INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of February 8, 2005 by and
between Centurion Gold Holdings, Inc., a Florida corporation (the "Company"),
and Dutchess Private Equities Fund, II, LP, a Delaware limited partnership (the
"Investor").
Whereas, the parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to Twenty Five Million dollars
($25,000,000) to purchase the Company's Common Stock, $0.0001 par value per
share (the "Common Stock");
Whereas, such investments will be made in reliance upon the provisions of
Section 4(2) under the Securities Act of 1933, as amended (the "1933 Act"), Rule
506 of Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the 1933
Act as may be available with respect to any or all of the investments in Common
Stock to be made hereunder; and
Whereas, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto (as amended from time to time, the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act, and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the foregoing recitals, which shall be
considered an integral part of this Agreement, the covenants and agreements set
forth hereafter, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investor hereby
agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings specified or indicated below, and such meanings shall be equally
applicable to the singular and plural forms of such defined terms.
"1933 Act" shall have the meaning set forth in the preamble of this
agreement.
"1934 Act" shall mean the Securities Exchange Act of 1934, as it may be
amended.
"Affiliate" shall have the meaning specified in Section 5(h), below.
"Agreement" shall mean this Investment Agreement.
"Best Bid" shall mean the highest posted bid price of the Common Stock.
"Buy In" shall have the meaning specified in Section 6, below.
"Buy In Adjustment Amount" shall have the meaning specified in Section
6.
"Closing" shall have the meaning specified in Section 2(h).
"Closing Date" shall mean no more than seven (7) Trading Days following
the Put Notice Date.
"Common Stock" shall have the meaning set forth in the preamble of this
Agreement.
"Control" or "Controls" shall have the meaning specified in Section 5(h).
"Covering Shares" shall have the meaning specified in Section 6.
"Effective Date" shall mean the date the SEC declares effective under the
1933 Act the Registration Statement covering the Securities.
"Environmental Laws" shall have the meaning specified in Section 4(m).
"Execution Date" shall mean the date indicated in the preamble to this
Agreement.
"Indemnities" shall have the meaning specified in Section 11.
"Indemnified Liabilities" shall have the meaning specified in Section 11.
"Ineffective Period" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (as defined in the
Registration Rights Agreement) becomes ineffective or unavailable for use for
the sale or resale, as applicable, of any or all of the Registrable Securities
(as defined in the Registration Rights Agreement) for any reason (or in the
event the prospectus under either of the above is not current and deliverable)
during any time period required under the Registration Rights Agreement.
"Investor" shall have the meaning indicated in the preamble of this
Agreement.
"Material Adverse Effect" shall have the meaning specified in Section
4(a).
"Maximum Common Stock Issuance" shall have the meaning specified in
Section 2(I).
"Minimum Acceptable Price" with respect to any Put Notice Date shall mean
seventy-five percent (75%) of the lowest closing bid prices for the ten (10)
Trading Day period immediately preceding such Put Notice Date.
"Open Period" shall mean the period beginning on and including the Trading
Day immediately following the Effective Date and ending on the earlier to occur
of (i) the date which is thirty-six (36) months from the Effective Date; or (ii)
termination of the Agreement in accordance with Section 9, below.
"Pricing Period" shall mean the period beginning on the Put Notice Date
and ending on and including the date that is five (5) Trading Days after such
Put Notice Date.
"Principal Market" shall mean the American Stock Exchange, Inc., the
National Association of Securities Dealers, Inc. Over-the-Counter Bulletin
Board, the NASDAQ National Market System or the NASDAQ SmallCap Market,
whichever is the principal market on which the Common Stock is listed.
"Prospectus" shall mean the prospectus, preliminary prospectus and
supplemental prospectus used in connection with the Registration Statement.
"Purchase Amount" shall mean the total amount being paid by the Investor
on a particular Closing Date to purchase the Securities.
"Purchase Price" shall mean ninety-five percent (95%) of the lowest
closing Best Bid price of the Common Stock during the Pricing Period.
"Put Amount" shall have the meaning set forth in Section 2(b) hereof.
"Put Notice" shall mean a written notice sent to the Investor by the
Company stating the Put Amount in U.S. dollars, the Company intends to sell to
the Investor pursuant to the terms of the Agreement and stating the current
number of Shares issued and outstanding on such date.
"Put Notice Date" shall mean the Trading Day immediately following the day
on which the Investor receives a Put Notice, however a Put Notice shall be
deemed delivered on (a) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 9:00 am Eastern Time, or (b)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 9:00 am Eastern Time on a Trading Day. No Put Notice may be
deemed delivered on a day that is not a Trading Day.
"Put Restriction" shall mean the days between the beginning of the Pricing
Period and Closing Date. During this time, the Company shall not be entitled to
deliver another Put Notice.
"Registration Period" shall have the meaning specified in Section 5(c),
below.
"Registration Rights Agreement" shall have the meaning set forth in the
recitals, above.
"Registration Statement" means the registration statement of the Company
filed under the 1933 Act covering the Common Stock issuable hereunder.
"Related Party" shall have the meaning specified in Section 5(h).
"Resolution" shall have the meaning specified in Section 8(e).
"SEC" shall mean the U.S. Securities & Exchange Commission.
"SEC Documents" shall have the meaning specified in Section 4(f).
"Securities" shall mean the shares of Common Stock issued pursuant to the
terms of the Agreement.
"Shares" shall mean the shares of the Company's Common Stock.
"Sold Shares" shall have the meaning specified in Section 6.
"Subsidiaries" shall have the meaning specified in Section 4(a).
"Trading Day" shall mean any day on which the Principal Market for the
Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.
"Transaction Documents" shall mean this Agreement, the Registration Rights
Agreement, and each of the other agreements entered into by the parties hereto
in connection with this Agreement.
SECTION 2. PURCHASE AND SALE OF COMMON STOCK.
(A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of Twenty-Five Million dollars ($25,000,000).
(B) DELIVERY OF PUT NOTICES.
(I) Subject to the terms and conditions of the Transaction Documents, and from
time to time during the Open Period, the Company may, in its sole discretion,
deliver a Put Notice to the Investor which states the Put Amount (designated in
U.S. Dollars) which the Company intends to sell to the Investor on a Closing
Date. The Put Notice shall be in the form attached hereto as Exhibit F and
incorporated herein by reference. The amount that the Company shall be entitled
to Put to the Investor (the "Put Amount") shall be equal to an amount up to Five
Hundred Thousand dollars ($500,000) with respect to any single Put. During the
Open Period, the Company shall not be entitled to submit a Put Notice until
after the previous Closing has been completed. The Purchase Price for the Common
Stock identified in the Put Notice shall be equal to ninety-five percent (95)%
of the lowest closing bid price of the Common Stock during the Pricing Period.
(II) If any closing bid price during the applicable Pricing Period with respect
to that Put Notice is less than Seventy-Five percent (75%) of the any closing
bid prices of the Common Stock for the ten (10) Trading Days prior to the Put
Notice Date (the "Minimum Acceptable Price"), the Put Notice will terminate at
the Company's request. In the event that the closing bid price for the
applicable Pricing Period is less than the Minimum Acceptable Price, the Company
may elect, by sending written notice to the Investor to cancel the Put Notice.
(C) RESERVED
(D) INVESTOR'S OBLIGATION TO PURCHASE SHARES. Subject to the conditions set
forth in this Agreement, following the Investor's receipt of a validly delivered
Put Notice, the Investor shall be required to purchase from the Company during
the related Pricing Period that number of Shares having an aggregate Purchase
Price equal to the lesser of (i) the Put Amount set forth in the Put Notice, and
(ii) twenty percent (20%) of the aggregate trading volume of the Common Stock
during the applicable Pricing Period times (x) the lowest closing Best Bid price
of the Company's Common Stock during the specified Pricing Period, but only if
said Shares bear no restrictive legend, are not subject to stop transfer
instructions, pursuant to Section 2(h), prior to the applicable Closing Date.
(E) Reserved
(F) CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding
anything to the contrary in this Agreement, the Company shall not be entitled to
deliver a Put Notice and the Investor shall not be obligated to purchase any
Shares at a Closing (as defined in Section 2(h)) unless each of the following
conditions are satisfied:
(I) a Registration Statement shall have been declared effective and shall remain
effective and available for the resale of all the Registrable Securities (as
defined in the Registration Rights Agreement) at all times until the Closing
with respect to the subject Put Notice;
(II) at all times during the period beginning on the related Put Notice Date and
ending on and including the related Closing Date, the Common Stock shall have
been listed on the Principal Market and shall not have been suspended from
trading thereon for a period of two (2) consecutive Trading Days during the Open
Period and the Company shall not have been notified of any pending or threatened
proceeding or other action to suspend the trading of the Common Stock;
(III) the Company has complied with its obligations and is otherwise not in
breach of a material provision of, or in default under, this Agreement, the
Registration Rights Agreement or any other agreement executed in connection
herewith which has not been corrected prior to delivery of the Put Notice Date;
(IV) no injunction shall have been issued and remain in force, or action
commenced by a governmental authority which has not been stayed or abandoned,
prohibiting the purchase or the issuance of the Securities; and
(V) the issuance of the Securities will not violate any shareholder approval
requirements of the Principal Market.
If any of the events described in clauses (i) through (v) above occurs during a
Pricing Period, then the Investor shall have no obligation to purchase the Put
Amount of Common Stock set forth in the applicable Put Notice.
(G) RESERVED
(H) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the
satisfaction of the conditions set forth in Sections 2(f), 7 and 8, the closing
of the purchase by the Investor of Shares (a "Closing") shall occur on the date
which is no later than seven (7) Trading Days following the applicable Put
Notice Date (each a "Closing Date"). Prior to each Closing Date, (I) the Company
shall deliver to the Investor pursuant to this Agreement, certificates
representing the Shares to be issued to the Investor on such date and registered
in the name of the Investor; and (II) the Investor shall deliver to the Company
the Purchase Price to be paid for such Shares, determined as set forth in
Sections 2(b) and 2(d). In lieu of delivering physical certificates representing
the Securities and provided that the Company's transfer agent then is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the Investor, the Company shall use
its commercially reasonable efforts to cause its transfer agent to
electronically transmit the Securities by crediting the account of the
Investor's prime broker (which shall be specified by the Investor a reasonably
sufficient time in advance) with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system.
The Company understands that a delay in the issuance of Securities beyond the
Closing Date could result in economic loss to the Investor. After the Effective
Date, as compensation to the Investor for such loss, the Company agrees to pay
late payments to the Investor for late issuance of Securities (delivery of
Securities after the applicable Closing Date) in accordance with the following
schedule (where "No. of Days Late" is defined as the number of trading days
beyond the Closing Date. The Amounts are cumulative.):
LATE PAYMENT
FOR EACH NO.
OF DAYS LATE $10,000 OF COMMON STOCK
1 $ 100
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1,000
Over 10 $1,000 + $200 for each
Business Day late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand by the Investor. Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue and
deliver the Securities to the Investor, except to the extent that such late
payments shall constitute payment for and offset any such actual damages alleged
by the Investor, and any Buy In Adjustment Amount.
(I) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained
herein to the contrary, if during the Open Period the Company becomes listed on
an exchange that limits the number of shares of Common Stock that may be issued
without shareholder approval, then the number of Shares issuable by the Company
and purchasable by the Investor, including the shares of Common Stock issuable
to the Investors, shall not exceed that number of the shares of Common Stock
that may be issuable without shareholder approval, subject to appropriate
adjustment for stock splits, stock dividends, combinations or other similar
recapitalization affecting the Common Stock (the "Maximum Common Stock
Issuance"), unless the issuance of Shares, including any Common Stock to be
issued to the Investor pursuant to Section 11(b), in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders in
accordance with applicable law and the Bylaws and Amended and Restated
Certificate of Incorporation of the Company, if such issuance of shares of
Common Stock could cause a delisting on the Principal Market. The parties
understand and agree that the Company's failure to seek or obtain such
shareholder approval shall in no way adversely affect the validity and due
authorization of the issuance and sale of Securities or the Investor's
obligation in accordance with the terms and conditions hereof to
purchase a number of Shares in the aggregate up to the Maximum Common Stock
Issuance limitation, and that such approval pertains only to the applicability
of the Maximum Common Stock Issuance limitation provided in this Section 2(j).
SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Investor represents and warrants to the Company, and covenants, that:
(A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment decisions of this type that it is
capable of (I) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (II) protecting its own
interest; and (III) bearing the economic risk of such investment for an
indefinite period of time.
(B) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor
will comply with the provisions of Section 9 of the 1934 Act, and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
The Investor agrees not to short, either directly or indirectly through its
affiliates, principals or advisors, the Company's common stock during the term
of this Agreement.
(D) ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term is
defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
(E) NO CONFLICTS. The execution, delivery and performance of the Transaction
Documents by the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby will not result in a violation of
Partnership Agreement or other organizational documents of the Investor.
(F) OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to
the Company's business, finance and operations which it has requested. The
Investor has had an opportunity to discuss the business, management and
financial affairs of the Company with the Company's management.
(G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own
account for investment purposes and not with a view towards distribution and
agrees to resell or otherwise dispose of the Securities solely in accordance
with the registration provisions of the 1933 Act (or pursuant to an exemption
from such registration provisions).
(H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to
be registered as a "dealer" under the 1934 Act, either as a result of its
execution and performance of its obligations under this Agreement or otherwise.
(I) GOOD STANDING The Investor is a Limited Partnership, duly organized, validly
existing and in good standing in the State of Delaware.
(J) TAX LIABILITIES. The Investor understands that it is liable for its own tax
liabilities.
(K) REGULATION M. The Investor will comply with Regulation M under the 1934 Act,
if applicable.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, or as disclosed on the
Company's SEC Documents, the Company represents and warrants to the Investor
that:
(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized
and validly existing in good standing under the laws of the State of Florida,
and has the requisite corporate power and authorization to own its properties
and to carry on its business as now being conducted. Both the Company and the
companies it owns or controls, its "Subsidiaries," are duly qualified to do
business and are in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined in Section 1 and 4(b), below).
(B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(I) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement, and each of the
other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof.
(II) The execution and delivery of the Transaction Documents by the Company and
the consummation by it, of the transactions contemplated hereby and thereby,
including without limitation the reservation for issuance and the issuance of
the Securities pursuant to this Agreement, have been duly and validly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors, or its shareholders.
(III) The Transaction Documents have been duly and validly executed and
delivered by the Company.
(IV) The Transaction Documents constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
(C) CAPITALIZATION. As of the date hereof, the authorized capital stock of the
Company consists of (i) 300,000,000 shares of Common Stock, $0.0001 par value
per share, of which as of the date hereof, 54,063,750 shares are issued and
outstanding; 20,000,000 shares of Preferred Stock authorized, $0.0001 par value
per share of which none are issued and outstanding; (as of February 4, 2005)
shares reserved for issuance pursuant to options, warrants and other convertible
securities. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in the
Company's publicly available filings with Periodic Filings,
(I) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company; (II) there are no outstanding debt securities; (III) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (IV) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the
1933 Act (except the Registration Rights Agreement), (V) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (VI) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; (VII) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement; and (VIII) there is no dispute as to the
classification of any shares of the Company's capital stock. The Company has
furnished to the Investor, or the Investor has had access through ▇▇▇▇▇ to, true
and correct copies of the Company's Amended and Restated Certificate of
Incorporation, as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
(D) ISSUANCE OF SHARES. The Company has reserved Seventy-Five million
($75,000,000) Shares for issuance pursuant to this Agreement has been duly
authorized and reserved for issuance (subject to adjustment pursuant to the
Company's covenant set forth in Section 5(f) below) pursuant to this Agreement.
Upon issuance in accordance with this Agreement, the Securities will be validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issue thereof. In the event the Company cannot register a
sufficient number of Shares for issuance pursuant to this Agreement, the Company
will use its best efforts to authorize and reserve for issuance the number of
Shares required for the Company to perform its obligations hereunder as soon as
reasonably practicable.
(E) NO CONFLICTS. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not (I) result in a violation of the
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws; or (II) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or to the Company's knowledge result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of the Principal
Market or principal securities exchange or trading market on which the Common
Stock is traded or listed) applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected. Except as disclosed in Schedule 4(e), neither
the Company nor its Subsidiaries is in violation of any term of, or in default
under, the Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the Bylaws or their organizational charter or by-laws, respectively,
or any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for possible conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not individually or in the aggregate have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, statute, ordinance, rule, order or
regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act to the Company's knowledge, the Company is not
required to obtain any consent, authorization, permit or order of, or make any
filing or registration (except the filing of a registration statement) with, any
court, governmental authority or agency, regulatory or self-regulatory agency or
other third party in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents in accordance
with the terms hereof or thereof. All consents, authorizations, permits, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof and are in full force and effect as of the date hereof. Except as
disclosed in Schedule 4(e), the Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future.
(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of February 4, 2005 the Company has
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 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investor or its representatives,
or they have had access through ▇▇▇▇▇ to, true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted 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. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles, by a firm
that is a member of the Public Companies Accounting Oversight Board ("PCAOB")
consistently applied, during the periods involved (except (I) as may be
otherwise indicated in such financial statements or the notes thereto, or (II)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 4(d) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstance
under which they are or were made, not misleading. Neither the Company nor any
of its Subsidiaries or any of their officers, directors, employees or agents
have provided the Investor with any material, nonpublic information which was
not publicly disclosed prior to the date hereof and any material, nonpublic
information provided to the Investor by the Company or its Subsidiaries or any
of their officers, directors, employees or agents prior to any Closing Date
shall be publicly disclosed by the Company prior to such Closing Date.
(G) ABSENCE OF CERTAIN CHANGES. Except as set forth in the SEC Documents, the
Company does not intend to change the business operations of the Company in any
material way. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
(H) ABSENCE OF LITIGATION. Except as set forth in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of Company or any of its
Subsidiaries, threatened against or affecting the Company, the Common Stock or
any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
(I) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The
Company further acknowledges that the Investor is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby
and any advice given by the Investor or any of its respective representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investor's purchase
of the Securities. The Company further represents to the Investor that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.
(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as
set forth in the SEC Documents, since February 5, 2005 no event, liability,
development or circumstance has occurred or exists, or to the Company's
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the ▇▇▇▇ ▇▇▇) has
notified the Company that such officer intends to leave the Company's employ or
otherwise terminate such officer's employment with the Company.
(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service ▇▇▇▇ registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth in the SEC Documents, none of the Company's
trademarks, trade names, service marks, service ▇▇▇▇ registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
necessary to conduct its business as now or as proposed to be conducted have
expired or terminated, or are expected to expire or terminate within two (2)
years from the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service ▇▇▇▇ registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth in the
SEC Documents, there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service ▇▇▇▇
registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the
knowledge of management of the Company, in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"); (II)
have, to the knowledge of management of the Company, received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses; and (III) are in compliance, to the
knowledge of the Company, with all terms and conditions of any such permit,
license or approval where, in each of the three (3) foregoing cases, the failure
to so comply would have, individually or in the aggregate, a Material Adverse
Effect.
(N) TITLE. The Company and its Subsidiaries have good and marketable title to
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(O) INSURANCE. Each of the Company's Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company reasonably believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and
effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
(Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (I) transactions are executed in accordance with
management's general or specific authorizations; (II) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles by a firm with membership to the PCAOB
and to maintain asset accountability; (III) access to assets is permitted only
in accordance with management's general or specific authorization; and (IV) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all
United States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at
least ten (10) days prior to the date hereof and except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain
from third parties and other than the grant of stock options disclosed in the
SEC Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect. The Board of Directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.
(V) RIGHT OF FIRST REFUSAL. The Company shall not, directly or indirectly,
without the prior written consent of Investor which will not be unreasonably
withheld, offer, sell, grant any option to purchase, or otherwise dispose of (or
announce any offer, sale, grant or any option to purchase or other disposition)
any of its Common Stock or securities convertible into Common Stock at a price
that is less than the market price of the Common Stock at the time of issuance
of such security or investment (a "Subsequent Financing") for a period of one
(1) year after the Effective Date, except (I) the granting of options or
warrants to employees, officers, directors and consultants, and the issuance of
shares upon exercise of options granted, under any stock option plan heretofore
or hereafter duly adopted by the Company or for services rendered or to be
rendered; (II) shares issued upon exercise of any currently outstanding warrants
or options and upon conversion of any currently outstanding convertible
debenture or convertible preferred stock, in each case disclosed pursuant to
Section 4(c); (III) securities issued in connection with the capitalization or
creation of a joint venture with a strategic partner; (IV) shares issued to pay
part or all of the purchase price for the acquisition by the Company of another
entity (which, for purposes of this clause (iv), shall not include an individual
or group of individuals); and (V) shares issued in a bona fide public offering
by the Company of its securities, unless (A) the Company delivers to Investor a
written notice (the
"Subsequent Financing Notice") of its intention to effect such Subsequent
Financing, which Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the person with whom such Subsequent Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto; and (B) Investor shall not have notified the Company by 5:00
p.m. (Eastern Time) on the fifth Trading Day after its receipt of the Subsequent
Financing Notice of its willingness to provide, subject to completion of
mutually acceptable documentation, financing to the Company on substantially the
terms set forth in the Subsequent Financing Notice; (VI) to enter into a loan,
credit or lease facility with a bank or financing institution. If Investor shall
fail to notify the Company of its intention to enter into such negotiations
within such time period, then the Company may effect the Subsequent Financing
substantially upon the terms set forth in the Subsequent Financing Notice;
provided that the Company shall provide Investor with a second Subsequent
Financing Notice, and Investor shall again have the right of first refusal set
forth above in this Section, if the Subsequent Financing subject to the initial
Subsequent Financing Notice shall not have been consummated for any reason on
the terms set forth in such Subsequent Financing Notice within thirty Trading
Days after the date of the initial Subsequent Financing Notice. The rights
granted to Investor in this Section are not subject to any prior right of first
refusal given to any other person disclosed on Schedule 4(c).
(W) LOCK-UP. The Company shall cause its officers, insiders, directors, and
affiliates or other related parties under control of the Company, to refrain
from selling Common Stock during each Pricing Period.
(X) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor
any person acting on its behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D) in connection with
the offer or sale of the Common Stock offered hereby.
(Y) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS will be
payable by the Company with respect to the transactions contemplated by this
Agreement, other than disclosed in this Agreement.
SECTION 5. COVENANTS OF THE COMPANY
(A) BEST EFFORTS. The Company shall use commercially reasonable efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Section 7
of this Agreement.
(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each
of the Closing Dates, take such action as the Company shall reasonably determine
is necessary to qualify the Securities for, or obtain exemption for the
Securities for, sale to the Investor at each of the Closings pursuant to this
Agreement under applicable securities or "Blue Sky" laws of such states of the
United States, as reasonably specified by Investor, and shall provide evidence
of any such action so taken to the Investor on or prior to the Closing Date.
(C) REPORTING STATUS. Until the earlier to occur of (I) the first date which is
after the date this Agreement is terminated pursuant to Section 9 and on which
the Holders (as that term is defined in the Registration Rights Agreement) may
sell all of the Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto); and (II) the date on
which (A) the Holders shall have sold all the Securities; and (B) this Agreement
has been terminated pursuant to Section 9 (the "Registration Period"), the
Company shall file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as a reporting company
under the 1934 Act.
(D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Shares (excluding amounts paid by the Company for fees as set forth in the
Transaction Documents) for general corporate and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the
Board of Directors deem to be in the best interest of the Company.
(E) FINANCIAL INFORMATION. The Company agrees to make available to the Investor
via ▇▇▇▇▇ or other electronic means the following to the Investor during the
Registration Period: (I) within five (5) Trading Days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports
on Form 10-QSB, any Current Reports on Form 8-K and any Registration Statements
or amendments filed pursuant to the 1933 Act; (II) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries; (III) copies of any notices and other information made
available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders; and (IV) within two (2) calendar days of filing or delivery
thereof, copies of all documents filed with, and all correspondence sent to, the
Principal Market, any securities exchange or market, or the National Association
of Securities Dealers, Inc., unless such information is material nonpublic
information.
(F) RESERVATION OF SHARES. Subject to the following sentence, the Company shall
take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common Stock to provide
for the issuance of the Securities hereunder. In the event that the Company
determines that it does not have a sufficient number of authorized shares of
Common Stock to reserve and keep available for issuance as described in this
Section 5(f), the Company shall use its best efforts to increase the number of
authorized shares of Common Stock by seeking shareholder approval for the
authorization of such additional shares.
(G) LISTING. The Company shall promptly secure and maintain the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon the Principal Market and each other national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, such listing
of all Registrable Securities from time to time issuable under the terms of the
Transaction Documents. Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market (excluding suspensions of
not more than one (1) trading day resulting from business announcements by the
Company). The Company shall promptly provide to the Investor copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 5(g).
(H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of
its Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two (2) years, shareholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (I) customary employment arrangements and benefit programs on
reasonable terms, (II) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, or (III) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(I) has a 5% or more equity interest in that person or entity, (II) has 5% or
more common ownership with that person or entity, (III) controls that person or
entity, or (IV) is under common control with that person or entity. "Control" or
"Controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
(I) FILING OF FORM 8-K. On or before the date which is three (3) Trading Days
after the Execution Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transaction contemplated by the
Transaction Documents in the form required by the 1934 Act, if such filing is
required.
(J) CORPORATE EXISTENCE. The Company shall use its best efforts to preserve and
continue the corporate existence of the Company.
(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE
A PUT. The Company shall promptly notify Investor upon the occurrence of any of
the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities: (I) receipt of any
request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (II) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that purpose;
(III) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or notice of any proceeding for such
purpose; (IV) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (V) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate, and the Company
shall promptly make available to Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events.
(L) REIMBURSEMENT. If (I) Investor becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person (other than as a result
of a breach of the Investor's representations and warranties set forth in this
Agreement); or (II)Investor becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents (other than as a result of a breach of
the Investor's representations and warranties set forth in this Agreement), or
if Investor is impleaded in any such action, proceeding or investigation by any
person, then in any such case, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which Investor is a named party, the Company will pay to Investor the charges,
as reasonably determined by Investor, for the time of any officers or employees
of Investor devoted to appearing and preparing to appear as witnesses, assisting
in preparation for hearings, trials or pretrial matters, or otherwise with
respect to inquiries, hearing, trials, and other proceedings relating to the
subject matter of this Agreement. The reimbursement obligations of the Company
under this section shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of Investor that are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees, attorneys,
accountants, auditors and controlling persons (if any), as the case may be, of
Investor and any such affiliate, and shall be binding upon and inure to the
benefit of any successors of the Company, Investor and any such affiliate and
any such person.
SECTION 6. COVER.
If the number of Shares represented by any Put Notice (s) become restricted or
are no longer freely trading for any reason, and after the applicable Closing
Date, the Investor purchases, in an open market transaction or otherwise, the
Company's Common Stock (the "Covering Shares") in order to make delivery in
satisfaction of a sale of Common Stock by the Investor (the "Sold Shares"),
which delivery such Investor anticipated to make using the Shares represented by
the Put Notice (a "Buy-In"), the Company shall pay to the Investor the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (A) the Investor's total purchase price
(including brokerage commissions, if any) for the Covering Shares over (B) the
net proceeds (after brokerage commissions, if any) received by the Investor from
the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount
to the Investor in immediately available funds immediately upon demand by the
Investor. By way of illustration and not in limitation of the foregoing, if the
Investor purchases Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to the Common
Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which
the Company will be required to pay to the Investor will be $1,000.
SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following 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) The Investor shall have executed each of this Agreement and the Registration
Rights Agreement and delivered the same to the Company.
(B) The Investor shall have delivered to the Company the Purchase Price for the
Securities being purchased by the Investor between the end of the Pricing Period
and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit G)
After receipt of confirmation of delivery of such Securities to the Investor,
the Investor, by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company will disburse the funds constituting
the Purchase Amount.
(C) 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 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject to the
satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
(A) The Company shall have executed each of the Transaction Documents and
delivered the same to the Investor.
(B) The Common Stock shall be authorized for quotation on the Principal Market
and trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of not more than
one (1) Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).
(C) The representations and warranties of the Company shall be true and correct
as of the date when made and as of the applicable Closing Date as though made at
that time (except for (I) representations and warranties that speak as of a
specific date and (II) with respect to the representations made in Sections
4(g), (h) and (j) and the third sentence of Section 4(k) hereof, events which
occur on or after the date of this Agreement and are disclosed in SEC filings
made by the Company at least ten (10) Trading Days prior to the applicable Put
Notice Date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company on or before such
Closing Date. The Investor may request an update as of such Closing Date
regarding the representation contained in Section 4(c) above.
(D) The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer of,
the
Securities (in such denominations as such Investor shall request) being
purchased by the Investor at such Closing.
(E) The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4(b)(ii) above (the "Resolutions") and such Resolutions
shall not have been amended or rescinded prior to such Closing Date.
(F) reserved
(G) 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.
(H) The Registration Statement shall be effective on each Closing Date and no
stop order suspending the effectiveness of the Registration statement shall be
in effect or to the Company's knowledge shall be pending or threatened.
Furthermore, on each Closing Date (I) neither the Company nor Investor shall
have received notice that the SEC has issued or intends to issue a stop order
with respect to such Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action), and (II) no other
suspension of the use or withdrawal of the effectiveness of such Registration
Statement or related prospectus shall exist.
(I) At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or which would require public
disclosure or an update supplement to the prospectus.
(J) If applicable, the shareholders of the Company shall have approved the
issuance of any Shares in excess of the Maximum Common Stock Issuance in
accordance with Section 2(i) or the Company shall have obtained appropriate
approval pursuant to the requirements of Florida law and the Company's Articles
of Incorporation and By-laws.
(K) The conditions to such Closing set forth in Section 2(f) shall have been
satisfied on or before such Closing Date.
(L) The Company shall have certified to the Investor the number of Shares of
Common Stock outstanding when a Put Notice is given to the Investor.
SECTION 9. TERMINATION. This Agreement shall terminate upon any of the following
events:
(I) when the Investor has purchased an aggregate of Twenty-Five Million dollars
($25,000,000) in the Common Stock of the Company pursuant to this Agreement;
(II) on the date which is thirty-six (36) months after the Effective Date;
SECTION 10. SUSPENSION
This Agreement shall be suspended upon any of the following events, and shall
remain suspended until such event is rectified:
(I) the trading of the Common Stock is suspended by the SEC, the Principal
Market or the NASD for a period of two (2) consecutive Trading Days during the
Open Period;
(II) The Common Stock ceases to be registered under the 1934 Act or listed
or traded on the Principal Market. Upon the occurrence of one (1) of the
above-described events, the Company shall send written notice of such event to
the Investor.
SECTION 11. INDEMNIFICATION.
In consideration of the parties mutual obligations set forth In the Transaction
Documents, each of the parties (in such capacity, an "Indemnitor") shall defend,
protect, indemnify and hold harmless the other and all of the other party's
shareholders, officers, directors, employees, counsel, and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and reasonable expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (I)
any misrepresentation or breach of any representation or warranty made by the
Indemnitor or any other certificate, instrument or document contemplated hereby
or thereby; (II) any breach of any covenant, agreement or obligation of the
Indemnitor contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; or (III) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, except insofar as any such
misrepresentation, breach or any untrue statement, alleged untrue statement,
omission or alleged omission is made in
reliance upon and in conformity with information furnished to Indemnitor which
is specifically intended for use in the preparation of any such Registration
Statement, preliminary prospectus, prospectus or amendments to the prospectus.
To the extent that the foregoing undertaking by the Indemnitor may be
unenforceable for any reason, the Indemnitor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions contained herein
shall be in addition to any cause of action or similar rights Indemnitor may
have, and any liabilities the Indemnitor or the Indemnitees may be subject to.
SECTION 12. GOVERNING LAW; MISCELLANEOUS.
(A) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts without regard to
the principles of conflict of laws. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
Boston, County of Suffolk, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the
Transaction Documents, each party shall pay the fees and expenses of its
advisers, counsel, the accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any attorneys' fees and
expenses incurred by either the Company or by the Investor in connection with
the preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of any Securities.
(C) COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
(D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.
(E) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other prior oral
or written agreements between the Investor, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein (including the other
Transaction Documents) contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Investor, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.
(G) NOTICES. Any notices or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (I) upon receipt, when delivered personally; (II) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (III) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Centurion Gold Holdings, Inc. ▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
Telephone: ▇▇(▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇, Savage, Kaplowitz, Wolf & Marcus, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor:
Dutchess Private Equities fund, LP, II
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
(H) NO ASSIGNMENT. This Agreement may not be assigned.
(I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of
the parties hereto and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.
(J) SURVIVAL. The representations and warranties of the Company and the Investor
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4 and 5, and the indemnification provisions set forth in Section 10,
shall survive each of the Closings and the termination of this Agreement.
(K) PUBLICITY. The Company and Investor shall consult with each other in issuing
any press releases or otherwise making public statements with respect to the
transactions contemplated hereby and no party shall issue any such press release
or otherwise make any such public statement without the prior consent of the
other parties, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other parties
with prior notice of such public statement. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of Investor without the prior
consent of such Investor, except to the extent required by law. Investor
acknowledges that this Agreement and all or part of the Transaction Documents
may be deemed to be "material contracts" as that term is defined by Item
601(b)(10) of Regulation S-B, and that the Company may therefore be required to
file such documents as exhibits to reports or registration statements filed
under the 1933 Act or the 1934 Act. Investor further agrees that the status of
such documents and materials as material contracts shall be determined solely by
the Company, in consultation with its counsel.
(L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(M) PLACEMENT AGENT. The Company agrees to pay the Placement Agent Thirty-Five
Thousand (35,000) shares upon the execution of this Agreement. The Investor
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other persons or entities for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by the Transaction Documents. The Company shall indemnify and hold
harmless the Investor, their employees, officers, directors, agents, and
partners, and their respective affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses incurred in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(N) NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(O) REMEDIES. The Investor and each holder of the Shares shall have all rights
and remedies set forth in this Agreement and the Registration Rights Agreement
and all rights and remedies which such holders have been granted at any time
under any other agreement or contract and all of the rights which such holders
have under any law. Any person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any default or breach
of any provision of this Agreement, including the recovery of reasonable
attorneys fees and costs, and to exercise all other rights granted by law.
(P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to the Investor hereunder or under the Registration Rights Agreement or
the Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
(Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the bid price of
the Common Stock in this Agreement shall be as reported on Bloomberg.
***
SIGNATURE PAGE OF INVESTMENT AGREEMENT
Your signature on this Signature Page evidences your agreement to be bound by
the terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.
The undersigned signatory hereby certifies that he has read and understands the
Investment Agreement, and the representations made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound by its terms.
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER,
DUTCHESS CAPITAL MANAGEMENT, LLC
By:____________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Member
CENTURION GOLD HOLDINGS, INC.
By__________________________________
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, Chief Executive Officer
LIST OF EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Opinion of Company's Counsel
EXHIBIT C [reserved]
EXHIBIT D Broker Representation Letter
EXHIBIT E Board Resolution
EXHIBIT F Put Notice
EXHIBIT G Put Settlement Sheet
LIST OF SCHEDULES
Schedule 4(a) Subsidiaries
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
[BROKER'S LETTERHEAD]
Date
Via Facsimile
Attention:
______________________________________________________
Re: Centurion Gold Holdings, Inc.
Dear __________________:
It is our understanding that the Form______ Registration Statement bearing SEC
File Number ( ___-______) filed by Centurion Gold Holdings, Inc., on Form _____
on __________, 200X was declared effective on _________, 200X.
This letter shall confirm that ______________ shares of the common stock of
Centurion Gold Holdings, Inc., are being sold on behalf of __________________
and that we shall comply with the prospectus delivery requirements set forth in
that Registration Statement by filing the same with the purchaser.
If you have any questions please do not hesitate to call.
Sincerely,
-----------------------------------------------------
cc: .
EXHIBIT E
EXHIBIT F
Date:
RE: Put Notice Number __
Dear ▇▇. ▇▇▇▇▇▇▇▇,
This is to inform you that as of today, Centurion Gold Holdings, Inc., a Florida
corporation (the "Company"), hereby elects to exercise its right pursuant to the
Investment Agreement to require Dutchess Private Equities Fund, II, LP. to
purchase shares of its common stock. The Company hereby certifies that:
The amount of this put is $__________.
The Pricing Period runs from ________ until _______.
The current number of shares issued and outstanding as of the Company are:
________________________________________
Regards,
________________________________________
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
CEO
Centurion Gold Holdings, Inc.
EXHIBIT G
PUT SETTLEMENT SHEET
Date:
▇▇▇▇,
Pursuant to the Put given by Centurion Gold Holdings, Inc. to Dutchess Private
Equities Fund, II, L.P. on _________________ 200x, we are now submitting the
amount of common shares for you to issue to Dutchess.
Please have a certificate bearing no restrictive legend totaling __________
shares issued to Dutchess Private Equities Fund, II, LP immediately and send via
DWAC to the following account:
XXXXXX
If not DWAC eligible, please send FedEx Priority Overnight to:
XXXXXX
Once these shares are received by us, we will have the funds wired to the
Company.
Regards,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
DATE................PRICE
Date of Day 1.......Closing Bid of Day 1
Date of Day 2.......Closing Bid of Day 2
Date of Day 3.......Closing Bid of Day 3
Date of Day 4.......Closing Bid of Day 4
Date of Day 5.......Closing Bid of Day 5
LOWEST 1 (ONE) CLOSING BID IN PRICING PERIOD
------------
PUT AMOUNT
------------
AMOUNT WIRED TO COMPANY
------------
PURCHASE PRICE (95% (NINETY-FIVE PERCENT))
------------
AMOUNT OF SHARES DUE
------------
The undersigned has completed this Put as of this ___th day of _________, 20xx.
Centurion Gold Holdings, Inc.
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, CEO
SCHEDULE 4(c) CAPITALIZATION
SCHEDULE 4(e) CONFLICTS
SCHEDULE 4(g) MATERIAL CHANGES
SCHEDULE 4(h) LITIGATION
SCHEDULE 4(l) INTELLECTUAL PROPERTY
SCHEDULE 4(n) LIENS
SCHEDULE 4(t) CERTAIN TRANSACTIONS