EXHIBIT 10.15
INVESTMENT AGREEMENT
between
QUEST PRODUCTS CORP.
and
DOMAIN INVESTMENTS, INC.
Dated as of November 2, 2000
INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of November 2, 2000 by
and among QUEST PRODUCTS CORP., a Delaware corporation with offices located at
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "COMPANY'), and DOMAIN
INVESTMENTS, INC. with offices located at c/o Meridian Equities, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "INVESTOR").
WHEREAS:
A. The Company and the Investor are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(2) under the Securities Act of 1933, as amended (the "1933 ACT");
B. The parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to $20,000,000 to purchase the
Company's common stock, $.00003 par value per share (the "COMMON STOCK"); and
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form to be attached hereto as Exhibit A (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, the Company and the Investor hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK
a. Purchase and Sale of Common Stock. Upon 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 those number of Shares having an
aggregate Purchase Price (as defined in Section 1(f)) of $20,000,000.
b. Delivery ofPut Notices. Subject to the satisfaction of the
conditions set forth in this Section 1, at any time and from time to time during
the period beginning on and including the Business Day (as defined below)
immediately following the date on which the initial Registration Statement (as
defined in the Registration Rights Agreement) filed pursuant to the Registration
Rights Agreement is declared effective (the "EFFECTIVE DATE") by the Securities
and Exchange Commission (the "SEC") and ending on the earlier of(i) the date
which is 24 months from the date hereof, and (ii) termination of this Agreement
in accordance with Section 8 (the "OPEN PERIOD"), the Company may, in its sole
discretion, deliver a written notice to the Investor (each such notice
hereinafter referred to as a "PUT NOTICE") stating a dollar amount (the "DOLLAR
AMOUNT") of Shares which the Company intends to sell to the Investor during the
period beginning on the Business Day on the date which the Investor receives the
Put Notice (the "PUT NOTICE DATE") and ending on and including the date which is
10 Business Days after such Put Notice Date (the "PURCHASE PERIOD") provided
that on the date of the delivery of the Put Notice the Company is in compliance
with the terms and conditions of the Escrow Agreement between the parties
annexed hereto as Exhibit I. In addition, the Dollar Amount designated by the
Company in a Put Notice shall be in increments of $25,000 and shall not exceed
$5,000,000. The Put Notice shall be irrevocable. During the Open Period, Put
Notices may be delivered no more frequently than once in each period of 10
consecutive Business Days, such that a Put Notice may not be given during a
Purchase Period. For purposes of this Agreement, "BUSINESS DAY" shall mean any
day other than a Saturday, Sunday or a day on which commercial banks in the City
of New York are authorized or required by law or executive order to remain
closed or on which the Principal Market (as defined in Section 1(e)) for the
Common Stock is not open for trading.
If the Company fails to deliver such number of Put Notices as allows
the Investor to purchase Shares having an aggregate Purchase Price of at least
$500,000 within 180 days of the date hereof then the Company shall deliver to
the Investor on such date (i) an amount equal to 10% of the difference between
$500,000 and the aggregate amount set forth in the Put Notices delivered to the
Investor by wire transfer of immediately available funds, and (ii) a warrant to
purchase 100,000 shares of Common Stock at an exercise price equal to 110% of
the closing bid price (the "Bid Price") of the Common Stock on the Principal
Market as reported by Bloomberg Financial Markets ("BLOOMBERG") (or in the event
that such price is not reported by Bloomberg, the average of the bid prices of
any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc.) on the day which is 180 days from the date
hereof; substantially in the form of Exhibit B, which payment shall be
Investor's sole remedy for the Company's failure to deliver such number of Put
Notices. The Company shall not be liable for the payments set forth in (i) and
(ii) above if the Company is not permitted to deliver Put Notices to the
Investor because 200% of
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the average Daily Trading Volume is less than $25,000 or because the
Registration Statement has not been declared effective. However, except as
provided in the immediately preceding sentence, the Investor shall be liable for
such payments, unless the Company delivers pursuant to the terms of the
Agreement Put Notices to the Company in an amount equal to 200% of the average
Daily Trading Volume, at least once every 10 Business Days from the period
commencing on the date that the initial Registration Statement is declared
effective through the date on which the Company has delivered Put Notices to the
Investor in the aggregate amount of $500,000. If the Company fails to deliver a
Put Notice to the Investor because 200% of the average Daily Trading Volume is
not equal to at least $25,000, then such failure shall not cause the Company to
be liable for the payments set forth in (i) and (ii) above. If the Company fails
to issue the warrants and pay to the Investor such amounts when due, the Company
shall pay to the Investor, on the first Business Day following the date such
payment was due (in addition to and not in lieu of any remedy the Investor may
have in law or equity) an amount equal to $3,000, in cash by wire transfer, plus
compounded annual interest of 18% on the sum of the cash amount due to the
Investor and the product of 100,000 and the Bid Price 180 days from the date
hereof during the period, beginning on the Business Day after such amount was
due, during which such amount, or any portion thereof is outstanding.
c. Investor 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 Purchase Period a number of Shares having an
aggregate Purchase Price equal to the lesser of (i) the Dollar Amount set forth
in the Put Notice (subject to reduction during the Purchase Period as
hereinafter provided), and (ii) 200% of the average Daily Trading Dollar Volume
(as defined below) of the Common Stock during the 30 consecutive Business Days
immediately preceding the Put Notice Date (the lesser of(i) or (ii) above shall
be referred to herein as the "REQUIRED DOLLAR AMOUNT"). For purposes of this
Agreement, "DAILY TRADING DOLLAR VOLUME" shall mean the number of shares of
Common Stock traded on such day on the Principal Market on which the Common
Stock is traded multiplied by such day's Applicable Trading Price of the Common
Stock (as reported by Bloomberg).
d. Limitation on Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, in no event shall
the Investor be required to purchase, and a Required Dollar Amount may not
include, an amount, which when added to the sum of (i) the number of shares of
Common Stock benefically owned by the Investor as such term is defined under
Section 13(d) of the Securities Exchange Act of 1934 (the "1934 ACT") and (ii)
all other Shares to be acquired by the Investor pursuant to this Agreement to
which this determination of the permitted Required Dollar Amount is being made,
would exceed 9.9% of the number of shares of Common Stock outstanding on the Put
Notice Date for such Purchase Period, as determined in accordance with Section
13(d) of the 1934 Act. Each Put Notice shall include a representation of the
Company as to the number of shares of Common Stock outstanding on the related
Put Notice Date as determined in accordance with Section 13(d) of the 1934 Act.
In the event that the number of shares of Common Stock outstanding as determined
in accordance with Section 13(d) of the 1934 Act is different on any date during
a Purchase Period than on the Put Notice Date associated with such Purchase
Period, then the number of shares on Common Stock outstanding on such date
during such
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Purchase Period shall govern for purposes of determining whether the Investor,
when aggregating all purchases of Shares made pursuant to this Agreement in the
61 calendar days preceding such date, would have acquired more than 9.9% of the
number of shares of Common Stock outstanding during such period.
e. 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 require the Investor to purchase any
Shares at a Closing (as defined in Section 1(g)) unless each of the following
conditions are satisfied: (i) the Daily Trading Volume for the 10 Business Days
preceding the Put Notice Date and the Closing Date, as defined below shall be at
least $25,000; (ii) a Registration Statement shall have been declared effective
and shall remain effective and available for sale of all the Registrable
Securities (as defined in the Registration Rights Agreement) at all times during
the Purchase Period, (iii) at all times during the period beginning on the date
that the Company delivers the related Put Notice and ending on and including the
related Closing Date, the Common Stock shall have been listed on The American
Stock Exchange, Inc. or The New York Stock Exchange, Inc. or designated on the
Nasdaq National Market, The Nasdaq SmallCap Market, or the National Association
of Securities Dealer's, Inc. OTC electronic bulletin board (the "PRINCIPAL
MARKET") and shall not have been suspended from trading thereon and the Company
shall not have been notified of any pending or threatened proceeding or other
action to delist or suspend the Common Stock; (iv) during the period beginning
on the date of this Agreement and ending on and including the applicable Closing
Date, there shall not have occurred a Major Transaction (as defined below) or
the public announcement of a pending Major Transaction which has not been
abandoned or terminated; and (v) the Company has complied with its obligations
and is otherwise not in breach of, or in default under, this Agreement, the
Registration Rights Agreement or any other agreement executed in connection
herewith. If any of the events described in clauses (i) through (v) above occurs
after an effective Put Notice is so delivered, then the Investor shall have no
further obligation to purchase the balance of such Required Dollar Amount of
Common Stock during such Purchase Period. The "APPLICABLE TRADING PRICE" with
respect to the Common Stock on any Business Day, shall mean the Weighted Average
Price (as defined below) of the Common Stock on such Business Day. "WEIGHTED
AVERAGE PRICE" means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market (as
reported by Bloomberg through its "Volume at Price" function) or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the dollar volume-weighted average price of such security on the
principal securities exchange or trading market where such security is listed or
traded (as reported by Bloomberg through its "Volume at Price" function), or if
the foregoing do not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the OTC electronic bulletin board for
such security as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg, the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Weighted Average Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Investor.
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A Put Notice shall be deemed delivered on (i) the Business Day it is
received by facsimile or otherwise by the Investor if such notice is received
prior to 12:00 noon Eastern Time, or (ii) the immediately succeeding Business
Day if it is received by facsimile or otherwise after 12:00 noon Eastern Time on
a Business Day or at any time on a day which is not a Business Day. No Put
Notice may be deemed delivered, on a day that is not a Business Day.
For purposes of this Agreement, a "MAJOR TRANSACTION" shall be deemed
to have occurred at the closing of any of the following events: (i) the
consolidation, merger or other business combination of the Company with or into
another person (other than pursuant to a migratory merger effected solely for
the purposes of changing the jurisdiction of incorporation of the Company); (ii)
the sale or transfer of all or substantially all of the Company's assets; or
(iii) the consummation of a purchase, tender or exchange offer made to, and
accepted by, the holders of more than 30% of the economic interest in, or the
combined voting power of all classes of voting stock of, the Company.
f. Purchase Price Per Share. For purposes of this Agreement, the
"PURCHASE PRICE" for each Share purchased by the Investor shall be equal to (i)
the product of (A) 91% and (B) the average of the three lowest Bid Prices of the
Common Stock during the ten consecutive Business Days ending on and including
the day preceding the Closing Date as described in Section 1(b). The number of
Shares so to be purchased pursuant to each Put Notice shall be rounded to the
nearest whole number so as to avoid the issuance of fractional shares.
g. Mechanics of Purchase of Shares by Investor. Subject to the
satisfaction of the conditions set forth in Sections 1(e), 6 and 7, the closing
of the purchase by the Investor of Shares (a "CLOSING") shall occur at 10:00
a.m. Eastern Time, on the date which is ten Business Days following the
applicable Put Notice Date (or such other time or later date as is mutually
agreed to by the Company and the Investor) (a "CLOSING DATE"). On or prior to
each Closing Date, (A) the Company shall deliver to the Escrow Agent pursuant to
the Escrow Agreement, annexed hereto, the Investor certificates representing the
Shares and the Class B Warrants in the form annexed hereto (the "CLASS B
WARRANTS"), as described below, to be issued and sold to the Investor on such
date and registered in the name of the Investor or deposit such Shares into the
account(s) (with the Investor receiving confirmation that the Shares are in such
account(s)) designated by the Investor for the benefit of the Investor and (B)
the Investor shall deliver to the Escrow Agent the Purchase Price to be paid for
such Shares (after receipt of confirmation of delivery of such Shares),
determined as aforesaid, by cashier's check or wire transfer. In addition, each
of the Company and the Investor shall deliver all documents, instruments and
writings required to be delivered by either of them to the Escrow Agent pursuant
to this Agreement at or prior to each Closing. In the alternative to physical
delivery of certificates for Common Stock to the Escrow Agent, if delivery of
the Shares may be effectuated by electronic book-entry through The Depository
Trust Company ("DTC"), then delivery of the Shares pursuant to such purchase
shall, unless requested otherwise by such Investor (or holder of such Shares),
settle by book-entry transfer through DTC by the Closing Date. The panics agree
to coordinate with DTC to accomplish this objective.
On each Closing Date, the Company shall issue to the Investor, the
Class B Warrants
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substantially in the form annexed hereto, to purchase a number of shares of
Common Stock equal to 10% of the number of Shares to be purchased by the
Investor on the Closing Date. The exercise price of each Class B Warrant shall
be equal to 110% of the Purchase Price paid for the Shares on the applicable
Closing Date.
h. Delisting; Suspension. If at anytime during the Open Period or
within 30 days after the end of the Open Period, (i) the Registration Statement,
after it has been declared effective, shall not remain effective and available
for sale of all the Registrable Securities, (ii) the Common Stock shall not be
listed on the Principal Market or shall have been suspended from trading thereon
(excluding suspensions of not more than one trading day resulting from business
announcements by the Company) or the Company shall have been notified of any
pending or threatened proceeding or other action to delist or suspend the Common
Stock, or (iii) there shall have occurred a Major Transaction or the public
announcement of a pending Major Transaction which has not been abandoned or
terminated, the Investor shall have the right (the "REPURCHASE OPTION"), as
partial relief for the damages to the Investor by reason of the occurrence of
the events listed in clauses (i), (ii) or (iii) above (which remedy shall not be
exclusive of any other remedies available at law or equity), in its sole
discretion, which right shall be exercised within 30 days of such event or
occurrence (a "REPURCHASE EVENT"), to sell to the Company, and the Company
agrees to buy, promptly upon the exercise of such right by the Investor, but in
any event within 10 calendar days of the exercise of such right, and subject to
the limitations imposed by the General Corporation Law of Delaware, all or any
part of the Shares issued to the Investor within the 60 Business Days preceding
the Investor's exercise of the Repurchase Option and then held by the Investor
at a price per Share equal to the highest Applicable Trading Price during the
period beginning on the date of the Repurchase Event and ending on and including
the date on which the Investor exercises its Repurchase Option (the "PAYMENT
AMOUNT"). If the Company fails to pay to the Investor the full aggregate Payment
Amount within 10 calendar days of the Investor's exercise of the Repurchase
Option hereunder, the Company shall pay to the Investor, on the first Business
Day following such tenth calendar day, in addition to and not in lieu of the
Payment Amount payable by the Company to the Investor upon exercise of the
Repurchase Option, an amount equal to 2% of the aggregate Payment Amount then
due and payable to the Investor, in cash by wire transfer, plus compounded
annual interest of 18% on such Payment Amount during the period, beginning on
the day following such tenth calendar day, during which such Payment Amount, or
any portion thereof, is outstanding.
i. Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, the number of Shares issuable by the Company
and purchasable by the Investor including the shares of Common Stock issuable in
connection with the warrants issuable hereunder, shall not exceed 19.99% of the
shares of Common Stock outstanding as of the date hereof, 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 the Shares of Common Stock
issuable in connection with the Warrants issuable hereunder in excess of the
Maximum Common Stock Issuance shall first be approved by the Company's
shareholders in accordance with applicable law and the By-laws and Articles of
Incorporation of the Company, if such issuance of shares of
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Common Stock could cause a delisting on the Principal Market. Without limiting
the generality of the foregoing, such shareholders' approval must duly authorize
the issuance by the Company of shares of Common Stock totaling 19.99% or more of
the shares of Common Stock outstanding on the date hereof 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 Shares hereunder 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 1(i).
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
The Investor represents and warrants to the Company that:
a. Investment Purpose. The Investor is acquiring the securities
issuable pursuant to the Agreement (the "Securities") for its own account for
investment, only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, the Investor does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status; Sophisticated Investor. The Investor is
an "accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the 1933 Act. The Investor has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities.
c. Reliance on Exemptions. The Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
the oInvestor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire such Securities.
d. Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Investor. The Investor and its advisors, if
any, have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by the
Investor or its advisors, if any, or its representatives shall modify, amend or
affect the Investor's right to rely on the Company's representations and
warranties contained in Section 3 below. The Investor understands that its
investment in the Securities involves a high degree of risk. The Investor has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with
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respect to its acquisition of the Securities.
e. No Governmental Review. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. The Investor understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered for resale thereunder and sold, assigned or transferred
in accordance with an effective registration statement, (B) the Investor shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such Securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) the Investor provides the Company with assurance reasonably
acceptable to the Company that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) ("RULE 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) maybe deemed
to be an underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. Legends. The Investor understands that, until such time as the
resale of the Securities has been registered under the 1933 Act as contemplated
by the Registration Rights Agreement, the certificates representing the
Securities, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED FOR RESALE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR
THE RESALE OF THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR
AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
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The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the Securities upon
which it is stamped, (i) unless otherwise required by state securities laws, (i)
such Securities are registered for resale under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of such Securities may be made without registration under
the 1933 Act, or (iii) such holder provides the Company with assurances
reasonably acceptable to the Company that such Securities can be sold pursuant
to Rule 144 without any restriction as to (A) the number of securities acquired
as of a particular date that can then be immediately sold or (B) manner of sale.
The Investor covenants that, in connection with any transfer of Securities by it
pursuant to an effective registration statement under the 1933 Act, it will (i)
comply with the applicable prospectus delivery requirements of the 1933 Act,
provided that copies of a current prospectus relating to such effective
registration statement are or have been supplied to the Investor, and (ii)
comply with the "Plan of Distribution" section of the current prospectus
relating to such effective registration statement.
h. 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.
i. Residency. The Investor is a resident of the State of New York.
j. Section 9 of the 1934 Act. During the Open Period, 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.
k. Restriction on Short Sales. The Investor agrees that the Investor
shall not engage in any transaction constituting a "short sale" (as defined in
Rule 3b-3 of the ▇▇▇▇ ▇▇▇) of the Common Stock (collectively, "Short Sales").
Notwithstanding the foregoing, the restriction on Short Sales set forth in the
previous sentence of this paragraph shall not apply (a) on and after any date on
which the Common Stock is not listed or quoted on the Principal Market or has
been suspended from trading on any such exchange (excluding suspensions of not
more than one day resulting from business announcements by the Company), or any
such delisting or suspension is threatened or pending; (b) on or after any date
on which there shall have occurred any breach of any covenant, representation or
agreement of the Company to the Investor; (c) on or after any date on which
there shall have been an announcement of a pending, proposed or intended change
of control of the Company; (d) with respect to a short sale that does not exceed
the sum of (i) the number of shares of Common Stock issuable upon the exercise
of warrants held by the Investor issued pursuant to this Agreement and (ii) the
number of shares of Common Stock which the Investor anticipates will be issued
to the Investor for which the Investor has received a Put Notice.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Investor that:
a. Organization and Oualification. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest) (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which 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 3(b)).
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, The Escrow Agreement,
the Irrevocable Transfer Agent Instructions, the Class A Warrants, the Class B
Warrants (collectively, the "WARRANTS") and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "TRANSACTION I)OCUMENTS"), and to issue the
Shares and the Warrants 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 Shares and the Warrants 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 and (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)390,000,000 shares of Common Stock, of which as of
the date hereof 216,838,334 shares are issued and outstanding, 10,000,000 shares
of Preferred Stock, of which as of the date hereof no shares are issued and
outstanding and 75,893,951 shares of Common Stock are issuable
-10-
upon the exercise of options, warrants and conversion rights. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as disclosed in Schedule 3(c), (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 class of any shares of the Company's capital stock. The Company has
furnished to the Investor true and correct copies of the Company's Articles of
Incorporation, as in effect on the date hereof (the "ARTICLES 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. A number of shares of Common Stock equal to at
least 150% of the aggregate number of Shares issuable pursuant to this Agreement
but not more than 19.99% of the shares of Common Stock outstanding as of the
date hereof, to the extent that the provisions of Section 1(i) are applicable
hereunder, based on the Purchase Price per Share as of the date hereof and an
aggregate Purchase Price of $20,000,000 (regardless of any limitation on the
timing or amount of such purchases) initially has been duly authorized and
reserved for issuance (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f) below) pursuant to this Agreement. Upon issuance in
accordance with this Agreement, the Securities will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof. The issuance by the Company of the Securities is exempt
from registration under the 1933 Act.
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 Articles of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of
-11-
the Company or the By-laws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including United States federal and state securities laws and
regulations and the rules and regulations ofthe 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 3(e), neither the Company nor its
Subsidiaries is in violation of any term of or in default under, the Articles of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws 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, the Company is not required to obtain any consent, authorization,
permit or order of, or make any filing or registration 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 3(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. Since December 31, 1999 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 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,
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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 in order 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, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the 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 disclosed in Schedule 3(g) or
the SEC Documents filed at least five (5) days prior to the date hereof, since
December 31, 1999, there has been no change or development in the business,
properties, assets, operations, financial condition, results of operations or
prospects of the Company or its Subsidiaries which has had or could have a
Material Adverse Effect. 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 Schedule 3(h), 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 Company or any of its Subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any ofthe 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
-13-
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.
No event, liability, development or circumstance has occurred or exists, or 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. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
1. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration under the
1933 Act of the Company's sale and issuance of the Securities to the Investor or
cause this offering of Shares to the Investor to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
shareholder approval provisions, including, without limitation, under the rules
and regulations of the Principal Market, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration under the
1933 Act of the Company's sale and issuance of the Securities to the Investor or
cause the offering of the Securities to be integrated with other offerings.
m. 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.
n. 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
-14-
as now conducted. Except as set forth on Schedule 3(n), 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 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 on Schedule 3(n), 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 reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
o. Environmental Laws. The Company and its Subsidiaries (i) are 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 received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
p. Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and 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 Schedule 3(p) 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 Subsidianes.
q. Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
-15-
its business at a cost that would not have a Material Adverse Effect.
r. 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.
s. 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 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.
t. 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.
u. 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.
v. Certain Transactions. Except as set forth on Schedule 3(v) and in
the SEC Documents filed at least ten 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
-16-
options disclosed on Schedule 3(c), 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.
w. 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. The Company further
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.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Blue Sky. The Company shall, 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 the states of the United States, and
shall provide evidence of any such action so taken to the Investor on or prior
to the Closing Date. The Company shall make all filings and reports relating the
offer and sale of the Securities required under the applicable securities or
"Blue Sky" laws of the states of the United States following each of the Closing
Dates.
c. Reporting Status. Until the earlier of (i) the first date which is
after the date this Agreement is terminated pursuant to Section 8 and on which
the Holders (as that term is defined in the Registration Rights Agreement) may
sell all of the Securities acquired pursuant to this Agreement without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Holders shall have sold all the
Securities issuable hereunder and (B) this Agreement has been terminated
pursuant to Section 8 (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 an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale of
the Shares for general corporate and working capital purposes.
-17-
e. Financial Information. The Company agrees to send the following to
the Investor during the Registration Period: (i) within five (5) Business Days
after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, 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 thereon 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) 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.
f. Reservation of Shares. The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, no
less than 150% of the number of shares of Common Stock needed to provide for the
issuance of all the Securities hereunder at the then current Purchase Price. In
the event that, notwithstanding the foregoing, 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 4(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 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, so long as
any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market. 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 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 4(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 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
-18-
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) shares 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 ten Business
Days after the date hereof, 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.
j. Corporate Existence. The Company will take all steps reasonably
necessary to preserve and continue the corporate existence of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of the Investor or its respective nominee(s), for the Shares in such
amounts as specified from time to time by the Investor to the Company upon
delivery of a Put Notice (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS). The
Irrevocable Transfer Agent Instructions shall have been delivered by the Company
to, and acknowledged in writing by, the Company's transfer agent prior to the
Company's delivery of the first Put Notice hereunder. Prior to registration of
the Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5 and stop transfer instructions to give effect to Sections 2(f)
and 2(g) hereof prior to registration of the Shares under the 1933 Act, will be
given by the Company to its transfer agent and that the Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Registration Rights Agreement. Nothing
in this Section 5 shall affect in any way the Investor's obligations and
agreements set forth in Section 2(g) to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Shares. If the Investor
provides the Company with an opinion of counsel, in generally acceptable form,
that registration of a resale by such Investor of any of such Shares is not
required under the 1933 Act, the Company shall permit the transfer, and, in the
case of the Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the Investor
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Investor by
vitiating the
-19-
intent and purpose ofthe transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Investor shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the Shares
to the Investor is further subject to the satisfaction, at or before each
Closing, 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 Shares being purchased by the Investor at the Closing (after receipt of
confirmation of delivery of such Shares) by cashier's check or wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.
c. The representations and warranties of the Investor 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 representations and warranties that speak
as of a specific date), and the Investor 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
Investor at or prior to such Closing Date.
d. 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.
7. CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject
to the satisfaction, at or before each Closing, of each of the following
conditions set forth below. These conditions are for the Investor's sole benefit
and may be waived by the Investor at any time in its sole discretion.
a. The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor.
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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 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
3(g), (h) and (j) and the third sentence of Section 3(m) 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 Business 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 at or prior to such
Closing Date. The Investor shall have received a certificate, executed by the
Chief Executive Officer and Chief Financial Officer of the Company, dated as of
the applicable Closing Date, in the form of Exhibit C attached hereto, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Investor including, without limitation, an update as of such Closing Date
regarding the representation contained in Section 3(c) above.
d. Such Investor shall have received the opinion of the Company's
counsel dated as of such Closing Date, in the form of Exhibit D attached hereto.
e. The Company shall have executed and delivered to the Escrow Agent
or Investor the certificates representing, or have executed electronic
book-entry transfer of, the Shares and the Warrants (in such denominations as
such Investor shall request) being purchased by the Investor at such Closing.
f. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to the Investor (the "RESOLUTIONS") and such Resolutions shall not
have been amended or rescinded prior to such Closing Date.
g. At each Closing the Investor shall have received a letter of the
type, in the form and with the substance of the letter described in Section 3(s)
of the Registration Rights Agreement from the Company's auditors.
h. The Irrevocable Transfer Agent Instructions, in the form ofExhibit
E attached hereto, shall have been delivered to, and acknowledged in writing by,
the Company's transfer agent.
i. The Company shall have delivered to the Investor a certificate
evidencing the due incorporation and good standing of the Company and each
Subsidiary in such corporation's state of
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incorporation issued by the Secretary of State of such state of incorporation as
of a date within 10 days of such Closing Date.
j. The Company shall have delivered to the Investor a copy of its
Articles of Incorporation, as amended and in effect on such Closing Date,
certified by the Secretary of State of the State of Delaware within 10 days of
such Closing Date.
k. The Company shall have delivered to the Investor a secretary's
certificate, dated as of such Closing Date, in the form of Exhibit F attached
hereto, as to (i) the Resolutions described in Section 7(f), (ii) the Articles
of Incorporation and (iii) the Bylaws, each as in effect at such Closing.
1. 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.
m. The Registration Statement shall be effective at the time of each
Closing and no stop order suspending the effectiveness of the Registration
Statement shall be in effect or shall be pending or threatened.
n. 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.
o. There shall have been no filing of a petition in bankruptcy, either
voluntarily or involuntarily, with respect to the Company and there shall not
have been commenced any proceedings under any bankruptcy or insolvency laws, or
any laws relating to the relief of debtors, readjustment of indebtedness or
reorganization of debtors, and there shall have been no calling of a meeting of
creditors of the Company or appointment of a committee of creditors or
liquidating agents or offering of a composition or extension to creditors by,
for, with or without the consent or acquiescence of the Company.
p. If applicable, the shareholders of the Company shall have approved
the issuance of any Shares in excess of the Maximum Common Stock Issuance Shares
in accordance with Section 1(i).
q. The conditions to such Closing set forth in Section 1(e) shall have
been satisfied on or before such Closing Date.
r. The Company shall have delivered to the Investor a letter from the
Transfer Agent
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certifying the number of shares of Common Stock outstanding as of a date within
five days of such Closing Date.
s. The Company shall have delivered to such Investor such other
documents relating to the transactions contemplated by this Agreement as such
Investor or its counsel may reasonably request upon reasonable advance notice.
8. TERMINATION.
a. Optional Termination. This Agreement may be terminated at any time
by the mutual written consent of the Company and the Investor. The
representations, warranties and covenants contained in or incorporated into this
Agreement, insofar as applicable to the transactions consummated hereunder prior
to such termination, shall survive its termination for the period of any
applicable statute of limitations.
b. Automatic Termination. This Agreement shall automatically terminate
without any further action of either party hereto upon the earliest of:
(i) when the Investor has purchased an aggregate of $20,000,000
in the Common Stock of the Company pursuant to this Agreement;
provided that the representations, warranties and covenants contained
in this Agreement insofar as applicable to the transactions
consummated hereunder prior to such termination, shall survive the
termination of this Agreement for the period of any applicable statute
of limitations;
(ii) on the date which is 24 months after the date hereof;
(iii) if the Company shall file or consent by answer or otherwise
to the entry of an order for relief or approving a petition for
relief, reorganization or arrangement or any other petition in
bankruptcy for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or shall make an assignment for
the benefit of its creditors, or shall consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers of
itself or of any substantial part of its property, or shall be
adjudicated a bankrupt or insolvent, or shall take corporate action
for the purpose of any of the foregoing, or if a court or governmental
authority of competent jurisdiction shall enter an order appointing a
custodian, receiver, trustee or other officer with similar powers with
respect to the Company or any substantial part of its property or an
order for relief or approving a petition for relief or reorganization
or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law, or an order for the
dissolution, winding up or liquidation of the Company, or if any such
petition shall be filed against the Company;
(iv) at the option of the Investor, if the Company shall issue or
sell any equity securities or securities convertible into, or
exchangeable for, equity securities without the prior written consent
of the Investor if the primary purpose of such issuance or sale is the
-23-
raising of capital, unless such transaction (A) is not similar to the
transactions described herein, (B) is for a fixed number of shares of
Common Stock at a fixed price or (C) for a fixed dollar amount at a
discount to the market price of the Common Stock on a fixed date or
dates provided that there are no more than three trances of
investment,
(v) the trading of the Common Stock is suspended by the SEC or
the Principal Market for a period of five consecutive Business Days;
(vi) the Company shall not have filed with the Securities and
Exchange Commission the initial Registration Statement with respect to
the resale of the Registrable Securities in accordance with the terms
of the initial Registration Rights Agreement within 90 days of the
date hereof or the Registration Statement has not been declared
effective within 180 days of the date hereof; or
(vii) the Common Stock ceases to be registered under the ▇▇▇▇ ▇▇▇.
All representations, warranties and covenants shall survive the
termination of this Agreement.
c. Other Termination. This Agreement may be terminated by the Company,
if within a reasonable period of time and after the Company's best efforts, the
Company believes that it is unable to cause the Registration Statement to become
effective and based upon an receives an opinion of counsel that the Company will
not in all likelihood be able to cause the Registration Statement to become
effective in substantially the same form as contemplated hereunder within a
reasonable period of time and provides a copy of such opinion to the Investor.
In such event the Company shall have no further liability to the Investor
hereunder. However, the Investor shall be entitled to retain the consideration
received by the Investor pursuant to Section 10(b)(i).
9. INDEMNIFICATION.
In consideration of the Investor's execution and delivery of the this
Agreement and the Registration Rights Agreement and acquiring the Shares
hereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Investor and all of their shareholders, officers, directors,
employees 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 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 (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the
-24-
Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (c) 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, (d) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Shares or (e) the status of the Investor or holder of the Shares
as an investor in the Company. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
10. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions shall be governed by and interpreted in
accordance with the laws of the State of New York 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
New York, borough of Manhattan, 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
junsdiction, 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. Fees and Expenses.
(i) As a further inducement to the Investor to enter into this
Agreement, the Company (A) shall pay to the Investor an amount equal
to $25,000 upon the execution of this Agreement, (B) shall pay to the
Investor an amount equal to 3% of the Purchase Price of the Shares on
each Closing Date, which amount the Investor may deduct against the
Purchase Price of the Shares, (C) shall issue to the Investor upon the
execution of this Agreement a warrant in the form of Exhibit G,
annexed hereto, the Class A Warrant to purchase 250,000 shares of
Common Stock at an exercise price equal to 110% of the Bid Price on
the day preceding the execution of this Agreement.
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(ii) As a further inducement to the Investor to enter into this
Agreement and in addition to the fees and expenses set forth elsewhere
herein, the Company agrees to reimburse the Investor or its designees
or clients, as applicable, for reasonable expenses (including legal
expenses) relating to the negotiation and execution of the Transaction
Documents and any Closings hereunder of $7,500 on the date of each of
the first Closing and second Closing pursuant to this Agreement. Such
amounts are to be paid promptly upon submission of an invoice by the
Investor to the Company and shall pay to counsel to the Investor the
lower of(i) 1.5% of the Purchase Price or (ii) $3,000 on each Closing
Date, but in no event less than $750.
(iii) Except as otherwise set forth herein, each party shall pay
the fees and expenses of its advisers, counsel, 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 Shares issued pursuant
hereto.
b. Counterparts. This Agreement maybe 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.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. 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.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or wntten 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
-26-
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.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
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:
Quest Products Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
Ostrolenk, Faber, Gerb & Soffen LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to the Transfer Agent:
[to be supplied]
If to the Investor:
Domain Investments, Inc.
C/O Meridian Equities, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, including any purchasers of the Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Investor, including by merger or consolidation. The
Investor may assign some or all of its rights hereunder; provided, however, that
any such assignment shall not release the Investor from its obligations
hereunder unless such obligations are assumed by such assignee and the Company
has consented to such assignment and assumption. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Investor shall be entitled
to pledge the Shares in connection with a bona fide margin account.
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. 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, 5 and 10, and the indemnification provisions set forth in Section
9, shall survive each of the Closings. The Investor shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Investor shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of the Investor, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although the Investor shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. 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.
l. Placement Agent. The Company acknowledges and warrants that it has
not engaged a placement agent in connection with the sale of the Shares. The
Company shall be responsible for the payment of any fees or commissions of
placement agents or brokers engaged by the Company in connection with the
purchase of the Shares by the Investor. The Company shall pay, and hold the
Investor harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim. The Investor shall be
-28-
responsible for the payment of any fees or commissions of brokers engaged by the
Investor in connection with its sale of the Shares.
m. 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.
n. 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 breach of
any provision of this Agreement and to exercise all other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a payment
or payments to the Investor hereunder or 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.
p. Days. Unless the context refers to "Business Days" or "trading
days", all references herein to "days" shall mean calendar days.
q. Registration Rights Agreement. The parties acknowledge that the
Registration Rights Agreement is not annexed hereto. The parties agree to
negotiate in good faith a Registration Rights Agreement within a reasonable
period of time. Notwithstanding the foregoing, the Investor shall in all events
be entitled to retain the consideration described in Section 10(b)(i)(A) and
10(b)(i)(C).
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IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Investment Agreement to be duly executed as of the date and year first above
written.
COMPANY:
QUEST PRODUCTS CORP.
By: /S/:
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President & Chief Operating Officer
INVESTOR:
DOMAIN INVESTMENTS, INC.
By: /S/:
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Investor
