Exhibit 10.1
COMMON STOCK PURCHASE AGREEMENT
Dated as of May 10, 2000
by and between
VALUE AMERICA, INC.
and
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
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TABLE OF CONTENTS
Page
ARTICLE I Definitions 1
SECTION 1.1 DEFINITIONS. 1
ARTICLE II Purchase and Sale of Common Stock 3
SECTION 2.1 PURCHASE AND SALE OF STOCK3
SECTION 2.2 THE SHARES 3
SECTION 2.3 THE WARRANTS 3
SECTION 2.4 CLOSING 4
ARTICLE III Representations and Warranties 4
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
SECTION 3.2 REPRESENTATION, WARRANTIES AND COVENANTS OF THE PURCHASER 11
ARTICLE IV Covenants 13
SECTION 4.1 SECURITIES 13
SECTION 4.2 REGISTRATION AND LISTING 13
SECTION 4.3 REGISTRATION STATEMENT. 13
SECTION 4.4 COMPLIANCE WITH LAWS. 14
SECTION 4.5 KEEPING OF RECORDS AND BOOKS OF ACCOUNT 14
SECTION 4.6 REPORTING REQUIREMENTS 14
SECTION 4.7 OTHER AGREEMENTS 14
SECTION 4.8 NON-PUBLIC INFORMATION 15
SECTION 4.9 NO STOP ORDERS 15
SECTION 4.10 AMENDMENTS TO THE REGISTRATION STATEMENT 16
SECTION 4.11 PROSPECTUS DELIVERY 16
SECTION 4.12 LEGENDS 16
SECTION 4.13 CONFIRMATION OF OWNERSHIP 16
ARTICLE V Conditions to Closing, Draw Downs and Warrant Exercise 17
SECTION 5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER
TO ENTER THIS AGREEMENT 17
SECTION 5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER
TO ACCEPT A DRAW DOWN OR PURCHASE SHARES UPON EXERCISE
OF THE WARRANTS AND PURCHASE THE SHARES 17
SECTION 5.3 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO ISSUE SHARES PURSUANT TO A DRAW DOWN OR EXERCISE
OF WARRANTS 18
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ARTICLE VI Draw Down Terms; Warrants 19
SECTION 6.1 DRAW DOWN TERMS 19
SECTION 6.2 DRAW DOWN WARRANTS 21
SECTION 6.3 WARRANT A AND WARRANT B 21
ARTICLE VII Legends 22
SECTION 7.1 LEGEND 22
SECTION 7.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS 23
SECTION 7.3 PURCHASER'S COMPLIANCE 23
ARTICLE VIII Termination 24
SECTION 8.1 TERMINATION BY MUTUAL CONSENT 24
SECTION 8.2 OTHER TERMINATION 24
SECTION 8.3 EFFECT OF TERMINATION 24
ARTICLE IX Indemnification 24
SECTION 9.1 GENERAL INDEMNITY. 24
SECTION 9.2 INDEMNIFICATION PROCEDURES 26
ARTICLE X Miscellaneous 27
SECTION 10.1 FEES AND EXPENSES 27
SECTION 10.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION. 27
SECTION 10.3 ENTIRE AGREEMENT; AMENDMENT 27
SECTION 10.4 NOTICES 27
SECTION 10.5 WAIVERS 28
SECTION 10.6 HEADINGS 29
SECTION 10.7 SUCCESSORS AND ASSIGNS 29
SECTION 10.8 GOVERNING LAW 29
SECTION 10.9 SURVIVAL 29
SECTION 10.10 COUNTERPARTS 29
SECTION 10.11 PUBLICITY 29
SECTION 10.12 SEVERABILITY 29
SECTION 10.13 FURTHER ASSURANCES 30
SECTION 10.14 CONFIDENTIALITY 30
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
May 10, 2000 by and between Value America, Inc., a Virginia corporation (the
"Company"), and Acqua Wellington North American Equities Fund, Ltd., a company
organized under the laws of the Commonwealth of The Bahamas (the "Purchaser").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchaser,
from time to time as provided herein, and the Purchaser shall purchase, up to
$60,000,000 of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) and ("Section 4(2)") and Regulation D ("Regulation D") of the
United States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the purchases of Common Stock to be made hereunder
from time to time.
NOW, THEREFORE, the parties hereto agree as follows:
Definitions
Definitions.
(a) "Commission" shall have the meaning assigned to such term in Section
3.1(f) hereof.
(b) "Commission Documents" shall have the meaning assigned to such term in
Section 3.1(f) hereof.
(c) "Commission Filings" means the Company's Form 10-K (as amended) for the
fiscal year ended December 31, 1999, and all other filings made by the Company
after the date hereof pursuant to the Securities Exchange Act of 1934.
(d) "Draw Down" shall have the meaning assigned to such term in Section
6.1(a) hereof.
(e) "Draw Down Amount" means the actual amount of a Draw Down up to
$16,000,000.
(f) "Draw Down Discount Percentage" means (i) 90% if the Threshold Price is
equal to and greater than $.35 but less than $1.00, (ii) 93% if the Threshold
Price is equal to or greater than $1.00 but less than or equal to $3.00, and
(iii) for every $1.00 increase of the Threshold Price above $3.00 up to $16.00,
such draw down discount percentage shall increase by 0.10%.
(g) "Draw Down Exercise Date" shall have the meaning assigned to such term
in Section 5.3 hereof.
(h) "Draw Down Notice" shall have the meaning assigned to such term in
Section 6.1(i) hereof.
(i) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive trading days on the Nasdaq National Market or any other relevant
market on which the Common Stock is listed starting with the first trading day
specified in a Draw Down Notice or such other period of consecutive trading days
as mutually agreed upon by the Company and the Purchaser.
(j) "Material Adverse Effect" shall mean any effect on the business,
results of operations, properties, assets or financial condition of the Company
that is material and adverse to the Company and its subsidiaries, taken as a
whole and/or any condition, circumstance, or situation that would prohibit the
Company to enter into and perform any of its obligations under this Agreement in
any material respect.
(k) "Maximum Commitment" shall have the meaning assigned to such term in
Section 2.1 hereof.
(l) "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement, as supplemented from time to time
pursuant to Rule 424(b) of the Securities Act.
(m) "Registration Statement" shall mean the registration statement on Form
S-3, to be filed with the Securities and Exchange Commission for the
registration for resale of the Shares, as such Registration Statement may be
amended from time to time.
(n) "Settlement Amount" shall mean the sum of the Draw Down Amount and the
exercise price of any Warrants which have been exercised.
(o) "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.
(p) "Shares" shall mean the shares of Common Stock of the Company that may
be purchased hereunder pursuant to Draw Down and/or upon the exercise of the
Warrants.
(q) "Threshold Price" is the lowest VWAP at which the Company will sell
Shares during each Draw Down Pricing Period.
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(r) "VWAP" shall mean the daily volume weighted average price (based on a
trading day from 9:30 a.m. to 4:00 p.m., eastern time) of the Company's Common
Stock on the Nasdaq National Market (or any successor thereto) (or, if the
Common Stock ceases to be traded on the Nasdaq National Market, but is traded on
an Other Exchange (as defined in Section 4.2 hereof), such price on such Other
Exchange) as reported by Bloomberg Financial LP using the AQR function.
(s) "Warrants" shall mean the Closing Warrants, the Draw Down Warrants,
Warrant A and Warrant B.
Section 2.1 Purchase and Sale of Common Stock Purchase and Sale of Stock.
Subject to the terms and conditions of this Agreement, the Company shall issue
and sell to the Purchaser and the Purchaser shall purchase from the Company (i)
up to $60,000,000 (the "Maximum Commitment") of the Company's common stock, no
par value per share (the "Common Stock"), based on Draw Downs in accordance with
Section 6.1 hereof and (ii) the Warrants in accordance with Section 6.2 hereof.
In no event shall the amount of Common Stock required to be purchased by the
Purchaser exceed (x) $16,000,000 per Draw Down during any Draw Down Pricing
Period or (y) in total the Maximum Commitment.
Section 2.2 The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders,
21,850,000 shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs and the exercise of all Warrants.
Section 2.3 The Warrants. Within five business days of the date hereof, the
Company shall issue to the Purchaser a warrant to purchase 250,000 shares of
Common Stock (the "Closing Warrants") at an exercise price of the lesser of (i)
$3.50 and (ii) 120% of the VWAP on the Closing Date, which shall be exercisable
for a period of three (3) years commencing on the earlier of (x) the date that
Purchaser has consummated one Draw Down or (y) 120 days from the date of
issuance; provided, however, that the exercise price of the Closing Warrants
shall be reduced to the exercise price for the first 250,000 shares of Common
Stock issuable upon exercise of the Draw Down Warrants that would have been
issued pursuant to Section 6.2 hereof if the exercise price of such Draw Down
Warrants is less than the exercise price of the Closing Warrants. The Closing
Warrants shall not be subject to rescission or cancellation by the Company for
any reason, including, but not limited to, the Company never providing the
Purchaser with a Draw Down Notice; provided, however, the Company may rescind or
cancel the Closing Warrants if the Purchaser fails to purchase Shares pursuant
to a Draw Down Notice made in accordance with the terms hereof. In addition, the
Company will issue the Draw Down Warrants, Warrant A and Warrant B pursuant to
Sections 6.2 and 6.3 hereof. The Closing Warrants will be credited against the
Draw Down Warrants issuable pursuant to Section 6.2 hereof.
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Section 2.4 Closing. In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Company agrees to issue and sell to the Purchaser and the Purchaser agrees
to purchase from the Company, that number of the Shares to be issued in
connection with each Draw Down. The closing of the execution and delivery of
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇
LLP, The Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at 5:00
p.m. Eastern Time on (i) the date that the closing conditions set forth in
Sections 5.1 and 5.2 hereof have been satisfied or waived, or (ii) such other
time and place or on such date as the Purchaser and the Company may agree upon
(the "Closing Date"). Each party shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to this Agreement at or
prior to the Closing. On the date hereof, the Purchaser shall have received an
opinion of one or more counsels to the Company, dated the date hereof, in the
forms attached as Exhibit A hereto. At or prior to the Closing, the Irrevocable
Transfer Agent Instructions, in the form of Exhibit B attached hereto, shall
have been delivered to the Purchaser and acknowledged in writing by the
Company's transfer agent.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Virginia and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
As of the date hereof, the Company does not have any subsidiaries (as defined in
Section 3.1(g)) except as set forth in the Company's most recent Form 10-K,
including the accompanying financial statements (as amended, the "Form 10-K"),
or in the Company's most recent Form 10-Q (the "Form 10-Q"), or on Schedule
3.1(g) attached hereto. The Company and each such subsidiary is duly qualified
to do business as a foreign corporation and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary except for any jurisdiction in which the
failure to be so qualified would not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and, except as contemplated by Section 3.1(e) and
except that the Company cannot issue more than 19.9% of the number of shares
outstanding on the date hereof to the Purchaser (including, for this purpose,
shares issuable upon exercise of the Warrants) (the "Nasdaq Number") without the
approval of the holders of a majority of the votes cast by the holders of the
Common Stock or a waiver by Nasdaq (the "Nasdaq Approval"), no further consent
or authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
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This Agreement constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of April 28, 2000 are set forth on
Schedule 3.1(c) attached hereto. All of the outstanding shares of the Company's
Common Stock have been duly and validly authorized, and are fully paid and
non-assessable. Except as set forth in this Agreement, the Commission Documents,
the Commission Filings or on Schedule 3.1(c) attached hereto, as of April 28,
2000, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement, the Commission
Documents, the Commission Filings or on Schedule 3.1(c) attached hereto, as of
the date hereof, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities and as set forth on Schedule 3.1(c) attached
hereto, as of the date hereof, the Company is not a party to any agreement
granting registration rights to any person with respect to any of its equity or
debt securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable federal and state securities laws, and no stockholder has a
right of rescission or damages with respect thereto which would have a Material
Adverse Effect. The Company has furnished or made available to the Purchaser
true and correct copies of the Company's Articles of Incorporation as in effect
on the date hereof (the "Articles"), and the Company's Bylaws as in effect on
the date hereof (the "Bylaws").
(d) Issuance of Shares. Assuming the accuracy of the representations and
warranties of the Purchaser contained herein, the sale and issuance of the
Shares in accordance with the terms and on the basis of the representations and
warranties set forth in this Agreement will be exempt from the registration
requirements of the Securities Act. The Shares have been duly authorized by all
necessary corporate action (subject, in the case of the Shares in excess of the
Nasdaq Number the Nasdaq Approval) and, when paid for or issued in accordance
with the terms hereof, the Shares shall be validly issued and outstanding, fully
paid and non-assessable, and the Purchaser shall be entitled to all rights
accorded to a holder of Common Stock.
(e) No Conflicts. Except as set forth on Schedule 3.1(e) attached hereto,
the execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated herein do not (i)
violate any provision of the Company's Articles or Bylaws, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
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amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company is
not required under federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement, or issue and sell the Shares in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the Commission, or Nasdaq subsequent to the
Closing, and, any registration statement which may be filed pursuant hereto);
provided that, for purpose of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (the
"Commission") pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "Commission Documents"). The Company has not provided
to the Purchaser any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed. The Form 10-K for the year ended December 31, 1999, as of its
date of filing, complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such document, and, as of its date, such Form 10-K did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Commission
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of the Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
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(g) Subsidiaries. The Commission Documents or Schedule 3.1(g) attached
hereto set forth each subsidiary of the Company as of the date hereof, showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
corporation or other entity of which at least a majority of the securities or
other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. Except as set forth in the Commission Documents or
the Commission Filings, none of such subsidiaries is a "significant subsidiary"
as defined in Regulation S-X.
(h) No Material Adverse Effect. Since May 1, 2000, the Company has not
experienced or suffered any Material Adverse Effect, except continued losses
from operations and except as set forth on Schedule 3.1(h) attached hereto.
(i) No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any subsidiary (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission Documents or Commission Filings, other
than those incurred in the ordinary course of the Company's or its subsidiaries'
respective businesses since December 31, 1999, and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, do or would have a
Material Adverse Effect.
(k) Indebtedness. The Commission Documents or the Commission Filings set
forth as of December 31, 1999 all outstanding secured and unsecured Indebtedness
of the Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $100,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $100,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the
Commission Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. All leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect in all
material respects.
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(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto except for any such actions, suits, claims, investigations or proceedings
which would not have a Material Adverse Effect. Except as set forth in the
Commission Documents or the Commission Filings and except as set forth on
Schedule 3.1(m) hereto, there is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets and which is reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the Commission Documents, the Commission Filings or on
Schedule 3.1(n) attached hereto or such that would not have a Material Adverse
Effect. The Company and each of its subsidiaries have all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted by
it, except for such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, the failure to possess
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(o) Certain Fees. Except as set forth on Schedule 3.1(o) attached hereto,
no brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(p) Operation of Business. Except as set forth on Schedule 3.1(p) attached
hereto, the Company or one of the subsidiaries owns or possesses all patents,
trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Commission Documents
or the Commission Filings and all rights with respect to the foregoing, which
are necessary for the conduct of its business as now conducted without any
conflict with the rights of others, except to the extent set forth in the
Commission Documents or that a Material Adverse Effect could not reasonably be
expected to result from such conflict.
(q) Environmental Compliance. The Company and each of its subsidiaries have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. "Environmental Laws" shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
8
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature.
Except for such instances as would not individually or in the aggregate have a
Material Adverse Effect, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its subsidiaries that violate any Environmental Law or
that could reasonably be expected to give rise to any environmental liability,
or otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation under any Environmental Law.
(r) Material Agreements. Except as disclosed in the Commission Documents or
the Commission Filings, neither the Company nor any subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to a Commission Filing (collectively, "Material Agreements") if
the Company or any subsidiary were registering securities under the Securities
Act immediately prior to the effectiveness of this Agreement. Except as set
forth on Schedule 3.1(r) attached hereto, the Company and each of its
subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received no
notice of default and, are not in default in any material respect under any
Material Agreement now in effect.
(s) Transactions with Affiliates. Except as set forth in the Commission
Documents or the Commission Filings, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $100,000 between (a) the Company, any
subsidiary or any of their respective customers (excluding agreements related to
the purchase or lease of the Company's products) or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person who would be covered by Item
404(a) of Regulation S-K or any corporation or other entity controlled by such
officer, employee, consultant, director or person.
(t) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder. The Company meets the
requirements for the use of Form S-3 under the Securities Act. The Company has
not distributed and, prior to the completion of the sale of the Shares to the
Purchaser, will not distribute any offering material in connection with the
offer and sale of the Shares other than the Registration Statement, the
Prospectus or other materials, if any, permitted by the Securities Act.
(u) 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 or sales of any
security or solicited any offers to buy any security, other than pursuant to
this Agreement, under circumstances that would require registration of the
Common Stock under the Securities Act. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has conducted or will
conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to any of the Shares.
9
(v) Employees. As of the date hereof, neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth in the Commission Documents or the
Commission Filings. Each of the Company and its subsidiaries requires its
officers, employees and certain consultants to enter into agreements regarding
proprietary information, noncompetition, nonsolicitation, confidentiality, or
other similar agreements containing restrictive covenants. As of the date
hereof, except as disclosed in Schedule 3.1(v), no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or
any subsidiary.
(w) Use of Proceeds. The proceeds from the sale of the Shares will be used
by the Company and its subsidiaries for the purposes set forth in the Prospectus
under "Use of Proceeds."
(x) Public Utility Holding Company Act and Investment Company Act Status.
The Company is not a "holding company" or a "public utility company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
The Company is not, and as a result of and immediately upon Closing will not be,
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan by the Company or any of its subsidiaries
which is or would have a Material Adverse Effect. The execution and delivery of
this Agreement and the issue and sale of the Shares will not involve any
transaction which is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of the
Purchaser, or any person or entity that owns a beneficial interest in any of the
Purchaser, is an "employee pension benefit plan" (within the meaning of Section
3(2) of ERISA) with respect to which the Company is a "party in interest"
(within the meaning of Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section
3.1(y), the term "Plan" shall mean an "employee pension benefit plan" (as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any
subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of
arm's length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares.
10
Section 3.2 Representation, Warranties and Covenants of the Purchaser. The
Purchaser hereby makes the following representations, warranties and covenants
to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the Commonwealth of The Bahamas.
(b) Authorization and Power. The Purchaser has the requisite corporate
power and authority to enter into and perform this Agreement and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Purchaser. This Agreement constitutes a valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of creditor's rights and remedies or by other
equitable principles of general application.
(c) Acquisition for Investment. The Purchaser is purchasing the Shares and
the Warrants solely for its own account for the purpose of investment and not
with a view to or for sale in connection with a distribution. The Purchaser has
no present intention to sell the Shares or the Warrants, nor a present
arrangement (whether or not legally binding) to effect any distribution of the
Shares or the Warrants to or through any person or entity; provided, however,
that by making the representations herein, the Purchaser does not agree to hold
the Common Stock for any minimum or other specific term and reserves the right
to dispose of the Common Stock at any time in accordance with federal and state
securities laws applicable to such disposition.
(d) Sophisticated Investor. The Purchaser is a sophisticated investor (as
described in Rule 506(b) (2) (ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and the Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in Common Stock. The Purchaser acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.
(e) General. The Purchaser understands that the Shares are being offered
and sold in reliance on a transactional exemption from the registration
requirement of federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Purchaser to acquire the Shares.
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(f) No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by the Purchaser of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of Purchaser's
charter documents or bylaws or (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Purchaser is a party, (iii) create or impose any lien, charge or encumbrance on
any property of the Purchaser under any agreement or any commitment to which the
Purchaser is party or by which the Purchaser is on or by which any of its
respective properties or assets are bound or (iv) result in a violation of any
law, rule or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Purchaser or its properties, except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Purchaser to
enter into and perform its obligations under this Agreement in any material
respect. The Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or to purchase the Shares in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
the Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(g) Information. The Purchaser 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 Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(h) No Shorting. The Purchaser has the right to sell shares of the
Company's Common Stock equal in number to the number of Shares that have been
purchased at the time of any such sale pursuant to this Agreement. The Purchaser
covenants, however, that prior to and during the term of any Draw Down Pricing
Period, neither the Purchaser nor any of its affiliates nor any entity managed
by the Purchaser will ever be in a net short position with respect to shares of
the Common Stock of the Company in any accounts directly or indirectly managed
by the Purchaser or any affiliate of the Purchaser or any entity managed by the
Purchaser. The Purchaser shall not sell any Shares on any trading day in excess
of 25% of the day's trading volume, as such volume is reported by Bloomberg
Financial LP, using the HP function for such trading day. The Purchaser shall
not sell any Shares in block lots or block trades.
12
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees (as defined
herein).
Section 4.1 Securities. The Company shall notify the Commission and Nasdaq,
if applicable, in accordance with their rules and regulations, of the
transactions contemplated by this Agreement, and shall take all other necessary
actions and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Shares to the Purchaser.
Section 4.2 Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all material respects with
its reporting and filing obligations under the Exchange Act, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will use
its commercially reasonable efforts to take all action necessary to continue the
listing or trading of its Common Stock and the listing of the Shares purchased
by Purchaser hereunder on the Nasdaq National Market or any relevant market or
system on which the Common Stock hereafter becomes traded or listed (which may
include the American Stock Exchange and Nasdaq Small Cap Market, or in the case
of the OTC Bulletin Board, if mutually agreed upon by the Company and the
Purchaser (collectively, an "Other Exchange")), if applicable, and will comply
in all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD or any relevant market or
system.
Section 4.3 Registration Statement.
(a) On or before June 16, 2000 (the "Filing Date"), the Company shall cause
to be filed with the Commission a Registration Statement on Form S-3 (or any
other comparable form) to register for resale the Shares (pursuant to a Draw
Down or the exercise of any Warrant) to be purchased by the Purchaser pursuant
to this Agreement. The Company shall use its reasonable best efforts to take all
steps necessary to cause the Registration Statement to be declared effective by
September 10, 2000, but in no event later than 120 days after the Filing Date.
If the Registration Statement is not declared effective within 120 days of the
Filing Date, the Company shall file a separate registration statement to
register the shares of Common Stock underlying the Closing Warrants within 30
days thereof. If a registration statement has not been filed within 30 days, the
Company shall issue an additional warrant to purchase 30,000 shares of Common
Stock for every 30 day period thereafter until the registration statement has
been filed or, if earlier, until the Purchaser shall have terminated this
Agreement. The Company shall use its reasonable best efforts to cause such
registration statement to become effective within 90 days of filing. If such
registration statement has not been declared effective within 90 days, the
Company shall issue an additional warrant to purchase 30,000 shares of Common
Stock for every 30 day period thereafter until the registration statement has
been declared effective or, if earlier, until the Purchaser shall have
terminated this Agreement.
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(b) Before the Purchaser shall be obligated to accept any Draw Down request
from the Company, the Company shall have caused a sufficient number of shares of
Common Stock to be registered to cover the Shares to be issued in connection
with such Draw Down request (including any Warrants to be issued in connection
therewith).
Section 4.4 Compliance with Laws.
(a) The Company shall comply, and cause each subsidiary to comply, with all
applicable laws, rules, regulations and orders, noncompliance with which could
reasonably be expected to have a Material Adverse Effect.
(b) Unless the Company obtains the requisite approval of its shareholders
or waiver of such approval in accordance with the applicable rules of Nasdaq,
the Company will not be obligated to issue and the Purchaser will not be
obligated to purchase any shares of the Company's Common Stock which would
result in the issuance under this Agreement of Shares representing more than
nineteen and nine-tenths percent (19.9%) of the issued and outstanding shares of
the Company's Common Stock on the date hereof.
Section 4.5 Keeping of Records and Books of Account. The Company shall keep
and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.6 Reporting Requirements. Upon written request, the Company shall
furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon as
available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within 90 days after the end of each fiscal year of
the Company.
Section 4.7 Other Agreements. The Company shall not enter into any other
financing agreement during a Draw Down Pricing Period (an "Other Financing"),
without the prior written consent of the Purchaser, except that the Company may
(i) enter into a loan, credit or lease facility with a bank or financing
institution or issue any other debt securities so long as no equity securities
are required to be issued in connection therewith, (ii) establish an employee
stock option plan or agreement or finance the acquisition of equipment,
technologies or lines of business and (iii) issue shares of Common Stock and/or
preferred stock of the Company in connection with the Company's current option
14
plans, stock purchase plans, rights plans, currently outstanding warrants or
options, acquisition of products, licenses or other assets and strategic
partnerships or joint ventures (the primary purpose of which is not to raise
equity) and the issuance of shares of Common Stock (including upon exercise of
preemptive rights), preferred stock and warrants pursuant to the Preferred Stock
and Warrant Purchase Agreement with certain existing shareholders and other
entities and up to an additional $20,000,000 in a future equity financing (each
a "Permitted Transaction"). The Purchaser shall be required to notify the
Company as to whether it will consent within five (5) calendar days of written
notice from the Company with respect to such Other Financing (a "Financing
Notice"). If the Purchaser consents to the Company entering into an Other
Financing (other than a Permitted Transaction), the Purchaser shall have the
option (the "Purchase Option"), which option shall be exercised within five (5)
calendar days of the date the Purchaser gives such consent, to (i) purchase up
to the same number of shares of Common Stock issued or to be issued in the Other
Financing at the price and on such terms as the Company would issue Shares to
the Purchaser during such Draw Down Pricing Period, (ii) purchase up to the same
number of shares of Common Stock issued or to be issued in the Other Financing
at the price and or such terms of the Other Financing or (iii) elect not to
purchase any Shares during such Draw Down Pricing Period. If the Purchaser does
not exercise its Purchase Option in writing before 5 p.m., eastern time, on such
fifth (5th) calendar day following the Purchaser's consent to the applicable
Other Financing, the Company shall have the right to close such Other Financing
on the scheduled closing date with a third party; provided that all of the
financial terms and conditions of such closing are the same as those provided to
the Purchaser prior to the Purchaser giving its consent to such Other Financing.
Section 4.8 Non-public Information. Except as otherwise required pursuant
to the terms of this Agreement, neither the Company nor any of its directors,
officers or agents shall disclose any material non-public information about the
Company to the Purchaser.
Section 4.9 No Stop Orders. The Company will advise the Purchaser promptly
and, if requested by the Purchaser, will confirm such advice in writing: (i) of
its receipt of notice of any request by the Commission for amendment of or a
supplement to the Registration Statement, any Prospectus or for additional
information; (ii) of its receipt of notice of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement or of
the suspension of qualification of the Shares for offering or sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iii) of
its becoming aware of the happening of any event, which makes any statement of a
material fact made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Securities Act
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, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make commercially reasonable efforts to
obtain the withdrawal of such order at the earliest possible time. Purchaser
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in this Section 4.9, Purchaser will immediately
cease disposition of the Shares pursuant to the Registration Statement and the
Prospectus until receipt of copies of a supplemented or amended Prospectus and,
at the Company's request, deliver to the Company copies of the Prospectus held
by Purchaser at the time of receipt of such notice.
15
Section 4.10 Amendments to the Registration Statement. The Company will not
(i) other than a periodic filing under the Exchange Act, file any amendment to
the Registration Statement or make any amendment or supplement to the Prospectus
of which the Purchaser shall not previously have been advised or to which the
Purchaser shall reasonably object after being so advised or (ii) so long as, in
the reasonable opinion of counsel for the Purchaser, a Prospectus is required to
be delivered in connection with sales by any Purchaser or dealer, file any
information, documents or reports pursuant to the Exchange Act without
delivering a copy of such information, documents or reports to the Purchaser
promptly following such filing.
Section 4.11 Prospectus Delivery. Prior to any Settlement Date, the Company
will deliver to the Purchaser, without charge, in such quantities as reasonably
requested by the Purchaser, copies of the Prospectus. As soon after the Closing
as possible and thereafter from time to time for such period as in the
reasonable opinion of counsel for the Purchaser a prospectus is required by the
Securities Act to be delivered in connection with sales by the Purchaser, the
Company will expeditiously deliver to the Purchaser, without charge, as many
copies of the Prospectus (and of any amendment or supplement thereto) as the
Purchaser may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares may be sold by the Purchaser, in connection
with the offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Securities Act to be delivered in
connection with sales of the Shares. If during such period of time any event
shall occur that in the judgment of the Company is required to be set forth in
the Prospectus (as then amended or supplemented) or should be set forth therein
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus to comply with the Securities Act or any other law, the
Company will forthwith prepare and, subject to the provisions of Section 4.10
above, file with the Commission an appropriate supplement or amendment thereto,
and will expeditiously furnish to the Purchaser a reasonable number of copies
thereof.
Section 4.12 Legends. The certificates evidencing the Shares and the shares
of Common Stock issuable upon exercise of the Warrants shall be free of legends,
except as provided for in Article VII.
Section 4.13 Confirmation of Ownership. At the Company's request on any
Settlement Date or any date upon which the Purchaser will be purchasing Shares
upon exercise of any Warrants, upon the Company informing the Purchaser of the
number of outstanding shares of Common Stock on such date, the Purchaser shall
confirm whether or not it would own, giving effect to the proposed issuance of
Shares on such date, more than 10% of such number of outstanding shares of
Common Stock.
16
ARTICLE V
Conditions to Closing, Draw Downs and Warrant Exercise
Section 5.1 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down or Purchase Shares upon Exercise of the Warrants and Purchase
the Shares. The obligation hereunder of the Purchaser to accept a Draw Down
Notice, to purchase Shares upon exercise of the Warrants and to acquire and pay
for the Shares is subject to the satisfaction or waiver, at or before the date
of each Draw Down Notice (the "Draw Down Exercise Date") or the date of the
purchase of the Shares upon exercise of any Warrant, of each of the conditions
set forth below. The conditions are for the Purchaser's sole benefit and may be
waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Draw Down Exercise Date
as though made at that time except for representations and warranties that speak
as of a particular date; provided that this condition shall be deemed satisfied
unless all such failures to be true and correct would have a Material Adverse
Effect.
(b) Effective Registration Statement. The Registration Statement
registering the Shares to be received in connection with each such Draw Down
(including upon exercise of the Warrants issued in connection therewith) shall
have been declared effective by the Commission and such Registration Statement
shall remain effective on each Settlement Date, and the Company shall have
delivered to the Purchaser an appropriate Prospectus on each Settlement Date.
(c) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company.
(d) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered or promulgated by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding by any
arbitrator or any governmental authority shall have been commenced against the
Company or any subsidiary, seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Material Adverse Effect. No Material Adverse Effect shall have
occurred.
(g) Ten Percent Limitation. On each Settlement Date, the number of Shares
then to be purchased by the Purchaser shall not exceed the number of such shares
that, when aggregated with all other shares of Common Stock then owned by the
Purchaser, would result in the Purchaser owning no more than 9.9% of all of such
17
Common Stock as would be outstanding on such Settlement Date, as determined in
accordance with Section 16 of the Exchange Act and the regulations promulgated
thereunder; provided that, if the Purchaser shall decline to purchase Shares on
any Settlement Date or date of purchase of any Shares upon exercise of any
Warrants, the Purchaser shall provide a certificate to the Company, executed by
an authorized officer, certifying the number of shares of Common Stock owned by
the Purchaser on such date. For purposes of this Section 5.3(g), in the event
that the amount of Common Stock outstanding as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder is
greater on a Settlement Date than on the date upon which the Draw Down Notice
associated with such Settlement Date is given, the amount of Common Stock
outstanding on such Settlement Date shall govern for purposes of determining
whether the Purchaser, when aggregating all purchases of Common Stock made
pursuant to this Agreement would own more than 9.9% of the Common Stock
following such Settlement Date.
(h) Shareholder Vote. The issuance of shares of Common Stock with respect
to the applicable Settlement Date, if any, shall not violate the shareholder
approval requirements of Nasdaq.
(i) Additional Funding. On or before issuing its initial Draw Down Notice,
the Company shall have received proceeds of $30,000,000 in a private placement
of 5% Cumulative Convertible Series D Preferred Stock or on a subsequent series
of preferred stock with substantially similar terms.
(j) Other. On each Settlement Date, the Purchaser shall have received a
certificate in substantially the form and substance of Exhibit C hereto,
executed by an executive officer of the Company and to the effect that all the
conditions to such Settlement Date shall have been satisfied as at the date of
each such certificate.
Section 5.2 Conditions Precedent to the Obligation of the Company to issue
Shares Pursuant to a Draw Down or Exercise of Warrants. The obligation hereunder
of the Company to issue the Shares pursuant to a Draw Down or upon exercise of
any Warrant is subject to the satisfaction or waiver, at or before each
Settlement Date, of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made, except for representations and
warranties that are expressly made as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser.
(c) No Injunction. No statute, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered or promulgated by any court or
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
18
(d) No Proceedings or Litigation. No action, suit or proceeding by any
arbitrator or any governmental authority shall have been commenced against the
Company or any subsidiary, seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(e) Shareholder Vote. The issuance of shares of Common Stock with respect
to the applicable Settlement Date, if any, shall not violate the shareholder
approval requirements of Nasdaq.
ARTICLE VI
Draw Down Terms; Warrants
Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:
(a) The Company may, in its sole discretion, issue a Draw Down Notice with
respect to a draw down (a "Draw Down") of up to $1,000,000 if the Threshold
Price is equal to or exceeds $0.35, and an additional $1,000,000 for every $1.00
increase of the Threshold Price above $1.00 up to and including $16.00 for a
maximum Draw Down of up to $16,000,000; provided, that the Company may, in its
sole discretion, issue a Draw Down Notice with respect to any Draw Down Amount
at any Threshold Price pursuant to such terms mutually agreed upon by the
Purchaser and the Company during any Draw Down Pricing Period, which Draw Down
the Purchaser will be obligated to accept. Prior to issuing any Draw Down
Notice, the Company shall have Shares representing at least the Draw Down Amount
registered under the Registration Statement.
(b) The number of Shares to be issued in connection with each Draw Down
shall be equal to the sum of the quotients (for each trading day of the Draw
Down Pricing Period for which the VWAP equals or exceeds the Threshold Price) of
(x) 1/20th (or such other fraction based upon the agreed upon Draw Down Pricing
Period) of the Draw Down Amount divided by (y) the applicable Draw Down Discount
Percentage multiplied by the VWAP for such day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing Period.
Each Draw Down Pricing Period shall consist of four (4) periods of five (5)
consecutive trading days (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect to each
Draw Down shall be determined on a daily basis during each Draw Down Pricing
Period and settled on the second business day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days (or such other number
of trading days mutually agreed upon by the Purchaser and the Company) between
the last day of a Draw Down Pricing Period and the first day of a subsequent
Draw Down Pricing Period.
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(f) There shall be a maximum of twelve (12) Draw Downs during the term of
this Agreement.
(g) Each Draw Down will expire on the last trading day of each Draw Down
Pricing Period.
(h) For each trading day during the Draw Down Pricing Period that the VWAP
is at or above the Threshold Price, 1/20th (or such other fraction based upon
the agreed upon Draw Down Pricing Period) of the Draw Down Amount shall be
allocated to purchase Shares at a price equal to the product of (x) the Draw
Down Discount Percentage multiplied by (y) the VWAP for such day. At no time
shall the Threshold Price be set below $0.35, provided, however, that at no time
shall the Company set the Threshold Price below $1.00 if the Company has
received proceeds of $42,000,000, consisting of $30,000,000 in a private
placement of 5% Cumulative Convertible Series D Preferred Stock or on a
subsequent series of preferred stock with substantially similar terms and
$12,000,000 under this Agreement, unless agreed upon by the Company and the
Purchaser. If trading in the Company's Common Stock is suspended for any reason
for more than three (3) hours in any trading day, the price of the Common Stock
shall be deemed to be below the Threshold Price for that trading day.
(i) The Company must inform the Purchaser via facsimile transmission as to
the Draw Down Amount the Company wishes to exercise before commencement of
trading on the first trading day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit D. In addition to
the Draw Down Amount, the Company shall set the Threshold Price and shall
designate the first trading day of the Draw Down Pricing Period with each Draw
Down Notice.
(j) On each Settlement Date, the Company shall deliver the Shares purchased
by the Purchaser to the Purchaser or its designees via DWAC during the Draw Down
Pricing Period, and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the Company's designated account by wire transfer
of immediately available funds provided that the Shares are received by the
Purchaser no later than 1:00 p.m., eastern time, or next day available funds if
the Shares are received thereafter.
(k) Intentionally Omitted.
(l) If on the Settlement Date, the Company fails to deliver the Shares to
be purchased by the Purchaser (unless the conditions to the Company's
obligations to deliver the Shares have not been satisfied in which case, the
following provisions shall not apply) and/or issued upon exercise of the
Warrants, and such failure continues for ten (10) trading days, the Company
shall pay, in cash or restricted shares of Common Stock, at the option of the
Purchaser, as liquidated damages and not as a penalty to the Purchaser an amount
equal to two percent (2%) of the Draw Down Amount for such Draw Down Pricing
Period for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
payments to be made pursuant to this clause (l) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
20
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such shares of Common Stock and piggyback registration rights if the Company
files a separate registration statement.
Section 6.2 Draw Down Warrants.
(a) If the Threshold Price is set between $1.00 and $10.00 for any Draw
Down Pricing Period, the Company shall issue to the Purchaser on the next
applicable Settlement Date for any such period, a warrant (a "Draw Down
Warrant") to purchase 30% of that number of Shares purchased by the Purchaser
during such Draw Down Pricing Period. Each such Draw Down Warrant shall have a
three-year exercise period and an exercise price equal to 120% of the average
purchase price per share paid by the Purchaser during such Draw Down Pricing
Period (based on the aggregate amount paid by the Purchaser on such Settlement
Date and the number of Shares purchased).
(b) If the Threshold Price is set below $1.00 for any Draw Down Pricing
Period, the Company shall issue a Draw Down Warrant to the Purchaser on the next
applicable Settlement Date for the purchase of 100% of that number of Shares
purchased by the Purchaser during such Draw Down Pricing Period. Each such Draw
Down Warrant shall have a three-year exercise period and an exercise price equal
to 100% of the average purchase price per share paid by the Purchaser during
such Draw Down Pricing Period (based on the aggregate amount paid by the
Purchaser on such Settlement Date and the number of Shares purchased).
(c) No Draw Down Warrants shall be issued by the Company if the Threshold
Price is set above $10.00. No Draw Down Warrant shall be issued by the Company
to the Purchaser until such time as the Company is required to issue a Draw Down
Warrant to purchase more than 250,000 shares of Common Stock in the aggregate.
(d) If the VWAP has been greater than $4.00 for ten (10) consecutive
trading days during the Investment Period, the Company, at its option, shall
have one (1) right to call ("Call Notice") 40% of the outstanding Draw Down
Warrants that have an exercise price equal to or less than $1.00, which Draw
Down Warrants shall expire within five (5) trading days after the Company
delivered the Call Notice to the Purchaser.
Section 6.3 Warrant A and Warrant B.
(a) Promptly after the Registration Statement has been declared effective
by the Commission and prior to the Company's initial Draw Down request, the
Company shall issue to the Purchaser on a quarterly basis (for up to four
quarters) one Warrant A to purchase 750,000 shares of Common Stock; provided,
however, that if the Purchaser purchases the full amount of shares issuable
pursuant to the exercise of a Warrant A prior to the end of the quarter in which
such Warrant A was issued, the Company shall immediately issue to the Purchaser
another Warrant A to purchase 750,000 shares of Common Stock; provided, further,
that in no event shall the Company issue to the Purchaser more than four Warrant
As. The Warrant A shall have an exercise price equal to the greater of (x) $2.00
and (y) 93% of the VWAP on the date of exercise. If the Threshold Price is equal
to or greater than $2.00 and the VWAP is equal to or greater than such Threshold
Price, the Company shall have the right to require the Purchaser to exercise the
Warrant A to purchase up to 6,000 shares of Common Stock on such trading day.
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(b) Promptly after the Registration Statement has been declared effective
by the Commission and prior to the Company's initial Draw Down request, the
Company shall issue to the Purchaser on a quarterly basis (for up to four
quarters) one Warrant B to purchase 750,000 Shares of Common Stock; provided,
however, that if the Purchaser purchases the full amount of shares issuable
pursuant to the exercise of a Warrant B prior to the end of the quarter in which
such Warrant B was issued, the Company shall immediately issue to the Purchaser
another Warrant B to purchase 750,000 shares of Common Stock; provided, further,
that in no event shall the Company issue to the Purchaser more than four Warrant
Bs. The Warrant B shall have an exercise price equal to the greater of (x) $1.00
and (y) 93% of the VWAP on the date of exercise. If the Threshold Price is set
above $1.00 but below $2.00 on any trading day and the VWAP is equal to or
greater than the Threshold Price, the Company shall have the right to require
the Purchaser to exercise the Warrant B to purchase up to 24,000 shares of
Common Stock on such trading day.
(c) If the Purchaser exercises any of the Warrants, the Company shall issue
the Shares issuable upon such exercise and the Purchaser shall pay the exercise
price for such Shares on the earlier of (i) the first and fourth Monday of each
month (if such Monday is a trading day, and if not a trading day, on the next
trading day) and (ii) the second trading day after the aggregate number of such
Shares to be issued equals or exceeds 60,000 shares of Common Stock.
(d) Each of Warrant A and Warrant B shall expire on the earliest of (i)
ninety (90) days from the date of issuance, (ii) termination of this Agreement
and (iii) the date the Company shall have received $6,000,000 in aggregate from
the exercise of each Warrant A and/or Warrant B.
ARTICLE VII
Legends
Section 7.1 Legend. Each certificate representing the Shares and the shares
of Common Stock issuable upon exercise of the Warrants shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or "blue sky"
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR VALUE AMERICA, INC. (THE
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"COMPANY") SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THAT ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing the Shares without
the legend set forth above if at such time, prior to making any transfer of any
Shares, such holder thereof shall give written notice (which notice may be given
by facsimile) to the Company describing the manner and terms of such transfer
and removal as the Company may reasonably request and the Company further agrees
to deliver any such reissued certificates within three (3) days of receipt of
written notice from such holder. Such proposed transfer will not be effected
until the Company has notified such holder that either (i) in the opinion of
Company counsel, the registration of such Shares under the Securities Act is not
required in connection with such proposed transfer; or (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Company with the Commission and has become effective under the
Securities Act. The restrictions on transfer contained in Section 7.1 shall be
in addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Agreement. The Company will use
its reasonable best efforts to deliver reissued certificates within three (3)
days of receipt of written notice from such holder. If the Company fails to
deliver reissued certificates representing the Shares pursuant to this Section
7.1 within ten (10) business days of receipt of written notice from such holder,
the Company shall issue, as liquidated damages, and not as a penalty, to the
Purchaser a number of shares of Common Stock equal to the quotient of (a) two
percent (2%) of the product of (i) the VWAP on the date the reissued
certificates representing the applicable Shares should have been delivered to
the Purchaser and (ii) the number of Shares the Company should have delivered to
the Purchaser on reissued certificates pursuant to this Section 7.1 divided by
(b) the VWAP on the trading day immediately prior to such 10th business day, for
the initial thirty (30) day period immediately following any such failure and
each additional thirty (30) day period thereafter until such failure has been
cured, while any periods of less than thirty (30) days shall be pro rated.
Section 7.2 No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 7.1 has been or shall be placed on the share
certificates representing the Shares and the shares of Common Stock issuable
upon exercise of the Warrants and no instructions or "stop transfer orders," so
called, "stock transfer restrictions," or other restrictions have been or shall
be given to the Company's transfer agent with respect thereto other than as
expressly set forth in this Article VII and as may be required under Delaware
law for corporations with more than one (1) class of stock outstanding.
Section 7.3 Purchaser's Compliance. Nothing in this Article VII shall
affect in any way the Purchaser's obligations under any agreement to comply with
all applicable securities laws upon resale of the Shares and the shares of
Common Stock issuable upon exercise of the Warrants.
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ARTICLE VIII
Termination
Section 8.1 Termination by Mutual Consent. The term of this Agreement shall
be fifteen and one-half (15.5) months from the date the Registration Statement
was declared effective by the Commission (the "Investment Period"). This
Agreement may be terminated at any time by mutual consent of the parties.
Section 8.2 Other Termination. The Purchaser may terminate this Agreement
upon one (1) day's notice (v) if the Company issues convertible debentures or
enters an equity financing facility without the Purchaser's prior written
consent, or (w) if an event resulting in a Material Adverse Effect has occurred,
or (x) the Registration Statement is not declared effective within 180 days
following the Filing Date, or (y) (A) Common Stock shall cease to be registered
under Section 12(b) or 12(g) of the Exchange Act or (B) to be listed or traded
on the Nasdaq National Market or an Other Exchange or (z) the Company shall not
be permitted to issue additional Shares without receiving the Nasdaq Approval
and such approval shall not have been received within sixty (60) days of the
date that the Company ceases to be permitted to so issue additional Shares.
Section 8.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 8.1 or 8.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 10.9.
Nothing in this Section 8.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE IX
Indemnification
Section 9.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify and hold
harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
reasonable attorney's fees) to which the Purchaser and each person, if any, who
controls the Purchaser may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or the Prospectus
relating to the shares being sold by the Purchaser, or any amendment or
supplement to it, or (ii) the omission or alleged omission to state in that
24
Registration Statement or any document incorporated by reference in the
Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
Company shall not be liable under this Section 9.1(a) to the extent that a court
of competent jurisdiction shall have determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent (x) arising out of or based upon
any untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or (y) Purchaser is obligated to deliver a Prospectus and such losses,
claims, damages, liabilities or expenses resulted from the fact that the
Purchaser sold Shares to a person to whom there was not sent or given a
Prospectus at or prior to the written confirmation of such sale and the Company
shall have previously and timely furnished sufficient copies of the Prospectus,
as so amended or supplemented, to Purchaser and such Prospectus, as so amended
or supplemented, would have corrected such untrue statement or omission of a
material fact.
The Company will reimburse the Purchaser and each such controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or the controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except that the Company will not be liable to the extent a claim or
action which results in a loss, claim, damage, liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in the Registration Statement or any Prospectus in
reliance upon, and in conformity with, written information furnished by the
Purchaser to the Company for inclusion in the Registration Statement or
Prospectus.
(b) Indemnification by the Purchaser. The Purchaser will indemnify and hold
harmless the Company, each of its directors and officers, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act from and against any expenses
(including reasonable costs of defense and investigation and all reasonable
attorneys fees) to which the Company and any director or officer of the Company
and each person, if any, who controls the Company may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus or (ii) the omission or alleged omission to
state in the Registration Statement or any Prospectus a material fact required
to be stated therein or necessary to make the statements therein not misleading,
to the extent, but only to the extent, the untrue statement, alleged untrue
statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information furnished by the Purchaser to the Company
for inclusion in the Registration Statement or Prospectus, and the Purchaser
will reimburse the Company and each such director, officer or controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Company or the other person in investigating, defending against,
or preparing to defend against any such claim, action, suit or proceeding.
25
Section 9.2 Indemnification Procedures. Promptly after a person receives
notice of a claim or the commencement of an action for which the person intends
to seek indemnification under paragraph (a) or (b) of Section 9.1, the person
will notify the indemnifying party in writing of the claim or commencement of
the action, suit or proceeding, but failure to notify the indemnifying party
will not relieve the indemnifying party from liability under paragraph (a) or
(b) of Section 9.1, except to the extent it has been materially prejudiced by
the failure to give notice. The indemnifying party will be entitled to
participate in the defense of any claim, action, suit or proceeding as to which
indemnification is being sought, and if the indemnifying party acknowledges in
writing the obligation to indemnify the party against whom the claim or action
is brought, the indemnifying party may (but will not be required to) assume the
defense against the claim, action, suit or proceeding with counsel reasonably
satisfactory to it. After an indemnifying party notifies an indemnified party
that the indemnifying party wishes to assume the defense of a claim, action,
suit or proceeding the indemnifying party will not be liable for any legal or
other expenses incurred by the indemnified party in connection with the defense
against the claim, action, suit or proceeding except that if, in the opinion of
counsel to the indemnifying party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or proceeding
the indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in Paragraph (a) or (b) or Section 9.1,
will cooperate in all reasonable respects with the indemnifying party in the
defense of any action or claim as to which indemnification is sought. No
indemnifying party will be liable for any settlement of any action effected
without its prior written consent, which consent shall not be unreasonably
withheld. No indemnifying party will without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld, effect any
settlement of a pending or threatened action with respect to which an
indemnified party is, or is informed that it may be, made a party and for which
it would be entitled to indemnification, unless the settlement includes an
unconditional release of the indemnified party from all liability and claims
which are the subject matter of the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
9.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
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ARTICLE X
Miscellaneous
Section 10.1 Fees and Expenses. Except as set forth in Article IX, the
Company shall pay (i) all reasonable fees and expenses related to the
transactions contemplated by this Agreement; provided, that the Company shall
pay, at the Closing, all reasonable attorneys fees and expenses (exclusive of
disbursements and out-of-pocket expenses and reasonably itemized) incurred by
the Purchaser up to $50,000 in connection with the preparation, negotiation,
execution and delivery of this Agreement, and (ii) all reasonable fees and
expenses incurred by the Purchaser in connection with any amendments,
modifications or waivers of this Agreement or incurred in connection with the
enforcement of this Agreement, including, without limitation, all reasonable
attorneys fees and expenses.
Section 10.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably submits to
the jurisdiction of the United States District Court and other courts of the
United States sitting in the State of New York for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 10.2 shall affect or limit any right to serve process in any other
manner permitted by law.
Section 10.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 10.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
27
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Value America, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Purchaser: Acqua Wellington North American Equities Fund, Ltd.
c/o Mees Pierson Fund Services (Bahamas) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days prior written notice of such changed address to
the other party hereto.
Section 10.5 Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
28
Section 10.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 10.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior written consent of the Company, which
consent will not be unreasonably withheld. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 10.9 Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article IX of this Agreement shall survive the execution and delivery hereof and
the Closing hereunder in accordance with their terms. Sections 4.3 and 10.14
shall survive the termination of this Agreement.
Section 10.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five (5) days of the execution and delivery hereof.
Section 10.11 Publicity. Except as required by law or any requirement of
Nasdaq or any other exchange on which the Common Stock may be listed, the
Company shall not issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement, without the prior consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed.
Section 10.12 Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible. In addition, if in connection with any review of any Registration
Statement hereunder, the Commission determines that any one or more of the
provisions or part of the provisions contained in this Agreement, including
without limitation any provision or part of any provision relating to the mutual
29
consent of the Company and the Purchaser but excluding the Maximum Commitment,
the Threshold Price, the Draw Down Amount, the Draw Down Discount Percentage,
the VWAP, the numbers or terms of the Warrants to be issued under this Agreement
or Section 5.1(f) or clause (w) of Section 8.2, shall prevent the sale of the
Shares to the Purchaser from being deemed a completed private placement prior to
the filing of such Registration Statement, the Company and the Purchaser shall
agree on a revision to this Agreement to cause, in the view of the Commission,
such transaction to qualify as such.
Section 10.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
Section 10.14 Confidentiality. Purchaser agrees to maintain the
confidentiality of all information about the Company received from any officer,
employee or agent of the Company, until such time as that confidential
information is released to the public generally other than as a result of any
disclosure by Purchaser.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
VALUE AMERICA, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
ACQUA WELLINGTON NORTH
AMERICAN EQUITIES FUND, LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director