EXHIBIT 4.1
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT, dated as of _________, 2006, is entered into by
and between BRILLIANT TECHNOLOGIES CORPORATION, a Delaware corporation with
headquarters located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "Company"),
and the entity named on an executed counterpart of the signature page hereto
(the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded, inter alia,
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to lend funds in the amount of the Purchase Price
(as defined below) to the Company, subject to and upon the terms and conditions
of this Agreement and acceptance of this Agreement by the Company, the repayment
of which will be represented by a Promissory Note of the Company (the "Note"),
on the terms and conditions referred to herein; and
WHEREAS, in connection with the loan to be made by the Buyer, the Company
has agreed to issue the Note and the Warrant (as defined below) to the Buyer;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase.
(i) Subject to the terms and conditions of this Agreement and the other
Transaction Agreements (as defined below), the Buyer hereby agrees to loan to
the Company the principal amount specified on the Buyer's signature page of this
Agreement (the "Purchase Price").
(ii) The obligation to repay the loan of the relevant Purchase Price from
the Buyer shall be evidenced by the Company's issuance of one or more Notes to
the Buyer in the principal amount of one hundred eight percent (108%) of the
Purchase Price paid by the Buyer. Each Note shall be payable on the date which
is the earlier of (i) one hundred twenty days after the Closing Date or (ii) the
date on which the New Transaction Threshold (as defined below) occurs. Each
Note, which shall be shall be in the form of Annex I annexed hereto.
(iii) In consideration of the loan to be made by the Buyer, the Company
will issue to the Buyer the Warrant to purchase the number of shares of Common
Stock of the Company ("Common Stock") as provided in Section 4 hereof.
(iv) The loan to be made by the Buyer and the issuance of the Note and the
Warrant to the Buyer and the other transactions contemplated hereby are
sometimes referred to herein and in the other Transaction Agreements as the
purchase and sale of the Securities (as defined below), and are referred to
collectively as the "Transactions."
b. Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
"Buyer Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Buyer pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).
"Certificate of Incorporation Amendment" means an amendment to the
Company's Certificate of Incorporation to increase the authorized capital stock
of the Company in an amount sufficient such that all shares of Common Stock
subject to the Warrants can be issued upon exercise of the Warrants.
"Certificate of Incorporation Amendment Filing Date" means the date the
Company files with the Secretary of State of Delaware the Certificate of
Incorporation Amendment.
"Certificates" means the ink-signed Note and the Warrant, each duly
executed by the Company and issued on the Closing Date in the name of the Buyer.
"Closing Date" means the date of the closing of the Transactions, as
provided herein.
"Company Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Company pursuant to
Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).
"Conversion Shares" shall mean the shares of Common Stock issuable pursuant
to the terms of the Note.
"Holder" means the Person holding the relevant Securities at the relevant
time.
"Last Audited Date" means December 31, 2005.
"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (x) adversely
affect the legality, validity or enforceability of the Purchased Securities or
any of the Transaction Agreements, (y) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its material obligations
under any of the Transaction Agreements or the transactions contemplated
thereby.
"New Common Stock" means shares of Common Stock and/or securities
convertible into, and/or other rights exercisable for, Common Stock, which are
offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or lender
(howsoever denominated) in a New Transaction.
"New Transaction" means the offer or sale of notes, debentures or New
Common Stock by or on behalf of the Company to a New Investor in a transaction
offered or consummated after the date hereof; provided, however, that it is
specifically understood that the term "New Transaction" (1) includes, but is not
limited to, a sale of Common Stock or of a security convertible into Common
Stock or an equity or credit line transaction, but (2) does not include (a) the
issuance of Common Stock upon the exercise or conversion of options, warrants or
convertible securities outstanding on the date hereof, or in respect of any
other financing agreements as in effect on the date hereof, (b) the issuance of
Common Stock pursuant to an Employee Stock Option Plan (an "ESOP") of the
Company, such ESOP having been properly approved by the shareholders of the
Company, (c) the issuance of Common Stock to employees, directors or consultants
of the Company, (d) the issuance of Common Stock upon the exercise of any
options or warrants referred to in the preceding clauses of this paragraph
(provided the same is not amended after the date hereof (other than the Company
may extend the expiration date thereof), or (e) the issuance of shares to a
Strategic Partner.
"New Transaction Funds" shall mean all amounts received in respect of any
New Transaction.
"Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin Board or
such other market on which the Common Stock is principally traded at the
relevant time, but shall not include the "pink sheets."
"Purchased Securities" means the Note and the Warrant.
"Registrable Securities" means the Warrant Shares and Conversion Shares,
unless such shares can then be sold by the Holder without volume or other
restrictions or limit.
"Registration Rights Provisions" means the registration rights contemplated
by the terms of this Agreement, including, but not necessarily limited to,
Section 4(h) hereof, and of the other Transaction Agreements.
"Registration Statement" means an effective registration statement covering
the Registrable Securities.
"Securities" means the Note, the Warrant and the Shares.
"Shares" means the shares of Common Stock representing any of the Warrant
Shares.
"State of Incorporation" means Delaware.
"Strategic Partner" means a third party, whether or not currently
affiliated with the Company, hereof, which party (i) is engaged in a business
which is the business in which the Company or one of its subsidiaries is engaged
or a similar or related business, and (ii) either (a) subsequently purchases
equity securities of the Company (or securities convertible into equity
securities of the Company), or (b) enters into an agreement for one or more of
the following: the licensing by the Company or one of its subsidiaries of all or
any portion of its technology to such third party, the licensing by such third
party of all or any portion of its technology to the Company or one of its
subsidiaries, or any other coordination of all or a portion of their respective
business activities or operations by the Company or one of its subsidiaries and
such third party.
"Trading Day" means any day during which the Principal Trading Market shall
be open for business.
"Transfer Agent" means, at any time, the transfer agent for the Common
Stock.
"Transaction Agreements" means this Bridge Loan Agreement, the Note, and
the Warrant, and includes all ancillary documents referred to in those
agreements.
"Warrant" means the warrant issued to the Buyer as contemplated by Section
4 of this Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon exercise of
the Warrant.
c. Form of Payment; Delivery of Certificates. On the Closing Date, the
Buyer shall pay the Purchase Price by delivering immediately available good
funds in United States Dollars to the Company no later than the date prior to
the Closing Date and the Company shall deliver the Certificates, each duly
executed on behalf of the Company and issued in the name of the Buyer, to the
Buyer.
d. Method of Payment. Payment of the Purchase Price shall be made by wire
transfer of funds to an account identified by the Company to the Buyer.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
Without limiting Buyer's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Buyer is purchasing the Securities for its own account for investment only
and not with a view towards the public sale or distribution thereof and not with
a view to or for sale in connection with any distribution thereof.
The Buyer is (i) an "accredited investor" as that term is defined in Rule
501 of the General Rules and Regulations under the 1933 Act by reason of Rule
501(a)(3), (ii) experienced in making investments of the kind described in this
Agreement and the related documents, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related documents,
and to evaluate the merits and risks of an investment in the Securities, and
(iv) able to afford the entire loss of its investment in the Securities.
All subsequent offers and sales of the Securities by the Buyer shall be
made pursuant to registration of the relevant Securities under the 1933 Act or
pursuant to an exemption from registration.
The Buyer understands that the Securities are being offered and sold to it
in reliance on specific exemptions from the registration requirements of the
1933 Act and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
The Buyer and its advisors, if any, have been furnished with or have been
given access to all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer, including those set forth on in any
annex attached hereto. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and its management and have
received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has also had the opportunity
to obtain and to review the Company's filings on ▇▇▇▇▇ listed on Annex VI hereto
(the documents listed on such Annex VI, to the extent available on ▇▇▇▇▇ or
otherwise provided to the Buyer as indicated on said Annex VI, collectively, the
"Company's SEC Documents").
The Buyer understands that its investment in the Securities involves a high
degree of risk.
The Buyer hereby represents that, in connection with its purchase of the
Securities, it has not relied on any statement or representation by the Company
or any of its officers, directors and employees or any of its attorneys or
agents, except as specifically set forth herein.
The Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities.
This Agreement and the other Transaction Agreements to which the Buyer is a
party, and the transactions contemplated thereby, have been duly and validly
authorized, executed and delivered on behalf of the Buyer and are valid and
binding agreements of the Buyer enforceable in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to the
Buyer as of the date hereof and as of the Closing Date that, except as otherwise
provided in the Company's SEC Documents (which qualifies all such
representations and warranties):
a. Rights of Others Affecting the Transactions. There are no preemptive
rights of any shareholder of the Company, as such, to acquire the Note, the
Warrant or the Shares. No party has a currently exercisable right of first
refusal which would be applicable to any or all of the transactions contemplated
by the Transaction Agreements.
b. Status. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Incorporation and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
or result in a Material Adverse Effect. The Company has registered its stock and
is obligated to file reports pursuant to Section 12 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended (the "1934 Act"). The Common
Stock is quoted on the Principal Trading Market. The Company has received no
notice, either oral or written, with respect to the continued eligibility of the
Common Stock for such quotation on the Principal Trading Market, and the Company
has maintained all requirements on its part for the continuation of such
quotation.
c. Authorized Shares.
(i) The authorized capital stock of the Company consists of (x) 800,000,000
shares of Common Stock, $0.0001 par value per share, of which approximately
405,217,523 are outstanding as of June 16, 2006, and (y) 1,000,000 shares of
Preferred Stock, $0.001 par value, of which none are outstanding as of the date
hereof.
(ii) There are no outstanding securities which are convertible into shares
of Common Stock, whether such conversion is currently exercisable or exercisable
only upon some future date or the occurrence of some event in the future.
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. On the
Certificate of Incorporation Amendment Filing Date the Company will have
sufficient authorized and unissued shares of Common Stock as would be necessary
to effect the issuance of the Shares upon the exercise of the Warrant.
(iv) On the Certificate of Incorporation Amendment Filing Date the Shares
will be duly authorized by all necessary corporate action on the part of the
Company, and, when issued upon exercise of the Warrant, in accordance with its
terms, will have been duly and validly issued, fully paid and non-assessable and
will not subject the Holder thereof to personal liability by reason of being
such Holder.
d. Transaction Agreements and Stock. This Agreement and each of the other
Transaction Agreements, and the transactions contemplated thereby, have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Note, the
Warrant and each of the other Transaction Agreements, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. Non-contravention. The execution and delivery of this Agreement and each
of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Note, the Warrant and the other Transaction
Agreements do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the certificate of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have or result in a Material Adverse Effect.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except approval by the shareholders of the
Company holding a majority of the outstanding shares of Common Stock on the
relevant record date of the Certificate of Incorporation Amendment and such
authorizations, approvals and consents that have been obtained.
g. Filings. None of the Company's SEC Documents contained, at the time they
were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading.
h. Absence of Certain Changes. Since the Last Audited Date, there has been
no material adverse change and no Material Adverse Effect. Since the Last
Audited Date, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to shareholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts owed to the Company
by any third party or claims of the Company against any third party, except in
the ordinary course of business consistent with past practices; (v) waived any
rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of existing business; (vi) made any
increases in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
i. Full Disclosure. To the best of the Company's knowledge, there is no
fact known to the Company (other than general economic conditions known to the
public generally) that has not been disclosed in writing to the Buyer that would
reasonably be expected to have or result in a Material Adverse Effect.
j. Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or nongovernmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements. The Company is not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.
k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, (i) neither the Company nor any of its subsidiaries is in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material agreement to which it is a party or by which its property is bound, and
(ii) no Event of Default (or its equivalent term), as defined in the respective
agreement to which the Company or its subsidiary is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a Material Adverse Effect.
l. Absence of Certain Company Control Person Actions or Events. To the
Company's knowledge, none of the following has occurred during the past five (5)
years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar officer
was appointed by a court for the business or property of such Company
Control Person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within two
years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding or
is a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, any
other Person regulated by the Commodity Futures Trading Commission
("CFTC") or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
(4) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or
state authority barring, suspending or otherwise limiting for more than 60
days the right of such Company Control Person to engage in any activity
described in paragraph (3) of this item, or to be associated with Persons
engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the CFTC or SEC has not been subsequently reversed, suspended,
or vacated.
m. No Undisclosed Liabilities or Events. To the best of the Company's
knowledge, the Company has no liabilities or obligations other than those
disclosed in the Transaction Agreements or those incurred in the ordinary course
of the Company's business since the Last Audited Date, or which individually or
in the aggregate, do not or would not have a Material Adverse Effect. No event
or circumstances has occurred or exists with respect to the Company or its
properties, business, operations, condition (financial or otherwise), or results
of operations, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed. Except for the Certificate of
Incorporation Amendment, there are no proposals currently under consideration or
currently anticipated to be under consideration by the Board of Directors or the
executive officers of the Company which proposal would (x) change the articles
or certificate of incorporation or other charter document or by-laws of the
Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.
n. No Integrated Offering. Neither the Company nor any of its Affiliates
nor any Person acting on its or their behalf has, directly or indirectly, at any
time since June 1, 2005, made any offer or sales of any security or solicited
any offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Regulation D in connection
with the offer and sale of the Securities as contemplated hereby.
o. Dilution. The number of shares issuable upon exercise of the Warrant may
have a dilutive effect on the ownership interests of the other shareholders (and
Persons having the right to become shareholders) of the Company. The Company's
executive officers and directors have studied and fully understand the nature of
the Securities being sold hereby and recognize that they have such a potential
dilutive effect. The board of directors of the Company has concluded, in its
good faith business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue the
Warrant Shares upon exercise of the Warrant is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company, and the Company will honor such
obligations, including honoring every Notice of Exercise (as contemplated by the
Warrant), unless the Company is subject to an injunction (which injunction was
not sought by the Company) prohibiting the Company from doing so.
p. Fees to Brokers, Finders and Others. The Company has taken no action
which would give rise to any claim by any Person for brokerage commission,
finder's fees or similar payments by Buyer relating to this Agreement or the
transactions contemplated hereby. Buyer shall have no obligation with respect to
such fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this paragraph that may be due in connection
with the transactions contemplated hereby. The Company shall indemnify and hold
harmless each of the Buyer, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as and when
incurred.
q. Confirmation. The Company confirms that all statements of the Company
contained herein shall survive acceptance of this Agreement by the Buyer for a
period of eighteen (18) months from the Closing Date. The Company agrees that,
if any events occur or circumstances exist prior to the Closing Date or the
release of the Purchase Price to the Company which would make any of the
Company's representations, warranties, agreements or other information set forth
herein materially untrue or materially inaccurate as of such date, the Company
shall immediately notify the Buyer (directly or through its counsel, if any) in
writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Securities
have not been and are not being registered under the provisions of the 1933 Act
and, except as provided in the Registration Rights Provisions or otherwise
included in an effective registration statement, the Shares have not been and
are not being registered under the 1933 Act, and may not be transferred unless
(A) subsequently registered thereunder or (B) the Buyer shall have delivered to
the Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Provisions) under the 1933 Act
or to comply with the terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that, until such
time as the relevant Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Provisions and sold in accordance with
an effective Registration Statement or otherwise in accordance with another
effective registration statement, the certificates and other instruments
representing any of the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all necessary filings
in connection with the sale of the Securities to the Buyer under any United
States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
d. Reporting Status. So long as the Buyer beneficially owns any of the
Securities and for at least twenty (20) Trading Days thereafter, the Company
shall file all reports required to be filed with the SEC pursuant to Section 13
or 15(d) of the 1934 Act, shall take all reasonable action under its control to
ensure that adequate current public information with respect to the Company, as
required in accordance with Rule 144(c)(2) of the 1933 Act, is publicly
available, and shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination. The Company will take all reasonable
action under its control to maintain the continued listing and quotation and
trading of its Common Stock (including, without limitation, all Registrable
Securities) on the Principal Trading Market or a listing on the NASDAQ/Small Cap
or National Markets and, to the extent applicable to it, will comply in all
material respects with the Company's reporting, filing and other obligations
under the by-laws or rules of the Principal Trading Market and/or the National
Association of Securities Dealers, Inc., as the case may be, applicable to it at
least through the date which is sixty (60) days after the Warrant has been
exercised in full or has expired.
e. Use of Proceeds. The Company will use the proceeds received hereunder
(excluding amounts paid by the Company for legal fees (i) first, as provided in
Annex VII attached hereto, and (ii) then, for general corporate purposes.
f. Warrant. The Company agrees to issue to the Buyer on the Closing Date a
transferable warrant (the "Warrant") for the purchase of ____________ shares of
Common Stock. The exercise price of the Warrant will be equal to $.07, subject
to adjustment as provided in the Warrant and herein. The Warrant shall be
exercisable initially on the Commencement Date specified in the Warrant and
shall expire on the last day of the calendar month in which the fifth
anniversary of the Closing Date occurs. Except as specified above, each Warrant
shall generally be in the form annexed hereto as Annex IV, and shall have the
benefit of the Registration Rights provisions set forth in Section 4 (h) hereof.
g. INTENTIONALLY DELETED
h. Piggy-Back Rights; Rule 144.
(i) The Holder shall have piggy-back registration rights with respect to
the Warrant Shares subject to the conditions set forth below. If the Company
participates (whether voluntarily or by reason of an obligation to a third
party) in the registration of any shares of the Company's stock (other than a
registration on Form S-8 or on Form S-4) filed after the date hereof, the
Company shall give written notice thereof to the Holder and the Holder shall
have the right, exercisable within ten (10) Trading Days after receipt of such
notice, to demand inclusion of all or a portion of the Holder's Registrable
Securities in such registration statement. If the Holder exercises such
election, the Registrable Securities so designated shall be included in the
registration statement (without any holdbacks) at no cost or expense to the
Holder (other than any commissions, if any, relating to the sale of Holder's
shares). The Holder's rights under this Section 4(h)(i) shall expire at such
time as such Holder can sell all of such Holder's remaining Registrable
Securities under Rule 144 (as defined below) without volume or other
restrictions or limit.
(ii) The Company shall prepare and file with the SEC within five (5)
business days of the Certificate of Incorporation Amendment Filing Date, a
Registration Statement registering for resale by the Holder a sufficient number
of shares of Common Stock for the Holder to sell any Registrable Securities not
previously registered, but in no event less than the number of shares equal to
the sum of (x) one hundred fifty percent (150%) of the number of shares into
which the Note would be convertible at the time of filing of such Registration
Statement (assuming for such purposes that this Note had been issued, had been
eligible to be converted, and had been converted, into Conversion Shares in
accordance with its terms, whether or not such issuance, eligibility, accrual of
interest or conversion had in fact occurred as of such date) and (y) one hundred
percent (100%) of the number of Warrant Shares which would be issuable on
exercise of the Warrants (assuming for such purposes that all Warrants had been
issued, had been eligible for exercise and had been exercised for Warrant Shares
in accordance with their terms, whether or not such issuance, eligibility or
exercise had in fact occurred as of such date). Unless otherwise specifically
agreed to in writing in advance by the Holder, the Registration Statement shall
state that, in accordance with Rule 416 and 457 under the 1933 Act, it also
covers such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Note or exercise of the Warrants to
prevent dilution resulting from stock splits, or stock dividends. The Company
will use its reasonable best efforts to cause such Registration Statement to be
declared effective on a date (the "Initial Required Effective Date") which is no
later than the earlier of (Y) five (5) days after oral or written notice by the
SEC that it may be declared effective or (Z) seventy-five (75) days folliwng the
Certificate of Incorporation Amendment Filing Date.
(iii) If at any time (an "Increased Registered Shares Date") after a
Registration Statement has been filed with the SEC, the number of shares of
Common Stock represented by the Registrable Shares, issued or to be issued as
contemplated by this Agreement, exceeds the aggregate number of shares of Common
Stock then registered or sought to be registered in a Registration Statement
which has not yet been declared effective, the Company shall either
(X) amend the relevant Registration Statement filed by the Company pursuant
to the preceding provisions of this Section 4(h), if such Registration
Statement has not been declared effective by the SEC at that time, to
register, in the aggregate, at least the number of shares (the "Increased
Shares Amount") equal to (A) the number of shares theretofore issued on
conversion of the Notes (including any interest paid on conversion by the
issuance of Conversion Shares) , plus (B) the number of shares theretofore
issued on exercise of the Warrants, plus (C) the sum of:
(I) the number of shares into which the unconverted Note and all
interest thereon through the Maturity Date would be convertible at the
date of such filing (assuming for such purposes that this Note had
been issued, had been eligible to be converted, and had been
converted, into Conversion Shares in accordance with its terms,
whether or not such issuance eligibility, accrual of interest, or
conversion had in fact occurred as of such date), and
(II) the number of Warrant Shares which would be issuable on exercise
of the unexercised Warrants (assuming for such purposes that all such
Warrants had been issued, had been eligible for exercise and had been
exercised for Warrant Shares in accordance with their terms, whether
or not such issuance, eligibility or exercise had in fact occurred as
of such date), or
(Y) if such Registration Statement has been declared effective by the SEC
at that time, file with the SEC an additional Registration Statement (an
"Additional Registration Statement") to register the number of shares equal
to the excess of the Increased Shares Amount over the aggregate number of
shares of Common Stock already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) forty-five (45) days after the Increased Registered Shares
Date.
(iv) With a view to making available to the Holder the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit Holder to sell securities of the Company to the
public without registration (collectively, "Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to the Holder so long as such party owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) if not available on the SEC's ▇▇▇▇▇ system, a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may be
reasonably requested to permit the Holder to sell such securities pursuant to
Rule 144 without registration;
(d) at the request of any Holder then holding Registrable Securities, give
the Transfer Agent instructions (supported by an opinion of Company counsel, if
required or requested by the Transfer Agent) to the effect that, upon the
Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the provisions of
Rule 144) for the Shares which the Holder proposes to sell (the "Securities
Being Sold") is not less than (1) year and (B) as to such other matters as
may be appropriate in accordance with Rule 144 under the Securities Act,
and
(ii) an opinion of counsel acceptable to the Company (for which purposes it
is agreed that ▇▇▇▇▇▇▇ & Prager LLP shall be deemed acceptable if not given
by Company counsel) that, based on the Rule 144 Certificate, Securities
Being Sold may be sold pursuant to the provisions of Rule 144, even in the
absence of an effective registration statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the relevant
Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Buyer). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.
(v) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the registration statement, the Company
notifies the Holder in writing that the effectiveness of the Registration
Statement is suspended for any reason, whether due to the existence of a
Potential Material Event (as defined below) or otherwise, the Holder shall not
offer or sell any Registrable Securities, or engage in any other transaction
involving or relating to the Registrable Securities, from the time of the giving
of notice with respect to a Potential Material Event until the Holder receives
written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event; provided, however, that the Company may not so suspend such right other
than during a Permitted Suspension Period. The term "Potential Material Event"
means any of the following: (i) the possession by the Company of material
information not ripe for disclosure in a registration statement, which shall be
evidenced by determinations in good faith by the Board of Directors of the
Company that disclosure of such information in the registration statement would
be detrimental to the business and affairs of the Company; or (ii) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information. The term "Permitted Suspension Period" means
up to two suspension periods during any consecutive 12-month period, each of
which suspension period shall not either (i) be for more than ten (10) business
days (and forty five (45) days in the case of the requirement to file a
post-effective amendment in connection with the filing with the SEC of the
Company's audited financial statements in its annual report) or (ii) begin less
than ten (10) business days after the last day of the preceding suspension
(whether or not such last day was during or after a Permitted Suspension
Period).
i. Available Shares. After the Certificate of Incorporation Amendment
Filing Date, the Company shall have at all times authorized and reserved for
issuance, free from preemptive rights, a number of shares (the "Minimum
Available Shares") at least equal to one hundred percent (100%) of the number of
shares which would be issuable upon exercise of the outstanding Warrants held by
all Holders (in each case, whether such Warrant were originally issued to the
Holder, the Buyer or to any other party). For the purposes of such calculations,
the Company should assume that the Warrant were then exercisable without regard
to any restrictions which might limit any Holder's right to exercise the Warrant
held by any Holder.
j. Publicity, Filings, Releases, Etc. Each of the parties agrees that it
will not disseminate any information relating to the Transaction Agreements or
the transactions contemplated thereby, including issuing any press releases,
holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects, unless in the reasonable opinion of
counsel to the party proposing such statement, such statement is legally
required to be included. In furtherance of the foregoing, the Company will
provide to the Buyer drafts of the applicable text of the first filing of a
Current Report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least two
(2) Trading Days before such filing will be made) will not include in such
filing any statement or statements or other material to which the other party
reasonably objects, unless in the reasonable opinion of counsel to the party
proposing such statement, such statement is legally required to be included.
Notwithstanding the foregoing, each of the parties hereby consents to the
inclusion of the text of the Transaction Agreements in filings made with the SEC
as well as any descriptive text accompanying or part of such filing which is
accurate and reasonably determined by the Company's counsel to be legally
required. Notwithstanding, but subject to, the foregoing provisions of this
Section 4(i), the Company will, after the Closing Date, promptly file a Current
Report on Form 8-K or, if appropriate, a quarterly or annual report on the
appropriate form, referring to the transactions contemplated by the Transaction
Agreements.
k. Stockholders Meeting. Within five business days of the date hereof, the
Company shall prepare and file with the SEC a proxy statement in connection with
the approval by the stockholders of the Company of the Certificate of
Incorporation Amendment (such proxy statement as amended or supplemented from
time to time being hereinafter referred to as the "Proxy Statement"). The
Company ,acting through its Board of Directors and in accordance with applicable
law and the Certificate of Incorporation and the Bylaws of the Company, shall at
its expense, duly call, give notice of, convene and hold a special meeting of
its stockholders within 60 business days following the date the Proxy Statement
may be disseminated to shareholders for the purpose of adopting the Certificate
of Incorporation Amendment. The Company shall, at its expense, secure the
services of a proxy solicitation firm in connection with the matters set forth
in the Proxy Statement.
5. TRANSFER AGENT INSTRUCTIONS.
The Company warrants that, with respect to the Securities, other than the
stop transfer instructions to give effect to Section 4(a) hereof, it will give
its transfer agent no instructions inconsistent with instructions to issue
Common Stock from time to time upon exercise of the Warrant or conversion of the
Note , if applicable, in such amounts as specified from time to time by the
Company to the transfer agent, bearing the restrictive legend specified in
Section 4(b) of this Agreement prior to registration of the Shares under the
1933 Act, registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Holder in connection with each exercise of
the Warrant or conversion of the Note , if applicable,. Except as so provided,
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Agreements. Nothing in this Section shall affect in any way the
Buyer's obligations and agreement to comply with all applicable securities laws
upon resale of the Securities. If the Buyer provides the Company with an opinion
of counsel reasonably satisfactory to the Company that registration of a resale
by the Buyer of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the 1933 Act, the Company
shall (except as provided in clause (2) of Section 4(a) of this Agreement)
permit the transfer of the Securities and, in the case of the Warrant Shares and
shares issuable upon conversion of the Note, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without legend
in such name and in such denominations as specified by the Buyer.
Subject to the provisions of this Agreement, the Company will permit the
Buyer to exercise the Warrant in the manner contemplated by the Warrant.
(i) The Company understands that a delay in the issuance of the Shares of
Common Stock beyond the Delivery Date (as defined in the Warrant) could result
in economic loss to the Buyer. As compensation to the Buyer for such loss, the
Company agrees to pay late payments to the Buyer for late issuance of Shares
upon exercise in accordance with the following schedule (where "No. Business
Days Late" refers to the number of Trading Days which is beyond two (2) Trading
Days after the Delivery Date):(2)
Late Payment For Each $10,000
No. Business Days Late Being Exercised of Exercise Price of Warrant
-------------------------------------- ----------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Buyer's exclusive remedy (other than the
following provisions of this Section 5(c)) for such delay. Furthermore, in
addition to any other remedies which may be available to the Buyer, in the event
that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the tenth Trading Day after the Delivery
Date, the Buyer will be entitled to revoke the relevant Notice of Exercise by
delivering a notice to such effect to the Company, whereupon the Company and the
Buyer shall each be restored to their respective positions immediately prior to
delivery of such Notice of Exercise; provided, however, that an amount equal to
any payments contemplated by this Section 5(c) which have accrued through the
date of such revocation notice shall remain due and owing to the Exercising
Holder notwithstanding such revocation.
(ii) If, by the close of business on the fifth Trading Day after the
Delivery Date, the Company fails for any reason to deliver the Shares to be
issued upon exercise of the Warrant and after such fifth Trading Day, the Holder
of the Warrant being exercised (an "Exercising Holder") purchases, in an
arm's-length open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Exercising Holder (the "Sold Shares"), which delivery such
Exercising Holder anticipated to make using the Shares to be issued upon such
--------
(2) Example: Notice of Exercise is delivered on Monday, July 10, 2006. The
Delivery Date would be Thursday, July 13 (the third Trading Day after such
delivery). If the certificate is delivered by Monday, July 17 (2 Trading Days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on July 18, that is 1 "Business Day Late" in the
table below; if delivered on July 25, that is 6 "Business Days Late" in the
table.
exercise (a "Buy-In"), the Exercising Holder shall have the right, in addition
to and not in lieu of all other amounts contemplated in other provisions of the
Transaction Agreements, including, but not limited to, the provisions of the
immediately preceding Section 5(c)(i)), the Buy-In Adjustment Amount (as defined
below). The "Buy-In Adjustment Amount" is the amount equal to the number of Sold
Shares multiplied by the excess, if any, of (x) the Exercising Holder's total
purchase price per share (including brokerage commissions, if any) for the
Covering Shares over (y) the net proceeds per share (after brokerage
commissions, if any) received by the Exercising Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Exercising
Holder in immediately available funds immediately upon demand by the Exercising
Holder. By way of illustration and not in limitation of the foregoing, if the
Exercising Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which Company will be required to pay to the Exercising Holder
will be $1,000.
The provisions of this paragraph apply on or after the effective date of
the Registration Statement. After such effective date, if the Holder provides
reasonable evidence to the Company and the Transfer Agent that the Holder has
sold Shares pursuant to the Registration Statement the Company will issue such
Shares without legend and without transfer restrictions on the books of the
Transfer Agent, and, at the request of the Holder, will use it best efforts to
have previously issued certificates representing such Shares re-issued without
legend and without transfer restrictions on the books of the Transfer Agent. In
lieu of delivering physical certificates representing the Common Stock issuable
upon exercise of a Warrant or at the request of the Holder with respect to any
Shares previously issued, provided the Transfer Agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of the Holder and its compliance with the provisions contained in
this paragraph, so long as the certificates therefor do not bear a legend and
the Holder thereof is not obligated to return such certificate for the placement
of a legend thereon, the Company shall use its best efforts to cause the
Transfer Agent to electronically transmit to the Holder the Common Stock
issuable upon exercise of the Warrant or in replacement of any Shares previously
issued by crediting the account of Holder's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission system. In connection therewith, it will be
the Holder's obligation to obtain formal requirements, such as medallion
guaranty, if necessary.
The Company shall assume any fees or charges of the Transfer Agent or
Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement.
The Holder of the Warrant shall be entitled to exercise its exercise
privilege with respect to the Warrant notwithstanding the commencement of any
case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code"). In the event the
Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the
fullest extent permitted, any rights to relief it may have under 11 U.S.C.
ss.362 in respect of such holder's exercise privilege. The Company hereby
waives, to the fullest extent permitted, any rights to relief it may have under
11 U.S.C. ss.362 in respect of the exercise of the Warrant. The Company agrees,
without cost or expense to such Holder, to take or to consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss.362.
The Company will authorize the Transfer Agent to give information relating
to the Company directly to the Holder or the Holder's representatives upon the
request of the Holder or any such representative, to the extent such information
relates to (i) the status of shares of Common Stock issued or claimed to be
issued to the Holder in connection with a Notice of Exercise, or (ii) the
aggregate number of outstanding shares of Common Stock of all shareholders (as a
group, and not individually) as of a current or other specified date. At the
request of the Holder, the Company will provide the Holder with a copy of the
authorization so given to the Transfer Agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first Trading Day
after each of the conditions contemplated by Sections 7 and 8 hereof shall have
either been satisfied or been waived by the party in whose favor such conditions
run.
The closing of the Transactions shall occur on the Closing Date at the
offices of the Company and shall take place no later than 3:00 P.M., New York
time, on such day or such other time as is mutually agreed upon by the Company
and the Buyer.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Note and
the Warrant to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon:
The execution and delivery of this Agreement by the Buyer;
Delivery by the Buyer to the Company of good funds as payment in full of an
amount equal to the Purchase Price in accordance with this Agreement;
The accuracy on such Closing Date of the representations and warranties of
the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and
There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Note
and the Warrant on the Closing Date is conditioned upon:
The execution and delivery of this Agreement and the other Transaction
Agreements by the Company;
Delivery by the Company to the Buyer of the Certificates in accordance with
this Agreement;
The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
On the Closing Date, all required SEC periodic filings shall have been
filed, and the designation "E" on the Company symbol as traded on the OTC shall
have been removed;
There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and
From and after the date hereof to and including the Closing Date, each of
the following conditions will remain in effect: (i) the trading of the Common
Stock shall not have been suspended by the SEC or on the Principal Trading
Market; (ii) trading in securities generally on the Principal Trading Market
shall not have been suspended or limited; (iii) no minimum prices shall been
established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market.
9. INDEMNIFICATION AND REIMBURSEMENT.
a. (i) The Company agrees to indemnify and hold harmless the Buyer and its
officers, directors, employees, and agents, and each Buyer Control Person from
and against any losses, claims, damages, liabilities or expenses incurred
(collectively, "Damages"), joint or several, and any action in respect thereof
to which the Buyer, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Buyer Control Person becomes subject
to, resulting from, arising out of or relating to any misrepresentation, breach
of warranty or nonfulfillment of or failure to perform any covenant or agreement
on the part of Company contained in this Agreement, as such Damages are
incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer, other than by
reason of its gross negligence, illegal or willful misconduct (in each case, as
determined by a non-appealable judgment to such effect), (x) becomes involved in
any capacity in any action, proceeding or investigation brought by any
shareholder of the Company, in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or if the Buyer is impleaded in any such action,
proceeding or investigation by any Person, or (y) becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisdiction, against or
involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by this Agreement or the other Transaction
Agreements, or (z) is impleaded in any such action, proceeding or investigation
by any Person, then in any such case, the Company shall indemnify, defend and
hold harmless the Buyer from and against and in respect of all losses, claims,
liabilities, damages or expenses resulting from, imposed upon or incurred by the
Buyer, directly or indirectly, and reimburse such Buyer for its reasonable legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Buyer, any such Affiliate and any such
Person. The Company also agrees that neither the Buyer nor any such Affiliate,
partner, director, agent, employee or Buyer Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except (i) as may be expressly
and specifically provided in or contemplated by this Agreement, (ii) as a result
of the breach of a Transaction Agreement by the Buyer or (iii) by reason of the
Buyer's actions.
b. All claims for indemnification by any Indemnified Party (as defined
below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any Person
claiming indemnification under any provision of this Section (an "Indemnified
Party") might seek indemnity under paragraph (a) of this Section is asserted
against or sought to be collected from such Indemnified Party by a Person other
than a party hereto or an Affiliate thereof (a "Third Party Claim"), the
Indemnified Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such Third
Party Claim and for the Indemnified Party's claim for indemnification that is
being asserted under any provision of this Section against any Person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have the
right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party
(but only with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which
the Indemnified Party shall not be indemnified in full pursuant to
paragraph (a) of this Section). The Indemnifying Party shall have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at
the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this subparagraph (x), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate to protect its interests; and
provided further, that if requested by the Indemnifying Party, the
Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in
contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this subparagraph (x), and except as
provided in the preceding sentence, the Indemnified Party shall bear its
own costs and expenses with respect to such participation. Notwithstanding
the foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it irrevocably
waives its right to indemnity under paragraph (a) of this Section with
respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third
Party Claim pursuant to paragraph (b) of this Section, or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the Indemnified Party
in a reasonable manner and in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). The Indemnified
Party will have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that if requested by
the Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this subparagraph (y), if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such
dispute is resolved in favor of the Indemnifying Party in the manner
provided in subparagraph(z) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this subparagraph (y) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified
Party pursuant to this subparagraph (y), and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its liability or the amount of its liability to the Indemnified
Party with respect to the Third Party Claim under paragraph (a) of this
Section or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third Party Claim,
the amount of Damages specified in the Claim Notice shall be conclusively
deemed a liability of the Indemnifying Party under paragraph (a) of this
Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in
good faith to negotiate a resolution of such dispute; provided, however,
that if the dispute is not resolved within thirty (30) days after the Claim
Notice, the Indemnifying Party shall be entitled to institute such legal
action as it deems appropriate.
(ii) In the event any Indemnified Party should have a claim under
paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Indemnity Notice, the Indemnifying Party shall be entitled to
institute such legal action as it deems appropriate.
The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a trial by
jury in any action, proceeding or counterclaim brought by either of the Parties
hereto against the other in respect of any matter arising out or in connection
with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of the federal
courts whose districts encompass any part of the County of New York or the state
courts of the State of New York sitting in the County of New York in connection
with any dispute arising under this Agreement or any of the other Transaction
Agreements and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions or to any claim that such
venue of the suit, action or proceeding is improper. To the extent determined by
such court, the Company shall reimburse the Buyer for any reasonable legal fees
and disbursements incurred by the Buyer in enforcement of or protection of any
of its rights under any of the Transaction Agreements. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
The Company and the Buyer acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Agreements 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 the other Transaction
Agreements and to enforce specifically the terms and provisions hereof and
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
Failure of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
All dollar amounts referred to or contemplated by this Agreement or any
other Transaction Agreement shall be deemed to refer to US Dollars, unless
otherwise explicitly stated to the contrary.
12. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the fifth Trading Day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(c) the third Trading Day after mailing by domestic or international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
BUYER: At the address set forth on the signature page of this
Agreement.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the payment
of the Purchase Price, and shall inure to the benefit of the Buyer and the
Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, with respect to the Purchase Price specified below,
this Agreement has been duly executed by the Buyer and the Company as of the
date set first above written.
PURCHASE PRICE: $______________________
BUYER:
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Address Printed Name of Buyer
________________________________
By: _________________________________
Telecopier No. _________________ (Signature of Authorized Person)
_____________________________________
______________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
COMPANY
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BRILLIANT TECHNOLOGIES CORPORATION
By: _________________________________
(Signature of Authorized Person)
_____________________________________
Printed Name and Title
ANNEX I FORM OF NOTE
ANNEX II [INTENTIONALLY OMITTED]
ANNEX III [INTENTIONALLY OMITTED]
ANNEX IV FORM OF WARRANT
ANNEX V USE OF PROCEEDS