STOCK PURCHASE AGREEMENT
BY AND BETWEEN
BRIGHTON OPPORTUNITY FUND, L.P.
AND
INTEGRATED TECHNOLOGY GROUP INC.
DATED AS OF FEBRUARY 14th, 2002
This STOCK PURCHASE AGREEMENT is entered into as of the 14th
day of February, 2002 (this "Agreement"), by and between Brighton Opportunity
Fund, L.P., an entity organized and existing under the laws of California and
affiliates it may designate as co-investors (collectively "Investor") and
Integrated Technology Group Inc., a corporation organized and existing under the
laws of the State of Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase,
up to $10,000,000 of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the
provisions of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of
the United States Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in Common Stock to be
made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I: CERTAIN DEFINITIONS
Section 1.1. "Adjustment Price" shall mean ninety percent
(90%) of the lowest closing bid price of the Company's Common Stock during the
Ten Trading Days prior to each Closing Date.
Section 1.2. "Adjustment Shares" shall mean all shares issued
pursuant to Section 2.6 below.
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Section 1.3. "Bid Price" shall mean the closing bid price as
reported under Section 10.2 of this Agreement.
Section 1.4. "Capital Shares" shall mean the Common Stock and
any shares of any other class of common stock whether now or hereafter
authorized, having the right to participate in the distribution of dividends (as
and when declared)and assets (upon liquidation of the Company).
Section 1.5. "Closing" shall mean one of the closings of a
purchase and sale of the Common Stock pursuant to Section 2.1.
Section 1.6. "Closing Date" shall mean, with respect to a
Closing, the Trading Day specified in Put Notice related to such Closing,
provided all conditions to such Closing have been satisfied on or before such
Trading Day.
Section 1.7. "Commitment Period" shall mean the period
commencing on the effectiveness of the Registration Statement and expiring on
the earlier to occur of (i) the date on which the Investor shall have purchased
Put Shares pursuant to this Agreement for an aggregate Purchase Price of the
Maximum Commitment Amount, (ii) the date this Agreement is terminated pursuant
to Section 2.4, or (iii) the date occurring two years from the Subscription
Date.
Section 1.8. "Commitment Shares" shall mean any shares of
Common Stock which may be issued pursuant to Section 2.5 below.
Section 1.9. "Common Stock" shall mean the Company's common
stock, par value $0.001 per share.
Section 1.10. "Condition Satisfaction Date" shall have the
meaning set forth in Section 7.2 of this Agreement.
Section 1.11. "Daily Trading Value" shall mean, on any Trading
Day, the Bid Price multiplied by the trading volume of the Common Stock.
Section 1.12. "Damages" shall mean any and all losses, claims,
damages, liabilities, costs and expenses (including, without limitation, any and
all investigative, legal and other expenses reasonably incurred in connection
with, and any and all amounts paid in defense or settlement of, any action, suit
or proceeding between any indemnified party and any indemnifying party or
between any indemnified party and any third party, or otherwise, or any claim
asserted).
Section 1.13. "Effective Date" shall mean the earlier to occur
of: (i) the date on which the SEC has declared effective a Registration
Statement registering resale of Registrable Securities as set forth in Section
7.2(a) and (ii) the date on which such Registrable Securities first become
eligible for resale pursuant to Rule 144 of the Securities Act.
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Section 1.14. "Exchange Act" shall mean the United States
Securities Exchange Act of 1934, as amended and the rules and regulations
promulgated thereunder.
Section 1.15. "Investment Amount" shall mean the dollar amount
to be invested by the Investor to purchase Put Shares with respect to any Put
Date as notified by the Company to the Investor in accordance with Section 2.2
hereof.
Section 1.16. "Legend" shall have the meaning specified in
Section 8.1.
Section 1.17. "Lowest Price" shall mean the lowest closing Bid
Prices during the applicable Valuation Period.
Section 1.18. "Material Adverse Effect" shall mean any effect
on the business, operations, properties, prospects, or financial condition of
the Company that is material and adverse to the Company or to the Company and
such other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
its obligations under any of (i) this Agreement or (ii) the Registration Rights
Agreement. Material Adverse Effect shall include, but not be limited to, any
qualification of the Company's financial statements by its auditor, any
restatement of prior financial results, resignation by any Director or failure
to timely file any SEC documents.
Section 1.19. "Material Adverse Market Event" shall mean a
fall in the Nasdaq Composite Index or Standard and Poors 500 index in excess of
10% in any Trading Day or in excess of 20% over any 5 consecutive Trading Days.
Section 1.20. "Maximum Commitment Amount" shall mean
$5,000,000.
Section 1.21. "Maximum Put Amount" shall mean the lesser of:
$250,000; remaining amounts available under the line; an amount equal to 10% of
the total dollar trading volume in Company common stock (based on the closing
bid prices) during the month in questions; or the maximum amount which the
Investor could purchase without being required to file a Form 13D under the
Securities Exchange Act of 1934.
Section 1.22. "Minimum Bid Price" shall have the meaning set
forth in Section 7.2(j) of this Agreement.
Section 1.23. "Minimum Put Amount" shall mean $100,000.
Section 1.24. "Minimum Time Interval" shall mean the mandatory
twenty-two (22) Trading Days between any two Put Dates.
Section 1.25. "NASD" shall mean the National Association of
Securities Dealers, Inc.
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Section 1.26. "Outstanding" when used with reference to Common
Shares or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not refer to any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.27. "Person" shall mean an individual, a
corporation, a partnership, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.28. "Principal Market" shall mean the Nasdaq
National Market, the Nasdaq Small Cap Market, the American Stock Exchange, the
Bulletin Board or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
Section 1.29. "Purchase Price" shall mean, with respect to a
Put, ninety percent (90%) of the Lowest Price.
Section 1.30. "Put" shall mean each occasion the Company
elects to exercise its right to tender a Put Notice requiring the Investor to
purchase a discretionary amount of the Company's Common Stock, subject to the
terms and conditions of this Agreement.
Section 1.31. "Put Date" shall mean the Trading Day during the
Commitment Period that a Put Notice to sell Common Stock to the Investor is
deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.32. "Put Notice" shall mean a written notice to the
Investor setting forth the intended Closing Date, which shall not be less than
seven (7) nor more than ten (10) Trading Days from the date the put Notice is
delivered to the Investor. and the Investment Amount that the Company intends to
require the Investor to purchase pursuant to the terms of this Agreement.
Section 1.33. "Put Notice Period" shall mean a period
beginning on a Put Date and ending on a Closing Date; provided that in no event
shall a Put Notice Period be less than seven (7) nor more than ten (10) Trading
Days.
Section 1.34. "Put Shares" shall mean all shares of Common
Stock issued or issuable pursuant to a Put that has been exercised or may be
exercised in accordance with the terms and conditions of this Agreement and, in
respect of representations and warranties of the Company and any ongoing
registration obligations, shall also include any Commitment Shares and any
Adjustment Shares, whether or not those are specified or not below.
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Section 1.35. "Registrable Securities" shall mean (i) the Put
Shares, (ii) any Commitment Shares; (ii) any Adjustment Shares and (iv) any
securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (w) the applicable
Registration Statement has been declared effective by the SEC and all such
Registrable Securities have been disposed of pursuant to the applicable
Registration Statement, (x) all such Registrable Securities have been sold under
circumstances under which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act("Rule 144") are met,
(y) such time as all such Registrable Securities have been otherwise transferred
to holders who may trade such shares without restriction under the Securities
Act, and the Company has delivered a new certificate or other evidence of
ownership for such securities not bearing a restrictive legend or (z) in the
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Investor, all such Registrable Securities may be sold without
registration or the need for an exemption from any registration requirements and
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
Section 1.36. "Registration Rights Agreement" shall mean the
registration rights agreement in the form of Exhibit A hereto.
Section 1.37. "Registration Statement" shall mean a
registration statement on Form S-3 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies and which counsel
for the Company shall deem appropriate and which form shall be available for the
resale of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.38. "Regulation D" shall have the meaning set forth
in the recitals of this Agreement.
Section 1.39. "SEC" shall mean the Securities and Exchange
Commission.
Section 1.40. "SEC Documents" shall mean the Company's latest
Form 10-K as of the time in question, all Forms 10-Q and 8-K filed thereafter,
and the Proxy Statement for its latest fiscal year as of the time in question
until such time the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.41. "Section 4(2)" shall have the meaning set forth
in the recitals of this Agreement.
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Section 1.42. "Securities Act" shall have the meaning set
forth in the recitals of this Agreement.
Section 1.43. "Subscription Date" shall mean the date on which
this Agreement is executed and delivered by the parties hereto.
Section 1.44. "Subsidiary" shall mean any Person in which the
Company, directly or indirectly through Subsidiaries or otherwise, beneficially
owns more than fifty percent (50%) of either the equity interests in, or the
voting control of, such Person.
Section 1.45. "Trading Day" shall mean any day during which
the Principal Market shall be open for business.
Section 1.46. "Underwriter" shall mean any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to a Registration Statement.
Section 1.47. "Valuation Period" shall mean (i) with respect
to an Effective Date, the ten Trading Day period immediately preceding such
Effective Date and (ii) with respect to a Closing Date, the ten Trading Day
period immediately preceding the applicable Put Date, during which the Purchase
Price of the Common Stock is determined.
ARTICLE II: PURCHASE AND SALE OF COMMON STOCK; TERMINATION OF
OBLIGATIONS
Section 2.1. Investments.
(a) Puts. Upon the terms and conditions set forth
herein (including, without limitation, the provisions of Article VII hereof), on
any Put Date the Company may exercise a Put by the delivery of a Put Notice. The
number of Put Shares that the Investor shall receive pursuant to such Put shall
be determined by dividing the Investment Amount specified in the Put Notice by
the Purchase Price with respect to such Put Date.
(b) Maximum Amount of Puts. Unless the Company
obtains the requisite approval of its shareholders in accordance with the
corporate laws of any State or regulatory or self regulatory authority which may
be applicable, no more than the amount of 19.9% of the Outstanding shares of
Common Stock may be issued and sold pursuant to Puts without said approval may
be put or sold. The obligation to purchase stock pursuant to the definitive
agreement in any monthly period shall be limited to the lesser of: $250,000;
remaining amounts available under the line; an amount equal to 10% of the total
dollar trading volume in Company common stock (based on the closing bid prices)
during the month in questions; or the maximum amount which the Investor could
purchase without being required to file a Form 13D under the Securities Exchange
Act of 1934.
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Section 2.2. Mechanics.
(a) Put Notice. At any time during the Commitment
Period, the Company may deliver a Put Notice to the Investor, subject to the
conditions set forth in Section 7.2; provided, however, the Investment Amount
for each Put as designated by the Company in the applicable Put Notice shall be
neither less than the Minimum Put Amount nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice
shall be deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon New
York time, or (ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 9:00 a.m. Pacific Coast time on a Trading Day or at
any time on a day which is not a Trading Day. No Put Notice may be deemed
delivered, on a day that is not a Trading Day.
Section 2.3. Closings. The Closing Date shall not be less
than seven (7) nor more than ten (10) Trading Days from the date the put Notice
is delivered to the Investor. On each Closing Date for a Put, (i) the Company
shall deliver irrevocable instructions to the transfer agent to prepare and
deliver to the Investor a share certificate in the name of the Investor and in
the amount of the applicable Put Shares and (ii) the Investor shall deliver to
the Company the Investment Amount specified in the Put Notice by wire transfer
of immediately available funds to the account designated in the Put Notice. In
addition, on or prior to such Closing Date, each of the Company and the Investor
shall deliver to the other all documents, instruments and writings required to
be delivered or reasonably requested by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated herein.
Section 2.4. Termination of Agreement and Investment
Obligation. The Company shall have the right to terminate this Agreement at any
time upon thirty (30) days' written notice to the Investor. The Investor shall
have the right to immediately terminate this Agreement (including with respect
to any Put, notice of which has been given but the applicable Closing Date has
not yet occurred) in accordance with Section 6.11 or in the event that: (i) the
Registration Statement with respect to the Registrable Securities is not
effective within one hundred twenty (120) days following the Subscription Date,
(ii) a Registration Statement with respect to Registrable Securities is no
longer effective or current at any point during the Commitment Period, (iii)
there shall occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of thirty (30) Trading Days during the
Commitment Period, (iv) the Company shall at any time fail to comply with the
requirements of Section 6.2, 6.3, 6.4, 6.5, 6.6, 6.8 or 6.9; (v) a Material
Adverse Market Event has occurred; (vi) a regulatory authority of self
regulatory organization governing broker-dealers takes the position that the
intended purchase of the Common Stock contemplated herein and its resale by the
Investor may cause the Investor to be a statutory underwriter subject alone or
with its agents to the restrictions of Regulation M as promulgated by the SEC or
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otherwise restrict or prohibit the resale of the Common Stock or (vii) the
Company shall otherwise breach the terms of this Agreement, including payment of
the commitment fee provided for in Section 2.5.
Section 2.5. The Commitment Fee. At Closing, the Company
shall pay Century Financial Advisors, a commitment fee equal to $100,000.
Section 2.6. Adjustment Shares. If the Adjustment Price shall
fall more than five percent (2.5%) below the Purchase Price in respect of shares
purchased by Investor on any Closing Date, then the Investor shall be issued
Adjustment Shares equal to the difference between the number of shares purchased
on the last Closing Date and the amount that would have been purchased if the
Purchase Price had been the Adjustment Price. The Adjustment Shares shall be
issued to Investor within 12 Trading Days of the Closing Date.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this
Agreement for its own account and has no present arrangement (whether or not
legally binding) at any time to sell the Registrable Securities to or through
any person or entity; provided, however, that by making the representations
herein, the Investor does not agree to hold the Registrable Securities for any
minimum or other specific term and reserves the right to dispose of the
Registrable Securities at any time pursuant to the Registration Statement and in
accordance with federal and state securities laws applicable to such
disposition.
Section 3.2. Sophisticated Investor. The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and Investor
has such experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Common Stock. The
Investor acknowledges that an investment in the Common Stock is speculative and
involves a high degree of risk.
Section 3.3. Authority. Each of this Agreement and the
Registration Rights Agreement has been duly authorized by all necessary action
and no further consent or authorization of the Investor, or its partners, is
required. Each of this Agreement and the Registration Rights Agreement was
validly executed and delivered by the Investor and each is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an
officer, director or "affiliate" (as that term is defined in Rule 405 of the
Securities Act) of the Company.
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Section 3.5. Organization and Standing. Investor is duly
organized, validly existing, and in good standing under the laws of California.
Section 3.6. Absence of Conflicts. The execution and delivery
of this Agreement and any other document or instrument contemplated hereby, and
the consummation of the transactions contemplated thereby, and compliance with
the requirements thereof, will not (a) violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor, or, to the
Investor's knowledge, (b) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (c) conflict with or constitute a material default
thereunder, (d) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (e) require the
approval of any third-party (that has not been obtained) pursuant to any
material contract to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7. Disclosure; Access to Information. Investor has
received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by Investor. The
Investor has received and reviewed copies of the SEC Documents.
Section 3.8. Manner of Sale. At no time was Investor
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general solicitation or
advertising.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1. Organization of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Except as set forth in the SEC Documents, the Company does not own more than
fifty percent (50%) of the outstanding capital stock of or control any other
business entity. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement and to issue the Put Shares
, the Commitment Shares and the Adjustment Shares; (ii) the execution and
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delivery of this Agreement and the Registration Rights Agreement by the Company
and the consummation by it of the transactions contemplated hereby and thereby
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) each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
Section 4.3. Corporate Documents. The Company has furnished
or made available to the Investor true and correct copies of the Company's
Articles of Incorporation, as amended and in effect on the date hereof (the
"Certificate"),and the Company's By-Laws, as amended and in effect on the date
hereof (the"By-Laws").
Section 4.4. Books and Records. The minute books and other
similar records of the Company and its subsidiaries as made available to
Investor prior to the execution of this Agreement contain a true and complete
record, in all material respects, of all action taken at all meetings and by all
written consents in lieu of meetings of the stockholders, the boards of
directors and committees of the boards of directors of the Company and the
subsidiaries. The stock transfer ledgers and other similar records of the
Company and the subsidiaries as made available to Investor prior to the
execution of this Agreement accurately reflect all record transfers prior to the
execution of this Agreement in the capital stock of the Company and the
subsidiaries. Neither the Company nor any subsidiary has any of its Books and
Records recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which(including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Company or a subsidiary.
Section 4.5. Capitalization. The authorized capital stock of
the Company consists of 20,000,000 shares of Common Stock, of which 11,225,000
shares are issued and outstanding, and 10,000,000 shares of preferred stock, of
which 9,535,000 are issued and outstanding. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued and
are fully paid and nonassessable.
Section 4.6. Registration and Listing of Common Stock. The
Company has registered its Common Stock pursuant to Section 12(b) or 12(g) of
the Exchange Act and is in full compliance with all reporting requirements of
the Exchange Act, and the Company has maintained all requirements for the
continued listing or quotation of its Common Stock, and such Common Stock is
currently listed or quoted on the Principal Market. As of the date hereof, the
Principal Market is the NASDAQ Bullitin Board.
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Section 4.7 Financial Statements. Prior to the execution of
this Agreement, the Company has delivered to the Investor true and complete
copies of the following financial statements:
(a) the audited balance sheets of the Company and its
consolidated subsidiaries as of December 31, 2000, and the related audited
consolidated statements of operations, stockholders' equity and cash flows for
each of the fiscal years then ended, together with a true and correct copy of
the report of such audited information by ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, L.L.P., and all
letters from such accountants with respect to the results of such audits; and
(b) the unaudited balance sheets of the Company and
its consolidated subsidiaries as of March 31, 2001, June 30, 2001, and ,
September 30, 2001, found in the Company's 10-Q's for the respective quarterly
periods then ended and the related unaudited consolidated statements of
operations and stockholders' equity for the portion of the fiscal year then
ended. The financial statements of the Company delivered to the Investor have
been prepared in accordance with generally accepted accounting principles
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 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).
Section 4.8. SEC Documents. The Company has delivered or made
available to the Investor true and complete copies of the SEC Documents
(including, without limitation, proxy information and solicitation materials).
The Company has not provided to the Investor any information that, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and 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 SEC Documents comply as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles 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 include summary notes
and may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
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case of unaudited statements, to normal year-end audit adjustments).
Section 4.9. Exemption from Registration; Valid Issuances;
New Issuances. The sale and issuance of the Put Shares , the Commitment Shares
and the Adjustment Shares in accordance with the terms and on the bases of the
representations and warranties set forth in this Agreement, may and shall be
properly issued pursuant to Rule 4(2), Regulation D and/or any applicable state
law. When issued and paid for as herein provided, the Put Shares , the
Commitment Shares and the Adjustment Shares shall be duly and validly issued,
fully paid, and nonassessable. Neither the sales of the Put Shares or the
Adjustment Shares pursuant to, nor the Company's performance of its obligations
under, this Agreement or the Registration Rights Agreement shall (i) result in
the creation or imposition of any liens, charges, claims or other encumbrances
upon the Put Shares or the Adjustment Shares or any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to preemptive
or other rights to subscribe to or acquire the Capital Shares or other
securities of the Company. The Put Shares , the Commitment Shares and the
Adjustment Shares shall not subject the Investor to personal liability by reason
of the ownership thereof. The Put Shares , the Commitment Shares and the
Adjustment Shares have been duly authorized by the Company, but have not been
issued (whether or not subsequently repurchased by the Company) to any Person,
and when issued to the Investor in accordance with this Agreement and will not
have been issued(whether or not subsequently repurchased by the Company) to any
Person other than the Investor.
Section 4.10. No General Solicitation or Advertising in
Regard to this Transaction. Neither the Company nor any of its affiliates nor
any distributor or any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D)or general advertising with respect to any of the Put Shares, or
(ii) made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the Common
Stock under the Securities Act.
Section 4.11. No Conflicts. The execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, including without limitation the
issuance of the Put Shares , the Commitment Shares and the Adjustment Shares do
not and will not (i) result in a violation of the Certificate or By-Laws or (ii)
conflict with, or constitute a material default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect) nor is
the Company otherwise in violation of, conflict with or in default under any of
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the foregoing; provided, however, that for purposes of the Company's
representations and warranties as to violations of foreign law, rule or
regulation referenced in clause (iii), such representations and warranties are
made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of the Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
(other than any SEC, NASD or state securities filings that may be required to be
made by the Company subsequent to any Closing, any registration statement that
may be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 4.12. No Material Adverse Change. Since January 1,
2002 no event has occurred that would have a Material Adverse Effect on the
Company.
Section 4.13. No Undisclosed Liabilities. The Company has no
liabilities or obligations that are material, individually or in the aggregate,
other than those incurred in the ordinary course of the Company's businesses
since January 1, 2002 and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.
Section 4.14. No Undisclosed Events or Circumstances. Since
January 1, 2002 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.
Section 4.15. No Integrated Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, other than pursuant to this Agreement, under
circumstances that would require registration of the Common Stock under the
Securities Act.
Section 4.16. Litigation and Other Proceedings. Except as may
be set forth in the SEC Documents, there are no lawsuits or proceedings pending
or to the best knowledge of the Company threatened, against the Company, nor has
the Company received any written or oral notice of any such action, suit,
proceeding or investigation, which might have a Material Adverse Effect. Except
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as set forth in the SEC Documents, no judgment, order, writ, injunction or
decree or award has been issued by or, so far as is known by the Company,
requested of any court, arbitrator or governmental agency which might result in
a Material Adverse Effect.
Section 4.17. No Misleading or Untrue Communication. The
Company, any Person representing the Company, and, to the knowledge of the
Company, any other Person selling or offering to sell the Put Shares , the
Commitment Shares and the Adjustment Shares in connection with the transactions
contemplated by this Agreement, have not made, at any time, any oral
communication in connection with the offer or sale of the same which contained
any untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading.
Section 4.18. Material Non-Public Information. The Company is
not in possession of, nor has the Company or its agents disclosed to the
Investor, any material non-public information that (i) if disclosed, would, or
could reasonably be expected to have, an effect on the price of the Common Stock
or(ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
ARTICLE V: COVENANTS OF THE INVESTOR
Section 5.1. No Short Sales. During the thirty (30) days
prior to the Subscription Date, neither the Investor nor any affiliate of the
Investor has, and during the Commitment Period neither the Investor nor any
affiliate of the Investor will (i) engage in any short sale of the Common Stock
of the Company unless Investor has given prior written notice to the Company.
Nothing in this Section 5.2 shall prohibit the Investor or any affiliate from
making regular sales of the Common Stock acquired pursuant to this Agreement or
to require any approvals from the Company.
ARTICLE VI: COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date
hereof, the Company has available and the Company shall reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Put
Shares , the Commitment Shares and the Adjustment Shares; such amount of shares
of Common Stock to be reserved shall be calculated based upon the minimum
Purchase Price for the Put Shares under the terms and conditions of this
Agreement.
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The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the number of
shares actually delivered.
Section 6.3. Listing of Common Stock. The Company shall
exercise best efforts to maintain the listing of the Common Stock on a Principal
Market, and as soon as practicable (but in any event prior to the Closing Date
for any Put)will cause the Put Shares , the Commitment Shares and the Adjustment
Shares with respect to such Put to be listed on the Principal Market. The
Company further shall, if the Company applies to have the Common Stock traded on
any other Principal Market, include in such application the Put Shares , the
Commitment Shares and the Adjustment Shares, and shall take such other action as
is necessary or desirable in the opinion of the Investor to cause the Common
Stock to be listed on such other Principal Market as promptly as possible. The
Company shall use commercially reasonable efforts to continue the listing and
trading of its Common Stock on the Principal Market (including, without
limitation, maintaining sufficient net tangible assets) 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 Principal Market.
Section 6.4. Exchange Act Registration. After each
Registration Statement becomes effective, the Company shall cause the Common
Stock covered by such Registration Statement to continue to be registered under
Section 12(g) or 12(b) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Exchange Act.
Section 6.5. Legends. The certificates evidencing the Put
Shares , the Commitment Shares and the Adjustment Shares shall be free of
legends, except as provided for in Article VIII.
Section 6.6. Corporate Existence. The Company shall take all
steps necessary to preserve and continue the corporate existence of the Company.
Section 6.7. Additional SEC Documents. During the Commitment
Period, the Company shall deliver to the Investor, as and when the originals
thereof are submitted to the SEC for filing, copies of all SEC Documents so
furnished or submitted to the SEC.
Section 6.8. Notice of Certain Events Affecting Registration;
Suspension of Right to Make a Put. The Company shall immediately notify the
Investor, but in no event later than two (2) business days by facsimile and by
overnight courier, upon the occurrence of any of the following events in respect
of a Registration Statement or related prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
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suspending the effectiveness of a 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 Registrable Securities 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 such 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 a 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; (v) the declaration by
the SEC of the effectiveness of a Registration Statement; and (vi) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events. While in possession of material non-public
information received from the Company, the Investor shall not dispose of any
Registrable Securities until such information is disclosed to the public
(a"Restricted Period"); provided that, if such Restricted Period exceeds one
hundred twenty (120) days, the liquidated damages described in Section 1.1(c) of
the Registration Rights Agreement shall be increased to three percent
(3.0%)until such Restricted Period shall have elapsed.
Section 6.9. 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 unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument the obligation to
deliver to the Investor such shares of stock and/or securities as the Investor
is entitled to receive pursuant to this Agreement.
Section 6.10. Legal Opinion on Subscription Date. The
Company's independent counsel shall deliver to the Investor on the Subscription
Date an opinion in the form of Exhibit D, except for paragraph 7 thereof.
Section 6.11. No Similar Arrangement; Right of First Refusal.
The Company shall refrain from entering into any other agreements, arrangements
or understandings granting to the Company the right to sell shares of its
securities to one or more investors in placements exempt from registration under
the Securities Act until thirty (30) calendar days after this Agreement is
terminated pursuant to Section 2.4 hereof (the "Exclusivity Period"). The
Exclusivity Period shall not apply to an issuance of securities exempt from
registration under the Securities Act by the Company in connection with any
strategic investment, corporate partnering arrangements, or other situations in
which the investment in the Company is not strictly a financial one. If the
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Company, for the purpose of obtaining any additional financing, wishes to sell
shares of its securities in placements exempt from registration under the
Securities Act during the Exclusivity Period (a "Sale") to a party other than
the Investor (the "Third Party"), the Company shall first offer (the "Offer") to
the Investor, in writing, the right to purchase such shares (the "Offered
Shares") at the bona fide price offered by the Third Party (the "Offer
Price").The Offer shall grant the Investor the right during the five (5) Trading
Days immediately following the date of the Offer to elect to purchase any or all
of the Offered Shares. The Company, in connection with such a Sale, shall
refrain from circumventing or attempting to circumvent the Investor's right of
first refusal by way of making such a Sale to any of its affiliates without
first making an Offer to the Investor. If the Investor so exercises it's right
to purchase any or all of the Offered Shares, the purchase will be treated as a
Put except that the purchase price for the Offered Shares shall be the Offer
Price. The closing and method of payment shall be as provided for in Section 2.2
hereof and the Closing Date shall be seven (7) Trading Days after the Investor
exercises such right. If the Investor fails to exercise its right to purchase
any or all of the Offered Shares, then during the thirty (30) calendar days
immediately following the expiration of such right, the Company shall be free to
sell any or all of the Offered Shares to a purchaser for a purchase price not
lower than the Offer Price payable on terms and conditions that are not more
favorable to such purchaser than those contained in the Offer. In the event that
the Company effects a Sale to a Third Party, the Investor may immediately
terminate this Agreement.
ARTICLE VII CONDITIONS TO DELIVERY OF PUT NOTICES AND CONDITIONS TO
CLOSING
Section 7.1. Conditions Precedent to the Obligation of the
Company to Issue and Sell Common Stock. The obligation hereunder of the Company
to issue and sell the Put Shares , the Commitment Shares and the Adjustment
Shares to the Investor incident to each Closing is subject to the satisfaction,
at or before each such Closing, of each of the conditions set forth below.
(a) Accuracy of the Investor's Representation and
Warranties. The representations and warranties of the Investor herein shall be
true and correct in all material respects as of the date of this Agreement and
as of the date of each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor 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 Investor at or prior to such Closing.
Section 7.2. Conditions Precedent to the Right of the Company
to Deliver a Put Notice and the Obligation of the Investor to Purchase Put
Shares. Following completion of the Early Put, the right of the Company to
deliver a Put Notice and the obligation of the Investor hereunder to acquire and
pay for the Put Shares incident to a Closing is subject to the satisfaction, on
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(i) the applicable Put Date and (ii) the applicable Closing Date (each a
"Condition Satisfaction Date"), of each of the following conditions:
(a) Termination Events. None of the Events which are
listed in Section 2.4 which would allow the Investor to terminate this Agreement
has occurred.
(b) Effective Registration Statement. As set forth in
the Registration Rights Agreement, the Registration Statement(s) shall have
previously become effective and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investor shall have
received notice that the SEC has issued or intends to issue a stop order with
respect to a Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of a Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC's concerns
have been addressed and the Investor is reasonably satisfied that the SEC no
longer is considering or intends to take such action), (ii) no other suspension
of the use or withdrawal of the effectiveness of such Registration Statement or
related prospectus shall exist and (iii) with respect to the second Put only,
the Company shall have notified the Investor in accordance with Section 6.8 that
the Registration Statement covering the Registrable Securities purchased by the
Investor through the Early Put has been declared effective by the SEC and (iv)
at least 30 days shall have elapsed since the Initial Registration Statement (as
defined in the Registration Rights Agreement) has been declared effective by the
SEC.
(c) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company shall be true and
correct as of each Condition Satisfaction Date as though made at each such time
(except for representations and warranties specifically made as of a particular
date).
(d) 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 and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of competent
jurisdiction that prohibits the transactions contemplated by this Agreement or
otherwise has a Material Adverse Effect, and no actions, suits or proceedings
shall be in progress, pending or threatened by any Person, that seek to enjoin
or prohibit the transactions contemplated by this Agreement or otherwise could
reasonably be expected to have a Material Adverse Effect. For purposes of this
paragraph (e), no proceeding shall be deemed pending or threatened unless one of
the parties has received written or oral notification thereof prior to the
applicable Closing Date.
(f) No Suspension of Trading In or Delisting of
Common Stock. The trading of the Common Stock shall not have been suspended by
the SEC, the Principal Market or the NASD and the Common Stock shall have been
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approved for listing or quotation on and shall not have been delisted from the
Principal Market. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(g) Legal Opinion. The Company shall have caused to
be delivered to the Investor, within five (5) Trading Days of the effective date
of a Registration Statement, an opinion of the Company's independent counsel in
the form of Exhibit D hereto, addressed to the Investor.
(h) Due Diligence. Pursuant to Section 7.3, the
Investor shall not have a material dispute with the Company as to the adequacy
of the disclosure contained in the Registration Statement.
(i) Five Percent Limitation. On each Closing Date,
the number of Put Shares , the Commitment Shares and the Adjustment Shares then
to be purchased by the Investor shall not exceed the number of such shares that,
when aggregated with all other shares of Common Stock and Registrable Securities
then owned by the Investor beneficially or deemed beneficially owned by the
Investor, would result in the Investor owning no more than 4.9% of all of such
Common Stock as would be outstanding on such Closing Date, as determined in
accordance with Section 13(d) of the Exchange Act and the regulations
promulgated thereunder. For purposes of this Section, in the event that the
amount of Common Stock outstanding as determined in accordance with Section
13(d) of the Exchange Act and the regulations promulgated thereunder is greater
on a Closing Date than on the date upon which the Put Notice associated with
such Closing Date is given, the amount of Common Stock outstanding on such
Closing Date shall govern for purposes of determining whether the Investor, when
aggregating all purchases of Common Stock made pursuant to this Agreement and
would own more than 4.9% of the Common Stock following such Closing Date.
(j) No Knowledge. The Company shall have no knowledge
of any event more likely than not to have the effect of causing any Registration
Statement to be suspended or otherwise ineffective (which event is more likely
than not to occur within the fifteen Trading Days following the Trading Day on
which such notice is deemed delivered).
(k) Minimum Time Interval. The Minimum Time Interval
shall have elapsed since the immediately preceding Put Date.
(l) Shareholder Vote. The issuance of shares of
Common Stock with respect to the applicable Closing, if any, shall not violate
the shareholder approval requirements of the Principal Market.
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(m) Other. On each Condition Satisfaction Date, the
Investor shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by the
Investor in order for the Investor to confirm the Company's satisfaction of the
conditions set forth in this Section 7.2., including, without limitation, a
certificate in substantially the form and substance of Exhibit E hereto,
executed in either case by an executive officer of the Company and to the effect
that all the conditions to such Closing shall have been satisfied as at the date
of each such certificate.
Section 7.3. Due Diligence Review; Non-Disclosure of
Non-Public Information.
(a) The Company shall make available for inspection
and review by the Investor, advisors to and representatives of the Investor (who
may or may not be affiliated with the Investor and who are reasonably acceptable
to the Company), and any Underwriter, any Registration Statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or Underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of such
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and Underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.
(b) Each of the Company, its officers, directors,
employees and agents shall in no event disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(c) Nothing herein shall require the Company to
disclose non-public information to the Investor or its advisors or
representatives, and the Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts; provided, however,
that notwithstanding anything herein to the contrary, the Company shall, as
herein above provided, immediately notify the advisors and representatives of
the Investor and any Underwriters of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
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(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the applicable Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 7.3 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms and conditions
of this Agreement and nothing herein shall prevent any such persons or entities
from notifying the Company of their opinion that based on such due diligence by
such persons or entities, that such Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
such Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE VIII LEGENDS
Section 8.1. Legends. Unless otherwise provided below, each
certificate representing Registrable Securities will bear the following legend
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH
IN A STOCK PURCHASE AGREEMENT, DATED AS OF _______ __,
_______. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE ISSUER'S
EXECUTIVE OFFICES.
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As soon as practicable after the execution and delivery
hereof, but in any event within five (5) Trading Days hereafter, the Company
shall issue to the transfer agent for its Common Stock (and to any substitute or
replacement transfer agent for its Common Stock upon the Company's appointment
of any such substitute or replacement transfer agent) instructions in
substantially the form of Exhibit F hereto, with a copy to the Investor. Other
than as required as a result of change in law, such instructions shall be
irrevocable by the Company from and after the date hereof or from and after the
issuance thereof to any such substitute or replacement transfer agent, as the
case may be, except as otherwise expressly provided in the Registration Rights
Agreement. It is the intent and purpose of such instructions, as provided
therein, to require the transfer agent for the Common Stock from time to time
upon transfer of Registrable Securities by the Investor to issue certificates
evidencing such Registrable Securities free of the Legend during the following
periods and under the following circumstances and without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the transfer agent by or from
the Company or its counsel or the Investor:
(a) At any time after the applicable Effective Date,
upon surrender of one or more certificates evidencing Common Stock that bear the
Legend, to the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered; provided that (i)
the applicable Registration Statement shall then be effective and (ii) if
reasonably requested by the transfer agent the Investor confirms to the transfer
agent that the Investor has transferred the Registrable Securities pursuant to
such Registration Statement and has complied with the prospectus delivery
requirement.
(b) At any time upon any surrender of one or more
certificates evidencing Registrable Securities that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered and containing representations that
the Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act.
Section 8.2. No Other Legend or Stock Transfer Restrictions.
No legend other than the one specified in Section 8.1 has been or shall be
placed on the share certificates representing the Common Stock and no
instructions or "stop transfers orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article VIII.
Section 8.3. Investor's Compliance. Nothing in this Article
VIII shall affect in any way the Investor's obligations under any agreement to
comply with all applicable securities laws upon resale of the Common Stock.
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ARTICLE IX INDEMNIFICATION; ARBITRATION
Section 9.1. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Investor, its partners, affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with its controlling persons from and against any
Damages, joint or several, and any action in respect thereof to which the
Investor, its partners, affiliates, officers, directors, employees, and duly
authorized agents, and any such controlling 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, unless such
Damages result primarily from the Investor's gross negligence, recklessness or
bad faith in performing its obligations under this Agreement; provided, however,
that the maximum aggregate liability of the Company shall be limited to the
amount actually invested by the Investor under this Agreement, and provided,
further, that in no event shall this provision be deemed to limit any rights to
indemnification arising under the Registration Rights Agreement.
(b) The Investor agrees to indemnify and hold
harmless the Company, its partners, affiliates, officers, directors, employees,
and duly authorized agents, and each Person or entity, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, together with its controlling persons from and against any
Damages, joint or several, and any action in respect thereof to which the
Company, its partners, affiliates, officers, directors, employees, and duly
authorized agents, and any such controlling 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
the Investor contained in this Agreement, as such Damages are incurred, unless
such Damages result primarily from the Company's gross negligence, recklessness
or bad faith in performing its obligations under this Agreement; provided,
however, that the maximum aggregate liability of the Investor shall be limited
to the amount actually invested by the Investor under this Agreement, and
provided, further, that in no event shall this provision be deemed to limit any
rights to indemnification arising under the Registration Rights Agreement.
Section 9.2. Method of Asserting Indemnification Claims. All
claims for indemnification by any Indemnified Party (as defined below) under
Section 9.1 shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of
which any person claiming indemnification under any provision of Section 9.1 (an
"Indemnified Party") might seek indemnity under Section 9.1 is asserted against
or sought to be collected from such Indemnified Party by a person other than the
Company, the Investor or any affiliate of the Company (a "Third Party Claim"),
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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 Section 9.1 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 irreparably 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 Section 9.1 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
(i) 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 Section 9.2(a), 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 Section 9.1). 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 clause (i), 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
clause (i), 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 Section 9.1 with respect to such
Third Party Claim.
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(ii) 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 Section 9.2(a), 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 clause (ii), 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 clause
(iii) below, the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this clause (ii) 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 clause (ii), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation.
(iii) 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
Section 9.1 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
Damages in the amount specified in the Claim Notice shall be conclusively deemed
a liability of the Indemnifying Party under Section 9.1 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, and
if not resolved through negotiations within the period of thirty (30) calendar
days immediately following the Dispute Period, such dispute shall be resolved by
arbitration in accordance with Section 9.3.
(b) In the event any Indemnified Party should have a
claim under Section 9.1 against the Indemnifying Party that does not involve a
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Third Party Claim, the Indemnified Party shall deliver a written notification of
a claim for indemnity under Section 9.1 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 Damages in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 9.1 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, and if not resolved through negotiations within the period of
thirty (30) calendar days immediately following the Dispute Period, such dispute
shall be resolved by arbitration in accordance with Section 9.3.
Section 9.3. Arbitration. Any dispute under or related to
this Agreement (including, without limitation, pursuant to Section 9.2) or the
Registration Rights Agreement shall be submitted to arbitration and shall be
finally and conclusively determined by the decision of a board of arbitration
consisting of three (3) members (the "Board of Arbitration") selected as
hereinafter provided. Each of the Company, on the one hand, and the Investor
and/or any other Indemnified Party, on the other hand, shall select one (1)
member and the third member shall be selected by mutual agreement of the other
members, or if the other members fail to reach agreement on a third member
within twenty (20) days after their selection, such third member shall
thereafter be selected by the American Arbitration Association upon application
made to it for such purpose by the other members. The Board of Arbitration shall
meet on consecutive business days in Los Angeles or such other place as a
majority of the members of the Board of Arbitration determines more appropriate,
and shall reach and render a decision in writing (concurred in by a majority of
the members of the Board of Arbitration). In connection with rendering its
decision, the Board of Arbitration shall adopt and follow such rules and
procedures as a majority of the members of the Board of Arbitration deems
necessary or appropriate. To the extent practicable, 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 the Company and the Investor
and/or any other Indemnified Party. 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 Company and
the Investor and/or any other Indemnified Party and entitled to be enforced to
the fullest extent permitted by law and entered in any court of competent
jurisdiction. The non-prevailing party to any arbitration shall bear the expense
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of both parties in relation thereto, including but not limited to the parties'
attorneys' fees, if any, and the expenses and fees of the Board of Arbitration.
ARTICLE X MISCELLANEOUS
Section 10.1. Transaction Costs. Each party shall bear its
own legal fees and other out of pocket costs in connecting with the negotiation
and execution of this Agreement. The Company agrees to pay its own expenses
incident to the performance of its obligations hereunder, including, but not
limited to, any registration of securities or delivery of documentation.
Section 10.2. Reporting Entity for the Common Stock. The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on the Principal Market on any given Trading
Day for the purposes of this Agreement shall be the ____________. The written
mutual consent of the Investor and the Company shall be required to employ any
other reporting entity.
Section 10.3. Brokerage. Each of the parties hereto
represents that it has had no dealings in connection with this transaction with
any finder or broker which would impose a legal obligation to pay any fee or
commission. The Company on the one hand, and the Investor, on the other hand,
agree to indemnify the other against and hold the other harmless from any and
all liabilities to any persons claiming brokerage commissions or finder's fees
on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 10.4. Notices. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i)
personally served,(ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice given in accordance
herewith. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, 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:
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If to the Company:
Integrated Technology Group
▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone:▇▇▇-▇▇▇-▇▇▇▇
If to the Investor: Brighton Opportunity Fund
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address
or facsimile number for notices under this Section by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 10.5. Assignment. Neither this Agreement nor any
rights of the Investor or the Company hereunder may be assigned by either party
to any other person. Notwithstanding the foregoing, the Investor's interest in
this Agreement may be assigned at any time, in whole or in part, to any
affiliate of the Investor or co-investor, provided, however, that any such
assignment or transfer shall relieve the Investor of its duties under this
Agreement only upon performance thereof by any such assignee or transferee.
Section 10.6. Amendment; No Waiver. No party shall be liable
or bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth in this Agreement or therein. Except
as expressly provided in this Agreement, neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by both parties hereto. The failure of the either party to
insist on strict compliance with this Agreement, or to exercise any right or
remedy under this Agreement, shall not constitute a waiver of any rights
provided under this Agreement, nor estop the parties from thereafter demanding
full and complete compliance nor prevent the parties from exercising such a
right or remedy in the future.
Section 10.7. Annexes and Exhibits; Entire Agreement. All
annexes and exhibits to this Agreement are incorporated herein by reference and
shall constitute part of this Agreement. This Agreement and the Registration
Rights Agreement set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.
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Section 10.8. Survival. The provisions of Articles VI, VIII,
IX and X, and of Section 7.3, shall survive the termination of this Agreement.
Section 10.9. Severability. In the event that any provision
of this Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Agreement shall continue in full force
and effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 10.10. Title and Subtitles. The titles and subtitles
used in this Agreement are used for the convenience of reference and are not to
be considered in construing or interpreting this Agreement.
Section 10.11. Counterparts. This Agreement may be executed
in multiple counterparts, each of which may be executed by less than all of the
parties and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument.
Section 10.12. Choice of Law. This Agreement shall be
construed under the laws of the State of California.
Section 10.13. Other Expenses. In the event that a dispute
between the parties is not determined by a Board of Arbitration, the
non-prevailing party in any action, suit or proceeding shall bear all
investigative, legal and other expenses reasonably incurred in connection with,
and any and all amounts paid in defense or settlement of such action, suit or
proceeding, including of the other party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by the undersigned, there unto duly authorized, as of
the date first set forth above.
Integrated Technology Group
By: _________________________________
Name_____________________________
Title______________________________
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ FUND, L.P.
By Its General Partner
_________________________________
Name_____________________________
Title______________________________
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