Exhibit 10.5
FORM OF SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement (together with the schedules and exhibits
hereto, this "Agreement"), dated as of December 31, 2004, by and between Advance
Nanotech, Inc., a Colorado corporation (the "Company"), and each of the Persons
(as defined below) who has executed a signature page to this Agreement (each a
"Purchaser," and together, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, the Securities (as such term is
defined below) as set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, the parties hereto hereby agree as follows:
1. Offer and Sale of Securities.
1.1 The Offering. The Company is offering for sale in this offering (the
"Offering") up to 7,000,000 shares (the "Maximum Offering") of its common stock,
par value $0.001 per share (the "Common Stock"). Notwithstanding the foregoing,
the Company, in its sole discretion, may increase the Maximum Offering, at any
time during the Offering and without prior notice, by up to ten percent (10%).
There is no minimum offering, and the Company may accept and close upon
subscriptions from time to time in its sole discretion during the offering
period referred to in this Agreement. In addition to the shares of Common Stock
being offered hereby (the "Shares"), for every two Shares acquired by a
Purchaser at an applicable Closing (as such term is hereinafter defined)
pursuant to this Agreement, the Company shall deliver to such Purchaser a
warrant (the "Warrant") to purchase one share of Common Stock. The Warrants,
which shall not be transferable, shall initially be exercisable at $3.00 per
share of Common Stock, subject to adjustment, and be exercisable for a period of
three (3) years after issuance or until the date which is ten (10) days after
the Company furnishes written notice to the Warrant holder that the market price
of the Common Stock has been at least 400% of the then applicable exercise price
of the Warrant for a period of at least thirty (30) days, and the average
trading volume of the Common Stock has been at least 100,000 shares per day
during the preceding thirty (30) days. The shares of Common Stock which may be
acquired upon exercise of a Warrant are sometimes hereinafter referred to as the
"Warrant Shares"). The Shares and the Warrants are sometimes hereinafter
referred to as the "Securities". The Purchasers of the Securities shall have the
benefit of certain registration rights in respect of the Shares and the Warrant
Shares on the terms and conditions of a Registration Rights Agreement, in the
form of Exhibit A hereto (the "Registration Rights Agreement"). The Company is
offering the Securities only to individuals, entities or groups, including,
without limitation, corporations, limited liability companies, limited or
general partnerships, joint ventures, associations, joint stock companies,
trusts, unincorporated organizations, or governments or any agencies or
political subdivisions thereof (each, a "Person") who are "accredited investors"
(as defined herein). The Company is making the Offering of the Securities
directly through certain of its officers and its directors, but may engage a
placement agent (the "Placement Agent") and other registered broker-dealers
("Other Participating Agents") may also place Securities. If the Company should
engage a Placement Agent or any Other Participating Agent, the Company presently
intends to pay to the Placement Agent and to Other Participating Agents, if any,
commissions equal to up to 10% of the gross sales price of the Shares sold in
the offering by the applicable Placement Agent or Other Participating Agent. In
addition, the Company presently intends to issue to any such Placement Agent or
Other Participating Agent, if any, at the final Closing warrants (the "Placement
Agent Warrants") granting to such person warrant coverage equal to 10% on the
number of Shares (but not Warrant Shares) sold in the Offering to investors
introduced by that person (without duplication of introduction). The Placement
Agent Warrants shall initially be exercisable at $2.00 per share of Common
Stock, subject to adjustment, commencing one year after the date of issuance and
continuing for five (5) years thereafter, and, unlike the Warrants issued to
Purchasers, shall contain a cashless exercise provision. The Placement Agent
Warrants shall be transferable by the Placement Agent or Other Participating
Agent receiving the same to its officers, directors, shareholders and employees,
as well as by such persons to their immediate family affiliates in connection
with estate planning, provided that no such transfer or disposition may be made
other than in compliance with applicable securities laws and furnishing
satisfactory evidence of such compliance to the Company. The Company will
indemnify the Placement Agent and any Other Participating Agents, if any,
against certain liabilities. The Company will pay its own costs of the Offering.
The Company will also pay a non-accountable expense fee to the Placement Agent
equal to 3% of the gross sales price of the Shares (but not any Warrant Shares)
sold in the Offering to investors introduced by the Placement Agent (without
duplication of introduction), such 3% amount being sometimes hereafter referred
to as the "Non-Accountable Expense Allowance. Notwithstanding the foregoing, the
Non-Accountable Expense Allowance shall be reduced on a dollar-for-dollar basis
by the fees and expenses of the Company's counsel for preparing and furnishing
the opinion letter referred to in Section 3.4(d) of this Agreement. All
subscription proceeds in the Offering will be paid at Closing to the account or
accounts specified in or pursuant to Section 1.2 herein, provided that the
Company will utilize an escrow agent (the "Escrow Agent") for receipt of funds
if required under applicable law. All references in this Agreement to the Escrow
Agent shall be deemed to be references to the Company in the event that there is
no third party Escrow Agent.
1.2 Subscription. Subject to the terms and conditions hereinafter set
forth in this Agreement, each Purchaser hereby offers to purchase, at a price of
$2.00 per Share, the number of Shares (together with one accompanying Warrant
for every 2 Shares) set forth beneath each such Purchaser's name on the
signature pages of this Agreement, for an aggregate purchase price (the
"Purchase Price") to be paid by such Purchaser in the amount set forth on the
signature page beneath such Purchaser's name to such account as the Company
shall indicate by written notice to the Purchaser.
1.3 Subscription Procedures. To submit this Subscription, each Purchaser
must deliver (i) this Agreement, including, without limitation, the related
Purchaser Questionnaire, both duly completed and executed and (ii) an executed
Registration Rights Agreement to the following address, unless otherwise advised
by the Company:
Advance Nanotech, Inc.
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Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with any questions to be raised with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at (▇▇▇) ▇▇▇ ▇▇▇▇.
The Company may accept or reject subscriptions, in whole or in part, or
accept subscriptions for less than the $50,000 minimum subscription, in its sole
discretion. The Company shall notify each Purchaser of the portion, if any, of
such Purchaser's subscription which has been accepted, payment instructions for
the Purchase Price, including wire transfer instructions and instructions for
delivery of payment by checks, if applicable, and the date upon which the
applicable Closing shall be held and payment must be made. At each applicable
Closing, each Purchaser acquiring Securities at such Closing shall deliver and
pay the applicable purchase price in full for the Securities being purchased by
such Purchaser at such Closing, in the amount of $2.00 for each Share for which
such Purchaser's subscription has been accepted, in U.S. dollars, in immediately
available funds, in accordance with the payment instructions contained in the
notification to such Purchaser by the Company.
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2. Closing. Upon acceptance of subscriptions for Securities offered
hereby, the Company shall hold one or more closings of the purchase and sale of
such Securities (each one, a "Closing"; the final closing, the "Final Closing").
Each Closing shall be held at such location as the Company may determine. The
Final Closing will take place on the earlier to occur of (i) December 31, 2004
or (ii) the sale of all of the Securities being offered hereby, unless this date
is extended, without notice to investors, by the Company in its sole discretion
for up to an additional 30 days (the "Termination Date"). The date of each
Closing will be referred to as a "Closing Date" and the date of the Final
Closing is referred to as the "Final Closing Date." At the Closing with respect
to the subscription by each Purchaser, to the extent the same is accepted by the
Company, the Company will register in the name of each such Purchaser that
number of Securities being purchased by such Purchaser in accordance with the
information on the applicable signature page of this Agreement.
2.1 Escrow. In the event that the Company engages a Placement Agent for
this Offering, which the Company may not choose to do, and the Company is
required under applicable law to arrange for applicable funds to be received
into an escrow account, then, and only in such case, pending each Closing all
funds paid in respect of this Agreement with regard to such Closing shall be
deposited in an escrow account (the "Escrow Account") maintained by the Escrow
Agent in accordance with Rule 15c2-4 under the Exchange Act (as defined herein).
The Escrow Account shall not be interest bearing. In such a case, if the Company
accepts subscriptions for the Securities at or prior to the Initial Closing Date
or the Final Closing Date, as the case may be, then all subscription proceeds
received for subscriptions accepted by the Company prior to such Closing Date
shall be paid over to the Company at each Closing, net of the Placement Agent
fees, if any, and other offering expenses, which shall be paid to the
appropriate parties at each such Closing. In any event, if the Company shall not
have received and accepted each Purchaser's subscription, then that subscription
shall be void and all funds paid hereunder by such Purchaser with respect to
such unaccepted subscription, without deduction therefrom or interest thereon,
shall be promptly returned to such Purchaser.
2.2. Return of Funds. Each Purchaser hereby authorizes and directs both
the Company and the Escrow Agent, if any, jointly and severally, to return or
direct the return of any funds from the Escrow Account, if any, without
deduction therefrom or interest thereon, to the same account from which the
funds were originally drawn, to the extent that such Purchaser's subscription is
not accepted prior to the termination of the Offering.
3. Conditions to the Obligations of each Purchaser at Closing.
The obligation of each Purchaser to purchase and pay for the Shares
subscribed for by such Purchaser at the applicable Closing is subject to the
satisfaction on or prior to the applicable Closing Date or the Final Closing
Date, as the case may be, of the following conditions, each of which may be
waived by the applicable Purchaser:
3.1 Representations and Warranties. The representations and warranties of
the Company contained in this Agreement which are qualified as to materiality
must be true and correct in all respects, and the representations and warranties
of the Company contained in this Agreement which are not qualified as to
materiality must be true and correct in all material respects, in each case as
of the applicable Closing Date except to the extent that the representations and
warranties relate to a different date in which case the representations and
warranties must be true and correct as written or true and correct in all
material respects, as the case may be, as of the different date.
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3.2 Performance of Covenants. The Company shall have performed or complied
with in all material respects all covenants and agreements required to be
performed by it on or prior to the applicable Closing pursuant to this
Agreement, including, without limitation, the delivery of certificates
evidencing the Securities issued to the Purchasers at the Closing.
3.3 No Injunctions; etc. No court or governmental injunction, order or
decree prohibiting the purchase and sale of the Securities or securities
underlying the Securities will be in effect. There will not be in effect any
law, rule or regulation prohibiting or restricting the sale or requiring any
consent or approval of any Person that has not been obtained to issue and sell
the Securities or securities underlying the Securities to the Purchasers.
3.4 Closing Documents. At each Closing, the Company shall have delivered
to each applicable Purchaser the following:
(a) a certificate of the President of the Company certifying that the
conditions in Sections 3.1 and 3.2 have been satisfied;
(b) A certificate of the Secretary of the Company, dated as of that
Closing Date, certifying (i) the attached copies of the Certificate of
Incorporation and By-laws of the Company, (ii) the resolutions of the Board of
Directors of the Company (the "Board") authorizing the execution, delivery and
performance of this Agreement and the issuance of the Securities and the
securities underlying the Securities (including, but not limited to, for
purposes of Section 203 of the Colorado General Corporation Law) and (iii) the
incumbency of the officers duly authorized to execute this Agreement and the
other documents contemplated by this Agreement;
(c) a certificate of the Secretary of State of the State of Colorado,
dated as of a recent date (but no more than five business days) prior to the
date of the applicable Closing, to the effect that the Company is in good
standing in the State of Colorado and that all annual reports, if any, have been
filed as required and that all taxes and fees have been paid in connection
therewith;
(d) an opinion of Company counsel, substantially in the form of Exhibit B
to this Agreement;
(e) a certificate or certificates evidencing the Securities purchased by
such Purchaser; and
(f) a Registration Rights Agreement duly executed by the Company.
3.5 Waivers and Consents. The Company will have obtained all consents and
waivers necessary to execute and deliver this Agreement and all related
documents and agreements and to issue and deliver the Securities, and all
consents and waivers will be in full force and effect.
4. Conditions to the Obligations of the Company at Closing.
The obligation of the Company to issue and sell the Securities to any
Purchaser is subject to the satisfaction on or prior to each Closing Date of the
following conditions, each of which may be waived by the Company:
4.1 Receipt of Purchase Price. The Company shall have received payment in
full in immediately available funds in U.S. dollars of the Purchase Price for
the Shares with respect to which the Company has accepted the Subscription made
by such Purchaser by means of this Agreement.
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4.2 Representations and Warranties. The representations and warranties of
the Purchaser contained in this Agreement which are qualified as to materiality
must be true and correct in all respects and the representations and warranties
of the Purchaser contained in this Agreement which are not qualified as to
materiality must be true and correct in all material respects, in each case as
of the applicable Closing Date except to the extent that the representations and
warranties relate to a different date in which case the representations and
warranties must be true and correct as of the different date..
4.3 Performance of Covenants. The Purchaser will have performed or
complied with in all material respects all covenants and agreements required to
be performed by the Purchaser on or prior to the Closing pursuant to this
Agreement.
4.4 Purchaser Questionnaire. All of the information furnished by such
Purchaser in the confidential purchaser questionnaire accompanying this
Agreement (the "Purchaser Questionnaire") shall have been accurate and complete
in all material respects.
4.5 No Injunctions. No court or governmental injunction, order or decree
prohibiting the purchase or sale of the Securities or the securities underlying
the Securities will be in effect.
4.6 Closing Documents. The Purchaser will have delivered to the Company a
Registration Rights Agreement duly executed by the Purchasers and such other
closing documents as the Company may reasonably request, if any.
5. Representations and Warranties of each Purchaser.
Each Purchaser, in order to induce the Company to perform this Agreement,
hereby represents and warrants, severally and not jointly, as follows:
5.1 Due Authorization. Each Purchaser represents for such Purchaser to the
Company that such Purchaser has full power and authority and has taken all
action necessary to authorize such Purchaser to execute, deliver and perform
such Purchaser's obligations under this Agreement. This Agreement is the legal,
valid and binding obligation of such Purchaser in accordance with its terms.
5.2 Accredited Investor. Each Purchaser represents that such Purchaser is
an Accredited Investor as that term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act").
5.3 No Investment Advice. The Company has not made any other
representations or warranties to such Purchaser other than as set forth herein
or incorporated herein by reference with respect to the Company or rendered any
investment advice.
5.4 Investment Experience. Each Purchaser represents that such Purchaser
has not authorized any Person to act as such Purchaser's Representative (as that
term is defined in Regulation D of the General Rules and Regulations under the
Securities Act) in connection with this transaction. Such Purchaser has such
knowledge and experience in financial, investment and business matters that such
Purchaser is capable of evaluating the merits and risks of the prospective
investment in the securities of the Company. Such Purchaser has consulted with
such independent legal counsel or other advisers as such Purchaser has deemed
appropriate to assist such Purchaser in evaluating the proposed investment in
the Company.
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5.5 Adequate Means. Each Purchaser represents as to such Purchaser that
such Purchaser (i) has adequate means of providing for such Purchaser's current
financial needs and possible contingencies; and (ii) can afford (a) to hold
unregistered securities for an indefinite period of time as required; and (b)
sustain a complete loss of the entire amount of the subscription.
5.6 Access to Information. Each Purchaser represents that such Purchaser
has been afforded the opportunity to ask questions of, and receive answers from
the officers and/or directors of the Company acting on its behalf concerning the
terms and conditions of this transaction and to obtain any additional
information, to the extent that the Company possesses such information or can
acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information furnished; and has had such opportunity to the
extent such Purchaser considers appropriate in order to permit such Purchaser to
evaluate the merits and risks of an investment in the Company. It is understood
that all documents, records and books pertaining to this investment have been
made available for inspection, and that the books and records of the Company
will be available upon reasonable notice for inspection by investors during
reasonable business hours at its principal place of business. The foregoing
shall in no way be deemed to limit the ability of each Purchaser to rely on the
representations and warranties set forth herein or incorporated herein by
reference.
5.7 No Endorsement. Each Purchaser further acknowledges that the offer and
sale of the Securities or the securities underlying the Securities has not been
passed upon or the merits thereof endorsed or approved by any state or federal
authorities.
5.8 Non-Registered Securities. Each Purchaser acknowledges that neither
the offer and sale of the Securities or the securities underlying the Securities
have not been registered under the Securities Act or any state securities laws
and the Securities and any underlying securities may be resold only if
registered pursuant to the provisions thereunder or if an exemption from
registration is available and if otherwise permitted by law and contract. Each
Purchaser understands that the offer and sale of the Securities and the
securities underlying the Securities is intended to be exempt from registration
under the Securities Act, based, in part, upon the representations, warranties
and agreements of such Purchaser contained in this Agreement.
5.9 No Resale. Each Purchaser represents that the Securities being
subscribed for, and the securities underlying the subscription, are being
acquired solely for the account of such Purchaser for such Purchaser's
investment and not with a view to, or for resale in connection with, any
distribution in any jurisdiction where such sale or distribution would be
precluded. By such representation, such Purchaser means that, other than as
disclosed on both the signature page of this Agreement and in the Purchaser
Questionnaire, no other Person has a beneficial interest in the Securities or
the securities underlying the subscription, and that no other Person has
furnished or will furnish directly or indirectly, any part of or guarantee the
payment of any part of the consideration to be paid by such Purchaser to the
Company in connection therewith. Such Purchaser does not intend to dispose of
all or any part of the Securities or the securities underlying the subscription
except in compliance with the provisions of the Securities Act and applicable
state securities laws, and understands that the Securities and the securities
underlying the subscription are being offered pursuant to a specific exemption
under the provisions of the Securities Act, which exemption(s) depends, among
other things, upon the compliance with the provisions of the Securities Act.
5.10 Legend. Each Purchaser hereby acknowledges and agrees that the
Company may insert the following or similar legend on the face of the
certificates evidencing the Securities purchased by such Purchaser and the
underlying securities, if any, as the case may be, if the Company deems the same
to be necessary or appropriate:
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"These securities have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws and
may not be sold or otherwise transferred or disposed of except pursuant to
an effective registration statement under the Securities Act and any
applicable state securities laws, or an opinion of counsel satisfactory to
counsel to the issuer that an exemption from registration under the
Securities Act and any applicable state securities laws is available."
In addition, the Company may insert a legend to the effect that the Warrants are
non-transferable.
5.11 Broker's or Finder's Commissions. Other than the Placement Agent (as
placement agent on behalf of the Company) or any Other Participating Agent, if
any, no finder, broker, agent, financial person or other intermediary has acted
on behalf of any Purchaser in connection with the sale of the Securities by the
Company or the consummation of this Agreement or any of the transactions
contemplated hereby.
Each Purchaser certifies that each of the foregoing representations and
warranties by such Purchaser set forth in this Section 5 are true as of the date
hereof and shall survive such date.
6. Representations and Warranties of the Company.
The Company represents and warrants to the Purchasers that:
6.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado. The Company and each subsidiary of the Company has
full corporate power and authority to own and hold its properties and to conduct
its business. The Company and each subsidiary of the Company is duly licensed or
qualified to do business, and in good standing, in each jurisdiction in which
the nature of its business requires licensing, qualification or good standing,
except for any failure to be so licensed or qualified or in good standing that
would not have a material adverse effect on the Company or any such subsidiary,
taken as a consolidated whole, or its results of operations, assets or financial
condition, taken as a consolidated whole, or on its ability to perform its
obligations under this Agreement or to issue the Securities (a "Material Adverse
Effect").
6.2 Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 100,000,000 shares of Common Stock, par value $0.001 per
share. Except as set forth in this Section 6.2, as of the date hereof, (i)
21,973,446 shares of Common Stock were issued and outstanding, (ii) there are no
outstanding options and no shares of Common Stock were reserved for issuance
upon exercise of options, (iii) the Company has reserved 3,000,000 shares of
Common Stock for issuance upon exercise of options which may be issued pursuant
to an option plan covering the Company's officers, directors, employees and
consultants, but no options have been granted to date under such plan, (iv) no
shares of Common Stock were reserved for issuance upon the exercise of
outstanding warrants other than 6,666,666 warrants (the "Jano Warrants"),
exercisable at $2.00 per share, issued to Jano Holdings Ltd., and (v) the
Company is offering up to 7,000,000 shares of its Common Stock, and up to
3,500,000 Warrants to purchase Warrant Shares, subject to an additional 10%
overallotment in the Company's sole discretion. All the outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights created by or through the Company,
and have been issued in compliance with all federal and state securities laws,
and were not issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. Except as set forth in this Section 6.2,
as of the date hereof there are no other options, warrants or other rights,
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convertible debt, agreements, arrangements or commitments of any character
obligating the Company to issue or sell any shares of capital stock of or other
equity interests in the Company. The Company has not adopted a stockholders
rights plan, poison pill or similar arrangement. As used in this Agreement, the
term "Commission Documents shall mean all reports, schedules, forms, statements
and other documents filed by the Company with the United States Securities and
Exchange Commission (the "Commission" or the "SEC") pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including all exhibits included therein and financial statements and
schedules thereto and documents or instruments incorporated by reference
therein.
6.3 Corporate Power, Authorization; Enforceability. The Company has full
corporate power and authority to execute, deliver and perform this Agreement,
the Warrants, and the Registration Rights Agreement (collectively, the
"Transaction Documents") and to consummate the transactions contemplated hereby
and thereby. All action on the part of the Company, its directors or
stockholders necessary for (i) the authorization, execution, delivery and
performance of the Transaction Documents by the Company, (ii) the authorization,
sale, issuance and delivery of the Common Stock and Warrants contemplated hereby
(iii) the reservation of shares of Common Stock for issuance upon exercise of
the Warrants and (iv) the performance of the Company's obligations hereunder and
thereunder has been taken. The Securities to be purchased on each the Closing
Date and the underlying Warrant Shares have been duly authorized and, when
issued in accordance with this Agreement or the Warrants, as the case may be,
will be validly issued, fully paid and nonassessable and will be free and clear
of any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance,
lien (statutory or other) or preference, priority, right or other security
interest or preferential arrangement of any kind or nature whatsoever
(collectively, "Liens") imposed by or through the Company other than
restrictions imposed by this Agreement, the Warrants, and the Registration
Rights Agreement, as the case may be, and applicable securities laws. No
preemptive or other rights to subscribe for or purchase equity securities of the
Company exists with respect to the issuance and sale of the Securities or the
Warrant Shares. The Transaction Documents have been duly executed and delivered
by the Company, and constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
6.4 No Conflict; Governmental Consents. (a) The execution and delivery by
the Company of this Agreement, the Warrants, and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby will not (i) result in the violation of any provision of the Certificate
of Incorporation or By-laws or other organizational documents of the Company or
any subsidiary of the Company, (ii) result in any violation of Requirements of
Law to or by which the Company or any subsidiary of the Company is bound, or
(iii) conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute (with due notice or lapse of time or both) a
default under, any bond, debenture, note or other evidence of indebtedness, or
any material lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the Company
or any subsidiary of the Company is a party or by which it or its property is
bound, nor result in the creation or imposition of any Lien upon any of the
properties or assets of the Company, except for, in the case of clauses (ii) and
(iii) of this subsection 6.7(a), any violation, conflict, breach or default
which would not have a Material Adverse Effect. For purposes of this Agreement,
"Requirements of Law" means, as to any Person, any law, statute, treaty, rule,
regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
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owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing (each, a "Governmental Authority") or stock exchange, in each case
applicable or binding upon such Person or any of its property or to which such
Person or any of its property is subject or pertaining to any or all of the
transactions contemplated or referred to herein.
(b) No material consent, approval, license, permit, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other Governmental Authority or Person, and no lapse of
any waiting period under any Requirements of Law, remains to be obtained (or
lapsed) or is otherwise required to be obtained by the Company or any subsidiary
of the Company in connection with the authorization, execution and delivery of
this Agreement, the Warrants, or the Registration Rights Agreement or the
consummation of the transactions contemplated hereby or thereby, including,
without limitation the issue and sale of the Securities as disclosed in this
Agreement, and except filings, if any, as may be required to be made by the
Company after each Closing with (i) the Commission, (ii) the National
Association of Securities Dealers, Inc. ("NASD"), (iii) the Nasdaq Stock Market,
Inc. and (iv) state blue sky or other securities regulatory authorities.
6.5 Litigation. There are no claims, actions, suits, investigations or
proceedings pending or, to the Company's knowledge, threatened against the
Company or any subsidiary of the Company or its respective assets, at law or in
equity, by or before any Governmental Authority, or by or on behalf of any third
party, except for any claim, action, suit, investigation or proceeding which
would not have a Material Adverse Effect nor does the Company have knowledge
that there is any reasonable basis for any of the foregoing. There are no
claims, actions, suits, investigations or proceedings pending or, to the
Company's knowledge, threatened proceedings against the Company or any
subsidiary of the Company contesting the right of the Company to use, sell,
import, license, or make available to any Person any of the Company's or any
subsidiary's products or services currently or previously sold, offered,
licensed or made available to any Person or used by the Company or opposing or
attempting to cancel any of the Company's Intellectual Property (as such term is
hereafter defined) rights, except for any claim, action, suit, investigation or
proceeding which would not have a Material Adverse Effect.
6.6 Compliance with Laws; No Default or Violation; Contracts. The Company
and each subsidiary of the Company is in compliance in all material respects
with all Requirements of Law and all orders issued by any court or Governmental
Authority against the Company in all material respects. To the Company's
knowledge, there is no existing or currently proposed Requirement of Law which
could reasonably be expected to prohibit or restrict the Company or any
subsidiary from, or otherwise materially adversely affect the Company or any
subsidiary in, conducting its business in any jurisdiction in which it now
conducts or proposes to conduct such business. The Company and each subsidiary
of the Company have all licenses, permits and approvals of any Governmental
Authority (collectively, "Permits") that are necessary for the conduct of the
business of the Company and each subsidiary of the Company, respectively; (ii)
such Permits are in full force and effect; and (iii) no violations are or have
been recorded in respect of any Permit, in each case except such as would not be
reasonably expected to have a Material Adverse Effect. No material expenditure
is presently required by the Company to comply with any existing Requirements of
Law or order. Except as would not be reasonably expected to have a Material
Adverse Effect, neither the Company nor any subsidiary of the Company is (i) in
default under or in violation of any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party of by which it or any of
its properties is bound or (ii) in violation of any order, decree or judgment of
any court, arbitrator or other Governmental Authority. The contracts described
in the Commission Documents or incorporated by reference therein that are
material to the Company (collectively, the "Contractual Obligations") are in
full force and effect on the date hereof, and neither the Company or any
subsidiary's nor, to the Company's knowledge, any other party to such contracts
is in breach of or default under any of such contracts nor, to the Company's
knowledge, does any condition exist that with notice or lapse of time or both
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would constitute a default by such other party thereunder, in each case except
such as would not be reasonably expected to have a Material Adverse Effect.
Neither the Company nor any subsidiary of the Company has not received notice of
a default and is not in default under, or with respect to, any Contractual
Obligation nor, to the Company's knowledge, does any condition exist that with
notice or lapse of time or both would constitute a default thereunder, in each
case except such as would not be reasonably expected to have a Material Adverse
Effect. All of such Contractual Obligations are valid, subsisting, in full force
and effect and binding upon the Company or each subsidiary that is a party
thereto and, to the Company's knowledge, the other parties thereto, and the
Company has paid in full or accrued all amounts due thereunder and has satisfied
in full or provided for all of its liabilities and obligations thereunder.
6.7 Environmental Matters. The Company and each subsidiary of the Company
is in compliance, in all material respects, with all applicable Environmental
Laws. There is no civil, criminal or administrative judgment, action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or, to the Company's knowledge, threatened against the
Company pursuant to Environmental Laws. To the Company's knowledge, there are no
past or present events, conditions, circumstances, activities, practices,
incidents, agreements, actions or plans which could reasonably be expected to
prevent compliance with, or which have given rise to or will give rise to
liability which would have a Material Adverse Effect, under Environmental Laws.
For purposes of the foregoing, "Environmental Laws" means federal, state, local
and foreign laws, principles of common laws, civil laws, regulations, and codes,
as well as orders, decrees, judgments or injunctions, issued, promulgated,
approved or entered thereunder relating to pollution, protection of the
environment or public health and safety.
6.8 Taxes. The Company and each subsidiary of the Company has filed all
required Tax returns and has paid or caused to be paid, or has established
reserves in accordance with GAAP for all Tax liabilities applicable to such
entity except as would not have a Material Adverse Effect. No additional Tax
assessment against the Company or its subsidiaries has been heretofore proposed
or, to the Company's knowledge, threatened by any Governmental Authority for
which provision has not been made on its balance sheet.
No tax audit is currently in progress and there is no unassessed
deficiency proposed or, to the Company's knowledge, threatened against the
Company or any subsidiary. The Company has no knowledge of any change in the
rates or basis of assessment of any Tax (other than federal income tax), of the
Company or any subsidiary which would reasonably be expected to have a Material
Adverse Effect. The Company has not agreed to or is required to make any
adjustments under section 481 of the Code by reason of a change of accounting
method or otherwise. None of the assets of the Company or any subsidiary is
required to be treated as being owned by any Person, other than the Company or
any of its subsidiaries, pursuant to the "safe harbor" leasing provisions of
Section 168(f)(8) of the Code. The company is not a "United States real property
holding corporation" (a "USRPHC") as that term is defined in Section 897(c)(2)
of the Code and the regulations promulgated thereunder.
For purposes of this Agreement, "Code" means the Internal Revenue Code of
1986, as amended, and "Taxes" means any federal, state, provincial, county,
local, foreign and other taxes (including, without limitation, income, profits,
windfall profits, alternative, minimum, accumulated earnings, personal holding
company, capital stock, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
-10-
6.9 Intellectual Property.
(a) "Intellectual Property" shall mean all of the following as they are
necessary in connection with the business of the Company or its subsidiaries as
presently conducted and as they exist in all jurisdictions throughout the world,
in each case, to the extent owned by or licensed to the Company or its
subsidiaries: (i) patents, patent applications and inventions, designs and
improvements described and claimed therein, patentable inventions and other
patent rights (including any divisions, continuations, continuations-in-part,
reissues, reexaminations, or interferences thereof, whether or not patents are
issued on any such applications and whether or not any such applications are
modified, withdrawn, or resubmitted) ("Patents"); (ii) trademarks, service
marks, trade dress, trade names, brand names, designs, logos, or corporate
names, whether registered or unregistered, and all registrations and
applications for registration thereof ("Trademarks"); (iii) copyrights and mask
works, including all renewals and extensions thereof, copyright registrations
and applications for registration thereof, and non-registered copyrights
("Copyrights"); (iv) trade secrets, inventions, know-how, process technology,
databases, confidential business information, customer lists, technical data and
other proprietary information and rights ("Trade Secrets"); (v) computer
software programs, including, without limitation, all source code, object code,
and documentation related thereto ("Software"); (vi) Internet addresses, domain
names, web sites, web pages and similar rights and items ("Internet Assets");
and (vii) all licenses, sublicenses and other agreements or permissions
including the right to receive royalties, or any other consideration related to
the property described in (i)-(vi). The Intellectual Property contains all of
the intellectual property necessary to operate the business of the Company as
currently conducted.
(b) The Company or its subsidiaries exclusively own (or otherwise have the
right to use the Intellectual Property pursuant to a valid license, sublicense
or other agreement), free and clear of all Liens, and has the unrestricted right
(subject to any such license terms, if applicable) to use, sell, license, or
sublicense all Intellectual Property.
(c) All products and materials made, used or sold by the Company or its
subsidiaries containing Trademarks bear the proper federal registration notice
where permitted by law.
(d) All works encompassed by the Copyrights and used by the Company or its
subsidiaries have been marked with the proper copyright notice.
(e) To the Company's knowledge, upon reasonable inquiry in accordance with
sound business practice and business judgment, all the Company's Intellectual
Property rights are valid and enforceable. The Company has taken all reasonably
necessary actions to maintain and protect each item of Intellectual Property
owned by the Company or its subsidiaries.
(f) The Company and each subsidiary of the Company has taken all
reasonable precautions to protect the secrecy, confidentiality, and value of its
Trade Secrets and the proprietary nature and value of its Intellectual Property.
To the best of the Company's knowledge, none of the Trade Secrets, wherever
-11-
located, the value of which is contingent upon maintenance of confidentiality
thereof, have been disclosed to any employee, representative or agent of the
Company or any other person not obligated to maintain such Trade Secret in
confidence pursuant to a confidentiality agreement entered into with the
Company, except as required pursuant to the filing of a patent application by
the Company.
(g) The Company or a subsidiary of the Company, as applicable, is
diligently prosecuting all Patent applications it has filed, as instructed by
patent counsel. The Company or a subsidiary of the Company, as applicable, is
diligently filing and preparing to file Patent applications for all inventions
in a manner and within a sufficient time period to avoid statutory
disqualification of any potential Patent application.
(h) To the knowledge of the Company, upon reasonable inquiry in accordance
with sound business practice and business judgment, none of the Intellectual
Property, products or services owned, used, developed, provided, sold or
licensed by the Company, or made for, used or sold by or licensed to the Company
by any person infringes upon or otherwise violates any Intellectual Property
rights of others.
(i) To the knowledge of the Company, upon reasonable inquiry in accordance
with sound business practice and business judgment, no Person is infringing upon
or otherwise violating the Intellectual Property rights of the Company.
6.10 Employee Benefit Plans.
(a) Neither the Company nor any entity which is or was under common
control within the meaning of Section 414(b), (c), (m) or (o) of the Code
maintains or contributes to, or has within the preceding six years maintained or
contributed to, or may have any liability with respect to any employee benefit
plan subject to Title IV of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 412 of the Code or any "multiple employer plan"
within the meaning of the Code or ERISA. Each employee benefit plan,
arrangement, policy, program, agreement or commitment which the Company
maintains, contributes to or may have any liability in respect to (each, a
"Plan") has been established and administered in accordance with its terms, and
complies in form and in operation with the applicable requirements of ERISA, the
Code and other applicable Requirements of Law. No claim with respect to the
administration or the investment of the assets of any Plan (other than routine
claims for benefits) is pending. No event has occurred in connection with which
the Company or any Plan, directly or indirectly, could be subject to any
material liability under ERISA, the Code or any other law, regulation or
governmental order applicable to any Plan, or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under which the Company has
agreed to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirement of, any such statute, regulation
or order. The Company has no liability, whether absolute or contingent,
including any obligations under any Plan, with respect to any misclassification
of any person as an independent contractor rather than as an employee.
(b) Neither the Company nor any subsidiary of the Company has any
obligations to provide or any direct or indirect liability, whether contingent
or otherwise, with respect to the provision of health or death benefits to or in
respect of any former employee, except as may be required pursuant to Section
4980B of the Code and the corresponding provisions of ERISA and the cost of
which are fully paid by such former employees.
-12-
(c) There are no unfunded obligations under any Plan which are not fully
reflected on the Financial Statements.
(d) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any Company (or subsidiary) employee to severance pay or
(ii) accelerate the time of payment or vesting or trigger any payment or funding
(though a grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligations pursuant
to, any Plan.
6.11 Investment Company. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
6.12 Compliance. The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act and the Common Stock is listed on the OTC Bulletin Board
under the symbol AVNA.OB, 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. The Company has not taken and will not, in violation of
applicable law, take any action designed to or that might reasonably be expected
to cause or result in unlawful manipulation of the price of the Common Stock to
facilitate the sale or resale of the Securities.
6.13 Private Offerings. Assuming the truth of each Purchaser's
representations and acknowledgments contained in Section 5 hereof, neither the
Company nor any Person acting on its behalf (other than the Purchasers, as to
whom the Company makes no representations) has offered or sold the Securities by
means of any general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act. The Company has not sold the Securities to
anyone other than the subscribers to this Agreement. Each Security shall bear
substantially the same legend set forth in Section 8 hereof for at least so long
as required by the Securities Act.
6.14 Broker's or Finder's Commissions. Other than the Company's officers
and directors, if at all, and the Placement Agent (as placement agent on behalf
of the Company) or any Other Participating Agent, if any are engaged by the
Company, no finder, broker, agent, financial person or other intermediary has
acted on behalf of the Company in connection with the sale of the Securities by
the Company or the consummation of this Agreement or any of the transactions
contemplated hereby. The Company has not had any direct or indirect contact with
any other investment banking firm (or similar firm) with respect to the offer of
the Securities by the Company to the Purchasers or the Purchasers' subscriptions
for the Securities.
6.15 Disclosure. The Transaction Documents do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading. The Company does not
have any knowledge of any fact that has specific application to the Company
(other than general economic or industry conditions) and that can reasonably be
foreseen to cause a Material Adverse Effect that has not been set forth in the
Transaction Documents or the Commission Documents.
The Company certifies that each of the foregoing representations and warranties
by the Company sets forth in this Section 6 are true as of the date hereof and
such representations and warranties shall survive the Closing pursuant to this
Agreement as contemplated in Section 7.1.
6.16 Commission Documents.
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The Company has filed all Commission Documents required to be filed by it
with the Commission pursuant to the reporting requirements of the Exchange Act
prior to the date hereof. Upon filing, each such Commission Document complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the Commission
Document, and none of the Commission Documents, at the time they were most
recently 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
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
6.17 Insurance.
The Company maintains and will continue to maintain insurance of the types
and in the amounts that the Company reasonably believes is adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in full force and
effect.
6.18 Registration Rights.
Except as provided in the Registration Rights Agreement, the Company is
not under any contractual obligation to register any of its outstanding
securities except for 7,000,000 shares of Common Stock to be registered on a
pari passu basis with the Shares, and the shares of Common Stock underlying the
Jano Warrants (which, however, are not required to be registered with the first
registration of the Shares).
7. Indemnification.
7.1 (a) The Company agrees to indemnify and hold harmless the Purchasers,
their affiliates and each of their respective directors, officers, general and
limited partners, principals, agents and attorneys from and against any and all
losses, claims, damages, liabilities, costs (including reasonable attorneys'
fees) and expenses (collectively, "Losses") to which any such Person may become
subject, insofar as such Losses arise out of, in any way relate to, or result
from (i) any breach of any representation or warranty made by the Company
contained in or made pursuant to Article 6 of this Agreement, or (ii) the
failure of the Company to fulfill any agreement or covenant contained in or made
pursuant to this Agreement. In no event, however, shall the Company be liable
for indirect, incidental or consequential or special damages of any kind. All of
the representations and warranties of the Company made herein shall survive the
execution and delivery of this Agreement until the date that is one (1) year
after the date of this Agreement, except for (a) Sections 6.1 (Organization,
Good Standing and Qualification), 6.2 (Capitalization), 6.3 (Corporate Power,
Authorization; Enforceability), 6.13 (Private Offerings) and 6.14 (Broker's or
Finder's Commission), which representations and warranties shall survive
indefinitely (or if indefinite survival is not permitted by law, then for the
maximum period permitted by applicable law), (b) Section 6.8 (Taxes), which
representation and warranty shall survive until the later to occur of (i) the
lapse of the statute of limitations with respect to the assessment of any tax to
which such representation and warranty relates (including any extensions or
waivers thereof) and (ii) sixty (60) days after the final administrative or
judicial determination of the Taxes to which such representation and warranty
relates, and no claim with respect to Section 6.8 may be asserted thereafter
with the exception of claims arising out of any fact, circumstance, action or
proceeding to which the party asserting such claim shall have given notice to
the other parties to this Agreement prior to the termination of such period of
reasonable belief that a tax liability will subsequently arise therefrom, and
(c) Section 6.7 (Environmental Matters), which representation and warranty shall
survive until the lapse of the applicable statute of limitations. Except as set
forth herein, all of the covenants, agreements and obligations of the Company
shall survive the Final Closing indefinitely (or if indefinite survival is not
permitted by law, then for the maximum period permitted by applicable law).
-14-
(b) Each Purchaser severally, and not jointly, agrees to indemnify and
hold harmless the Company, its affiliates and each of their respective
directors, officers, general and limited partners, principals, agents and
attorneys from and against any and all Losses to which any such Person may
become subject, insofar as such Losses arise out of, in any way relate to, or
result from (i) any breach of any representation or warranty made by such
Purchaser contained in or made pursuant to Article 5 of this Agreement, or (ii)
the failure of such Person to fulfill any agreement or covenant contained in or
made pursuant to this Agreement. In no event, however, shall any Purchaser be
liable for indirect, incidental or consequential or special damages of any kind.
All of the representations and warranties of each Purchaser made herein shall
survive the execution and delivery of this Agreement for the maximum period
permitted by applicable law with respect to the statute of limitations
applicable to survival of contractual claims for indemnification. Except as set
forth herein, all of the covenants, agreements and obligations of the Purchasers
shall survive the Final Closing for the maximum period permitted by applicable
law with respect to the statute of limitations applicable to survival of
contractual claims for indemnification. Furthermore, in no event shall any
Purchaser be required to make indemnification pursuant to this Section in excess
of the gross Purchase Price of the Securities acquired by such Purchaser in the
Offering.
7.2 Promptly after receipt by any Person entitled to seek indemnification
under Section 7.1 of this Agreement (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") of notice of any claim as to which
indemnity may be sought, including, without limitation, the commencement of any
action or proceeding, the Indemnified Party will, if a claim in respect thereof
may be made against a Person required to provide indemnification under Section
7.1 of this Agreement (individually, an "Indemnifying Party" and collectively,
the "Indemnifying Parties"), promptly notify the Indemnifying Party in writing
of the commencement thereof; provided that the failure of the Indemnified Party
to so notify the Indemnifying Party will not relieve the Indemnifying Party from
its obligations under this Section unless, and only to the extent that, such
omission results in the Indemnifying Party's forfeiture of substantive rights or
defenses or being materially prejudiced by the Indemnified Person's failure to
give such notice. In case any action or proceeding is brought against any
Indemnified Party, and it notifies the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to assume the defense thereof
at its own expense, with counsel reasonably satisfactory to such Indemnified
Party, which approval will not be unreasonably withheld or delayed unreasonably;
provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense at its own expense. After notice
from the Indemnifying Party to the Indemnified Party of its election to so
assume the defense thereof, the Indemnifying Party will not be liable to the
Indemnified Party under that Section 7 for any legal or any other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof (other than reasonable costs of investigation) unless incurred at the
written request of the Indemnifying Party. Notwithstanding the above, the
Indemnified Party will have the right to employ counsel of its own choice in any
action or proceeding (and be reimbursed by the Indemnifying Party for the
reasonable fees and expenses of the counsel and other reasonable costs of the
defense) if, in the written opinion of such Indemnified Party's counsel,
representation of the Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests or conflicts between the Indemnified Party and any other party
represented by the counsel in the action; provided, however, that the
Indemnifying Party will not in connection with any one action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties,
except to the extent that local counsel, in addition to regular counsel, is
required in order to effectively defend against the action or proceeding. An
Indemnifying Party will not be liable to any Indemnified Party for any
settlement or entry of judgment
-15-
concerning any action or proceeding effected without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been actually
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Party from all
liability arising or that may arise out of such claim. The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
contrary contained in this Agreement, (a) nothing in this Section 7 shall
restrict or limit any rights that any Indemnified Party may have to seek
equitable relief and (b) this Section 7 shall be the sole remedy for any breach
of the Company's representations and warranties contained in this Agreement and
for any breach of any Purchaser's representations and warranties contained in
this Agreement except, in either case, with respect to claims arising out of
fraud or willful misconduct.
8. Covenants.
8.1 Use of Proceeds. The Company will use the proceeds from this Offering
for general corporate purposes, and working capital.
8.2 Conduct of the Company's Business. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Company and its subsidiaries will conduct their respective business and
operations solely in the ordinary course of business consistent with past
practice and each shall use reasonable commercial efforts to keep available the
services of its officers and employees and preserve its current relationships
with customers, suppliers, licensors, creditors and others having business
dealings with it, except as would not be reasonably expected to have a Material
Adverse Effect.
8.3 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement at the earliest
practicable date.
8.4 Tax Matters.
(a) The Company covenants that it will use commercially reasonable efforts
not to become a USRPHC at any time while any Purchaser owns any of the
Securities.
(b) In the event that a Purchaser desires to sell or dispose of any of the
Securities or underlying securities as permitted under this Agreement and
applicable law, and upon demand by such Purchaser, the Company agrees to deliver
to such Purchaser a letter (the "Letter") which complies with Sections
1.1445-2(c)(3) and 1.897-2(h) of the Treasury Regulations, addressed to such
Purchaser, stating whether or not the Company is a USRPHC. The Letter shall be
delivered to the Purchaser one business day prior to the close of any sale or
disposition of the Securities or Conversion Stock by the Purchaser (the
"Delivery Date"). The Letter shall be dated as of the Delivery Date and signed
by a corporate officer who must verify under penalties of perjury that the
statement is correct to his knowledge and belief pursuant to Section 1.897-2(h)
of the Treasury Regulations.
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8.5 Independent Public Accountant.
The Company shall retain a national public accounting firm approved by the
Public Company Accounting Oversight Board to serve as its independent auditor.
9. FOR RESIDENTS OF ALL STATES: NEITHER THE SECURITIES OFFERED HEREBY OR
THE UNDERLYING SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND
SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT
AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD
BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE WARRANTS ARE NON-TRANSFERABLE.
10. No Waiver.
Notwithstanding any of the representations, warranties, acknowledgments or
agreements made herein by the Purchasers, the Purchasers do not thereby or in
any manner waive any rights granted to the Purchasers under federal or state
securities laws.
11. Miscellaneous.
11.1 Notices. Any notice or other communication given hereunder by any
party hereto to any other party hereto shall be in writing and delivered
personally or by facsimile transmission or sent by registered or certified mail
or by any express mail or overnight courier service, postage or fees prepaid:
If to the Company:
Advance Nanotech, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
If to the Purchasers:
To each Purchaser at such Purchaser's name and
address set forth on the signature page to this
Agreement.
Any notice that is delivered personally or by facsimile transmission in
the manner provided herein shall be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party or its agent. Any
notice that is addressed and mailed, postage prepaid for most rapid method of
delivery, or sent by courier in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail or, if earlier, the date and time of actual
receipt.
-17-
11.2 Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns, provided, that no party may assign this
Agreement without the prior written consent of the other party, such consent not
to be unreasonably withheld; provided that any transfer of Securities or shares
of Common Stock underlying such Securities must be in compliance with the
Transaction Documents and all applicable law.
11.3 Entire Agreement. This Agreement sets forth the entire agreement and
understanding among the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them; provided that any confidentiality agreement between the
Company and any Purchaser shall remain in effect. This Agreement may be amended
only by mutual written agreement of the Company and a majority in interest of
the Purchasers, and the Company may take any action herein prohibited or omit to
take any action herein required to be performed by it, and any breach of any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the Purchasers purchasing
a majority of the Shares offered hereby.
11.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York with respect to contracts made
and to be fully performed therein, without regard to the conflicts of laws
principles thereof. The parties hereto hereby agree that any suit or proceeding
arising under this Agreement, or in connection with the consummation of the
transactions contemplated hereby, shall be brought solely in a federal or state
court located in the County of New York and State of New York. By its execution
hereof, both the Company and the Purchasers hereby consent and irrevocably
submit to the in personam jurisdiction of the federal and state courts located
in the County of New York and State of New York and agree that any process in
any suit or proceeding commenced in such courts under this Agreement may be
served upon it personally or by certified or registered mail, return receipt
requested, or by Federal Express or other courier service, with the same force
and effect as if personally served upon the applicable party in New York and in
the city or county in which such other court is located. The parties hereto each
waive any claim that any such jurisdiction is not a convenient forum for any
such suit or proceeding and any defense of lack of in personam jurisdiction with
respect thereto.
11.5 Severability. The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction will not affect
any other provision of this Agreement, which will remain in full force and
effect. If any provision of this Agreement is declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the provision will be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof will nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions will be deemed dependent upon any other covenant
or provision unless so expressed herein.
11.6 No Waiver. A waiver by either party of a breach of any provision of
this Agreement will not operate, or be construed, as a waiver of any subsequent
breach by that same party.
11.7 Further Assurances. The parties agree to execute and deliver all
further documents, agreements and instruments and take further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
11.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which will
together constitute the same instrument.
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11.9 No Third Party Beneficiaries. Nothing in this Agreement creates in
any Person not a party to this Agreement any legal or equitable right, remedy or
claim under this Agreement, and this Agreement is for the exclusive benefit of
the parties hereto. The parties expressly recognize that this Agreement is not
intended to create a partnership, joint venture or other similar arrangement
between any of the parties or their respective affiliates.
11.10 Headings. The headings in this Agreement are solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
11.11 Securities Laws Disclosure; Publicity Restrictions. The Company
shall issue a press release by 8:30 a.m. Eastern time on the trading day
following each applicable Closing, or file a Current Report on Form 8-K
disclosing the consummation of the transactions consummated on such Closing by
8:30 a.m. Eastern time on the fourth day following each applicable Closing.
Except as may be required by applicable Requirements of Law, none of the parties
hereto shall issue a publicity release or public announcement or otherwise make
any disclosure concerning this Agreement, the transactions contemplated hereby
without prior approval by the other party hereto; provided that each Purchaser
may disclose on its worldwide web pages and its offering materials, if any, the
name of the Company, the name of the Chief Executive Officer of the Company, a
brief description of the business of the Company consistent with the Commission
Documents or the Company's press releases or other public statements, the
Company's logo and the aggregate amount of such Purchaser's investment in the
Company. If any announcement is required by applicable law or the rules of any
securities exchange or market on which such shares of Common Stock are traded to
be made by any party hereto, prior to making such announcement such party will
deliver a draft of such announcement to the other parties and shall give the
other parties reasonable opportunity to comment thereon. The parties agree to
attribute and otherwise indicate ownership of the other party's trademarks and
logos.
11.12 Certification. Each Purchaser certifies that such Purchaser has read
this entire Agreement and that every statement on such Purchaser's part made and
set forth herein is true and complete.
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IN WITNESS WHEREOF, the undersigned has executed this Securities Purchase
Agreement on the date his signature has been subscribed and sworn to below.
The shares of Common Stock and Warrants are to be issued in:
----------------------------------------------------
Print Name of Investor
___________________ shares of Common Stock subscribed
____ individual name for (which number must be an even number), with 1
Warrant also being issued for every 2 shares of Common
Stock purchased. Subscription price paid herewith:
$__________________ (being $2.00 x the number of shares
____ tenants in the entirety of Common Stock listed above)
----------------------------------------------------
____ corporation (an officer must sign) Print Name of Joint Investor
(if applicable)
----------------------------------------------------
____ partnership (all general partners must sign) Signature of Investor
----------------------------------------------------
____ trust Signature of Joint Investor
----------------------------------------------------
____ limited liability company
----------------------------------------------------
(with a copy to:)
----------------------------------------------------
Address of Investor
Accepted as of the 20th day of January, 2005 as to _______________ shares of
Common Stock (which number must be an even number), it being agreed that the
Company also shall deliver 1 Warrant for every two shares of Common Stock for
which this Subscription is accepted; Subscription price accepted being
$______________, being $2.00 x the number of shares of Common Stock as to which
this Subscription is accepted:
ADVANCE NANOTECH, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
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