misstatement or omission to state a material fact for a period not exceeding the
earlier of (i) the second anniversary of the Closing Date, (ii) the date on
which each Investor may sell all Shares then held by such Investor without
restriction by the volume limitations of Rule 144(e) of the Securities Act, or
(iii) such time as all Shares purchased by such Investor in this Offering have
been sold pursuant to a registration statement;
(d) furnish to each Investor with respect to the Shares
registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses and Preliminary Prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Investors may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Shares by the Investors; provided,
however, that the obligation of the Company
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to deliver copies of Prospectuses or Preliminary Prospectuses to the Investor
shall be subject to the receipt by the Company of reasonable assurances from
each Investor that the Investors will comply with the applicable provisions of
the Securities Act and of such other securities or blue sky laws as may be
applicable in connection with any use of such Prospectuses or Preliminary
Prospectuses;
(e) file documents required of the Company for normal blue
sky clearance in states specified in writing by each Investor and use its
reasonable commercial efforts to maintain such blue sky qualifications during
the period the Company is required to maintain the effectiveness of the
Registration Statement pursuant to Section 7.1(c); provided, however, that the
Company shall not be required to qualify to do business or consent to service of
process in any jurisdiction in which it is not now so qualified or has not so
consented;
(f) bear all expenses in connection with the procedures in
paragraph (a) through (e) of this Section 7.1 (other than underwriting discounts
or commissions, brokers' fees and similar selling expenses, and any other fees
or expenses incurred by the Investors, including attorney fees of the Investor)
and the registration of the Shares pursuant to the Registration Statement; and
(g) advise the Investors, promptly after it shall receive
notice or obtain knowledge of the issuance of any stop order by the SEC delaying
or suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its reasonable commercial efforts to prevent the issuance of any stop order
or to obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
The Registration Statement shall cover the resale of the Shares by each
Investor, but not the Units or the Warrants as separate securities. The
Registration Statement shall also cover, for resale by other selling
shareholders, (i) approximately 1,300,000 shares of Common Stock that may be
issued pursuant to a concurrent private placement; (ii) 1,740,336 shares of
Common Stock currently outstanding; and (iii) 1,816,956 shares of Common Stock
underlying warrants, all for resale by other selling shareholders whom the
Company had previously granted registration rights. In no event at any time
before the Registration Statement becomes effective with respect to the Shares
shall the Company publicly announce or file any other registration statement,
other than registrations on Form S-8, without the prior written consent of a
majority in interest of the Total Investors.
The Company understands that the Investors disclaim being an underwriter,
but if the SEC deems any Investor to be an underwriter the Company shall not be
relieved of any obligations it has hereunder; provided, however that if the
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Company receives notification from the SEC that such Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (i) the 90th
day after such SEC notification, or (ii) 120 days after the initial filing of
the Registration Statement with the SEC.
7.2 Transfer of Shares After Registration; Suspension.
-------------------------------------------------
(a) Each Investor agrees that it will not effect any
disposition of the Shares or its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act except as
contemplated in the Registration Statement referred to in Section 7.1 and as
described below or as otherwise permitted by law, and that it will promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.
(b) Except in the event that paragraph (c) below applies, the
Company shall (i) if deemed necessary by the Company, prepare and file from time
to time with the SEC a post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and so that, as
thereafter delivered to purchasers of the Shares being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) provide each Investor copies of any documents filed
pursuant to Section 7.2(b)(i) as the Investor may reasonably request; and (iii)
inform each Investor that the Company has complied with its obligations in
Section 7.2(b)(i) (or that, if the Company has filed a post-effective amendment
to the Registration Statement which has not yet been declared effective, the
Company will notify each Investor to that effect, will use its reasonable
commercial efforts to secure the effectiveness of such post-effective amendment
as promptly as possible and will promptly notify each Investor pursuant to
Section 7.2(b)(i) hereof when the amendment has become effective).
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(c) Subject to paragraph (d) below, in the event (i) of any
request 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 a Registration Statement or related Prospectus or for additional
information; (ii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; or (iv) of any event or circumstance which, upon
the advice of its counsel, necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a 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; then the Company shall deliver a certificate in
writing to each Investor (the "Suspension Notice") to the effect of the
foregoing and, upon receipt of such Suspension Notice, each Investor will
refrain from selling any Shares pursuant to the Registration Statement (a
"Suspension") until the Investor's receipt of copies of a supplemented or
amended Prospectus prepared and filed by the Company, or until it is advised in
writing by the Company that the current Prospectus may be used, and has received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its reasonable commercial efforts to cause the
use of the Prospectus so suspended to be resumed as soon as reasonably
practicable within 20 business days after the delivery of a Suspension Notice to
the Investors. In addition to and without limiting any other remedies
(including, without limitation, at law or at equity) available to the Investors,
the Investors shall be entitled to specific performance in the event that the
Company fails to comply with the provisions of this Section 7.2(c).
(d) Notwithstanding the foregoing paragraphs of this Section
7.2, the Investors shall not be prohibited from selling Shares under the
Registration Statement as a result of Suspensions on more than two occasions of
not more than 30 days each in any twelve month period, unless, in the good faith
judgment of the Company's Board of Directors, upon the written opinion of
counsel of the Company, the sale of Shares under the Registration Statement in
reliance on this paragraph 7.2(d) would be reasonably likely to cause a
violation of the Securities Act or the Exchange Act and result in liability to
the Company.
(e) Provided that a Suspension is not then in effect, the
Investors may sell Shares under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of such Shares.
Upon receipt of a request therefor, the Company has agreed to provide an
adequate number of current Prospectuses to each Investor and to supply copies to
any other parties requiring such Prospectuses.
(f) In the event of a sale of Shares by any of the Investors
pursuant to the Registration Statement, such Investor must also deliver to the
Company's transfer agent, with a copy to the Company, a Certificate of
Subsequent Sale substantially in the form attached hereto as Exhibit A, so that
---------
the Shares may be properly transferred.
7.3 Indemnification. For the purpose of this Section 7.3:
---------------
(i) the term "Selling Stockholder" means the Investor and any
affiliate of such Investor;
(ii) the term "Registration Statement" shall include the
Prospectus in the form first filed with the SEC pursuant to Rule 424(b) of the
Securities Act or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required, and any exhibit, supplement
or amendment included in or relating to the Registration Statement referred to
in Section 7.1; and
(iii) the term "Untrue Statement" means any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a 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.
(a) The Company agrees to indemnify and hold harmless each
Selling Stockholder from and against any losses, claims, damages or liabilities
to which such Selling Stockholder may become subject (under the Securities Act
or otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon (i) any
breach of the representations or warranties of the Company contained herein or
failure to comply with the covenants and agreements of the Company contained
herein, (ii) any Untrue Statement, or (iii) any failure by the Company to
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fulfill any undertaking included in the Registration Statement as amended or
supplemented from time to time, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim, or preparing to defend any such action, proceeding or claim, provided,
--------
however, that the Company shall not be liable in any such case to the extent
-------
that such loss, claim, damage or liability arises out of, or is based upon, an
Untrue Statement made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling Stockholder
specifically for use in preparation of the Registration Statement, as amended or
supplemented from time to time (including, without limitation, information set
forth in the Investor Questionnaire), or the failure of such Selling Stockholder
to comply with its covenants and agreements contained in Section 7.2 hereof
respecting sale of the Shares or any statement or omission in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the Selling
Stockholder prior to the pertinent sale or sales by the Selling Stockholder.
The Company shall reimburse each Selling Stockholder for the indemnifiable
amounts provided for herein on demand as such expenses are incurred.
(b) Each Investor agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs the
Registration Statement and each director of the Company) from and against any
losses, claims, damages or liabilities to which the Company (or any such
officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (i) any failure to comply with the covenants and agreements
contained in Section 7.2 hereof respecting sale of the Shares, or (ii) any
Untrue Statement if such Untrue Statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Investor
specifically for use in preparation of the Registration Statement, as amended or
supplemented from time to time (including, without limitation, information set
forth in the Investor Questionnaire), and such Investor will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim. Such Investor
shall reimburse the Company or such officer, director or controlling person, as
the case may be, for the indemnifiable amounts provided for herein on demand as
such expenses are incurred. Notwithstanding the foregoing, the Investor's
aggregate obligation to indemnify the Company and such officers, directors and
controlling persons shall be limited to the net amount received by the Investor
from the sale of the Shares.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 7.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, but the omission to so notify the
indemnifying person will not relieve it from any liability which it may have to
any indemnified person under this Section 7.3 (except to the extent that such
omission materially and adversely affects the indemnifying person's ability to
defend such action) or from any liability otherwise than under this Section 7.3.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified person promptly after receiving the aforesaid
notice from such indemnified person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After
notice from the indemnifying person to such indemnified person of its election
to assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
-------- -------
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
--------
that such consent shall not be unreasonably withheld or delayed. No
indemnifying person shall, without the prior written consent of the indemnified
person, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified person is or could have been a party and
indemnification could have been sought hereunder by such indemnified person,
unless such settlement includes an unconditional release of such indemnified
person from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in this Section 7.3
is unavailable to or insufficient to hold harmless an indemnified person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying person shall contribute to the amount paid or payable by
such indemnified person as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Investor,
-11-
as well as any other Selling Shareholders under such Registration Statement on
the other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the case of an
Untrue Statement, whether the Untrue Statement relates to information supplied
by the Company on the one hand or an Investor or other Selling Shareholder on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such Untrue Statement. The Company and such
Investor agree that it would not be just and equitable if contribution pursuant
to this subsection (d) were determined by pro rata allocation (even if the
Investor and other Selling Shareholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), the Investor shall not be required to contribute any amount in
excess of the amount by which the net amount received by the Investor from the
sale of the Shares to which such loss relates exceeds the amount of any damages
which such Investor has otherwise been required to pay by reason of such Untrue
Statement. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Investor's obligations in this subsection to contribute shall be in proportion
to its Investor sale of Shares to which such loss relates and shall not be joint
with any other Selling Shareholders.
(e) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof including, without limitation,
the provisions of this Section 7.3, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 7.3
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Securities Act and the Exchange
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 7.3, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 7.3 and further agree not to attempt to assert any
such defense.
7.4 Termination of Conditions and Obligations. The conditions
-----------------------------------------
precedent imposed by Section 5 or this Section 7 upon the transferability of the
Shares shall cease and terminate as to any particular number of the Shares when
such Shares shall have been effectively registered under the Securities Act and
sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Shares or at
such time as an opinion of counsel reasonably satisfactory to the Company shall
have been rendered to the effect that such conditions are not necessary in order
to comply with the Securities Act.
7.5 Information Available. So long as the Registration Statement
---------------------
is effective covering the resale of Shares owned by the Investors, the Company
will furnish to each Investor:
(a) as soon as practicable after it is available, one copy of
(i) its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles), (ii) its Annual Report on Form 10-KSB and (iii) its Quarterly
Reports on Form 10-QSB (the foregoing, in each case, excluding exhibits);
(b) upon the request of the Investors, all exhibits excluded
by the parenthetical to subparagraph (a) of this Section 7.5 as filed with the
SEC and all other information that is made available to shareholders; and
(c) upon the reasonable request of the Investors, the
President or the Chief Financial Officer of the Company (or an appropriate
designee thereof) will meet with the Investor or a representative thereof at the
Company's headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Shares and will otherwise cooperate with any
Investor conducting an investigation for the purpose of reducing or eliminating
such Investor's exposure to liability under the Securities Act, including the
reasonable production of information at the Company's headquarters; provided,
that the Company shall not be required to disclose any confidential information
to or meet at its headquarters with any Investor until and unless the Investor
shall have entered into a confidentiality agreement in form and substance
reasonably satisfactory to the Company with the Company with respect thereto.
7.6 Legend; Restrictions on Transfer. The certificate or
-----------------------------------
certificates for the Shares and the Warrants shall be
-12-
subject to a legend or legends restricting transfer under the Securities Act and
referring to restrictions on transfer herein, such legend to be substantially as
follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL, IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
The Company and each Investor acknowledge and agree that each Investor may, as
permitted by law, from time to time pledge pursuant to a bona fide margin
agreement or grant a security interest in some or all of the Shares and, if
required under the terms of such arrangement, Investor may, as permitted by law,
transfer pledged or secured Shares to the pledgees or secured parties. So long
as the Investor is not an affiliate of the Company, such a pledge or transfer
would not be subject to approval or consent of the Company, provided that, upon
the request of the Company, a legal opinion of legal counsel to the pledgee,
secured party or pledgor shall be obtained. At the Investor's expense, so long
as the Shares are subject to the legend required by this Section 7.6, the
Company will use its reasonable commercial efforts to execute and deliver such
reasonable documentation as a pledgee or secured party of Shares may reasonably
request in connection with a pledge or transfer of the Shares including such
amendments or supplements to the Registration Statement and Prospectus as may be
reasonably required. The foregoing does not affect Investor's obligations
pursuant to Section 7.2(a).
7.7 Liquidated Damages. The Company and each Investor agree that
------------------
each Investor will suffer damages if the Company fails to fulfill its
obligations pursuant to Section 7.1 and 7.2 hereof and that it would not be
possible to ascertain the extent of such damages with precision. Accordingly,
the Company hereby agrees to pay liquidated damages ("Liquidated Damages") to
each Investor under the following circumstances: (a) if the Registration
Statement is not filed by the Company on or prior to 30 days after the Closing
Date (such an event, a "Filing Default"); (b) if the Registration Statement is
not declared effective by the SEC on or prior to 90 days after the Closing Date
(such an event, an "Effectiveness Default"); or (c) if the Registration
Statement (after its effectiveness date) ceases to be effective and available to
Investors for any continuous period that exceeds 30 days or for one or more
period that exceeds in the aggregate 60 days in any 12-month period (such an
event, a "Suspension Default" and together with a Filing Default and an
Effectiveness Default, a "Registration Default"). In the event of a
Registration Default, the Company shall as Liquidated Damages pay to each
Investor, for each 45-day period of a Registration Default, an amount in cash
equal to 5% of the aggregate purchase price paid by each Investor pursuant to
this Agreement up to a maximum of 30% of the aggregate purchase price paid by
each Investor, provided that Liquidation Damages in respect of a Suspension
Default shall not be payable in relation to any Units not owned by the Investor
at the time of the Suspension Default. The Company shall pay the Liquidated
Damages as follows: (i) in connection with a Filing Default, on the 46th day
after the Closing Date, and each 30th day thereafter until the Registration
Statement is filed with the SEC; (ii) in connection with an Effectiveness
Default, on the 91st day after the Closing Date and each 30th day thereafter
until the Registration Statement is declared effective by the SEC; or (iii) in
connection with a Suspension Default, on either (x) the 31st consecutive day of
any Suspension or (y) the 61st day (in the aggregate) of any Suspensions in any
12-month period, and each 30th day thereafter until the Suspension is terminated
in accordance with Section 7.2. Notwithstanding the foregoing, all periods
shall be tolled during delays directly caused by the action or inaction of any
Investor, and the Company shall have no liability to any Investor in respect of
any such delay. The Liquidated Damages payable herein shall apply on a pro rata
basis for any portion of a 30-day period of a Registration Default.
8. Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing, shall be mailed (A) if within the United States
by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if delivered
from outside the United States, by International Federal Express (or other
recognized international express courier) or facsimile, and shall be deemed
given (i) if delivered by first-class registered or certified mail, three
business days after so mailed, (ii) if delivered by nationally recognized
overnight carrier, one business day after so mailed, (iii) if delivered by
International Federal Express (or other recognized international express
courier), two business days after so mailed, (iv) if delivered by facsimile,
upon electronic confirmation of receipt and shall be delivered as addressed as
follows:
(a) if to the Company, to:
Integral Technologies, Inc.
-13-
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(b) with a copy to (does not constitute notice):
Futro & Associates, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
1401 - 17th Street, Sutie 1150
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(c) if to the Investors, to:
c/o Wellington Management Company, llp
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
9. Changes. This Agreement may be modified, amended or waived only
-------
pursuant to a written instrument signed by the Company and (a) Investors holding
a majority of the Units issued and sold in the Offering, provided that such
modification, amendment or waiver is made with respect to all Agreements and
does not adversely affect the Investor without adversely affecting all Investors
in a similar manner; or (b) the Investor.
10. Headings. The headings of the various sections of this Agreement
--------
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
11. Severability. In case any provision contained in this Agreement
------------
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
12. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the internal laws of the State of Nevada, without giving
effect to the principles of conflicts of law.
13. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
14. Entire Agreement. This Agreement constitute the entire agreement
----------------
between the parties hereto and supersedes any prior understandings or agreements
concerning the purchase and sale of the Units and the resale registration of the
Shares.
15. Rule 144. The Company covenants that it will timely file the
--------
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder (or, if the Company
is not required to file such reports, it will, upon the request of any Investor
holding Shares made after the first anniversary of the Closing Date, make
publicly available such information as necessary to permit sales pursuant to
Rule 144 under the Securities Act), and it will take such further action as any
such Investor may reasonably request, all to the extent required from time to
time to enable such Investor to sell Shares purchased hereunder without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of the Investor, the Company will deliver to such
holder a written statement as to whether it has complied with such information
and requirements.
16. Confidential Information.
------------------------
-14-
(a) Each Investor represents to the Company that, at all times
during the Company's offering of the Units, the Investors have maintained in
confidence all non-public information regarding the Company received by the
Investors from the Company or its agents, and covenants that it will continue to
maintain in confidence such information until such information (a) becomes
generally publicly available other than through a violation of this provision by
the Investors or its agents or (b) is required to be disclosed in legal
proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority or
similar process), provided, however, that before making any use or disclosure in
reliance on this subparagraph (b) the Investors shall give the Company at least
fifteen (15) days prior written notice (or such shorter period as required by
law) specifying the circumstances giving rise thereto and will furnish only that
portion of the non-public information which is legally required and will
exercise its reasonable commercial efforts to obtain reliable assurance that
confidential treatment will be accorded any non-public information so furnished.
(b) The Company shall on the Closing Date issue a press release
disclosing the material terms of the transactions contemplated hereby (including
at least the number of Units sold and proceeds therefrom). The Company shall
not publicly disclose the name of any Investor, or include the name of any
Investor in any filing with the SEC or any state and federal regulatory agency
(other than the filing of the Agreements with the SEC pursuant to the Exchange
Act or the filing of the Registration Statement), without the prior written
consent of any Investor, except to the extent such disclosure is required by law
or regulation.
17. No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
18. Knowledge. The term "knowledge" in this Agreement shall mean the
---------
knowledge of the directors and officers of the Company after due inquiry.
-15-
SCHEDULE A
----------
ACCOUNT LEGAL NAME COMMON WARRANTS
------------------ ------ --------
SHARES TO PURCHASE
------ -----------
CS
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British Columbia Investment 230,000 69,000
Management Corporation
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The Dow Chemical 454,000 136,200
Employees' Retirement Plan
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The Retirement Program Plan 378,000 113,400
for Employees of Union
Carbide Corporation
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----------------------------------------------------------------
Government of Singapore 1,757,000 527,100
Investment Corporation Pte
Ltd
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----------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ Medical 460,000 138,000
Institute
----------------------------------------------------------------
----------------------------------------------------------------
New York State Nurses 275,000 82,500
Association Pension Plan
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----------------------------------------------------------------
Ohio Carpenters' Pension Fund 150,000 45,000
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----------------------------------------------------------------
Laborers' District Council and 125,000 37,500
Contractors' of Ohio Pension
Fund
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----------------------------------------------------------------
The ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ 507,000 152,100
Foundation
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WTC-CIF Emerging 630,000 189,000
Companies Portfolio
----------------------------------------------------------------
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WTC-CTF Emerging 745,000 223,500
Companies Portfolio