Exhibit 7a
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement') is dated as of April
9, 2000 by and between Dauphin Technology, Inc., an Illinois corporation (the
"Company"), and Techrich International Limited (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Definitions.
(a) "Average Daily Price" shall be the price based on the VWAP of the
Company on the OTC Bulletin Board or, if the OTC Bulletin Board is not
the Principal Market, on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term in Section 6.1
(a) hereof.
(c) "Draw Down Exercise Date" shall have the meaning assigned to such term in
Section 6.1(b) hereof.
(d) "Draw Down Pricing Period" shall mean a period of twenty-two (22)
consecutive Trading Days preceding a Draw Down Exercise Date.
(e) "Effective Date" shall mean the date the Registration Statement of the
Company covering the Shares being subscribed for hereby is declared
effective.
(f) "Material Adverse Effect" shall mean any adverse effect on the business,
operations, properties or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates,
taken as a whole and/or any condition, circumstance, or situation that
would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement
or the Registration Rights Agreement or to perform its obligations under
any other material agreement.
(g) "Principal Market" shall mean initially the OTC Bulletin Board, and shall
include the Nasdaq National Market, Nasdaq SmallCap Market, the American
Stock Exchange or the New York Stock Exchange if the Company is listed
and trades on such market or exchange.
(h) "Registration Statement" shall mean the registration statement under the
Securities Act of 1933, as amended, to be filed with the Securities and
Exchange Commission for the registration of the Shares pursuant to the
Registration Rights Agreement attached hereto as Exhibit A.
(i) "SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB as of
the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter,
and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement as set forth in
the Registration Rights Agreement.
(j) "Shares" shall mean, collectively, the shares of Common Stock of the
Company being subscribed for hereunder and those shares of Common Stock
issuable to the Purchaser upon exercise of the Warrants.
(k) "Threshold Price" is the lowest Average Daily Price at which the Company
will sell its Common Stock with respect to this Agreement.
(l) "Trading Day" shall mean any day on which the Principal Market is open
for business.
(m) "VWAP" shall mean the daily volume weighted average price of the
Company's Common Stock on the OTC Bulletin Board or on any Principal
Market as reported by Bloomberg Financial using the AQR function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock.
Subject to the terms and conditions of this Agreement, the Company may issue
and sell to the Purchaser and the Purchaser shall purchase from the Company
up to One Hundred Million Dollars ($100,000,000) of the Company's Common
Stock, $0.001 par value per share (the "Common Stock"), based on up to
eighteen (18) Draw Downs of up to Ten Million Dollars ($10,000,000) per Draw
Down.
Section 2.2 The Shares.
The Company has authorized and has reserved and covenants to continue to
reserve, free of preemptive rights and other similar contractual rights of
stockholders, a sufficient number of its authorized but unissued shares of
its Common Stock to cover the Shares to be issued in connection with all Draw
Downs requested under this Agreement. Anything in this Agreement to the
contrary notwithstanding, the Company may not make a Draw Down to the extent
that, after such purchase by the Purchaser, the sum of the number of shares
of Common Stock beneficially owned by the Purchaser and its affiliates would
result in beneficial ownership by the Purchaser and its affiliates of more
than 9.9% of the then outstanding shares of Common Stock. For purposes of
the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities and Exchange Act of 1934,
as amended.
Section 2.3 Purchase Price and Closing.
The Company agrees to issue and sell to the Purchaser and, in consideration
of and in express reliance upon the representation, warranties, covenants,
terms and conditions of this Agreement, the Purchaser agrees to purchase that
number of the Shares to be issued in connection with each Draw Down. The
closing under this Agreement shall take place at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & Green, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Closing") at 10:00 a.m. E.S.T. on (i) April 9, 2000, 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.
ARTICLE III
Representations and Warranties
Section 3.1 Representation 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 the State of Illinois and has all requisite
corporate authority to own, lease and operate its properties and assets and
to carry on its business as now being conducted. The Company does not have
any subsidiaries and does not own more that fifty percent (50%) of or control
any other business entity except as set forth in the SEC Documents. The
Company is duly qualified and is in good standing as a foreign corporation to
do business in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other
than those in which the failure so to qualify would not have a Material
Adverse Effect on the Company's financial condition.
(b) Authorization, Enforcement.
(i) The Company has the requisite corporate power and corporate authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement, the Escrow Agreement and to issue the Draw Down Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery
of this Agreement, the Registration Rights Agreement and the Escrow Agreement
by the Company 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 Company or its Board of Directors or
stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement and the Escrow Agreement have been duly executed and delivered by
the Company and at the initial Closing shall constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their 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, creditors' rights and remedies or by other
equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock
sufficient in number for the issuance of the Draw Down Shares.
(c) Capitalization. As of March 28, 2000, the authorized capital stock of the
company consists of 100,000,000 shares of Common Stock, $0.001 par value per
share, of which 53,935,308 shares are issued and outstanding and 10,000,000
shares of preferred stock, of which none are issued and outstanding. 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 and the Registration Rights Agreement and as set
forth in the SEC Documents, or on Schedule 3.1(c) hereto, 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,
calls 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 and as set forth in the
SEC Documents or on Schedule 3.1(c), 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.
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. Except
as set forth in the SEC Documents or on Schedule 3.1(c) hereto, 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 on the Company's financial condition or operating results.
The Company has 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"). The Principal Market for the Common Stock in the United States is
the OTC Bulletin Board, and the Company has not received any notice from such
market questioning or threatening the continued inclusion of the Common Stock
on such market.
(d) Issuance of Shares. The Shares to be issued under this Agreement have
been duly authorized by all necessary corporate action 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. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated herein do not and will 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, amendment, acceleration
or cancellation of, any 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 other foreign statute, rule, regulation, order,
judgment or decree (including any federal and state or 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, termination,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company and its subsidiaries is not being conducted in violation of any
laws, ordinances or regulations of any governmental entity, except for possible
violations which singularly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under any 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 Securities and Exchange Commission (the
"Commission") or state securities administrators 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(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
except as disclosed in the SEC Documents or on Schedule 3.1(f) hereto, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with 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 delivered or made available to the
Purchaser true and complete copies of the Commission Documents filed with the
Commission since December 31, 1998. 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, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such documents, and, as of their respective dates,
none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents comply 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).
(g) Subsidiaries.
The SEC Documents or Schedule 3.1(g) hereto sets forth each subsidiary of the
Company, 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 interests 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. All of the
outstanding shares of capital stock of each subsidiary have been duly
authorized and validly issued, and are fully paid and non-assessable. There
are no outstanding preemptive, conversion or other rights, options, warrants
or agreements granted or issued by or binding upon any subsidiary for the
purchase or acquisition of any shares of capital stock of any subsidiary or
any other securities convertible into, exchangeable for or evidencing the
rights to subscribe for any shares of such capital stock. Neither the
Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights,
warrants or options of the type described in the preceding sentence. Neither
the Company nor any subsidiary is a party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital
stock of any subsidiary.
(h) No Material Adverse Effect.
Since September 30, 1999, no Material Adverse Effect has occurred or exists
with respect to the Company, except as disclosed in the SEC Documents or on
Schedule 3.1(h) hereof.
(i) No Undisclosed Liabilities.
Except as disclosed in the SEC Documents or on Schedule 3.1(i) hereto,
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 which are not disclosed
in the Commission Documents, other than those incurred in the ordinary course
of the Company's or its subsidiaries respective businesses since such date
and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances.
Since September 30, 1999, no event or circumstance has occurred or exists
with respect to the Company or its businesses, properties, prospects,
operations or financial condition, that, 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 in the SEC Documents.
(k) Indebtedness.
The SEC Documents or Schedule 3.1(k) hereto sets forth as of the date hereof
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 $250,000 (other than trade
accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and 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 $250,000 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, except for those indicated in the SEC Documents or on Schedule
3.1(1) hereto or such that do not cause a Material Adverse Effect on the
Company's financial condition or operating results. All said leases of the
Company and each of its subsidiaries are valid and subsisting and in full
force and effect.
(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 or
thereto. Except as set forth in the SEC Documents or 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.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company
or any subsidiary.
(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 SEC Documents or on Schedule 3.1(n) hereto or such that do not cause 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 their respective
businesses as now being conducted by them unless the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(o) Taxes.
The Company and each subsidiary has filed all Tax Returns which it is
required to file under applicable laws; all such Tax Returns are true and
accurate and has been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld
and paid over to the appropriate taxing authorities all Taxes which it is
required to withhold from amounts paid or owing to any employee, stockholder,
creditor or other third parties; and since December 31, 1998, the charges,
accruals and reserves for Taxes with respect to the Company (including any
provisions for deferred income taxes) reflected on the books of the Company
are adequate to cover any Tax liabilities of the Company if its current tax
year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where the
Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority; and, except as disclosed above, no
written notice indicating an intent to open an audit or other review has been
received by the Company or any subsidiary from any foreign, federal, state or
local taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to sec 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; and (B) has not agreed to or is required to make any
adjustments pursuant to sec 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any
knowledge that the IRS has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to
the business or operations of the Company. The Company has not been a United
States real property holding corporation within the meaning of Sec. 897(c)(2) of
the Internal Revenue Code during the applicable period specified in Sec. 897
(c)(1)(A)(ii) of the Internal Revenue Code.
The Company has not made an election under Sec. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that
is not a subsidiary of the Company under (A) Treas. Reg. sec 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not
a party to any tax sharing agreement. The Company has not made any payments,
is obligated to make payments or is a party to an agreement that could
obligate it to make any payments that would not be deductible under sec 280G of
the Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real
or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation, deficiencies, penalties, additions
to tax, and interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any amendment
thereof.
(p) Certain Fees. Except as set forth on Schedule 3.1(p) 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.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and each of the subsidiaries owns or
possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents and on Schedule
3.1(r) hereto, 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.
(s) Regulatory Compliance. The Company has all necessary licenses,
registrations and permits to conduct its business as now being conducted in
all states where the Company conducts its business.
(t) Books and Records. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location
and collection of their assets, and the nature of all transactions giving
rise to the obligations or accounts receivable of the Company or any
subsidiary.
(u) Material Agreements. Except as set forth in the SEC Documents, or on
Schedule 3.1(u) hereto, 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 registration statement on Form S-1 or other
applicable form (collectively, "Material Agreements") if the Company or any
subsidiary were registering securities under the Securities Act of 1933, as
amended (the "Securities Act"). 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, to the best of the Company's knowledge are not in
default under any Material Agreement now in effect, the result of which could
cause a Material Adverse Effect. No written or oral contract, instruments,
agreement, commitment, obligation, plan or arrangement of the Company or of
any subsidiary limits or shall limit the payment of dividends on the
Company's Common Stock.
(v) Transactions with Affiliates. Except as set forth in the SEC Documents
or on Schedule 3.1(v) hereto, 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 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 owning any capital
stock of the Company or any subsidiary or any member of the immediately
family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder.
(w) Securities Act of 1933. The Company has complied and will comply with
all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Shares hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy the Shares or similar securities to, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other than
the Purchaser), so as to bring the issuance and sale of the Shares and/or
Warrants under the registration provisions of the Securities Act and
applicable state securities laws. Neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale
of the Shares.
(x) Governmental Approvals. Except as set forth in the SEC Documents or on
Schedule 3.1(x) hereto, and except for the filing of any notice prior or
subsequent to the Closing that may be required under applicable federal or
state securities laws (which if required, shall be filed on a timely basis),
including the filing of a registration statement or statements pursuant to
this Agreement, no authorization, consent, approval, license, exemption of,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the execution or delivery of the
Shares, or for the performance by the Company of its obligations under this
Agreement.
(y) Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except
as set forth in the SEC Documents or on Schedule 3(y) hereto. Except as set
forth in the SEC Documents or on Schedule 3(y) hereto, neither the Company
nor any subsidiary is in breach of any employment contract, agreement
regarding proprietary information, noncompetition agreement, nonsolicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such subsidiary. Since
the date of the December 31, 1998, Form 10-K, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either
individually or in the aggregate, could 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.
(z) Absence of Certain Developments. Except as provided in SEC Documents or
in Schedule 3.1(z) hereto, since September 30, 1999 neither the Company nor
any subsidiary has:
(i) issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to
the current liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year, as adjusted to
reflect the current nature and volume of the Company's or such
subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid any obligation
or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other property
to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital
stock;
(v) sold, assigned or transferred any other tangible assets, or canceled any
debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of
business or to the Purchaser or its representatives;
(vii) suffered any substantial losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in
excess of $ 500,000;
(x) entered into any other material transaction, whether or not in the
ordinary course of business;
(xi) suffered any material damage, destruction or casualty loss, whether or
not covered by insurance;
(xii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its subsidiaries.
(aa) Use of Proceeds. The proceeds from the sale of the Shares will be used
by the Company and its subsidiaries for general corporate purposes.
(bb) Acknowledgment Regarding Purchaser's Purchase of Shares. Company
acknowledges and agrees that 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. The Company
further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation
by the Company and its own representatives and counsel.
Section 3.2 Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
corporation duly incorporated, validly existing and in good standing
under the laws of the British Virgin Islands.
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the
Shares being sold to it hereunder. 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.
(c) 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 such 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 agreement,
indenture or instrument to which the Purchaser is a party, or 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, have a Material Adverse
Effect on Purchaser). 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.
(d) Financial Risks. The Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Shares and that it
has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as
it has deemed necessary or appropriate to conduct its due diligence
investigation. The Purchaser is capable of evaluating the risks and
merits of an investment in the Shares by virtue of its experience as an
investor and its knowledge, experience, and sophistication in financial
and business matters and the Purchaser is capable of bearing the entire
loss of its investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited investor" as defined
in Regulation D promulgated under the Securities Act.
(f) Compliance With Law. The Purchaser's trading and distribution activities
with respect to the Shares will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules
and regulations of the Principal Market.
(g) General. The Purchaser understands that 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 suitability of the Purchaser to acquire the
Shares.
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows:
Section 4.1 Securities Compliance. The Company shall notify The NASD, in
accordance with their rules and regulations, of the transactions contemplated
by this Agreement, and shall take all other necessary action and proceedings
as may be required and permitted by applicable law, rule and regulation, for
the legal and valid issuance of the Shares and the Warrants to the Purchaser
or subsequent holders.
Section 4.2 Registration and Listing. The Company will cause its Common Stock
to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations
under the Exchange Act, will comply with all requirements related to any
registration statement filed pursuant to this Agreement, 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 take all action necessary to continue the listing or trading of
its Common Stock on the OTC Bulletin Board or another Principal Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and The Nasdaq Stock
Market.
Section 4.3 Registration Statement. The Company shall cause to be filed the
Registration Statement, which Registration Statement shall provide for the
sale of the Shares to the Purchaser and resale by the Purchaser to the public
in accordance with this Agreement. The Company shall use its best efforts to
cause such Registration Statement to be declared effective by the Commission
as expeditiously as practicable. Before the Purchaser shall be obligated to
accept a 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.
Section 4.4 Escrow Arrangement. The Company and the Purchaser shall enter
into an escrow arrangement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C. (the "Escrow
Agent") in the Form of Exhibit B hereto respecting payment against delivery
of the Shares.
Section 4.5 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 4.6 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 4.7 Amendments. The Company shall not amend or waive any provision
the Articles of Incorporation, Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.8 Other Agreements. The Company shall not enter into any agreement
the terms of which such agreement would restrict or impair the right to
perform of the Company or any subsidiary under this Agreement or the Articles
of Incorporation of the Company.
Section 4.9 Notice of Certain Events Affecting Registration; Suspension of
Right to Request a Draw Down. The Company will immediately notify the
Purchaser upon the occurrence of any of the following events in respect of
the Registration Statement or related prospectus in respect of the Shares:
(i) receipt of any request for additional information from the Commission or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement the response to which would
require any amendments or supplements to the Registration Statement or
related prospectus; (ii) the issuance by the Commission or any other federal
or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any
of the Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; (iv) the happening of any event that
makes any statement made in the Registration Statement or related prospectus
or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-
effective amendment to the Registration Statement would be appropriate; and
the Company will promptly make available to the Purchaser any such supplement
or amendment to the related prospectus. The Company shall not deliver to the
Purchaser any Draw Down Notice during the continuation of any of the
foregoing events.
Section 4.10 Consolidation; Merger. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company
to, another entity (a "Consolidation Event") unless the resulting successor
or acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Purchaser such shares of
stock and/or securities as the Purchaser is entitled to receive pursuant to
this Agreement.
Section 4.11 Limitation on Future Financing. The Company agrees that, except
as set forth below, it will not enter into any sale of its securities for
cash at a discount to the current market price until the earlier of (i)
eighteen (18) months from the effective date of the Registration Statement or
(ii) sixty (60) days after the entire $100,000,000 of Shares has been
purchased by Purchaser. The foregoing shall not prevent or limit the Company
from engaging in any sale of securities (i) in a registered public offering
by the Company which is underwritten by one or more established investment
banks, (ii) in one or more private placements where the purchasers do not
have registration rights, (iii) pursuant to any presently existing or future
employee benefit plan which plan has been or is approved by the Company's
stockholders, (iv) pursuant to any compensatory plan for a full-time employee
or key consultant, (v) in connection with a strategic partnership or other
business transaction, the principal purpose of which is not simply to raise
money, or (vi) to which Purchaser gives its written approval.
ARTICLE V
Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell the
Shares. The obligation hereunder of the Company to issue and sell the Shares
to the Purchaser is subject to the satisfaction or waiver, at or before the
Closing, 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 and as of the Closing
and as of each Draw Down Exercise Date as though made at that time,
except for representations and warranties that speak as of a particular
date.
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all material
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Purchaser at or prior to the
Closing and as of each Draw Down Exercise Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated
by this Agreement.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close.
The obligation hereunder of the Purchaser to enter this Agreement is subject
to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These 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 Closing
as though made at that time (except for representations and warranties
that speak as of a particular date).
(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated
by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and
no investigation by any governmental authority shall have been
threatened, against the Purchaser or the Company or any subsidiary, or
any of the officers, directors or affiliates of 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) Opinion of Counsel, Etc. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit C hereto, and such other certificates and
documents as the Purchaser or its counsel shall reasonably require
incident to the Closing.
(f) Warrants. At the Closing of each Draw Down, the Purchaser shall receive a
warrant certificate to purchase up to a number of shares of Common Stock
as shall equal seven percent (7%) of the purchase price of the Draw Down
divided by the VWAP on the Trading Day immediately prior to the
applicable closing date. The Warrants will have a three (3) year term
from their date of issuance. The Warrant Strike Price shall be 120% of
the VWAP on the Trading Day immediately prior to the applicable closing
date. The Common Stock underlying the Warrants will be registered in the
Registration Statement referred to in Section 4.3 hereof. The Warrants
shall be in the form of Exhibit E hereto.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept
a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares
is subject to the satisfaction or waiver, at or before each Draw Down
Exercise Date, 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) Satisfaction of Conditions to Closing. The Company shall have satisfied,
or the Purchaser shall have waived, the conditions set forth in Section 5.2
hereof
(b) Effective Registration Statement. The Registration Statement registering
the Shares shall have been declared effective by the Commission and shall
remain effective on each Draw Down Exercise Date.
(c) No Suspension. Trading in the Company's Common Stock shall not have been
suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to each Draw Down request), and, at any
time prior to such request, trading in securities generally as reported on
the OTC Bulletin Board shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are
reported on the OTC Bulletin Board.
(d) Material Adverse Effect. No Material Adverse Effect and no Consolidation
Event shall have occurred.
(e) Opinion of Counsel. The Purchaser shall have received a "down-to-date"
letter from the Company's counsel, confirming that there is no change from
the counsel's previously delivered opinion, or else specifying with
particularity the reason for any change.
ARTICLE VI
Draw Down Terms
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 and exercise a draw down
(a "Draw Down") during each Draw Down Pricing Period, which Draw Down the
Purchaser will be obligated to accept.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period. The
price per share paid by the Purchaser shall be based on the Average Daily
Price on each separate Trading Day during the Draw Down Pricing Period. The
number of shares of Common Stock 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 at the election of the Purchaser on a weekly basis
or on the Draw Down Exercise Date, which shall be the first Trading Day
following the end of the Draw Down Pricing Period. In connection with each
Draw Down Pricing Period, the Company may set an Average Daily Price below
which the Company will not sell any Shares (the "Threshold Price"). If the
Average Daily Price on any day within the Draw Down Pricing Period is less
than the Threshold Price, the Company shall not sell and the Purchaser shall
not be obligated to purchase the Shares otherwise to be purchased for such
day.
(c) There shall be a maximum of eighteen (18) Draw Downs during the terms of
this Agreement. The Company shall have the right to issue and exercise a
Draw Down of up to $10,000,000 of the Company's Common Stock per Draw Down,
subject to the limitations set forth immediately below. The minimum Draw
Down shall be $250,000, unless otherwise agreed by Purchaser.
(d) The maximum dollar amount of each Draw Down during any Draw Down Pricing
Period shall be limited pursuant to the following formula: Average Stock
Price: Average of the Average Daily Prices for the 22 Trading Days prior to
the Draw Down Notice date. Average Trading Volume: Average daily trading
volume for the 45 Trading Days prior to the Draw Down Notice date. Maximum
dollar amount of each Draw Down: 20% of (Average Stock Price x (Average
Trading Volume x 22)) the number of Shares of Common Stock to be issued in
connection with each Draw Down shall be equal to the sum of the quotients
(for each trading day within the Draw Down Pricing Period) of (x) 1/22nd of
the Draw Down amount and (y) 93% of the Average Daily Price of the Common
Stock on each Trading Day within the Draw Down Pricing Period. If the
Average Daily Price on a given Trading Day is less than the Threshold Price,
then the Purchaser's Draw Down will be reduced by 1/22nd and that day shall
be withdrawn from the Draw Down Pricing Period.
(e) The Company must inform the Purchaser by delivering a Draw Down Notice,
in the form of Exhibit D hereto, via facsimile transmission as to the amount
of the Draw Down the Company wishes to exercise before the first day of the
Draw Down Pricing Period (the "Draw Down Notice"). The Company may set the
Threshold Price, if any, prior to each Draw Down request. At no time shall
the Purchaser be required to purchase more than the scheduled Draw Down
amount for a given Draw Down Pricing Period so that if the Company chooses
not to exercise the maximum permitted Draw Down in a given Draw Down Pricing
Period the Purchaser is not obligated to purchase more than the scheduled
maximum amount in a subsequent Draw Down Pricing Period.
(f) On or before three Trading Days after each Draw Down Exercise Date, the
Shares purchased by the Purchaser shall be delivered to The Depository Trust
Company ("DTC") on the Purchaser's behalf. The Shares shall be credited by
the Company to the DTC account designated by the Purchaser upon receipt by
the Escrow Agent of payment for the Draw Down into the Escrow Agent's trust
account as provided in the Escrow Agreement. The Escrow Agent shall be
directed to pay 97% of the purchase price to the Company, net of One Thousand
Five Hundred Dollars ($1,500) as escrow expenses to the Escrow Agent, and 3%
to the placement agent. The delivery of the Shares into the Purchaser's DTC
account in exchange for payment therefor shall be referred to herein as
"Settlement".
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The term of this Agreement shall
be eighteen (18) months from the Effective Date. This Agreement may be
terminated at any time by mutual consent of the parties.
Section 7.2 Other Termination.
(a) The Purchaser may terminate this Agreement upon one (1) Trading Day's
notice if (i) an event resulting in a Material Adverse Effect has
occurred, (ii) the Common Stock is de-listed from the OTC Bulletin Board
unless such de-listing is in connection with the listing of the Common
Stock on the Nasdaq National Market, Nasdaq SmallCap Market, the New York
Stock Exchange or American Stock Exchanges, (iii) the Company files for
protection from creditors under any applicable law, (iv) the Company
completes any financing prohibited by Section 4.11, or (v) the
Registration Statement is not effective by September 30, 2000.
(b) The Company may terminate this Agreement upon one (1) Trading Day's
notice if the Purchaser shall fail to fund more than one properly noticed
Draw Down within three (3) Trading Days of the date payment for such Draw
Down is due.
Section 7.3 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 7.1 or 7.2 herein, this Agreement shall
become void and of no further force and effect, except for Sections 9.1 and
9.2, and Article VIII herein. Nothing in this Section 7.3 shall be deemed to
release the Company or the Purchaser from any liability for any breach under
this Agreement, or to impair the rights to the Company and the Purchaser to
compel specific performance by the other party of its obligations under this
Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the
Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. The Purchaser agrees to
indemnify and hold harmless the Company and its directors, officers,
affiliates, agents, successors and assigns from and against any and all
losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys fees, charges and disbursements)
incurred by the Company as result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Purchaser herein.
Notwithstanding anything to the contrary herein, the Purchaser shall be
liable under this Section 8.1 for only that amount as does not exceed the net
proceeds to such Purchaser as a result of the sale of Shares pursuant to the
Registration Statement.
Section 8.2 Indemnification Procedure. Any party entitled to indemnification
under this Article VIII (an "indemnified party") will give written notice to
the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any action, proceeding or claim is brought against
an indemnified party in respect of which indemnification is sought hereunder,
the indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the indemnified party a conflict of
interest between it and the indemnifying party may exist with respect of such
action, proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of
its election to defend, settle or compromise, at its sole cost and expense,
any action, proceeding or claim (or discontinues its defense at any time
after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim.
In any event, unless and until the indemnifying party elects in writing to
assume and does so assume the defense of any such claim, proceeding or
action, the indemnified party's costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
settlement negotiations or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to
such action or claim. The indemnifying party shall keep the indemnified
party fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall
be entitled to participate in such defense with counsel of its choice at its
sole cost and expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its prior
written consent. Notwithstanding anything in this Article VIII to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of
any judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the indemnified party
of a release from all liability in respect of such claim. The
indemnification required by this Article VIII shall be made by periodic
payments of the amount thereof during the course of investigation or defense,
as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Trading Days of written notice thereof to the
indemnifying party so long as the indemnified party irrevocably agrees to
refund such moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification. The
indemnity agreements contained herein shall be in addition to (a) any cause
of action or similar rights of the indemnified party against the indemnifying
party or others, and (b) any liabilities the indemnifying party may be
subject to.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses. The Company shall pay all fees and expenses
related to the transactions contemplated by this Agreement; provided, that
each party shall pay its own legal fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the transactions
contemplated hereunder. In addition, the Company shall pay all reasonable
fees and expenses incurred by the Purchaser in connection with any
amendments, modifications or waivers of this Agreement or the Registration
Rights Agreement requested by the Company or incurred in connection with the
enforcement of this Agreement and the Registration Rights Agreement,
including, without limitation, all reasonable attorneys fees and expenses.
The Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto.
Section 9.2 Specific Enforcement. 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.
Section 9.3 Entire Agreement; Amendment. This Agreement, together with the
Registration Rights Agreement and the Escrow 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 9.4 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 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 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:Dauphin Technology, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇.▇▇▇▇▇
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With copies to: ▇▇▇▇▇ and ▇▇▇▇▇▇, P.C.
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Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Purchaser: Dr. ▇▇. ▇▇▇▇▇▇▇▇ & Partner
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Liechtenstein
Telephone Number: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
with copies to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
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Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto in
accordance herewith.
Section 9.5 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.
Section 9.6 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 9.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser
to be affected by the amendment. 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 9.8 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 9.9 Governing Law/Arbitration. 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. Any dispute under this
Agreement or any Exhibit attached hereto shall be submitted to arbitration
under the American Arbitration Association (the "AAA") in New York City, New
York, and shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter referred to
as the "Board of Arbitration") selected as according to the rules governing
the AAA. The Board of Arbitration shall meet on consecutive business days in
New York City, New York, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of Arbitration) with
respect to the amount, if any, which the losing party is required to pay to
the other party in respect of a claim filed. In connection with rendering
its decisions, the Board of Arbitration shall adopt and follow the laws of
the State of New York. To the extent practical, decisions of the Board of
Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to
participate in the arbitration proceeding within thirty days of any deadline
for such participation. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) calendar day period)
shall be final, binding and conclusive on the parties to the dispute, and
entitled to be enforced to the fullest extent permitted by law and entered in
any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part
of the arbitration award. Any party shall have the right to seek injunctive
relief from any court of competent jurisdiction in any case where such relief
is available. The prevailing party in such injunctive action shall be
awarded its costs, including attorney's fees, from the non-prevailing party.
Section 9.10 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. Execution may be made
by delivery by facsimile.
Section 9.11 Publicity. Prior to the Closing, neither the Company nor the
Purchaser shall 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. After the Closing,
the Company may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; provided, that prior to issuing
any such press release, making any such public statement or announcement, the
Company obtains the prior consent of the Purchaser, which consent shall not
be unreasonably withheld or delayed.
Section 9.12 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.
Section 9.13 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 instruments, 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.
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.
DAUPHIN TECHNOLOGY, INC.
By: s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President & CEO
TECHRICH INTERNTIONAL LIMITED
By: s/▇▇▇▇ ▇▇▇▇▇▇▇/
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Authorized Signatory