Exhibit 10.1
EXECUTION VERSION
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 18, 2014
BY AND BETWEEN
TUNGSTEN CORP.,
A NEVADA CORPORATION
AND
HANOVER HOLDINGS I, LLC,
A NEW YORK LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS ....................................................... 1
ARTICLE II PURCHASE AND SALE OF COMMON STOCK ................................ 1
Section 2.1. Purchase and Sale of Stock ................................ 1
Section 2.2. Closing Date; Settlement Dates ............................ 2
Section 2.3. Initial Public Announcements and Required Filings ......... 2
ARTICLE III DRAW DOWN TERMS ................................................. 3
Section 3.1. Draw Downs ................................................ 3
Section 3.2. Limitation of Draw Downs .................................. 5
Section 3.3. Reduction of Commitment ................................... 5
Section 3.4. Below Floor Price ......................................... 5
Section 3.5. Settlement ................................................ 6
Section 3.6. Failure to Deliver Shares ................................. 6
Section 3.7. Certain Limitations ....................................... 7
Section 3.8. Blackout Periods .......................................... 8
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR ........ 9
Section 4.1. Organization and Standing of the Investor ................. 9
Section 4.2. Authorization and Power ................................... 9
Section 4.3. No Conflicts .............................................. 9
Section 4.4. Investment Purpose ........................................ 10
Section 4.5. Accredited Investor Status ................................ 10
Section 4.6. Reliance on Exemptions .................................... 10
Section 4.7. Information ............................................... 10
Section 4.8. No Governmental Review .................................... 11
Section 4.9. No General Solicitation ................................... 11
Section 4.10. Not an Affiliate ......................................... 11
Section 4.11. Statutory Underwriter Status ............................. 11
Section 4.12. Resales of Securities .................................... 11
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY .......... 12
Section 5.1. Organization, Good Standing and Power ..................... 12
Section 5.2. Authorization, Enforcement ................................ 12
Section 5.3. Capitalization and Voting Rights .......................... 12
Section 5.4. Issuance of Securities .................................... 13
Section 5.5. No Conflicts .............................................. 13
Section 5.6. Commission Documents, Financial Statements ................ 14
Section 5.7. Subsidiaries .............................................. 16
Section 5.8. No Material Adverse Effect ................................ 16
Section 5.9. No Undisclosed Liabilities ................................ 16
Section 5.10. No Undisclosed Events or Circumstances ................... 17
Section 5.11. Indebtedness; Solvency ................................... 17
Section 5.12. Title To Assets .......................................... 17
Section 5.13. Actions Pending .......................................... 18
Section 5.14. Compliance With Law ...................................... 18
Section 5.15. Certain Fees ............................................. 18
Section 5.16. Disclosure ............................................... 19
Section 5.17. Operation of Business .................................... 19
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Section 5.18. Environmental Compliance ................................. 20
Section 5.19. Material Agreements ...................................... 21
Section 5.20. Transactions With Affiliates ............................. 21
Section 5.21. Employees ................................................ 21
Section 5.22. Use of Proceeds .......................................... 22
Section 5.23. Investment Company Act Status ............................ 22
Section 5.24. ERISA .................................................... 22
Section 5.25. Taxes .................................................... 22
Section 5.26. Insurance ................................................ 23
Section 5.27. U.S. Real Property Holding Corporation ................... 23
Section 5.28. Exemption from Registration; Valid Issuances ............. 23
Section 5.29. No General Solicitation or Advertising ................... 23
Section 5.30. No Integrated Offering ................................... 23
Section 5.31. Dilutive Effect .......................................... 24
Section 5.32. Manipulation of Price .................................... 24
Section 5.33. Securities Act ........................................... 24
Section 5.34. Listing and Maintenance Requirements; DTC Eligibility .... 25
Section 5.35. Application of Takeover Protections ...................... 25
Section 5.36. Foreign Corrupt Practices Act ............................ 25
Section 5.37. Money Laundering Laws .................................... 26
Section 5.38. OFAC ..................................................... 26
Section 5.39. No Disqualification Events ............................... 26
Section 5.40. Mineral Resource Properties and Surface Rights ........... 26
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Section 5.41. Royalties and Commissions ................................ 27
Section 5.42. Acknowledgement Regarding Investor's Acquisition
of Securities ............................................ 27
ARTICLE VI ADDITIONAL COVENANTS ............................................. 27
Section 6.1. Securities Compliance ..................................... 27
Section 6.2. Reservation of Common Stock ............................... 27
Section 6.3. Registration and Listing .................................. 28
Section 6.4. Compliance with Laws ...................................... 28
Section 6.5. Keeping of Records and Books of Account; Due Diligence .... 29
Section 6.6. Limitations on Holdings and Issuances ..................... 29
Section 6.7. Other Agreements and Alternate Transactions ............... 29
Section 6.8. Corporate Existence ....................................... 32
Section 6.9. Fundamental Transaction ................................... 32
Section 6.10. Delivery of Registration Statement and Prospectus;
Subsequent Changes ....................................... 32
Section 6.11. Amendments to the Registration Statement; Prospectus
Supplements .............................................. 33
Section 6.12. Stop Orders .............................................. 33
Section 6.13. Selling Restrictions ..................................... 34
Section 6.14. Effective Registration Statement ......................... 35
Section 6.15. Blue Sky ................................................. 35
Section 6.16. NonPublic Information .................................... 35
Section 6.17. Broker/Dealer ............................................ 35
Section 6.18. Disclosure Schedule ...................................... 36
ARTICLE VII CONDITIONS TO CLOSING AND CONDITIONS TO THE SALE AND PURCHASE
OF THE SHARES ................................................... 36
Section 7.1. Conditions Precedent to Closing ........................... 36
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Section 7.2. Conditions Precedent to a Draw Down ....................... 37
Article VIII TERMINATION ............................................... 40
Section 8.1. Termination ............................................... 40
Section 8.2. Other Termination ......................................... 41
Section 8.3. Effect of Termination ..................................... 42
ARTICLE IX INDEMNIFICATION .................................................. 43
Section 9.1. Indemnification of Investor ............................... 43
Section 9.2. Indemnification Procedures ................................ 44
ARTICLE X MISCELLANEOUS ..................................................... 45
Section 10.1. Fees and Expenses; Commitment Shares ..................... 45
Section 10.2. Specific Enforcement, Consent to Jurisdiction, Waiver
of Jury Trial ............................................ 47
Section 10.3. Entire Agreement; Amendment .............................. 48
Section 10.4. Notices .................................................. 48
Section 10.5. Waivers .................................................. 49
Section 10.6. Headings ................................................. 49
Section 10.7. Construction ............................................. 50
Section 10.8. Successors and Assigns ................................... 50
Section 10.9. No Third Party Beneficiaries ............................. 50
Section 10.10. Governing Law ........................................... 50
Section 10.11. Survival ................................................ 50
Section 10.12. Counterparts ............................................ 51
Section 10.13. Publicity ............................................... 51
Section 10.14. Severability ............................................ 51
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Section 10.15. Further Assurances ...................................... 51
Annex I. Definitions
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT is made and entered into as of
February 18, 2014 (this "Agreement"), by and between Hanover Holdings I, LLC, a
New York limited liability company (the "INVESTOR"), and Tungsten Corp., a
corporation organized and existing under the laws of the State of Nevada (the
"COMPANY").
RECITALS
WHEREAS, the parties desire that, upon the terms and subject to the
conditions and limitations set forth herein, the Company may issue and sell to
the Investor, from time to time as provided herein, and the Investor shall
purchase from the Company, up to $3,000,000 of newly issued shares of the
Company's common stock, $0.0001 par value per share ("COMMON STOCK");
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(a)(2) of the Securities Act ("SECTION 4(A)(2)") and Rule 506 of
Regulation D promulgated by the Commission under the Securities Act ("REGULATION
D"), and upon such other exemptions 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;
WHEREAS, the parties hereto are concurrently entering into a Registration
Rights Agreement in the form of Exhibit A hereto (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company shall register the Registrable
Securities (as defined in the Registration Rights Agreement), upon the terms and
subject to the conditions set forth therein; and
WHEREAS, in consideration for the Investor's execution and delivery of this
Agreement, the Company is concurrently causing its transfer agent to issue to
the Investor the Initial Commitment Shares, upon the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings ascribed
to such terms in Annex I hereto, and hereby made a part hereof, or as otherwise
set forth in this Agreement.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
SECTION 2.1. PURCHASE AND SALE OF STOCK. Upon the terms and subject to the
conditions of this Agreement, during the Investment Period, the Company in its
discretion may issue and sell to the Investor, and the Investor shall purchase
from the Company, up to $3,000,000 (the "TOTAL COMMITMENT") of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (the
"AGGREGATE LIMIT"), by the delivery to the Investor of Draw Down Notices as
provided in Article III hereof.
SECTION 2.2. CLOSING DATE; SETTLEMENT DATES. This Agreement shall become
effective and binding (the "Closing") upon the delivery of irrevocable
instructions to issue the Initial Commitment Shares to the Investor or its
designees as provided in Sections 7.1 and 10.1, the delivery of counterpart
signature pages of this Agreement and the Registration Rights Agreement executed
by each of the parties hereto and thereto, and the delivery of all other
documents, instruments and writings required to be delivered at the Closing, in
each case as provided in Section 7.1, to the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 5:00 p.m., New York City time, on
the Closing Date. In consideration of and in express reliance upon the
representations, warranties and covenants contained in, and upon the terms and
subject to the conditions of, this Agreement, during the Investment Period the
Company shall issue and sell to the Investor, and the Investor shall purchase
from the Company, the Shares in respect of each Draw Down. The issuance and sale
of Shares to the Investor pursuant to any Draw Down shall occur on the
applicable Settlement Date in accordance with Section 3.5, provided that all of
the conditions precedent thereto set forth in Article VII theretofore shall have
been fulfilled on or prior to such Settlement Date.
SECTION 2.3. INITIAL PUBLIC ANNOUNCEMENTS AND REQUIRED FILINGS. The Company
shall, at or before 8:30 a.m., New York City time, on the first Trading Day
immediately following the Closing Date, issue a press release (the "PRESS
RELEASE") reasonably acceptable to the Investor disclosing the execution of this
Agreement and the Registration Rights Agreement by the Company and the Investor
and the issuance of the Initial Commitment Shares to the Investor, and briefly
describing the transactions contemplated thereby. At or before 8:30 a.m., New
York City time, on the second Trading Day immediately following the Closing
Date, the Company shall file a Current Report on Form 8-K describing all the
material terms of the transactions contemplated by the Transaction Documents in
the form required by the Exchange Act and attaching copies of each of this
Agreement, the Registration Rights Agreement and the Press Release as exhibits
thereto (including all exhibits thereto, the "CURRENT REPORT"). The Company
shall provide the Investor a reasonable opportunity to comment on a draft of the
Current Report prior to filing the Current Report with the Commission and shall
give due consideration to all such comments. From and after the issuance of the
Press Release and the filing of the Current Report, the Company shall have
disclosed all material, nonpublic information delivered to the Investor (or the
Investor's representatives or agents) by the Company or any of its Subsidiaries,
or any of their respective officers, directors, employees, agents or
representatives (if any) in connection with the transactions contemplated by the
Transaction Documents. The Investor covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in this Section 2.3, the Investor will maintain the
confidentiality of all disclosures made to it in connection with the
transactions contemplated by the Transaction Documents (including the existence
and terms of the transactions), except that the Investor may disclose the terms
of such transactions to its financial, accounting, legal and other advisors
(provided that the Investor directs such Persons to maintain the confidentiality
of such information). Not later than 15 calendar days following the Closing
Date, the Company shall file a Form D with respect to the Securities in
accordance with Regulation D and shall provide a copy thereof to the Investor
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promptly after such filing. The Company shall prepare and file with the
Commission the Registration Statement (including the Prospectus) covering the
resale by the Investor of the Registrable Securities in accordance with the
Securities Act and the Registration Rights Agreement. At or before 8:30 a.m.
(New York City time) on the Trading Day immediately following the Effective
Date, the Company shall file with the Commission in accordance with Rule 424(b)
under the Securities Act the final Prospectus to be used in connection with
sales pursuant to the Registration Statement. If the transactions contemplated
by any Draw Down are material to the Company (individually or collectively with
all other prior Draw Downs, the consummation of which have not previously been
reported in any Prospectus Supplement filed with the Commission under Rule
424(b) under the Securities Act or in any report, statement or other document
filed by the Company with the Commission under the Exchange Act), or if
otherwise required under the Securities Act (or the interpretations of the
Commission thereof), in each case as reasonably determined by the Company or the
Investor, then, (i) with respect to a Fixed Draw Down Notice delivered pursuant
to Section 3.1(a) hereof, at or before 5:30 p.m., New York City time, on the
applicable Settlement Date with respect to such Fixed Draw Down Notice, and (ii)
with respect to a Regular Draw Down Notice delivered pursuant to Section 3.1(b)
hereof, at or before 5:30 p.m., New York City time, on the first Trading Day
immediately following the last Trading Day of the applicable Pricing Period with
respect to such Draw Down, the Company shall file with the Commission a
Prospectus Supplement pursuant to Rule 424(b) under the Securities Act with
respect to the applicable Draw Down(s), disclosing the total Draw Down Amount
Requested pursuant to such Draw Down(s), the total number of Shares that are to
be (and, if applicable, have been) issued and sold to the Investor pursuant to
such Draw Down(s), the total purchase price for the Shares subject to such Draw
Down(s), the applicable Discount Price(s) for such Shares (as applicable) and
the net proceeds that are to be (and, if applicable, have been) received by the
Company from the sale of such Shares. To the extent not previously disclosed in
the Prospectus or a Prospectus Supplement, the Company shall disclose in its
Quarterly Reports on Form 10-Q and in its Annual Reports on Form 10-K the
information described in the immediately preceding sentence relating to all Draw
Down(s) consummated during the relevant fiscal quarter, and include each such
Quarterly Report on Form 10-Q and Annual Report on Form 10-K in a Prospectus
Supplement and file such Prospectus Supplement with the Commission under Rule
424(b) under the Securities Act.
ARTICLE III
DRAW DOWN TERMS
Subject to the satisfaction of the conditions set forth in this Agreement,
the parties agree as follows:
SECTION 3.1. DRAW DOWNS.
(a) FIXED DRAW DOWN NOTICE. If each of the Equity Conditions have been
satisfied as of the applicable Draw Down Exercise Date, then from time to time
during the Investment Period, the Company may, in its sole discretion, no later
than 4:30 p.m. (New York City time) on the applicable Draw Down Exercise Date,
provide to the Investor a Fixed Draw Down Notice, substantially in the form
attached hereto as Exhibit B-1 (the "FIXED DRAW DOWN NOTICE"), which Fixed Draw
Down Notice shall become effective upon receipt thereof by the Investor on the
applicable Draw Down Exercise Date, and directing the Investor to purchase a
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specified Draw Down Amount Requested (which shall not exceed the Maximum Fixed
Draw Down Amount Requested). Upon the terms and subject to the conditions of
this Agreement, the Investor is obligated to accept each Fixed Draw Down Notice
prepared and delivered in accordance with the provisions of this Agreement and
shall purchase from the Company the Shares subject to such Fixed Draw Down
Notice at the applicable Fixed Purchase Price on the applicable Settlement Date.
Notwithstanding anything in this Agreement to the contrary, if, on the
applicable Draw Down Exercise Date, each of the Equity Conditions have not been
satisfied in all respects, such Fixed Draw Down Notice shall be void, AB INITIO,
and the Company shall not sell, and the Investor shall not purchase, any Shares
pursuant thereto. "EQUITY CONDITIONS" shall mean: (i) on each Trading Day during
the period beginning 30 Trading Days prior to the applicable Draw Down Exercise
Date and ending on and including the applicable Draw Down Exercise Date, the
lowest trade price of a share of Common Stock on the Trading Market, as reported
by Bloomberg, L.P., shall have been greater than the Fixed Floor Price; and (ii)
on each Trading Day during the period beginning 30 Trading Days prior to the
applicable Draw Down Exercise Date and ending on and including the applicable
Draw Down Exercise Date, the trade price of a share of Common Stock on the
Trading Market, as reported by Bloomberg, L.P., shall not have declined more
than 7.0% from an intraday high to an intraday low during such Trading Day.
(b) REGULAR DRAW DOWN NOTICE. From time to time during the Investment
Period, the Company may, in its sole discretion, no later than 9:30 a.m. (New
York City time) on the first Trading Day of the applicable Pricing Period,
provide to the Investor a Regular Draw Down Notice, substantially in the form
attached hereto as Exhibit B-2 (the "REGULAR DRAW DOWN NOTICE"), which Regular
Draw Down Notice shall become effective at 9:30 a.m. (New York City time) on the
first Trading Day of the applicable Pricing Period specified in the Regular Draw
Down Notice; provided, however, that if the Company delivers the Regular Draw
Down Notice to the Investor later than 9:30 a.m. (New York City time) on a
Trading Day, then the first Trading Day of such Pricing Period shall not be the
Trading Day on which the Investor received such Regular Draw Down Notice, but
rather shall be the immediately following Trading Day (unless a subsequent
Trading Day is therein specified). The Regular Draw Down Notice shall specify
the Draw Down Amount Requested (which shall not exceed the Maximum Regular Draw
Down Amount Requested), the applicable Floor Price for such Draw Down and the
first and last Trading Day of the Pricing Period. Upon the terms and subject to
the conditions of this Agreement, the Investor is obligated to accept each
Regular Draw Down Notice prepared and delivered in accordance with the
provisions of this Agreement and shall purchase from the Company the Shares
subject to such Regular Draw Down Notice at the applicable Discount Price on the
applicable Settlement Date.
(c) GENERAL. The date on which the Company delivers any Draw Down Notice in
accordance with this Section 3.1 hereinafter shall be referred to as a "DRAW
DOWN EXERCISE DATE". Anything to the contrary in this Agreement notwithstanding,
the parties hereto acknowledge and agree that the Investor shall not be required
to purchase, and shall not purchase, more than (i) the Maximum Fixed Draw Down
Amount Requested pursuant to any single Fixed Draw Down Notice and (ii) the
Maximum Regular Draw Down Amount Requested pursuant to any single Regular Draw
Down Notice.
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SECTION 3.2. LIMITATION OF DRAW DOWNS.
(a) FIXED DRAW DOWN NOTICE. At least 11 Trading Days shall elapse between
the completion of the settlement, in accordance with Section 3.5(a) and (c)
below, of a Draw Down with respect to which a Fixed Draw Down Notice was
delivered and the delivery of any Fixed Draw Down Notice or Regular Draw Down
Notice for any other Draw Down during the Investment Period.
(b) REGULAR DRAW DOWN NOTICE. The Company shall not make more than one Draw
Down (whether pursuant to a Fixed Draw Down Notice or a Regular Draw Down
Notice) during any Pricing Period with respect to which a Regular Draw Down
Notice has been delivered. At least 24 hours shall elapse between the completion
of the settlement, in accordance with Section 3.5(b) and (c) below, of a Draw
Down with respect to which a Regular Draw Down Notice was delivered and the
delivery of any Fixed Draw Down Notice or Regular Draw Down Notice for any other
Draw Down during the Investment Period.
(c) GENERAL. Each Draw Down automatically shall expire immediately
following the completion of the settlement thereof in accordance with Section
3.5 below.
SECTION 3.3. REDUCTION OF COMMITMENT. On each Settlement Date, the
Investor's Total Commitment under this Agreement automatically shall be reduced,
on a dollar-for-dollar basis, by the total Draw Down Amount paid to the Company
on such Settlement Date.
SECTION 3.4. BELOW FLOOR PRICE. With respect to a Draw Down for which a
Regular Draw Down Notice was delivered, if the VWAP on any Trading Day during
the applicable Pricing Period is lower than the applicable Floor Price, then for
each such Trading Day, the Draw Down Amount Requested shall be reduced by an
amount of shares of Common Stock equal to the product of (x) 0.10 and (y) the
total Draw Down Amount Requested, and no Shares shall be purchased or sold with
respect to such Trading Day. If trading in the Common Stock on the Trading
Market is suspended for any reason for more than three hours on any Trading Day
during the applicable Pricing Period for a Draw Down for which a Regular Draw
Down Notice was delivered, then for each such Trading Day during the Pricing
Period the Draw Down Amount Requested shall be reduced as provided in the
immediately preceding sentence, and no Shares shall be purchased or sold with
respect to such Trading Day.
SECTION 3.5. SETTLEMENT. The payment for, against simultaneous delivery of,
Shares in respect of any Draw Down shall be settled as provided in this Section
3.5. Each date on which settlement of the purchase and sale of Shares occurs
under this Section 3.5 shall be referred to herein as a "SETTLEMENT DATE".
(a) FIXED DRAW DOWN NOTICE. With respect to any Draw Down pursuant to a
Fixed Draw Down Notice received by the Investor in accordance with Section
3.1(a) hereof, the settlement thereof shall occur not later than the first
Trading Day next following the applicable Draw Down Exercise Date.
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(b) REGULAR DRAW DOWN NOTICE. With respect to any Draw Down pursuant to a
Regular Draw Down Notice received by the Investor in accordance with Section
3.1(b) hereof, the settlement thereof shall occur not later than the second
Trading Day next following the last Trading Day of the applicable Pricing
Period.
(c) GENERAL. On each Settlement Date, the Company shall, or shall cause its
transfer agent to, electronically transfer the Shares purchased by the Investor
by crediting the Investor's or its designees' account (provided the Investor
shall have given the Company written notice of such designee prior to the
Settlement Date) at DTC through its Deposit/Withdrawal at Custodian (DWAC)
system, which Shares shall be freely tradable and transferable and without
restriction on resale pursuant to the Registration Statement, against
simultaneous payment therefor, less any amounts to be withheld and payable to
Garden State Securities pursuant to the Placement Agent Engagement Letter, to
the Company's designated account by wire transfer of immediately available
funds; provided that if the Shares are received by the Investor later than 2:00
p.m., New York City time, payment therefor shall be made with next day funds. As
set forth in Section 3.6, a failure by the Company or its transfer agent (if
applicable) to deliver such Shares on the applicable Settlement Date, among
other things, shall result in the payment of partial damages by the Company to
the Investor.
SECTION 3.6. FAILURE TO DELIVER SHARES. If the Company issues a Draw Down
Notice to the Investor, and the Company or its transfer agent shall fail for any
reason or for no reason to electronically deliver all of the Shares subject
thereto to the Investor on the applicable Settlement Date by crediting the
Investor's or its designees' account at DTC through its Deposit/Withdrawal at
Custodian (DWAC) system in compliance with Section 3.5 of this Agreement, then,
in addition to all other remedies available to the Investor, the Company shall
pay the Investor, in cash, as partial damages for such failure and not as a
penalty, an amount equal to 2.0% of the payment required to be paid by the
Investor on such Settlement Date for the initial 30 days following such
Settlement Date until the Shares have been delivered, and an additional 2.0% for
each additional 30-day period thereafter until the Shares have been delivered,
which amount shall be prorated for such periods less than 30 days. In addition
to the foregoing, if the Company or its transfer agent shall fail for any reason
or for no reason to electronically transfer all of the Shares subject to a Draw
Down Notice to the Investor on the applicable Settlement Date by crediting the
Investor's or its designees' account at DTC through its Deposit/Withdrawal at
Custodian (DWAC) system in compliance with Section 3.5 of this Agreement, and if
on or after such applicable Settlement Date the Investor purchases, in an open
market transaction or otherwise, shares of Common Stock necessary to make
delivery by the Investor in satisfaction of a sale by the Investor of Shares
that the Investor anticipated receiving from the Company in connection with such
Draw Down, then the Company shall, in addition to any other amounts due to the
Investor pursuant to this Agreement, within three Trading Days after the
Investor's request, pay cash to the Investor in an amount equal to the
Investor's total purchase price (including brokerage commissions, if any) for
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the Shares so purchased, at which point the Company's obligation to credit such
Investor's or its designee's account at DTC for such Shares shall terminate. All
amounts due and payable to the Investor pursuant to this Section 3.6 are
hereinafter referred to collectively as the "MAKE WHOLE AMOUNT". If the Make
Whole Amount is not paid within two Trading Days following the date when due
hereunder, the Make Whole Amount shall accrue annual interest (on the basis of
the 365 day year) compounded daily at a rate equal to the greater of (i) the
prime rate of interest then in effect as published by the Wall Street Journal
plus 3.0% and (ii) 10.0%, up to and including the date on which the Make Whole
Amount is actually paid. The Company shall not issue a Draw Down Notice to the
Investor until the Make Whole Amount, plus all accrued interest, has been paid
to the Investor in full.
SECTION 3.7. CERTAIN LIMITATIONS. Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a Draw Down
Notice to the extent that (i) the Draw Down Amount Requested in such Draw Down
Notice exceeds the Maximum Fixed Draw Down Amount Requested, in the case of a
Fixed Draw Down Notice, or exceeds the Maximum Regular Draw Down Amount
Requested, in the case of a Regular Draw Down Notice or, (ii) the sale of Shares
pursuant to such Draw Down Notice would cause the Company to issue or sell or
the Investor to acquire or purchase a dollar value of shares of Common Stock
which, when aggregated with all Draw Down Amounts paid by the Investor pursuant
to all prior Draw Down Notices issued under this Agreement, would exceed the
Aggregate Limit, or (iii) the sale of Shares pursuant to such Draw Down Notice
would cause the Company to sell or the Investor to purchase a number of shares
of Common Stock which, when aggregated with all other shares of Common Stock
then beneficially owned (as calculated pursuant to Section 13(d) of the Exchange
Act and Rule 13d-3 promulgated thereunder) by the Investor and its Affiliates,
would result in the beneficial ownership by the Investor or any of its
Affiliates of more than 9.99% of the then issued and outstanding shares of
Common Stock (the "OWNERSHIP LIMITATION"). If the Company issues a Draw Down
Notice in which the Draw Down Amount Requested exceeds the Maximum Fixed Draw
Down Amount Requested, in the case of a Fixed Draw Down Notice, or exceeds the
Maximum Regular Draw Down Amount Requested, in the case of a Regular Draw Down
Notice, such Draw Down Notice shall be void AB INITIO to the extent the Draw
Down Amount Requested exceeds the Maximum Fixed Draw Down Amount Requested, in
the case of a Fixed Draw Down Notice, or exceeds the Maximum Regular Draw Down
Amount Requested, in the case of a Regular Draw Down Notice. If the Company
issues a Draw Down Notice that otherwise would require the Investor to purchase
shares of Common Stock which would cause the aggregate purchases of Common Stock
by the Investor under this Agreement to exceed the Aggregate Limit, such Draw
Down Notice shall be void AB INITIO to the extent of the amount by which the
dollar value of shares of Common Stock otherwise issuable pursuant to such Draw
Down Notice, together with all Draw Down Amounts paid by the Investor pursuant
to all prior Draw Down Notices issued under this Agreement, would exceed the
Aggregate Limit. If the Company issues a Draw Down Notice that otherwise would
require the Investor to purchase shares of Common Stock which would cause the
aggregate number of shares of Common Stock then beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3
promulgated thereunder) by the Investor and its Affiliates to exceed the
Ownership Limitation, such Draw Down Notice shall be void AB INITIO to the
extent of the amount by which the number of shares of Common Stock otherwise
issuable pursuant to such Draw Down Notice, together with all shares of Common
Stock then beneficially owned by the Investor and its Affiliates, would exceed
the Ownership Limitation.
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SECTION 3.8. BLACKOUT PERIODS. Notwithstanding any other provision of this
Agreement, the Company shall not deliver any Draw Down Notice or otherwise offer
or sell Shares to the Investor, and the Investor shall not be obligated to
purchase any Shares pursuant to this Agreement, (i) during any period in which
the Company is, or may be deemed to be, in possession of material non-public
information, or (ii) except as expressly provided in this Section 3.8, at any
time from and including the date (each, an "ANNOUNCEMENT DATE") on which the
Company shall issue a press release containing, or shall otherwise publicly
announce, its earnings, revenues or other results of operations (each, an
"EARNINGS ANNOUNCEMENT") through and including the time that is 24 hours after
the time that the Company files (a "FILING TIME") a Quarterly Report on Form
10-Q or an Annual Report on Form 10-K that includes consolidated financial
statements as of and for the same period or periods, as the case may be, covered
by such Earnings Announcement. If the Company wishes to deliver any Draw Down
Notice or otherwise offer, sell or deliver Shares to the Investor at any time
during the period from and including an Announcement Date through and including
the time that is 24 hours after the corresponding Filing Time, the Company
shall, as conditions thereto, (1) prepare and deliver to the Investor (with a
copy to counsel to the Investor) a report on Form 8-K which shall include
substantially the same financial and related information as was set forth in the
relevant Earnings Announcement (other than any earnings or other projections,
similar forward-looking data and officers' quotations) (each, an "EARNINGS
8-K"), (2) provide the Investor with the compliance certificate substantially in
the form attached hereto as Exhibit D, dated the date of such Draw Down Notice,
which certificate shall be deemed to remain in effect during the applicable
Pricing Period through and including the applicable Settlement Date, and the
"bring down" opinions in the form mutually agreed to by the parties hereto prior
to the date hereof, dated the date of such Draw Down Notice and (3) file such
Earnings 8-K with the Commission (so that it is deemed "filed" for purposes of
Section 18 of the Exchange Act), include such Earnings 8-K in a Prospectus
Supplement and file such Prospectus Supplement with the Commission under Rule
424(b) under the Securities Act, in each case on or prior to the date of such
Draw Down Notice. The provisions of clause (ii) of this Section 3.8 shall not be
applicable for the period from and after the time at which all of the conditions
set forth in the immediately preceding sentence shall have been satisfied (or,
if later, the time that is 24 hours after the time that the relevant Earnings
Announcement was first publicly released) through and including the time that is
24 hours after the Filing Time of the relevant Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, as the case may be. For purposes of clarity, the
parties agree that the delivery of the compliance certificate and the "bring
down" opinions pursuant to this Section 3.8 shall not relieve the Company from
any of its obligations under this Agreement with respect to the delivery of the
compliance certificate called for by Section 7.2(ii) and the "bring down"
opinions called for by Section 7.2(xv) on the applicable Settlement Date, which
Sections shall have independent application.
8
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
The Investor hereby makes the following representations, warranties and
covenants to the Company:
SECTION 4.1. ORGANIZATION AND STANDING OF THE INVESTOR. The Investor is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of New York.
SECTION 4.2. AUTHORIZATION AND POWER. The Investor has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement and to purchase or acquire
the Securities in accordance with the terms hereof. The execution, delivery and
performance by the Investor of this Agreement and the Registration Rights
Agreement 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 Investor, its Board of Directors or its
stockholders is required. Each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Investor and constitutes a
valid and binding obligation of the Investor enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application (including any limitation of
equitable remedies).
SECTION 4.3. NO CONFLICTS. The execution, delivery and performance by the
Investor of this Agreement and the Registration Rights Agreement and the
consummation by the Investor of the transactions contemplated hereby and thereby
do not and shall not (i) result in a violation of such Investor's charter
documents, bylaws or other applicable organizational instruments, (ii) conflict
with, constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Investor is a party or is bound, (iii) create or impose
any lien, charge or encumbrance on any property of the Investor under any
agreement or any commitment to which the Investor is party or under which the
Investor is bound or under which any of its properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign statute,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or by which any of its properties
or assets are bound or affected, except, in the case of clauses (ii), (iii) and
(iv), for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
prohibit or otherwise interfere with, in any material respect, the ability of
the Investor to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement. The Investor is not required under any
applicable federal, state, local or foreign 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 and the Registration Rights
Agreement or to purchase the Securities in accordance with the terms hereof;
9
provided, however, that for purposes of the representation made in this
sentence, the Investor is assuming and relying upon the accuracy of the relevant
representations and warranties and the compliance with the relevant covenants
and agreements of the Company in the Transaction Documents to which it is a
party.
SECTION 4.4. INVESTMENT PURPOSE. The Investor is acquiring the Securities
for its own account, for investment purposes and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under or exempt from the registration requirements
of the Securities Act; provided, however, that by making the representations
herein, the Investor does not agree, or make any representation or warranty, to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
The Investor does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
SECTION 4.5. ACCREDITED INVESTOR STATUS. The Investor is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
SECTION 4.6. RELIANCE ON EXEMPTIONS. The Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of U.S. federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.
SECTION 4.7. INFORMATION. All materials relating to the business, financial
condition, management and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Investor
have been furnished or otherwise made available to the Investor or its advisors,
including, without limitation, the Commission Documents. The Investor
understands that its investment in the Securities involves a high degree of
risk. The Investor is able to bear the economic risk of an investment in the
Securities and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of a proposed
investment in the Securities. The Investor and its advisors have been afforded
the opportunity to ask questions of and receive answers from representatives of
the Company concerning the financial condition and business of the Company and
other matters relating to an investment in the Securities. Neither such
inquiries nor any other due diligence investigations conducted by the Investor
or its advisors, if any, or its representatives shall modify, amend or affect
the Investor's right to rely on the Company's representations and warranties
contained in this Agreement or in any other Transaction Document to which the
Company is a party or the Investor's right to rely on any other document or
instrument executed and/or delivered in connection with this Agreement or the
consummation of the transaction contemplated hereby (including, without
limitation, the opinions of the Company's counsel delivered pursuant to Section
7.2(xv)). The Investor has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Securities. The Investor understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
10
SECTION 4.8. NO GOVERNMENTAL REVIEW. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
SECTION 4.9. NO GENERAL SOLICITATION. The Investor is not purchasing the
Securities as a result of any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities.
SECTION 4.10. NOT AN AFFILIATE. The Investor is not an officer, director or
an Affiliate of the Company.
SECTION 4.11. STATUTORY UNDERWRITER STATUS. The Investor acknowledges that
it will be disclosed as an "underwriter" and a "selling stockholder" in the
Registration Statement and in any Prospectus contained therein to the extent
required by applicable law and to the extent the Prospectus is related to the
resale of Registrable Securities.
SECTION 4.12. RESALES OF SECURITIES. The Investor represents, warrants and
covenants that it will resell such Securities only pursuant to the Registration
Statement, in a manner described under the caption "Plan of Distribution" in the
Registration Statement, and in a manner in compliance with all applicable U.S.
federal and state securities laws, rules and regulations, including, without
limitation, any applicable prospectus delivery requirements of the Securities
Act.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
the Investor (which is hereby incorporated by reference in, and constitutes an
integral part of, this Agreement) (the "DISCLOSURE SCHEDULE"), the Company
hereby makes the following representations, warranties and covenants to the
Investor:
SECTION 5.1. ORGANIZATION, GOOD STANDING AND POWER. The Company and each of
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as it is now being conducted and as
presently proposed to be conducted. The Company and each Subsidiary 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, except for any jurisdiction in
which the failure to be so qualified would not have a Material Adverse Effect.
SECTION 5.2. AUTHORIZATION, ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
each of the Transaction Documents to which it is a party and to issue the
Securities in accordance with the terms hereof and thereof. Except for approvals
of the Company's Board of Directors or a committee thereof as may be required in
11
connection with any issuance and sale of Securities to the Investor hereunder
(which approvals shall be obtained prior to the delivery of any Draw Down
Notice), the execution, delivery and performance by the Company of each of the
Transaction Documents to which it is a party and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required. Each of the Transaction Documents to which the Company is a party has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application (including any limitation of
equitable remedies).
SECTION 5.3. CAPITALIZATION AND VOTING RIGHTS. The authorized capital stock
of the Company and the shares thereof issued and outstanding were as set forth
in the Commission Documents as of the dates reflected therein. All of the
outstanding shares of Common Stock have been duly authorized and validly issued,
and are fully paid and nonassessable. Except as set forth in the Commission
Documents, this Agreement and the Registration Rights Agreement, there are no
agreements or arrangements under which the Company is obligated to register the
sale of any securities under the Securities Act. Except as set forth in the
Commission Documents, no shares of Common Stock are entitled to preemptive
rights and there are no outstanding debt securities and 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, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of capital stock of the Company other than those
issued or granted in the ordinary course of business pursuant to the Company's
equity incentive and/or compensatory plans or arrangements. Except for customary
transfer restrictions contained in agreements entered into by the Company to
sell restricted securities or as set forth in the Commission Documents, 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 Commission Documents, the offer and sale of all capital
stock, convertible or exchangeable securities, rights, warrants or options of
the Company issued prior to the Closing Date complied with all applicable
federal and state securities laws, and no stockholder has any right of
rescission or damages or any "put" or similar right with respect thereto that
would have a Material Adverse Effect. Except as set forth in the Commission
Documents, there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by this Agreement or any of the other
Transaction Documents or the consummation of the transactions described herein
or therein. The Company has furnished or made available to the Investor via
▇▇▇▇▇ true and correct copies of the Company's Articles of Incorporation as in
effect on the Closing Date (the "Charter"), and the Company's Bylaws as in
effect on the Closing Date (the "BYLAWS").
SECTION 5.4. ISSUANCE OF SECURITIES. The Initial Commitment Shares have
been, the Additional Commitment Shares (if any) to be issued under this
Agreement have been or will be (prior to the issuance thereof), and the Shares
12
to be issued under this Agreement have been or will be (prior to the delivery of
any Draw Down Notice to the Investor hereunder), duly authorized by all
necessary corporate action on the part of the Company. The Commitment Shares,
when issued in accordance with the terms of this Agreement, and the Shares, when
issued and paid for in accordance with the terms of this Agreement, shall be
validly issued and outstanding, fully paid and nonassessable and free from all
liens, charges, taxes, security interests, encumbrances, rights of first
refusal, preemptive or similar rights and other encumbrances with respect to the
issue thereof.
SECTION 5.5. NO CONFLICTS. The execution, delivery and performance by the
Company of each of the Transaction Documents to which it is a party and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and shall not (i) result in a violation of any provision of the Company's
Charter or Bylaws, (ii) conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company or any of its
Significant Subsidiaries is a party or is bound, (iii) create or impose a lien,
charge or encumbrance on any property or assets of the Company or any of its
Significant Subsidiaries under any agreement or any commitment to which the
Company or any of its Significant Subsidiaries is a party or by which the
Company or any of its Significant Subsidiaries is bound or to which any of their
respective properties or assets is subject, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree 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 (including federal and state securities laws and regulations and the
rules and regulations of the Trading Market), except, in the case of clauses
(ii), (iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations, liens, charges, encumbrances and violations as
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as specifically contemplated by this Agreement or the Registration Rights
Agreement and as required under the Securities Act and any applicable state
securities laws, the Company is not required under any federal, state, local or
foreign law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency
(including, without limitation, the Trading Market) in order for it to execute,
deliver or perform any of its obligations under the Transaction Documents to
which it is a party, or to issue the Securities to the Investor in accordance
with the terms hereof and thereof (other than such consents, authorizations,
orders, filings or registrations as have been obtained or made prior to the
Closing Date); provided, however, that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
representations and warranties of the Investor in this Agreement and the
compliance by it with its covenants and agreements contained in this Agreement
and the Registration Rights Agreement.
SECTION 5.6. COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. (a) The Company
has timely filed (giving effect to permissible extensions in accordance with
Rule 12b-25 under the Exchange Act) all Commission Documents. The Company has
delivered or made available to the Investor via ▇▇▇▇▇ or otherwise true and
complete copies of the Commission Documents filed with or furnished to the
Commission prior to the Closing Date (including, without limitation, the Jumbo
13
8-K). No Subsidiary of the Company is required to file or furnish any report,
schedule, registration, form, statement, information or other document with the
Commission. As of its filing date, each Commission Document filed with or
furnished to the Commission prior to the Closing Date (including, without
limitation, the Jumbo 8-K) complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and other
federal, state and local laws, rules and regulations applicable to it, and, as
of its filing date (or, if amended or superseded by a filing prior to the
Closing Date, on the date of such amended or superseded filing), such Commission
Document did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Registration Statement, on the date it is filed with
the Commission, on the date it is declared effective by the Commission, on each
Draw Down Exercise Date and on each Settlement Date, shall comply in all
material respects with the requirements of the Securities Act (including,
without limitation, Rule 415 under the Securities Act) and shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, except that this representation and warranty shall not apply to
statements in or omissions from the Registration Statement made in reliance upon
and in conformity with information relating to the Investor furnished to the
Company in writing by or on behalf of the Investor expressly for use therein.
The Prospectus and each Prospectus Supplement required to be filed pursuant to
this Agreement or the Registration Rights Agreement after the Closing Date, when
taken together, on its date, on each Draw Down Exercise Date and on each
Settlement Date, shall comply in all material respects with the requirements of
the Securities Act (including, without limitation, Rule 424(b) under the
Securities Act) and shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation and warranty
shall not apply to statements in or omissions from the Prospectus or any
Prospectus Supplement made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on behalf of
the Investor expressly for use therein. Each Commission Document (other than the
Registration Statement, the Prospectus or any Prospectus Supplement) to be filed
with or furnished to the Commission after the Closing Date and incorporated by
reference in the Registration Statement, the Prospectus or any Prospectus
Supplement required to be filed pursuant to this Agreement or the Registration
Rights Agreement (including, without limitation, the Current Report), when such
document is filed with or furnished to the Commission and, if applicable, when
such document becomes effective, as the case may be, shall comply in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Company has delivered or made
available to the Investor via ▇▇▇▇▇ or otherwise true and complete copies of all
comment letters and substantive correspondence received by the Company from the
Commission relating to the Commission Documents filed with or furnished to the
Commission as of the Closing Date, together with all written responses of the
Company thereto in the form such responses were filed via ▇▇▇▇▇. There are no
outstanding or unresolved comments or undertakings in such comment letters
received by the Company from the Commission. The Commission has not issued any
14
stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the Securities Act or the Exchange Act.
(b) The financial statements, together with the related notes and
schedules, of the Company included in the Commission Documents comply as to form
in all material respects with all applicable accounting requirements and the
published rules and regulations of the Commission and all other applicable rules
and regulations with respect thereto. Such financial statements, together with
the related notes and schedules, have been prepared in accordance with 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 condition of the Company and its consolidated
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).
(c) The Company has timely filed with the Commission and made available to
the Investor via ▇▇▇▇▇ or otherwise all certifications and statements required
by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C.
Section 1350 (Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 ("SOXA")) with
respect to all relevant Commission Documents. The Company is in compliance in
all material respects with the provisions of SOXA applicable to it as of the
date hereof. Except as disclosed in the Commission Documents, the Company
maintains disclosure controls and procedures required by Rule 13a-15 or Rule
15d-15 under the Exchange Act; such controls and procedures are effective to
ensure that all material information concerning the Company and its Subsidiaries
is made known on a timely basis to the individuals responsible for the timely
and accurate preparation of the Company's Commission filings and other public
disclosure documents. As used in this Section 5.6(c), the term "file" shall be
broadly construed to include any manner in which a document or information is
furnished, supplied or otherwise made available to the Commission.
(d) Li and Company, PC, who shall express their opinion on the audited
financial statements and related schedules to be included or incorporated by
reference in the Registration Statement and the Prospectus are, with respect to
the Company, independent public accountants as required by the Securities Act
and is an independent registered public accounting firm within the meaning of
SOXA as required by the rules of the Public Company Accounting Oversight Board.
Li and Company, PC has not been engaged by the Company to perform any
"prohibited activities" (as defined in Section 10A of the Exchange Act).
SECTION 5.7. SUBSIDIARIES. The Jumbo 8-K sets forth each Subsidiary of the
Company as of the Closing Date, showing its jurisdiction of incorporation or
organization and the percentage of the Company's ownership of the outstanding
capital stock or other ownership interests of such Subsidiary, and the Company
does not have any other Subsidiaries as of the Closing Date.
SECTION 5.8. NO MATERIAL ADVERSE EFFECT. Except as disclosed in any
Commission Documents filed since January 31, 2013, or which may be deemed to
have resulted from the Company's continued losses from operations, since January
31, 2013, the Company has not experienced or suffered any Material Adverse
15
Effect, and there exists no current state of facts, condition or event which
would have a Material Adverse Effect.
SECTION 5.9. NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any Subsidiary (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission Documents, other than those incurred in
the ordinary course of the Company's or its Subsidiaries respective businesses
since January 31, 2013 and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect.
SECTION 5.10. NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, liabilities,
operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company at or before the Closing but which has not been so
publicly announced or disclosed, except for events or circumstances which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
SECTION 5.11. INDEBTEDNESS; SOLVENCY. The Company's Quarterly Report on
Form 10-Q for its fiscal quarter ended October 31, 2013 sets forth, as of
October 31, 2013, all outstanding secured and unsecured Indebtedness of the
Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments through such date. For the purposes of this Agreement,
"INDEBTEDNESS" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $1,000,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements, indemnities and
other contingent obligations in respect of Indebtedness of others in excess of
$1,000,000, 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 $1,000,000 due under leases required to be capitalized in accordance
with GAAP. There is no existing or continuing default or event of default in
respect of any Indebtedness of the Company or any of its Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to Title 11 of the United States Code or any
similar federal or state bankruptcy law or law for the relief of debtors, nor
does the Company have any Knowledge that its creditors intend to initiate
involuntary bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for relief under Title 11 of the United States Code or any
other federal or state bankruptcy law or any law for the relief of debtors. The
Company is financially solvent and is generally able to pay its debts as they
become due.
SECTION 5.12. TITLE TO ASSETS. Each of the Company and its Subsidiaries has
good and valid title to, or has valid rights to lease or otherwise use, all of
their respective real and personal property reflected in the Commission
Documents, free of mortgages, pledges, charges, liens, security interests or
other encumbrances, except for those indicated in the Commission Documents and
those that would not have a Material Adverse Effect. All real property and
facilities held under lease by the Company or any of its Subsidiaries are held
16
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company or any of its Subsidiaries.
SECTION 5.13. 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 the Transaction Documents or the transactions contemplated thereby or any
action taken or to be taken pursuant thereto. Except as set forth in the
Commission Documents, 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, or involving any officers or directors of the Company or any of its
Subsidiaries, including, without limitation, any securities class action lawsuit
or stockholder derivative lawsuit related to the Company, in each case which, if
determined adversely to the Company, its Subsidiary or any officer or director
of the Company or its Subsidiaries, would have a Material Adverse Effect. Except
as set forth in the Commission Documents, no judgment, order, writ, injunction
or decree or award has been issued by or, to the Knowledge of the Company,
requested of any court, arbitrator or governmental agency which would be
reasonably expected to result in a Material Adverse Effect.
SECTION 5.14. COMPLIANCE WITH LAW. The business of the Company and the
Subsidiaries has been and is presently being conducted in compliance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents and
except for such non-compliance which, individually or in the aggregate, would
not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except in all cases for
possible violations which could not, individually or in the aggregate, have a
Material Adverse Effect. Without limiting the generality of the foregoing, the
Company has maintained all requirements for the continued listing or quotation
of its Common Stock on the Trading Market, and the Company is not in violation
of any of the rules, regulations or requirements of the Trading Market and has
no Knowledge of any facts or circumstances that could reasonably lead to
delisting or suspension of the Common Stock by the Trading Market in the
foreseeable future.
SECTION 5.15. CERTAIN FEES. Except for the placement fee payable by the
Company to Garden State Securities ("GARDEN STATE"), which shall be set forth in
a separate engagement letter between the Company and Garden State (a true and
complete fully executed copy of which has heretofore been provided to the
Investor) (the "PLACEMENT AGENT ENGAGEMENT LETTER"), no brokers, finders or
financial advisory fees or commissions are or shall be payable by the Company or
any Subsidiary (or any of their respective Affiliates) with respect to the
transactions contemplated by the Transaction Documents.
SECTION 5.16. DISCLOSURE. The Company confirms that neither it nor any
other Person acting on its behalf has provided the Investor or any of its
agents, advisors or counsel with any information that constitutes or could
reasonably be expected to constitute material, nonpublic information concerning
the Company or any of its Subsidiaries, other than the existence of the
17
transactions contemplated by the Transaction Documents. The Company understands
and confirms that the Investor will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
Investor regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated by the Transaction Documents (including, without
limitation, the representations and warranties of the Company contained in the
Transaction Documents to which it is a party (as modified by the Disclosure
Schedule)) furnished by or on behalf of the Company or any of its Subsidiaries,
taken together, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. Each press release issued by the Company or any of
its Subsidiaries during the 12 months preceding the Closing Date did not at the
time of release (or, if amended or superseded by a later dated press release
issued by the Company or any of its Subsidiaries prior to the Closing Date or by
a later dated Commission Document filed with or furnished to the Commission by
the Company prior to the Closing Date, at the time of issuance of such later
dated press release or filing or furnishing of such Commission Document, as
applicable) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
SECTION 5.17. OPERATION OF BUSINESS. (a) The Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies as
are necessary to conduct the business now operated by it (collectively,
"GOVERNMENTAL LICENSES"), except where the failure to possess such Governmental
Licenses, individually or in the aggregate, would not have a Material Adverse
Effect. The Company and its Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure to so
comply, individually or in the aggregate, would not have a Material Adverse
Effect or except as otherwise disclosed in the Commission Documents. All of the
Governmental Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect, individually or in the aggregate, would
not have a Material Adverse Effect or except as otherwise disclosed in the
Commission Documents. Except as set forth in the Commission Documents, neither
the Company nor any of its Subsidiaries has received any written notice of
proceedings relating to the revocation or modification of any such Governmental
Licenses which, if the subject of any unfavorable decision, ruling or finding,
individually or in the aggregate, would have a Material Adverse Effect. This
Section 5.17 does not relate to environmental matters, such items being the
subject of Section 5.18.
(b) The Company or one or more of its Subsidiaries owns or possesses
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
18
trade names, trade dress, logos, copyrights and other intellectual property,
including, without limitation, all of the intellectual property described in the
Commission Documents as being owned or licensed by the Company (collectively,
"INTELLECTUAL PROPERTY"), necessary to carry on the business now operated by it.
Except as set forth in the Commission Documents, there are no actions, suits or
judicial proceedings pending, or to the Company's Knowledge threatened, relating
to patents or proprietary information to which the Company or any of its
Subsidiaries is a party or of which any property of the Company or any of its
Subsidiaries is subject, and neither the Company nor any of its Subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which could render any Intellectual Property invalid
or inadequate to protect the interest of the Company and its Subsidiaries
therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, individually or in the
aggregate, would have a Material Adverse Effect.
SECTION 5.18. ENVIRONMENTAL COMPLIANCE. Except as disclosed in the
Commission Documents, the Company and each of its Subsidiaries have obtained all
material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws, except for any
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations the failure of which to obtain does not or would
not have a Material Adverse Effect. "ENVIRONMENTAL LAWS" shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not, individually or in
the aggregate, have a Material Adverse Effect, to the Company's Knowledge, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or could reasonably be expected to violate any Environmental Law
after the Closing Date or that could reasonably be expected to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
SECTION 5.19. MATERIAL AGREEMENTS. Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary of the Company 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
19
Commission as an exhibit to an annual report on Form 10-K (collectively,
"MATERIAL AGREEMENTS"). Except as set forth in the Commission Documents, the
Company and each of its Subsidiaries have performed in all material respects all
the obligations then required to be performed by them under the Material
Agreements, have received no notice of default or an event of default by the
Company or any of its Subsidiaries thereunder and are not aware of any basis for
the assertion thereof, and neither the Company or any of its Subsidiaries nor,
to the Knowledge of the Company, any other contracting party thereto are in
default under any Material Agreement now in effect, the result of which would
have a Material Adverse Effect. Except as set forth in the Commission Documents,
each of the Material Agreements is in full force and effect, and constitutes a
legal, valid and binding obligation enforceable in accordance with its terms
against the Company and/or any of its Subsidiaries and, to the Knowledge of the
Company, each other contracting party thereto, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
SECTION 5.20. TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Commission Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts, service arrangements or other continuing
transactions exceeding $120,000 between (a) the Company or any Subsidiary, on
the one hand, and (b) any person or entity who would be covered by Item 404(a)
of Regulation S-K, on the other hand. Except as disclosed in the Commission
Documents, there are no outstanding amounts payable to or receivable from, or
advances by the Company or any of its Subsidiaries to, and neither the Company
nor any of its Subsidiaries is otherwise a creditor of or debtor to, any
beneficial owner of more than 5% of the outstanding shares of Common Stock, or
any director, employee or affiliate of the Company or any of its Subsidiaries,
other than (i) reimbursement for reasonable expenses incurred on behalf of the
Company or any of its Subsidiaries or (ii) as part of the normal and customary
terms of such person's employment or service as a director with the Company or
any of its Subsidiaries.
SECTION 5.21. EMPLOYEES. Neither the Company nor any Subsidiary of the
Company has any collective bargaining arrangements or agreements covering any of
its employees, except as set forth in the Commission Documents. Except as
disclosed in the Commission Documents, no officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect, has
terminated or, to the Knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.
SECTION 5.22. USE OF PROCEEDS. The proceeds from the sale of the Shares
shall be used by the Company and its Subsidiaries as set forth in the Prospectus
and any Prospectus Supplement filed pursuant to Section 2.3 of this Agreement
and pursuant to the Registration Rights Agreement.
20
SECTION 5.23. INVESTMENT COMPANY ACT STATUS. The Company is not, and as a
result of the consummation of the transactions contemplated by the Transaction
Documents and the application of the proceeds from the sale of the Shares as set
forth in the Prospectus and any Prospectus Supplement shall not be required to
be registered as, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 5.24. ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect. No
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) or "accumulated funding deficiency" (as defined in Section 302 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA has occurred
with respect to any Plan which has had or would have a Material Adverse Effect,
and the execution and delivery of this Agreement and the issuance and sale of
the Securities hereunder shall not result in any of the foregoing events. Each
Plan is in compliance in all material respects with applicable law, including
ERISA and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any Plan; and each Plan for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualifications. As
used in this Section 5.24, the term "PLAN" shall mean an "employee pension
benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
SECTION 5.25. TAXES. The Company and each of its Subsidiaries (i) has filed
all necessary federal, state and foreign income and franchise tax returns or has
duly requested extensions thereof, except for those the failure of which to file
would not have a Material Adverse Effect, (ii) has paid all federal, state,
local and foreign taxes due and payable for which it is liable, except to the
extent that any such taxes are being contested in good faith and by appropriate
proceedings, except for such taxes the failure of which to pay would not have a
Material Adverse Effect, and (iii) does not have any tax deficiency or claims
outstanding or assessed or, to the Company's Knowledge, proposed against it
which would have a Material Adverse Effect. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company and its Subsidiaries know of no basis for any
such claim. The Company is not operated in such a manner as to qualify as a
passive foreign investment company, as defined in Section 1297 of the Code.
SECTION 5.26. INSURANCE. The Company and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
21
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for, and neither the Company nor any such
Subsidiary has any reason to believe that it will be unable to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
SECTION 5.27. U.S. REAL PROPERTY HOLDING CORPORATION. Neither the Company
nor any of its Subsidiaries is, or has ever been, and so long as any of the
Securities are held by the Investor, shall become a U.S. real property holding
corporation within the meaning of Section 897 of the Code.
SECTION 5.28. EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to, and
in reliance on, the representations, warranties and covenants made herein by the
Investor, the offer and sale of the Securities in accordance with the terms and
conditions of this Agreement is exempt from the registration requirements of the
Securities Act pursuant to Section 4(a)(2) and Rule 506 of Regulation D;
provided, however, that at the request of and with the express agreement of the
Investor, the Shares and the Additional Commitment Shares will be delivered to
the Investor via book entry through DTC and will not bear legends noting
restrictions as to resale of such securities under federal or state securities
laws, nor will any such securities be subject to stop transfer instructions.
Neither the offer or sale of the Securities pursuant to, nor the Company's
performance of its obligations under, the Transaction Documents to which it is a
party shall (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Securities, or (ii) entitle the holders of
any outstanding shares of capital stock of the Company to preemptive or other
rights to subscribe to or acquire the shares of Common Stock or other securities
of the Company.
SECTION 5.29. NO GENERAL SOLICITATION OR ADVERTISING. Neither the Company,
nor any of its Subsidiaries or 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) in connection with the offer or sale of the
Securities.
SECTION 5.30. NO INTEGRATED OFFERING. None of the Company, its Subsidiaries
or any of their Affiliates, nor any Person acting on their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of the
issuance of any of the Securities under the Securities Act, whether through
integration with prior offerings or otherwise, or cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Trading Market. None of the Company, its
Subsidiaries, their Affiliates nor any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of the issuance of any of the Securities under the Securities Act
or cause the offering of any of the Securities to be integrated with other
offerings.
SECTION 5.31. DILUTIVE EFFECT. The Company is aware and acknowledges that
issuance of the Securities could cause dilution to existing stockholders and
could significantly increase the outstanding number of shares of Common Stock.
22
The Company further acknowledges that its obligation to issue Shares pursuant to
the terms of a Draw Down in accordance with this Agreement is, in each case,
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
SECTION 5.32. MANIPULATION OF PRICE. Neither the Company nor any of its
officers, directors or Affiliates has, and, to the Knowledge of the Company, no
Person acting on their behalf has, (i) taken, directly or indirectly, any action
designed or intended to cause or to result in the stabilization or manipulation
of the price of any security of the Company, or which caused or resulted in, or
which would in the future reasonably be expected to cause or result in, the
stabilization or manipulation of the price of any security of the Company, in
each case to facilitate the sale or resale of any of the Securities, or (ii)
sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities, other than, in the case of clause (ii), compensation paid
to Garden State in connection with the placement of the Securities pursuant to
the Placement Agent Engagement Letter. Neither the Company nor any of its
officers, directors or Affiliates will during the term of this Agreement, and,
to the Knowledge of the Company, no Person acting on their behalf will during
the term of this Agreement, take any of the actions referred to in the
immediately preceding sentence, other than, in the case of clause (ii),
compensation paid to Garden State in connection with the placement of the
Securities pursuant to the Placement Agent Engagement Letter.
SECTION 5.33. SECURITIES ACT. The Company has complied and shall comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Securities hereunder, including, without
limitation, the applicable requirements of the Securities Act. The Registration
Statement, upon filing with the Commission and at the time it is declared
effective by the Commission, shall satisfy all of the requirements of the
Securities Act to register the resale of the Registrable Securities by the
Investor in accordance with the Registration Rights Agreement on a delayed or
continuous basis under Rule 415 under the Securities Act at then-prevailing
market prices, and not fixed prices. The Company is not, and has not previously
been at any time, an issuer identified in, or subject to, Rule 144(i).
SECTION 5.34. LISTING AND MAINTENANCE REQUIREMENTS; DTC ELIGIBILITY. The
Company's Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to its
Knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act, nor has the Company received any
notification that the Commission is contemplating terminating such registration.
The Company has not, in the 12 months preceding the Closing Date, received
notice from any Trading Market on which the Common Stock is or has been listed
or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. As of the Closing Date, the
Company is in compliance with all such listing and maintenance requirements. The
Common Stock may be issued and transferred electronically to third parties via
DTC through its Deposit/Withdrawal at Custodian (DWAC) system. The Company has
not received notice from DTC to the effect that a suspension of, or restriction
on, accepting additional deposits of the Common Stock, electronic trading or
book-entry services by DTC with respect to the Common Stock is being imposed or
is contemplated.
23
SECTION 5.35. APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Charter or the laws of its state of
incorporation that is or could become applicable to the Investor as a result of
the Investor and the Company fulfilling their respective obligations or
exercising their respective rights under the Transaction Documents (as
applicable), including, without limitation, as a result of the Company's
issuance of the Securities and the Investor's ownership of the Securities.
SECTION 5.36. FOREIGN CORRUPT PRACTICES ACT. None of the Company, any
Subsidiary or, to the Knowledge of the Company, any director, officer, agent,
employee, affiliate or other Person acting on behalf of the Company or any of
its Subsidiaries, is aware of or has taken any action, directly or indirectly,
that would result in a violation by such Persons of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations thereunder
(collectively, the "FCPA"), including, without limitation, making use of the
mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any "foreign official" (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate
for foreign political office, in contravention of the FCPA. The Company and the
Subsidiaries have conducted their respective businesses in compliance with the
FCPA and have instituted and maintain policies and procedures designed to
ensure, and which are reasonably expected to continue to ensure, continued
compliance therewith.
SECTION 5.37. MONEY LAUNDERING LAWS. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the "MONEY LAUNDERING LAWS")
and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
Knowledge of the Company, threatened.
SECTION 5.38. OFAC. None of the Company, any Subsidiary or, to the
Knowledge of the Company, any director, officer, agent, employee, affiliate or
Person acting on behalf of the Company or any of its Subsidiaries is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department ("OFAC"); and the Company will not
directly or indirectly use the proceeds of the offering, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner
or other Person, for the purpose of financing the activities of any Person
currently subject to any U.S. sanctions administered by OFAC.
SECTION 5.39. NO DISQUALIFICATION EVENTS. None of the Company, any of its
predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the offering contemplated hereby, any
24
beneficial owner of 20% or more of the Company's outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of sale (each, an "ISSUER COVERED PERSON") is
subject to any of the "Bad Actor" disqualifications described in Rule
506(d)(1)(i) to (viii) under the Securities Act (a "DISQUALIFICATION EVENT"),
except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under
the Securities Act. The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event.
SECTION 5.40. MINERAL RESOURCE PROPERTIES AND SURFACE RIGHTS. All material
interests in mineral resource properties and surface rights for exploration and
exploitation, as applicable, overlying those properties of the Company and its
Subsidiaries are described in all material respects in the Commission Documents
and, except as set forth in the Commission Documents, are owned or held by the
Company or such Subsidiaries as owner thereof with good title, are in good
standing, and are valid and enforceable and free and clear of any liens, charges
or encumbrances and no royalty is payable in respect of any of them. Except as
set forth in the Commission Documents, no other material property rights are
necessary for the conduct of the Company's or its Subsidiaries' businesses as
they are currently being conducted, and there are no material restrictions on
the ability of the Company or its Subsidiaries to use or otherwise exploit any
such property rights, and the Company does not know of any claim or basis for a
claim that may adversely affect such rights in any material respect.
SECTION 5.41. ROYALTIES AND COMMISSIONS. Except as set forth in the
Commission Documents, neither the Company nor any of its Subsidiaries has any
responsibility or obligation to pay or have paid on their behalf any material
commission, royalty or similar payment to any person with respect to their
property rights.
SECTION 5.42. ACKNOWLEDGEMENT REGARDING INVESTOR'S ACQUISITION OF
SECURITIES. The Company acknowledges and agrees that the Investor is acting
solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated by the Transaction Documents. The
Company further acknowledges that the Investor 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 by the Transaction Documents,
and any advice given by the Investor or any of its representatives or agents in
connection therewith is merely incidental to the Investor's acquisition of the
Securities. The Company further represents to the Investor that the Company's
decision to enter into the Transaction Documents to which it is a party has been
based solely on the independent evaluation of the transactions contemplated
thereby by the Company and its representatives. The Company acknowledges and
agrees that the Investor has not made and does not make any representations or
warranties with respect to the transactions contemplated by the Transaction
Documents other than those specifically set forth in Article IV of this
Agreement.
25
ARTICLE VI
ADDITIONAL COVENANTS
The Company covenants with the Investor, and the Investor covenants with
the Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:
SECTION 6.1. SECURITIES COMPLIANCE. The Company shall notify the Commission
and the Trading Market, if and as applicable, in accordance with their
respective rules and regulations, of the transactions contemplated by the
Transaction Documents, and shall take all necessary action, undertake all
proceedings and obtain all registrations, permits, consents and approvals for
the legal and valid issuance of the Securities to the Investor in accordance
with the terms of the Transaction Documents, as applicable.
SECTION 6.2. RESERVATION OF COMMON STOCK. The Company has available and the
Company shall reserve and keep available at all times, free of preemptive and
other similar rights of stockholders, the requisite aggregate number of
authorized but unissued shares of Common Stock to enable the Company to timely
effect the issuance, sale and delivery in full to the Investor of all Securities
to be issued and delivered under this Agreement, in any case prior to the
issuance to the Investor of such Securities. The number of shares of Common
Stock so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares of Common Stock
actually delivered pursuant to this Agreement.
SECTION 6.3. REGISTRATION AND LISTING. The Company shall take all action
necessary to cause the Common Stock to continue to be registered as a class of
securities under Sections 12(b) or 12(g) of the Exchange Act, shall comply with
its reporting and filing obligations under the Exchange Act, and shall not take
any action or file any document (whether or not permitted by the Securities Act
or the Exchange Act) 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 shall use its reasonable
best efforts to continue the listing and trading of its Common Stock and the
listing of the Securities purchased or acquired by the Investor hereunder on the
Trading Market and to comply with the Company's reporting, filing and other
obligations under the bylaws, listed securities maintenance standards and other
rules and regulations of the Trading Market. The Company shall not take any
action which could be reasonably expected to result in the delisting or
suspension of the Common Stock on the Trading Market. If the Company receives
any final and non-appealable notice that the listing or quotation of the Common
Stock on the Trading Market shall be terminated on a date certain, the Company
shall promptly (and in any case within 48 hours) notify the Investor of such
fact in writing and shall use its reasonable best efforts to cause the Common
Stock to be listed or quoted on another Trading Market prior to such date
certain.
SECTION 6.4. COMPLIANCE WITH LAWS.
(i) The Company shall comply, and cause each Subsidiary to comply, (a) with
all laws, rules, regulations and orders applicable to the business and
operations of the Company and its Subsidiaries, except as would not have a
Material Adverse Effect and (b) with all applicable provisions of the Securities
Act and the Exchange Act and the rules and regulations of the Trading Market.
Without limiting the foregoing, neither the Company, nor any of its
26
Subsidiaries, nor to the Knowledge of the Company, any of their respective
directors, officers, agents, employees or any other Persons acting on their
behalf shall, in connection with the operation of the Company's and its
Subsidiaries' respective businesses, (1) use any corporate funds for unlawful
contributions, payments, gifts or entertainment or to make any unlawful
expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, (2) pay, accept or receive any
unlawful contributions, payments, expenditures or gifts, or (3) violate or
operate in noncompliance with any export restrictions, anti-boycott regulations,
embargo regulations or other applicable domestic or foreign laws and
regulations, including, without limitation, the FCPA and the Money Laundering
Laws.
(ii) The Investor shall comply with all laws, rules, regulations and orders
applicable to the performance by it of its obligations under this Agreement and
its investment in the Securities, except as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any material
respect. Without limiting the foregoing, the Investor shall comply with all
applicable provisions of the Securities Act and the Exchange Act, including
Regulation M thereunder, and any applicable securities laws of any non-U.S.
jurisdictions.
SECTION 6.5. KEEPING OF RECORDS AND BOOKS OF ACCOUNT; DUE DILIGENCE.
(i) The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries shall 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. The
Company shall maintain a system of internal accounting controls that (a) pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (b)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the Company's financial statements
(it being acknowledged and agreed that the identification by the Company and/or
its independent registered public accounting firm of any "significant
deficiencies" or "material weaknesses" (each as defined by the Public Company
Accounting Oversight Board) in the Company's internal controls over its
financial reporting shall not, in and of itself, constitute a breach of this
Section 6.5(i)).
(ii) Subject to the requirements of Section 6.16 of this Agreement, from
time to time from and after the Closing Date, the Company shall make available
for inspection and review by the Investor during normal business hours and after
reasonable notice, customary documentation reasonably requested by the Investor
and/or its appointed counsel or advisors to conduct due diligence; provided,
however, that after the Closing Date, the Investor's continued due diligence
shall not be a condition to the issuance of any Draw Down Notice or the
settlement of any Draw Down.
SECTION 6.6. LIMITATIONS ON HOLDINGS AND ISSUANCES. The Company shall not
issue and the Investor shall not purchase any shares of Common Stock which would
cause the aggregate number of shares of Common Stock then beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3
27
promulgated thereunder) by the Investor and its Affiliates to exceed the
Ownership Limitation. Promptly following any request by the Company, the
Investor shall inform the Company of the number of shares of Common Stock then
beneficially owned by the Investor and its Affiliates.
SECTION 6.7. OTHER AGREEMENTS AND ALTERNATE TRANSACTIONS.
(i) The Company shall not enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction in or of which the
terms thereof would restrict, materially delay, conflict with or impair the
ability or right of the Company to perform its obligations under the Transaction
Documents to which it is a party, including, without limitation, the obligation
of the Company to deliver (i) the Initial Commitment Shares to the Investor not
later than 4:00 p.m. (New York time) on the second Trading Day immediately
following the Closing Date, (ii) the Shares to the Investor in respect of a Draw
Down on the applicable Settlement Date and (iii) the Additional Commitment
Shares in accordance with Section 10.1. For the avoidance of doubt, nothing in
this Section 6.7(i) shall in any way limit the Company's right to terminate this
Agreement in accordance with Section 8.1 (subject in all cases to Section 8.3).
(ii) If the Company enters into any agreement, plan, arrangement or
transaction with a third party or seeks to utilize any existing agreement, plan
or arrangement with a third party, in each case the principal purpose of which
is to implement, effect or consummate, at any time during (x) the period
beginning on the 10th Trading Day immediately preceding the applicable Draw Down
Exercise Date on which the Company has delivered a Fixed Draw Down Notice and
ending on the second Trading Day next following the applicable Settlement Date
therefor or (y) the period beginning on the applicable Draw Down Exercise Date
on which the Company has delivered a Regular Draw Down Notice and ending on the
second Trading Day next following the applicable Settlement Date therefor (such
periods referred to in clause (x) and (y), a "REFERENCE PERIOD"), an Alternate
Transaction that does not constitute an Acceptable Transaction, the Company
shall provide prompt notice thereof (an "ALTERNATE TRANSACTION NOTICE") to the
Investor; provided, however, that (1) any such Alternate Transaction Notice
relating to an Alternate Transaction not constituting an Acceptable Transaction
to be implemented, effected or consummated during a Reference Period referred to
in clause (x) of this sentence must be received by the Investor not later than
the applicable Draw Down Exercise Date on which the Company has delivered the
applicable Fixed Draw Down Notice, and (2) any such Alternate Transaction Notice
relating to an Alternate Transaction not constituting an Acceptable Transaction
to be implemented, effected or consummated during a Reference Period referred to
in clause (y) of this sentence must be received by the Investor not later than
the earlier of (a) 48 hours after the Company's execution of any agreement,
plan, arrangement or transaction relating to such Alternate Transaction (or,
with respect to any existing agreement, plan or arrangement, 48 hours after the
Company has determined to utilize any such existing agreement, plan or
arrangement to implement, effect or consummate such Other Financing) and (b) the
second Trading Day immediately preceding the applicable Settlement Date with
respect to the applicable Regular Draw Down Notice. If required under applicable
law, including, without limitation, Regulation FD promulgated by the Commission,
or under the applicable rules and regulations of the Trading Market, the Company
shall simultaneously publicly disclose the information included in any Alternate
Transaction Notice in accordance with Regulation FD and the applicable rules and
regulations of the Trading Market. For purposes of this Section 6.7(ii), any
press release issued by, or Commission Document filed by, the Company shall
constitute sufficient notice, provided that it is issued or filed, as the case
may be, within the time requirements set forth in the first sentence (including
the provisos thereto) of this Section 6.7(ii) for an Alternate Transaction
Notice. With respect to any Reference Period for which the Company is required
to provide an Alternate Transaction Notice pursuant to the first sentence of
this Section 6.7(ii), the Investor shall purchase the Shares subject to the
applicable Draw Down at the lower of (x) the price therefor in accordance with
the terms of this Agreement or (y) the third party's per share purchase price
(or exercise or conversion price, as the case may be) in connection with the
Alternate Transaction, net of such third party's discounts, Warrant Value and
fees.
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(iii) For all purposes of this Agreement, an "ALTERNATE TRANSACTION" shall
mean (w) the issuance of Common Stock for a purchase price less than, or the
issuance of securities convertible into or exchangeable for Common Stock at an
exercise or conversion price (as the case may be) less than, the then Current
Market Price of the Common Stock (including, without limitation, pursuant to any
"equity line" or other financing that is substantially similar to the financing
provided for under this Agreement, or pursuant to any other transaction in which
the purchase, conversion or exchange price for such Common Stock is determined
using a floating discount or other post-issuance adjustable discount to the then
Current Market Price (any such transaction, a "SIMILAR FINANCING")), in each
case, after all fees, discounts, Warrant Value and commissions associated with
the transaction (a "BELOW MARKET OFFERING"); (x) an "at-the-market" offering of
Common Stock or securities convertible into or exchangeable for Common Stock
pursuant to Rule 415(a)(4) under the Securities Act (an "ATM"); (y) the
implementation by the Company of any mechanism in respect of any securities
convertible into or exchangeable for Common Stock for the reset of the purchase
price of the Common Stock to below the then Current Market Price of the Common
Stock (including, without limitation, any antidilution or similar adjustment
provisions in respect of any Company securities, but specifically excluding
customary antidilution adjustments for stock splits, stock dividends, stock
combinations, recapitalizations, reclassifications and similar events) (a "PRICE
RESET PROVISION"); or (z) the issuance of options, warrants or similar rights of
subscription or the issuance of convertible equity or debt securities, in each
case not constituting an Acceptable Transaction. For all purposes of this
Agreement, an "ACCEPTABLE TRANSACTION" shall mean the issuance by the Company
of: (1) debt securities or any class or series of preferred stock of the
Company, in each case that are not convertible into or exchangeable for Common
Stock or securities convertible into or exchangeable for Common Stock; (2)
shares of Common Stock or securities convertible into or exchangeable for Common
Stock other than in connection with a Below Market Offering or an ATM, and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (3) shares of Common Stock or securities convertible into or
exchangeable for Common Stock in connection with an underwritten public offering
of equity securities of the Company or a registered direct public offering of
equity securities of the Company, in each case where the price per share of such
Common Stock (or the conversion or exercise price of such securities, as
applicable) is fixed concurrently with the execution of definitive documentation
relating to such offering, and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (4) shares of Common Stock or
securities convertible into or exchangeable for Common Stock in connection with
awards under the Company's benefit and equity plans and arrangements or
shareholder rights plan (as applicable), and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof; (5) shares of Common
Stock issuable upon the conversion, exercise or exchange of equity awards or
convertible, exercisable or exchangeable securities outstanding as of the
Closing Date; (6) shares of Common Stock in connection with stock splits, stock
dividends, stock combinations, recapitalizations, reclassifications and similar
events; (7) shares of Common Stock or securities convertible into or exercisable
or exchangeable for Common Stock issued in connection with the acquisition,
license or sale of one or more other companies, equipment, technologies, other
assets or lines of business, and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (8) shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock or
similar rights to subscribe for the purchase of shares of Common Stock in
connection with technology sharing, collaboration, partnering, licensing,
research and joint development agreements (or amendments thereto) with third
parties, and the issuance of shares of Common Stock upon the conversion,
29
exercise or exchange thereof; (9) shares of Common Stock or securities
convertible into or exchangeable for Common Stock to employees, consultants
and/or advisors as consideration for services rendered or to be rendered, and
the issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; and (10) shares of Common Stock or securities convertible into or
exchangeable for Common Stock issued in connection with capital or equipment
financings and/or real property lease arrangements, and the issuance of shares
of Common Stock upon the conversion, exercise or exchange thereof.
SECTION 6.8. CORPORATE EXISTENCE. The Company shall take all steps
necessary to preserve and continue the corporate existence of the Company;
provided, however, that, except as provided in Section 6.9, nothing in this
Agreement shall be deemed to prohibit the Company from engaging in any
Fundamental Transaction with another Person. For the avoidance of doubt, nothing
in this Section 6.8 shall in any way limit the Company's right to terminate this
Agreement in accordance with Section 8.1 (subject in all cases to Section 8.3).
SECTION 6.9. FUNDAMENTAL TRANSACTION. If a Draw Down Notice has been
delivered to the Investor and the transactions contemplated therein have not yet
been fully settled in accordance with the terms and conditions of this
Agreement, the Company shall not effect any Fundamental Transaction until the
expiration of five Trading Days following the Settlement Date with respect to
such Draw Down Notice.
SECTION 6.10. DELIVERY OF REGISTRATION STATEMENT AND PROSPECTUS; SUBSEQUENT
CHANGES. In accordance with the Registration Rights Agreement, the Company shall
deliver or make available to the Investor and its counsel, without charge, an
electronic copy of the Registration Statement, the Prospectus and all amendments
and supplements to the Registration Statement or Prospectus that are filed with
the Commission during any period in which a Prospectus (or in lieu thereof, the
notice referred to in Rule 173(a) under the Securities Act) is required by the
Securities Act to be delivered in connection with resales of the Registrable
Securities, in each case as soon as reasonably practicable after the filing
thereof with the Commission. The Company shall provide the Investor a reasonable
opportunity to comment on a draft of each such document and shall give due
consideration to all such comments. The Company consents to the use of the
Prospectus (and of any Prospectus Supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or "Blue Sky" laws of
the jurisdictions in which the Registrable Securities may be sold by the
Investor, in connection with the resale of the Registrable Securities and for
such period of time thereafter as the Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Securities Act) is required by the
Securities Act to be delivered in connection with resales of the Registrable
Securities. If during such period of time any event shall occur that in the
reasonable judgment of the Company and its counsel is required to be set forth
in the Registration Statement, the Prospectus or any Prospectus Supplement or
should be set forth therein in order to make the statements made therein (in the
case of the Prospectus or any Prospectus Supplement, in light of the
circumstances under which they were made) not misleading, or if it is necessary
to amend the Registration Statement or supplement or amend the Prospectus or any
Prospectus Supplement to comply with the Securities Act or any other applicable
law or regulation, the Company shall forthwith (i) notify the Investor to
suspend the resale of Registrable Securities during such period and (ii) prepare
and file with the Commission an appropriate amendment to the Registration
30
Statement or Prospectus Supplement to the Prospectus, and shall expeditiously
furnish or make available to the Investor an electronic copy thereof, so as to
correct such statement or omission or effect such compliance.
SECTION 6.11. AMENDMENTS TO THE REGISTRATION STATEMENT; PROSPECTUS
SUPPLEMENTS. Except as provided in this Agreement and other than periodic
reports required to be filed pursuant to the Exchange Act, the Company shall not
file with the Commission any amendment to the Registration Statement that
relates to the Investor, the Transaction Documents or the transactions
contemplated thereby or file with the Commission any Prospectus Supplement that
relates to the Investor, the Transaction Documents or the transactions
contemplated thereby with respect to which (a) the Investor shall not previously
have been advised, or (b) the Company shall not have given due consideration to
any comments thereon received from the Investor or its counsel, unless it is
necessary to amend the Registration Statement or make any supplement to the
Prospectus to comply with the Securities Act or any other applicable law or
regulation, in which case the Company shall promptly so inform the Investor, the
Investor shall be provided with a reasonable opportunity to review and comment
upon any disclosure relating to the Investor and the Company shall expeditiously
furnish to the Investor an electronic copy thereof. In addition, for so long as,
in the reasonable opinion of counsel for the Investor, the Prospectus (or in
lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is
required to be delivered in connection with any sales of Registrable Securities
by the Investor, the Company shall not file any Prospectus Supplement without
delivering or making available a copy of such Prospectus Supplement to the
Investor promptly.
SECTION 6.12. STOP ORDERS. The Company shall notify the Investor as soon as
possible (but in no event later than 24 hours), and confirm in writing, upon its
becoming aware of the occurrence of any of the following events in respect of
the Registration Statement or related Prospectus or Prospectus Supplement
relating to an offering of Registrable Securities: (i) receipt of any request by
the Commission or any other federal or state governmental authority for any
additional information relating to the Registration Statement, the Prospectus or
any Prospectus Supplement, or for any amendment of or supplement to the
Registration Statement, the Prospectus, or any Prospectus Supplement; (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
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, or of the suspension of qualification or exemption from
qualification of the Securities for offering or sale in any jurisdiction, or the
initiation or contemplated initiation of any proceeding for such purpose; and
(iii) any event or the existence of any condition or state of facts, which makes
any statement of a material fact made in the Registration Statement, the
Prospectus or any Prospectus Supplement untrue or which requires the making of
any additions to or changes to the statements then made in the Registration
Statement, the Prospectus or any Prospectus Supplement in order to state a
material fact required by the Securities Act to be stated therein or necessary
in order to make the statements then made therein (in the case of the Prospectus
or any Prospectus Supplement, in light of the circumstances under which they
were made) not misleading, or which requires an amendment to the Registration
Statement or a supplement to the Prospectus or any Prospectus Supplement to
comply with the Securities Act or any other law (other than the transactions
contemplated by any Draw Down Notice and the settlement thereof). The Company
shall not be required to disclose to the Investor the substance or specific
31
reasons of any of the events set forth in clauses (i) through (iii) of the
immediately preceding sentence, but rather, shall only be required to disclose
that the event has occurred. The Company shall not issue any Draw Down during
the continuation of any of the foregoing events. If at any time the Commission
or any other federal or state governmental authority shall issue any stop order
suspending the effectiveness of the Registration Statement or prohibiting or
suspending the use of the Prospectus or any Prospectus Supplement, the Company
shall use commercially reasonable efforts to obtain the withdrawal of such order
at the earliest possible time.
SECTION 6.13. SELLING RESTRICTIONS.
(i) Except as expressly set forth below, the Investor covenants that from
and after the Closing Date through and including the Trading Day next following
the expiration or termination of this Agreement (the "RESTRICTED PERIOD"),
neither the Investor nor any of its Affiliates nor any entity managed or
controlled by the Investor (collectively, the "RESTRICTED PERSONS" and each of
the foregoing is referred to herein as a "RESTRICTED PERSON") shall, directly or
indirectly, (x) engage in any Short Sales involving the Company's securities or
(y) grant any option to purchase, or acquire any right to dispose of or
otherwise dispose for value of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for any shares of Common Stock,
or enter into any swap, hedge or other similar agreement that transfers, in
whole or in part, the economic risk of ownership of the Common Stock.
Notwithstanding the foregoing, it is expressly understood and agreed that
nothing contained herein shall (without implication that the contrary would
otherwise be true) prohibit any Restricted Person during the Restricted Period
from: (1) selling "long" (as defined under Rule 200 promulgated under Regulation
SHO) the Securities; or (2) selling a number of shares of Common Stock equal to
the number of Shares that such Restricted Person is or may be obligated to
purchase under a pending Draw Down Notice but has not yet taken possession of so
long as such Restricted Person (or the Broker-Dealer, as applicable) delivers
the Shares purchased pursuant to such Draw Down Notice to the purchaser thereof
or the applicable Broker-Dealer; provided, however, such Restricted Person (or
the applicable Broker-Dealer, as applicable) shall not be required to so deliver
any such Shares subject to such Draw Down Notice if the Company fails for any
reason to deliver such Shares to the Investor on the applicable Settlement Date
upon the terms and subject to the provisions of this Agreement.
(ii) In addition to the foregoing, in connection with any sale of
Securities (including any sale permitted by paragraph (i) above), the Investor
shall comply in all respects with all applicable laws, rules, regulations and
orders, including, without limitation, the requirements of the Securities Act
and the Exchange Act.
SECTION 6.14. EFFECTIVE REGISTRATION STATEMENT. During the Investment
Period, the Company shall use its commercially reasonable efforts to maintain
the continuous effectiveness of the Registration Statement under the Securities
Act.
SECTION 6.15. BLUE SKY. The Company shall take such action, if any, as is
necessary in order to obtain an exemption for or to qualify the Securities for
issuance and sale to the Investor pursuant to the Transaction Documents, at the
request of the Investor, and the subsequent resale of Registrable Securities by
the Investor, in each case, under applicable state securities or "Blue Sky" laws
32
and shall provide evidence of any such action so taken to the Investor from time
to time following the Closing Date; provided, however, that the Company shall
not be required in connection therewith or as a condition thereto to (x) qualify
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 6.15, (y) subject itself to general taxation in any
such jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction.
SECTION 6.16. NON-PUBLIC INFORMATION. Neither the Company or any of its
Subsidiaries, nor any of their respective directors, officers, employees or
agents shall disclose any material non-public information about the Company to
the Investor, unless a simultaneous public announcement thereof is made by the
Company in the manner contemplated by Regulation FD. In the event of a breach of
the foregoing covenant by the Company or any of its Subsidiaries, or any of
their respective directors, officers, employees and agents (as determined in the
reasonable good faith judgment of the Investor), (i) the Investor shall promptly
provide written notice of such breach to the Company and (ii) after such notice
has been provided to the Company and in addition to any other remedy provided
herein or in the other Transaction Documents, the Investor shall have the right
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public information without the
prior approval by the Company, any of its Subsidiaries, or any of their
respective directors, officers, employees or agents; provided that the Company
shall have failed to publicly disclose such material, non-public information
within 24 hours following demand therefor by the Investor. The Investor shall
not have any liability to the Company, any of its Subsidiaries, or any of their
respective directors, officers, employees, stockholders or agents, for any such
disclosure.
SECTION 6.17. BROKER/DEALER. The Investor shall use one or more
broker-dealers to effectuate all sales, if any, of Securities that it may
purchase or otherwise acquire from the Company pursuant to the Transaction
Documents, as applicable, which (or whom) shall be unaffiliated with the
Investor and Garden State and not then currently engaged or used by the Company
(collectively, the "BROKER-DEALER"). The Investor shall, from time to time,
provide the Company with all information regarding the Broker-Dealer reasonably
requested by the Company. The Investor shall be solely responsible for all fees
and commissions of the Broker-Dealer, which shall not exceed customary brokerage
fees and commissions.
SECTION 6.18. DISCLOSURE SCHEDULE.
(i) The Company may, from time to time, update the Disclosure Schedule as
may be required to satisfy the condition set forth in Section 7.2(i). For
purposes of this Section 6.18, any disclosure made in a schedule to the
Compliance Certificate substantially in the form attached hereto as Exhibit D
shall be deemed to be an update of the Disclosure Schedule. Notwithstanding
anything in this Agreement to the contrary, no update to the Disclosure Schedule
pursuant to this Section 6.18 shall cure any breach of a representation or
warranty of the Company contained in this Agreement and made prior to the update
and shall not affect any of the Investor's rights or remedies with respect
thereto.
(ii) Notwithstanding anything to the contrary contained in the Disclosure
Schedule or in this Agreement, the information and disclosure contained in any
Schedule of the Disclosure Schedule shall be deemed to be disclosed and
incorporated by reference in any other Schedule of the Disclosure Schedule as
33
though fully set forth in such Schedule for which applicability of such
information and disclosure is readily apparent on its face. The fact that any
item of information is disclosed in the Disclosure Schedule shall not be
construed to mean that such information is required to be disclosed by this
Agreement. Except as expressly set forth in this Agreement, such information and
the thresholds (whether based on quantity, qualitative characterization, dollar
amounts or otherwise) set forth herein shall not be used as a basis for
interpreting the terms "material" or "Material Adverse Effect" or other similar
terms in this Agreement.
ARTICLE VII
CONDITIONS TO CLOSING AND CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES
SECTION 7.1. CONDITIONS PRECEDENT TO CLOSING. The Closing is subject to the
satisfaction of each of the conditions set forth in this Section 7.1.
(i) ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Investor contained in this Agreement (a)
that are not qualified by "materiality" shall be true and correct in all
material respects as of the Closing Date, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct in all material
respects as of such other date and (b) that are qualified by "materiality" shall
be true and correct as of the Closing Date, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of such other date.
(ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this Agreement (a)
that are not qualified by "materiality" or "Material Adverse Effect" shall be
true and correct in all material respects as of the Closing Date, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct in all
material respects as of such other date and (b) that are qualified by
"materiality" or "Material Adverse Effect" shall be true and correct as of the
Closing Date, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct as of such other date.
(iii) ISSUANCE OF INITIAL COMMITMENT SHARES. On the Closing Date, the
Company shall deliver irrevocable instructions to its transfer agent to issue to
the Investor, not later than 4:00 p.m. (New York City time) on the second
Trading Day immediately following the Closing Date, a certificate representing
the Initial Commitment Shares in the name of the Investor or its designee (in
which case such designee name shall have been provided to the Company prior to
the Closing Date), in consideration for the Investor's execution and delivery of
this Agreement. Such certificate shall be delivered to the Investor by overnight
courier at its address set forth in Section 10.4 hereof. For the avoidance of
doubt, all of the Initial Commitment Shares shall be fully earned as of the
Closing Date regardless of whether any Draw Downs are issued by the Company or
settled hereunder.
34
(iv) CLOSING DELIVERABLES. At the Closing, counterpart signature pages of
this Agreement and the Registration Rights Agreement executed by each of the
parties hereto shall be delivered as provided in Section 2.2. Simultaneously
with the execution and delivery of this Agreement and the Registration Rights
Agreement, the Investor's counsel shall have received (a) a certificate from the
Company, dated the Closing Date, in the form of Exhibit C hereto, (b) a copy of
the irrevocable instructions to the Company's transfer agent regarding the
issuance to the Investor of the certificate representing the Initial Commitment
Shares, and (c) a copy of the Placement Agent Engagement Letter executed by each
of the parties thereto.
SECTION 7.2. CONDITIONS PRECEDENT TO A DRAW DOWN. The right of the Company
to deliver a Draw Down Notice and the obligation of the Investor to accept a
Draw Down Notice and to acquire and pay for the Shares in accordance therewith
is subject to the satisfaction, at each Draw Down Exercise Date and at each
Settlement Date (except as otherwise expressly set forth below), of each of the
conditions set forth in this Section 7.2.
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this Agreement (a)
that are not qualified by "materiality" or "Material Adverse Effect" shall have
been true and correct in all material respects when made and shall be true and
correct in all material respects as of the applicable Draw Down Exercise Date
and the applicable Settlement Date with the same force and effect as if made on
such dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct in all material respects as of such other date and (b) that are
qualified by "materiality" or "Material Adverse Effect" shall have been true and
correct when made and shall be true and correct as of the applicable Draw Down
Exercise Date and the applicable Settlement Date with the same force and effect
as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of such other date.
(ii) PERFORMANCE OF THE COMPANY. The Company shall have performed,
satisfied and complied in all material 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 the
applicable Draw Down Exercise Date and the applicable Settlement Date. The
Company shall have delivered to the Investor on the applicable Settlement Date
the Compliance Certificate substantially in the form attached hereto as Exhibit
D.
(iii) REGISTRATION STATEMENT EFFECTIVE. The Registration Statement covering
the resale by the Investor of the Registrable Securities shall have been
declared effective under the Securities Act by the Commission and shall remain
effective, and the Investor shall be permitted to utilize the Prospectus therein
to resell (a) all of the Initial Commitment Shares and all of the Additional
Commitment Shares (if any) issuable pursuant to this Agreement, (b) all of the
Shares issued pursuant to all prior Draw Down Notices, and (c) all of the Shares
issuable pursuant to the applicable Draw Down Notice.
(iv) NO MATERIAL NOTICES. None of the following events shall have occurred
and be continuing: (a) receipt of any request by the Commission or any other
federal or state governmental authority for any additional information relating
35
to the Registration Statement, the Prospectus or any Prospectus Supplement, or
for any amendment of or supplement to the Registration Statement, the
Prospectus, or any Prospectus Supplement; (b) 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 prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, or of the suspension of
qualification or exemption from qualification of the Securities for offering or
sale in any jurisdiction, or the initiation or contemplated initiation of any
proceeding for such purpose; or (c) the occurrence of any event or the existence
of any condition or state of facts, which makes any statement of a material fact
made in the Registration Statement, the Prospectus or any Prospectus Supplement
untrue or which requires the making of any additions to or changes to the
statements then made in the Registration Statement, the Prospectus or any
Prospectus Supplement in order to state a material fact required by the
Securities Act to be stated therein or necessary in order to make the statements
then made therein (in the case of the Prospectus or any Prospectus Supplement,
in light of the circumstances under which they were made) not misleading, or
which requires an amendment to the Registration Statement or a supplement to the
Prospectus or any Prospectus Supplement to comply with the Securities Act or any
other law (other than the transactions contemplated by the applicable Draw Down
Notice and the settlement thereof). The Company shall have no Knowledge of any
event that could reasonably be expected to have the effect of causing the
suspension of the effectiveness of the Registration Statement or the prohibition
or suspension of the use of the Prospectus or any Prospectus Supplement in
connection with the resale of the Registrable Securities by the Investor.
(v) OTHER COMMISSION FILINGS. The Current Report and the Form D shall have
been filed with the Commission as required pursuant to Section 2.3, and the
final Prospectus and all other Prospectus Supplements required to have been
filed with the Commission pursuant to Section 2.3 and pursuant to the
Registration Rights Agreement shall have been filed with the Commission in
accordance with Section 2.3 and the Registration Rights Agreement. All reports,
schedules, registrations, forms, statements, information and other documents
required to have been filed by the Company with the Commission pursuant to the
reporting requirements of the Exchange Act, including all material required to
have been filed pursuant to Section 13(a) or 15(d) of the Exchange Act, shall
have been filed with the Commission and, if any Registrable Securities are
covered by a Registration Statement on Form S-3, such filings shall have been
made within the applicable time period prescribed for such filing under the
Exchange Act.
(vi) NO SUSPENSION OF TRADING IN OR NOTICE OF DELISTING OF COMMON STOCK.
Trading in the Common Stock shall not have been suspended by the Commission, the
Trading Market or the FINRA (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to
the applicable Draw Down Exercise Date), the Company shall not have received any
final and non-appealable notice that the listing or quotation of the Common
Stock on the Trading Market shall be terminated on a date certain (unless, prior
to such date certain, the Common Stock is listed or quoted on any other Trading
Market), trading in securities generally as reported on the Trading Market shall
not have been suspended or limited, nor shall a banking moratorium have been
declared either by the U.S. or New York State authorities (except for any
suspension, limitation or moratorium which shall be terminated prior to the
36
applicable Draw Down Exercise Date), there shall not have been imposed any
suspension of, or restriction on, accepting additional deposits of the Common
Stock, electronic trading or book-entry services by DTC with respect to the
Common Stock that is continuing, the Company shall not have received any notice
from DTC to the effect that a suspension of, or restriction on, accepting
additional deposits of the Common Stock, electronic trading or book-entry
services by DTC with respect to the Common Stock is being imposed or is
contemplated (unless, prior to such suspension or restriction, DTC shall have
notified the Company in writing that DTC has determined not to impose any such
suspension or restriction), nor shall there have occurred any material outbreak
or escalation of hostilities or other national or international calamity or
crisis that has had or would reasonably be expected to have a material adverse
change in any U.S. financial, credit or securities market that is continuing.
(vii) COMPLIANCE WITH LAWS. The Company shall have complied with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances in connection with the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the Company shall have obtained all permits and
qualifications required by any applicable state securities or "Blue Sky" laws
for the offer and sale of the Securities by the Company to the Investor and the
subsequent resale of the Registrable Securities by the Investor (or shall have
the availability of exemptions therefrom).
(viii) NO INJUNCTION. No statute, regulation, order, decree, writ, ruling
or injunction shall have been enacted, entered, promulgated, threatened or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of or which would materially modify or delay any of
the transactions contemplated by the Transaction Documents.
(ix) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or
threatened, and no inquiry or investigation by any governmental authority shall
have been commenced or threatened, against 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 the
Transaction Documents, or seeking material damages in connection with such
transactions.
(x) AGGREGATE LIMIT. The issuance and sale of the Shares issuable pursuant
to such Draw Down Notice shall not violate Sections 3.1, 3.7, 3.9 and 6.6
hereof.
(xi) SECURITIES AUTHORIZED AND DELIVERED. The Shares issuable pursuant to
such Draw Down Notice shall have been duly authorized by all necessary corporate
action of the Company. The Company shall have delivered all Shares relating to
all prior Draw Down Notices and all Additional Commitment Shares required to be
delivered pursuant to this Agreement, as applicable.
37
(xii) LISTING OF SECURITIES. All of the Securities that may be issued
pursuant to this Agreement shall have been approved for listing or quotation on
the Trading Market as of the Closing Date, subject only to notice of issuance.
(xiii) NO MATERIAL ADVERSE EFFECT. No condition, occurrence, state of facts
or event constituting a Material Adverse Effect shall have occurred and be
continuing.
(xiv) NO RESTRICTIVE LEGENDS. If requested by the Investor from and after
the Effective Date, the Company shall have either (i) issued and delivered (or
caused to be issued and delivered) to the Investor a certificate representing
the Initial Commitment Shares that is free from all restrictive and other
legends or (ii) caused the Company's transfer agent to credit the Investor's or
its designee's account at DTC through its Deposit/Withdrawal at Custodian (DWAC)
system with a number of shares of Common Stock equal to the number of Initial
Commitment Shares represented by the certificate delivered by the Investor to
the Company in accordance with Section 10.1(iv) of this Agreement.
(xv) OPINION OF COUNSEL; BRING-DOWN. Prior to the first Draw Down Exercise
Date, the Investor shall have received an opinion from outside counsel to the
Company, in the form mutually agreed to by the parties hereto prior to the date
hereof. On each Settlement Date, the Investor shall have received an opinion
"bring down" from outside counsel to the Company, dated the applicable
Settlement Date, in the form mutually agreed to by the parties hereto prior to
the date hereof.
ARTICLE VIII
TERMINATION
SECTION 8.1. TERMINATION. Unless earlier terminated as provided hereunder,
this Agreement shall terminate automatically on the earliest to occur of (i) the
first day of the month next following the 24-month anniversary of the Effective
Date, (ii) the date on which the Investor shall have purchased or acquired
shares of Common Stock pursuant to this Agreement equal to the Aggregate Limit
and (iii) the date on which the Common Stock shall have failed to be listed or
quoted on a Trading Market. Subject to Section 8.3, the Company may terminate
this Agreement effective upon one Trading Day's prior written notice to the
Investor in accordance with Section 10.4; provided, however, that (A) the
Company shall have paid all fees and amounts and issued all Commitment Shares
owed to the Investor or its counsel, as applicable, pursuant to Section 10.1 of
this Agreement, prior to such termination, and (B) prior to issuing any press
release, or making any public statement or announcement, with respect to such
termination, the Company shall consult with the Investor and its counsel on the
form and substance of, and shall give due consideration to all comments of the
Investor and its counsel on, such press release or other disclosure. Subject to
Section 8.3, this Agreement may be terminated at any time by the mutual written
consent of the parties, effective as of the date of such mutual written consent
unless otherwise provided in such written consent.
SECTION 8.2. OTHER TERMINATION. Subject to Section 8.3, the Investor shall
have the right to terminate this Agreement effective upon one Trading Day's
prior written notice to the Company in accordance with Section 10.4, if: (i) any
condition, occurrence, state of facts or event constituting a Material Adverse
Effect has occurred and is continuing; (ii) the Company shall have entered into
38
any agreement, plan, arrangement or transaction with a third party or shall have
determined to utilize any existing agreement, plan or arrangement with a third
party, in each case the principal purpose of which is to implement, effect or
consummate at any time during the Investment Period a Similar Financing, an ATM
or a Price Reset Provision; (iii) a Fundamental Transaction shall have occurred;
(iv) (A) the Registration Statement is not filed by the Filing Deadline (as
defined in the Registration Rights Agreement) or declared effective by the
Effectiveness Deadline (as defined in the Registration Rights Agreement), or (B)
the Company is otherwise in breach or default in any material respect under any
of the other provisions of the Registration Rights Agreement, and in the case of
this clause (B), if such failure, breach or default is capable of being cured,
such failure, breach or default is not cured within 10 Trading Days after notice
of such failure, breach or default is delivered to the Company pursuant to
Section 10.4; (v) while the Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement and the
Investor holds any Registrable Securities, the effectiveness of the Registration
Statement lapses for any reason (including, without limitation, the issuance of
a stop order) or the Registration Statement, the Prospectus or any Prospectus
Supplement is otherwise unavailable to the Investor for the resale of all of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of 20
consecutive Trading Days or for more than an aggregate of 60 Trading Days in any
365-day period, other than due to acts of the Investor; (vi) trading in the
Common Stock on the Trading Market shall have been suspended and such suspension
continues for a period of five consecutive Trading Days or for more than an
aggregate of 20 Trading Days in any 365-day period; (vii) the Company has filed
for and/or is subject to any bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors instituted by or against the Company or
(viii) the Company is in material breach or default of this Agreement, and, if
such breach or default is capable of being cured, such breach or default is not
cured within 10 Trading Days after notice of such breach or default is delivered
to the Company pursuant to Section 10.4. Unless notification thereof is required
elsewhere in this Agreement (in which case such notification shall be provided
in accordance with such other provision), the Company shall promptly (but in no
event later than 24 hours) notify the Investor (and, if required under
applicable law, including, without limitation, Regulation FD promulgated by the
Commission, or under the applicable rules and regulations of the Trading Market,
the Company shall publicly disclose such information in accordance with
Regulation FD and the applicable rules and regulations of the Trading Market)
upon becoming aware of any of the events set forth in the immediately preceding
sentence.
SECTION 8.3. EFFECT OF TERMINATION. In the event of termination by the
Company or the Investor pursuant to Section 8.1 or 8.2, as applicable, written
notice thereof shall forthwith be given to the other party as provided in
Section 10.4 and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 8.1 or 8.2 herein, this Agreement shall become
void and of no further force and effect, except that (i) the provisions of
Article V (Representations, Warranties and Covenants of the Company), Article IX
(Indemnification), Article X (Miscellaneous) and this Article VIII (Termination)
shall remain in full force and effect indefinitely notwithstanding such
termination, and, (ii) so long as the Investor owns any Securities, the
covenants and agreements of the Company contained in Article VI (Additional
39
Covenants) shall remain in full force and notwithstanding such termination for a
period of six months following such termination. Notwithstanding anything in
this Agreement to the contrary, no termination of this Agreement by any party
shall (i) become effective prior to the first Trading Day immediately following
the Settlement Date related to any pending Draw Down Notice that has not been
fully settled in accordance with the terms and conditions of this Agreement (it
being hereby acknowledged and agreed that no termination of this Agreement shall
limit, alter, modify, change or otherwise affect any of the Company's or the
Investor's rights or obligations under the Transaction Documents with respect to
any pending Draw Down, and that the parties shall fully perform their respective
obligations with respect to any such pending Draw Down under the Transaction
Documents, provided all of the conditions to the settlement thereof set forth in
Article VII are timely satisfied), (ii) limit, alter, modify, change or
otherwise affect the Company's or the Investor's rights or obligations under the
Registration Rights Agreement, all of which shall survive any such termination,
(iii) affect any Initial Commitment Shares previously issued or delivered, or
any rights of any holder thereof (it being hereby acknowledged and agreed that
all of the Commitment Shares shall be fully earned as of the Closing Date,
regardless of whether any Draw Downs are issued by the Company or settled
hereunder), or (iv) affect any Additional Commitment Shares previously issued or
delivered (if any), or any rights of any holder thereof (it being hereby
acknowledged and agreed that all of the Additional Commitment Shares shall be
fully earned as of the date such shares are required to be issued to the
Investor under this Agreement, regardless of whether any Draw Downs are issued
by the Company or settled hereunder). Nothing in this Section 8.3 shall be
deemed to release the Company or the Investor from any liability for any breach
or default under this Agreement or any of the other Transaction Documents to
which it is a party, or to impair the rights of the Company and the Investor to
compel specific performance by the other party of its obligations under the
Transaction Documents to which it is a party.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1. INDEMNIFICATION OF INVESTOR. In consideration of the
Investor's execution and delivery of this Agreement and acquiring the Shares
hereunder and in addition to all of the Company's other obligations under the
Transaction Documents to which it is a party, subject to the provisions of this
Section 9.1, the Company shall indemnify and hold harmless the Investor, each of
its directors, officers, shareholders, members, partners, employees,
representatives, agents and advisors (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding the lack of such
title or any other title), each Person, if any, who controls the Investor
(within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act), and the respective directors, officers, shareholders, members,
partners, employees, representatives, agents and advisors (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding the lack of such title or any other title) of such controlling
Persons (each, an "INVESTOR Party"), from and against all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses (including all
judgments, amounts paid in settlement, court costs, reasonable attorneys' fees
and costs of defense and investigation) (collectively, "DAMAGES") that any
Investor Party may suffer or incur as a result of or relating to (a) any breach
of any of the representations, warranties, covenants or agreements made by the
40
Company in this Agreement or in the other Transaction Documents to which it is a
party or (b) any action, suit, claim or proceeding (including for these purposes
a derivative action brought on behalf of the Company) instituted against such
Investor Party arising out of or resulting from the execution, delivery,
performance or enforcement of the Transaction Documents, other than claims for
indemnification within the scope of Section 6 of the Registration Rights
Agreement; provided, however, that (x) the foregoing indemnity shall not apply
to any Damages to the extent, but only to the extent, that such Damages resulted
directly and primarily from a breach of any of the Investor's representations,
warranties, covenants or agreements contained in this Agreement or the
Registration Rights Agreement, and (y) the Company shall not be liable under
subsection (b) of this Section 9.1 to the extent, but only to the extent, that a
court of competent jurisdiction shall have determined by a final judgment (from
which no further appeals are available) that such Damages resulted directly and
primarily from any acts or failures to act, undertaken or omitted to be taken by
such Investor Party through its fraud, bad faith, gross negligence, or willful
or reckless misconduct.
The Company shall reimburse any Investor Party promptly upon demand (with
accompanying presentation of documentary evidence) for all legal and other costs
and expenses reasonably incurred by such Investor Party in connection with (i)
any action, suit, claim or proceeding, whether at law or in equity, to enforce
compliance by the Company with any provision of the Transaction Documents or
(ii) any other any action, suit, claim or proceeding, whether at law or in
equity, with respect to which it is entitled to indemnification under this
Section 9.1; provided that the Investor shall promptly reimburse the Company for
all such legal and other costs and expenses to the extent a court of competent
jurisdiction determines that any Investor Party was not entitled to such
reimbursement.
An Investor Party's right to indemnification or other remedies based upon
the representations, warranties, covenants and agreements of the Company set
forth in the Transaction Documents shall not in any way be affected by any
investigation or knowledge of such Investor Party. Such representations,
warranties, covenants and agreements shall not be affected or deemed waived by
reason of the fact that an Investor Party knew or should have known that any
representation or warranty might be inaccurate or that the Company failed to
comply with any agreement or covenant. Any investigation by such Investor Party
shall be for its own protection only and shall not affect or impair any right or
remedy hereunder.
To the extent that the foregoing undertakings by the Company set forth in
this Section 9.1 may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Damages
which is permissible under applicable law.
SECTION 9.2. INDEMNIFICATION PROCEDURES. Promptly after an Investor Party
receives notice of a claim or the commencement of an action for which the
Investor Party intends to seek indemnification under Section 9.1, the Investor
Party will notify the Company in writing of the claim or commencement of the
action, suit or proceeding; provided, however, that failure to notify the
Company will not relieve the Company from liability under Section 9.1, except to
the extent it has been materially prejudiced by the failure to give notice. The
Company will be entitled to participate in the defense of any claim, action,
suit or proceeding as to which indemnification is being sought, and if the
Company acknowledges in writing the obligation to indemnify the Investor Party
against whom the claim or action is brought, the Company may (but will not be
required to) assume the defense against the claim, action, suit or proceeding
41
with counsel satisfactory to it. After the Company notifies the Investor Party
that the Company wishes to assume the defense of a claim, action, suit or
proceeding, the Company will not be liable for any further legal or other
expenses incurred by the Investor Party in connection with the defense against
the claim, action, suit or proceeding except that if, in the opinion of counsel
to the Investor Party, it would be inappropriate under the applicable rules of
professional responsibility for the same counsel to represent both the Company
and such Investor Party. In such event, the Company will pay the reasonable fees
and expenses of no more than one separate counsel for all such Investor Parties
promptly as such fees and expenses are incurred. Each Investor Party, as a
condition to receiving indemnification as provided in Section 9.1, will
cooperate in all reasonable respects with the Company in the defense of any
action or claim as to which indemnification is sought. The Company will not be
liable for any settlement of any action effected without its prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. The Company will not, without the prior written consent of the
Investor Party, effect any settlement of a pending or threatened action with
respect to which an Investor Party is, or is informed that it may be, made a
party and for which it would be entitled to indemnification, unless the
settlement includes an unconditional release of the Investor Party from all
liability and claims which are the subject matter of the pending or threatened
action.
The remedies provided for in this Article IX are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
Investor Party at law or in equity.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. FEES AND EXPENSES; COMMITMENT SHARES.
(i) FEES AND EXPENSES. Each party shall bear its own fees and expenses
related to the transactions contemplated by this Agreement. The Company shall
pay all U.S. federal, state and local stamp and other similar transfer and other
taxes and duties levied in connection with issuance of the Securities pursuant
hereto.
(ii) COMMITMENT SHARES. In consideration for the Investor's execution and
delivery of this Agreement, concurrently with the execution and delivery of this
Agreement on the Closing Date, the Company shall deliver irrevocable
instructions to its transfer agent to issue to the Investor, not later than 4:00
p.m. (New York City time) on the second Trading Day immediately following the
Closing Date, a certificate representing the Initial Commitment Shares in the
name of the Investor or its designee (in which case such designee name shall
have been provided to the Company prior to the Closing Date). Such certificate
shall be delivered to the Investor by overnight courier at its address set forth
in Section 10.4 hereof. For the avoidance of doubt, all of the Initial
Commitment Shares shall be fully earned as of the Closing Date, regardless of
whether any Draw Downs are issued by the Company or settled hereunder. Upon
issuance, the Initial Commitment Shares shall constitute "restricted securities"
as such term is defined in Rule 144(a)(3) under the Securities Act and, subject
to the provisions of subsection (iv) of this Section 10.1, the certificate
representing the Initial Commitment Shares shall bear the restrictive legend set
forth below in subsection (iii) of this Section 10.1. In addition, not later
than 4:00 p.m. (New York City time) on the Trading Day immediately following the
Effective Date, the Company shall, or shall cause its transfer agent to,
42
electronically transfer to the Investor the Additional Commitment Shares by
crediting the Investor's or its designees' account (provided the Investor shall
have given the Company written notice of such designee prior to the Effective
Date) at DTC through its Deposit/Withdrawal at Custodian (DWAC) system, which
Additional Commitment Shares shall be freely tradable and transferable and
without restriction on resale pursuant to the Registration Statement.
"ADDITIONAL COMMITMENT SHARES" shall mean a number of shares of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (which shall
be appropriately adjusted for any stock splits, stock combinations, stock
dividends, recapitalizations and other similar transactions that occur on or
after the date of this Agreement), rounded up to the nearest whole share, equal
to the greater of (I) zero and (II) the difference of (i) the quotient of (x)
$150,000 divided by (y) the greater of (A) the Effective Date Market Price and
(B) $0.04, less (ii) 2,065,177; provided, however, that in no event shall the
Company issue more than an aggregate of 3,750,000 shares of Common Stock
(subject to adjustment for any stock splits, stock combinations, stock
dividends, recapitalizations and other similar transactions that occur on or
after the date of this Agreement) as Additional Commitment Shares pursuant to
this Agreement. For the avoidance of doubt, all of the Additional Commitment
Shares shall be fully earned as of the date such shares are required to be
issued to the Investor under this Agreement, regardless of whether any Draw
Downs are issued by the Company or settled hereunder. The Initial Commitment
Shares and the Additional Commitment Shares shall constitute Registrable
Securities and shall be included in the Registration Statement in accordance
with the terms of the Registration Rights Agreement.
(iii) LEGENDS. The certificate(s) representing the Initial Commitment
Shares issued prior to the Effective Date, except as set forth below, shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificate(s)):
THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED
BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Notwithstanding the foregoing and for the avoidance of doubt, all Shares to
be issued in respect of any Draw Down Notice delivered to the Investor pursuant
to this Agreement and any Additional Commitment Shares issued after the
Effective Date shall be issued to the Investor in accordance with Section 3.5
and Section 10.1(ii), as applicable, by crediting the Investor's or its
43
designees' account at DTC through its Deposit/Withdrawal at Custodian (DWAC)
system, and all such Shares and Additional Commitment Shares (if any) shall be
freely tradable and transferable and without restriction on resale (and no
stop-transfer order shall be placed against transfer thereof), and the Company
shall not take any action or give instructions to any transfer agent of the
Company otherwise.
(iv) REMOVAL OF LEGEND. From and after the Effective Date, the Company
shall, no later than two Trading Days following the delivery by the Investor to
the Company or the Company's transfer agent (with notice to the Company) of a
legended certificate representing the Initial Commitment Shares (endorsed or
with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect the reissuance and/or transfer, if applicable), as directed
by the Investor, either: (A) issue and deliver (or cause to be issued and
delivered) to the Investor a certificate representing such Initial Commitment
Shares that is free from all restrictive and other legends or (B) cause the
Company's transfer agent to credit the Investor's or its designee's account at
DTC through its Deposit/Withdrawal at Custodian (DWAC) system with a number of
shares of Common Stock equal to the number of Initial Commitment Shares
represented by the certificate so delivered by the Investor (the date by which
such certificate is required to be delivered to the Investor or such credit is
so required to be made to the account of the Investor or its designee at DTC
pursuant to the foregoing is referred to herein as the "REQUIRED DELIVERY
DATE"). If the Company fails on or prior to the Required Delivery Date to either
(i) issue and deliver (or cause to be issued and delivered) to the Investor a
certificate representing the Initial Commitment Shares that is free from all
restrictive and other legends or (ii) cause the Company's transfer agent to
credit the balance account of the Investor or its designee at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system with a number of shares of Common
Stock equal to the number of Initial Commitment Shares represented by the
certificate delivered by the Investor pursuant hereto, then, in addition to all
other remedies available to the Investor, the Company shall pay in cash to the
Investor on each day after the Required Delivery Date that the issuance or
credit of such shares is not timely effected an amount equal to 2.0% of the
product of (A) the sum of the number of Initial Commitment Shares not issued to
the Investor on a timely basis and to which the Investor is entitled and (B) the
VWAP for the five Trading Day period immediately preceding the Required Delivery
Date. In addition to the foregoing, if the Company fails to so properly deliver
such unlegended certificates or so properly credit the account of the Investor
or its designee at DTC by the Required Delivery Date, and if on or after the
Required Delivery Date the Investor purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Investor of shares of Common Stock that the Investor anticipated receiving from
the Company without any restrictive legend, then the Company shall, within three
Trading Days after the Investor's request, pay cash to the Investor in an amount
equal to the Investor's total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased, at which point the
Company's obligation to deliver a certificate or credit such Investor's or its
designee's account at DTC for such shares of Common Stock shall terminate and
such shares shall be cancelled.
44
SECTION 10.2. SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION, WAIVER OF JURY
TRIAL.
(i) The Company and the Investor 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 either party shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement by the other party and to enforce specifically the terms and
provisions hereof (without the necessity of showing economic loss and without
any bond or other security being required), this being in addition to any other
remedy to which either party may be entitled by law or equity.
(ii) Each of the Company and the Investor (a) hereby irrevocably submits to
the jurisdiction of the U.S. District Court and other courts of the United
States sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement, and (b) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 10.2
shall affect or limit any right to serve process in any other manner permitted
by law.
(iii) EACH OF THE COMPANY AND THE INVESTOR HEREBY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
DISPUTES RELATING HERETO. EACH OF THE COMPANY AND THE INVESTOR (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.2.
SECTION 10.3. ENTIRE AGREEMENT; AMENDMENT. The Transaction Documents set
forth the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written, with
respect to such matters. There are no promises, undertakings, representations or
warranties by either party relative to subject matter hereof not expressly set
forth in the Transaction Documents. No provision of this Agreement may be
amended by the parties from and after the date that is one Trading Day
immediately preceding the initial filing of the Registration Statement with the
Commission. Subject to the immediately preceding sentence, no provision of this
Agreement may be amended other than by a written instrument signed by both
parties hereto. The Disclosure Schedule and all exhibits to this Agreement are
hereby incorporated by reference in, and made a part of, this Agreement as if
set forth in full herein.
45
SECTION 10.4. NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile (with facsimile
machine confirmation of delivery received) 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 address
for such communications shall be:
If to the Company:
Tungsten Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: [________________]
Attention: Chief Executive Officer
If to the Investor:
Hanover Holdings I, LLC, a New York
limited liability company
c/o Magna Group
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
The MetLife Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Either party hereto may from time to time change its address for notices by
giving at least 10 days advance written notice of such changed address to the
other party hereto.
SECTION 10.5. WAIVERS. No provision of this Agreement may be waived by the
parties from and after the date that is one Trading Day immediately preceding
the initial filing of the Registration Statement with the Commission. Subject to
the immediately preceding sentence, no provision of this Agreement may be waived
other than in a written instrument signed by the party against whom enforcement
46
of such waiver is sought. No failure or delay in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercises thereof or of any other right, power or privilege.
SECTION 10.6. HEADINGS. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof. Unless the context clearly indicates otherwise, each
pronoun herein shall be deemed to include the masculine, feminine, neuter,
singular and plural forms thereof. The terms "including," "includes," "include"
and words of like import shall be construed broadly as if followed by the words
"without limitation." The terms "herein," "hereunder," "hereof" and words of
like import refer to this entire Agreement instead of just the provision in
which they are found.
SECTION 10.7. CONSTRUCTION. The parties agree that each of them and their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents. In addition, each and every
reference to share prices (including the Floor Prices and the Fixed Floor Price)
and shares of Common Stock in any Transaction Document shall be subject to
adjustment for any stock splits, stock combinations, stock dividends,
recapitalizations and other similar transactions that occur on or after the date
of this Agreement. Any reference in this Agreement to "Dollars" or "$" shall
mean the lawful currency of the United States of America.
SECTION 10.8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder to any Person without the prior written consent of the Investor, which
may be withheld or delayed in the Investor's sole discretion, including by any
Fundamental Transaction. The Investor may not assign its rights or obligations
under this Agreement.
SECTION 10.9. NO THIRD PARTY BENEFICIARIES. Except as expressly provided in
Article IX, this Agreement is intended only 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 10.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal procedural and substantive laws of the
State of New York, without giving effect to the choice of law provisions of such
state that would cause the application of the laws of any other jurisdiction.
SECTION 10.11. SURVIVAL. The representations, warranties, covenants and
agreements of the Company and the Investor contained in this Agreement shall
survive the execution and delivery hereof until the termination of this
Agreement; provided, however, that (i) the provisions of Article V
(Representations, Warranties and Covenants of the Company), Article VIII
(Termination), Article IX (Indemnification) and this Article X (Miscellaneous)
shall remain in full force and effect indefinitely notwithstanding such
termination, and, (ii) so long as the Investor owns any Securities, the
covenants and agreements of the Company contained in Article VI (Additional
Covenants), shall remain in full force and effect notwithstanding such
termination for a period of six months following such termination.
47
SECTION 10.12. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which taken together shall constitute one and the same
original and binding instrument and shall become effective when all counterparts
have been signed by each party and delivered to the other parties hereto, it
being understood that all parties hereto need not sign the same counterpart. In
the event any signature is delivered by facsimile, digital or electronic
transmission, such transmission shall constitute delivery of the manually
executed original and the party using such means of delivery shall thereafter
cause four additional executed signature pages to be physically delivered to the
other parties within five days of the execution and delivery hereof. Failure to
provide or delay in the delivery of such additional executed signature pages
shall not adversely affect the efficacy of the original delivery.
SECTION 10.13. PUBLICITY. The Company shall afford the Investor and its
counsel with a reasonable opportunity to review and comment upon, shall consult
with the Investor and its counsel on the form and substance of, and shall give
due consideration to all such comments from the Investor or its counsel on, any
press release, Commission filing or any other public disclosure made by or on
behalf of the Company relating to the Investor, its purchases hereunder or any
aspect of the Transaction Documents or the transactions contemplated thereby,
prior to the issuance, filing or public disclosure thereof. For the avoidance of
doubt, the Company shall not be required to submit for review any such
disclosure (i) contained in periodic reports filed with the Commission under the
Exchange Act if it shall have previously provided the same disclosure for review
in connection with a previous filing or (ii) any Prospectus Supplement if it
contains disclosure that does not reference the Investor, its purchases
hereunder or any aspect of the Transaction Documents or the transactions
contemplated thereby. The Company agrees and acknowledges that its failure to
fully comply with this provision constitutes a Material Adverse Effect.
SECTION 10.14. 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 10.15. FURTHER ASSURANCES. From and after the Closing Date, upon
the request of the Investor or the Company, each of the Company and the Investor
shall execute and deliver such instrument, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
[Signature Page Follows]
48
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.
TUNGSTEN CORP.:
By:
--------------------------------------------
Name:
Title:
HANOVER HOLDINGS I, LLC, a New York limited
liability company:
By:
--------------------------------------------
Name:
Title:
49
ANNEX I TO THE
COMMON STOCK PURCHASE AGREEMENT
DEFINITIONS
"ACCEPTABLE TRANSACTION" shall have the meaning assigned to such term in
Section 6.7(iii) hereof.
"ADDITIONAL COMMITMENT SHARES" shall have the meaning assigned to such term
in Section 10.1(ii) hereof.
"AFFILIATE" means any Person that, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with
a Person, as such terms are used in and construed under Rule 144. With respect
to the Investor, without limitation, any Person owning, owned by, or under
common ownership with the Investor, and any investment fund or managed account
that is managed on a discretionary basis by the same investment manager as the
Investor will be deemed to be an Affiliate.
"AGGREGATE LIMIT" shall have the meaning assigned to such term in Section
2.1 hereof.
"AGREEMENT" shall have the meaning assigned to such term in the preamble
hereof.
"ALTERNATE TRANSACTION" shall have the meaning assigned to such term in
Section 6.7(iii) hereof.
"ALTERNATE TRANSACTION NOTICE" shall have the meaning assigned to such term
in Section 6.7(ii) hereof.
"ANNOUNCEMENT DATE" shall have the meaning assigned to such term in Section
3.8 hereof.
"ATM" shall have the meaning assigned to such term in Section 6.7(iii)
hereof.
"AVERAGE TRADING VOLUME" means the average trading volume of the Common
Stock on the Trading Market for the 10 Trading Days immediately prior to the
applicable Draw Down Exercise Date.
"BELOW MARKET OFFERING" shall have the meaning assigned to such term in
Section 6.7(iii) hereof.
"BROKER-DEALER" shall have the meaning assigned to such term in Section
6.17 hereof.
"BYLAWS" shall have the meaning assigned to such term in Section 5.3
hereof.
"CHARTER" shall have the meaning assigned to such term in Section 5.3
hereof.
"CLOSING" shall have the meaning assigned to such term in Section 2.2
hereof.
i
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the U.S. Securities and Exchange Commission or any
successor entity.
"COMMISSION DOCUMENTS" shall mean (1) all reports, schedules,
registrations, forms, statements, information and other documents filed with or
furnished to the Commission by the Company pursuant to the reporting
requirements of the Exchange Act, including all material filed or furnished
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, since January
31, 2013, including, without limitation, the Annual Report on Form 10-K filed by
the Company for its fiscal year ended January 31, 2013 and the Current Report on
Form 8-K dated April 8, 2013, as amended (the "JUMBO 8-K"), and which hereafter
shall be filed with or furnished to the Commission by the Company, including,
without limitation, the Current Report, (2) the Registration Statement, as the
same may be amended from time to time, the Prospectus and each Prospectus
Supplement and (3) all information contained in such filings and all documents
and disclosures that have been and heretofore shall be incorporated by reference
therein.
"COMMITMENT SHARES" means, collectively, the Initial Commitment Shares and
the Additional Commitment Shares (if any).
"COMMON STOCK" shall have the meaning assigned to such term in the recitals
hereof.
"COMPANY" shall have the meaning assigned to such term in the preamble
hereof.
"CURRENT MARKET PRICE" means, with respect to any particular measurement
date, the closing trade price of a share of Common Stock on the Trading Market
for the Trading Day immediately preceding such measurement date, as reported by
Bloomberg, L.P.
"CURRENT REPORT" shall have the meaning assigned to such term in Section
2.3 hereof.
"DAMAGES" shall have the meaning assigned to such term in Section 9.1
hereof.
"DISCLOSURE SCHEDULE" shall have the meaning assigned to such term in the
preamble to Article V hereof.
"DISCOUNT PRICE" means a price equal to the product of (i) 0.95 and (ii)
the arithmetic average of the three lowest VWAPs that equal or exceed the
applicable Floor Price during the applicable Pricing Period, which shall be
appropriately adjusted for any stock splits, stock combinations, stock
dividends, recapitalizations and other similar transactions; provided, however,
that if the VWAP does not equal or exceed the applicable Floor Price for at
least three Trading Days during the applicable Pricing Period, then the
"DISCOUNT PRICE" shall mean a price equal to the product of (i) 0.95 and (ii)
the arithmetic average of all of the VWAPs that equal or exceed the applicable
Floor Price (if any) during such Pricing Period, which shall be appropriately
ii
adjusted for any stock splits, stock combinations, stock dividends,
recapitalizations and other similar transactions.
"DISQUALIFICATION EVENT" shall have the meaning assigned to such term in
Section 5.39 hereof.
"DRAW DOWN" means the transactions contemplated in Article III of this
Agreement with respect to any Draw Down Notice delivered by the Company in
accordance with Article III of this Agreement.
"DRAW DOWN AMOUNT" means the actual amount of proceeds received by the
Company pursuant to a Draw Down under this Agreement.
"DRAW DOWN AMOUNT REQUESTED" shall mean the specific amount of shares of
Common Stock requested by the Company in a Draw Down Notice delivered pursuant
to Section 3.1, which shall not exceed (i) the Maximum Fixed Draw Down Amount
Requested, in the case of a Fixed Draw Down Notice, or (ii) the Maximum Regular
Draw Down Amount Requested, in the case of a Regular Draw Down Notice.
"DRAW DOWN EXERCISE DATE" shall have the meaning assigned to such term in
Section 3.1(c) hereof.
"DRAW DOWN NOTICE" means a Fixed Draw Down Notice or a Regular Draw Down
Notice, as applicable.
"DTC" means The Depository Trust Company, a subsidiary of The Depository
Trust & Clearing Corporation, or any successor thereto.
"EARNINGS ANNOUNCEMENT" shall have the meaning assigned to such term in
Section 3.8 hereof.
"EARNINGS 8-K" shall have the meaning assigned to such term in Section 3.8
hereof.
"▇▇▇▇▇" means the Commission's Electronic Data Gathering, Analysis and
Retrieval System.
"EFFECTIVE DATE" means the first Trading Day immediately following the date
on which the initial Registration Statement filed pursuant to Section 2(a) of
the Registration Rights Agreement is declared effective by the Commission.
"EFFECTIVE DATE MARKET PRICE" means the lowest trade price of a share of
Common Stock on the Trading Market during the 10-Trading Day period immediately
preceding the Effective Date, as reported by Bloomberg, L.P.
"ENVIRONMENTAL LAWS" shall have the meaning assigned to such term in
Section 5.18 hereof.
iii
"EQUITY CONDITIONS" shall have the meaning assigned to such term in Section
3.1(a) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder.
"FCPA" shall have the meaning assigned to such term in Section 5.36 hereof.
"FILING TIME" shall have the meaning assigned to such term in Section 3.8
hereof.
"FINRA" means the Financial Industry Regulatory Authority.
"FIXED DRAW DOWN NOTICE" shall have the meaning assigned to such term in
Section 3.1(a) hereof.
"FIXED FLOOR PRICE" means $0.20, which shall be appropriately adjusted for
any stock splits, stock combinations, stock dividends, recapitalizations and
other similar transactions that occur on or after the date of this Agreement.
"FIXED PURCHASE PRICE" means a price equal to 90.0% of the lower of (i) the
lowest trade price of a share of Common Stock on the Trading Market, as reported
by Bloomberg, L.P., on the applicable Draw Down Exercise Date and (ii) the
arithmetic average of the three lowest daily VWAPs during the 10 consecutive
Trading Days ending on the Trading Day immediately preceding the applicable Draw
Down Exercise Date (in each case, to be appropriately adjusted for any stock
splits, stock combinations, stock dividends, recapitalizations and other similar
transactions).
"FLOOR PRICE" means, with respect to a Draw Down for which a Regular Draw
Down Notice has been delivered, the product of (i) 0.70 and (ii) the VWAP over
the 10 Trading Days immediately preceding the applicable Draw Down Exercise
Date, which shall be appropriately adjusted for any stock splits, stock
combinations, stock dividends, recapitalizations and other similar transactions.
"FUNDAMENTAL TRANSACTION" means that (i) the Company shall, directly or
indirectly, in one or more related transactions, (1) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, with the result that the holders of the Company's capital stock
immediately prior to such consolidation or merger together beneficially own less
than 50% of the outstanding voting power of the surviving or resulting
corporation, or (2) sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (3) take action to facilitate a purchase, tender or
exchange offer by another Person that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
iv
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (4) consummate a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination), or (5) reorganize, recapitalize or reclassify its Common
Stock, or (ii) any "person" or "group" (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act) is or shall become the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued
and outstanding Common Stock.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as applied by the Company.
"GOVERNMENTAL LICENSES" shall have the meaning assigned to such term in
Section 5.17(a) hereof.
"INDEBTEDNESS" shall have the meaning assigned to such term in Section 5.11
hereof.
"INITIAL COMMITMENT SHARES" means 2,065,177 shares of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock which,
concurrently with the execution and delivery of this Agreement on the Closing
Date, the Company has caused its transfer agent to issue and deliver to the
Investor not later than 4:00 p.m. (New York City time) on the second Trading Day
immediately following the Closing Date.
"INTELLECTUAL PROPERTY" shall have the meaning assigned to such term in
Section 5.17(b) hereof.
"INVESTMENT PERIOD" means the period commencing on the Effective Date and
expiring on the date this Agreement is terminated pursuant to Article VIII
hereof.
"INVESTOR" shall have the meaning assigned to such term in the preamble
hereof.
"INVESTOR PARTY" shall have the meaning assigned to such term in Section
9.1 hereof.
"ISSUER COVERED PERSON" shall have the meaning assigned to such term in
Section 5.39 hereof.
"KNOWLEDGE" means the actual knowledge of the Company's Chief Executive
Officer or Chief Financial Officer, after reasonable inquiry of all officers,
directors and employees of the Company who could reasonably be expected to have
knowledge or information with respect to the matter in question.
"MAKE WHOLE AMOUNT" shall have the meaning assigned to such term in Section
3.6 hereof.
v
"MATERIAL ADVERSE EFFECT" means (i) any condition, occurrence, state of
facts or event having, or insofar as reasonably can be foreseen would likely
have, any material adverse effect on the legality, validity or enforceability of
the Transaction Documents or the transactions contemplated thereby, (ii) any
condition, occurrence, state of facts or event having, or insofar as reasonably
can be foreseen would likely have, any effect on the business, operations,
properties or financial condition of the Company that is material and adverse to
the Company and its Subsidiaries, taken as a whole, and/or (iii) any condition,
occurrence, state of facts or event that would, or insofar as reasonably can be
foreseen would likely, prohibit or otherwise materially interfere with or delay
the ability of the Company to perform any of its obligations under any of the
Transaction Documents to which it is a party; provided, however, that none of
the following, individually or in the aggregate, shall be taken into account in
determining whether a Material Adverse Effect has occurred or insofar as
reasonably can be foreseen would likely occur: (a) changes in conditions in the
U.S. or global capital, credit or financial markets generally, including changes
in the availability of capital or currency exchange rates, provided such changes
shall not have affected the Company in a materially disproportionate manner as
compared to other similarly situated companies; (b) changes generally affecting
the industries in which the Company and its Subsidiaries operate, provided such
changes shall not have affected the Company in a materially disproportionate
manner as compared to other similarly situated companies; (c) any effect of the
announcement of, or the consummation of the transactions contemplated by, this
Agreement and the other Transaction Documents on the Company's relationships,
contractual or otherwise, with customers, suppliers, vendors, bank lenders,
strategic venture partners or employees; and (d) the receipt of any notice that
the Common Stock may be ineligible to continue listing or quotation on the
Trading Market, other than a final and non-appealable notice that the listing or
quotation of the Common Stock on the Trading Market shall be terminated on a
date certain (unless, prior to such date certain, the Common Stock is listed or
quoted on any other Trading Market).
"MATERIAL AGREEMENTS" shall have the meaning assigned to such term in
Section 5.19 hereof.
"MAXIMUM FIXED DRAW DOWN AMOUNT REQUESTED" means the lesser of (i) $250,000
worth of Common Stock and (ii) the product of (A) the Average Trading Volume and
(B) 2.5.
"MAXIMUM REGULAR DRAW DOWN AMOUNT REQUESTED" means the product of (i) the
Average Trading Volume and (ii) 3.5.
"MONEY LAUNDERING LAWS" shall have the meaning assigned to such term in
Section 5.37 hereof.
"OFAC" shall have the meaning assigned to such term in Section 5.38 hereof.
"OWNERSHIP LIMITATION" shall have the meaning assigned to such term in
Section 3.7 hereof.
vi
"PERSON" means any person or entity, whether a natural person, trustee,
corporation, partnership, limited partnership, limited liability company, trust,
unincorporated organization, business association, firm, joint venture,
governmental agency or authority.
"PLACEMENT AGENT ENGAGEMENT LETTER" shall have the meaning assigned to such
term in Section 5.15 hereof.
"PLAN" shall have the meaning assigned to such term in Section 5.24 hereof.
"PRESS RELEASE" shall have the meaning assigned to such term in Section 2.3
hereof.
"PRICE RESET PROVISION" shall have the meaning assigned to such term in
Section 6.7(iii) hereof.
"PRICING PERIOD" shall mean, with respect to each Draw Down for which a
Regular Draw Down Notice has been delivered, a period of 10 consecutive Trading
Days commencing on the Pricing Period start date set forth in the Regular Draw
Down Notice in accordance with Section 3.1 hereof.
"PROSPECTUS" means the prospectus in the form included in the Registration
Statement, as supplemented from time to time by any Prospectus Supplement,
including the documents incorporated by reference therein.
"PROSPECTUS SUPPLEMENT" means any prospectus supplement to the Prospectus
filed with the Commission from time to time pursuant to Rule 424(b) under the
Securities Act, including the documents incorporated by reference therein.
"REFERENCE PERIOD" shall have the meaning assigned to such term in Section
6.7(ii) hereof.
"REGISTRABLE SECURITIES" shall have the meaning assigned to such term in
the Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned to such
term in the recitals hereof.
"REGISTRATION STATEMENT" shall have the meaning assigned to such term in
the Registration Rights Agreement.
"REGULAR DRAW DOWN NOTICE" shall have the meaning assigned to such term in
Section 3.1(b) hereof.
"REGULATION D" shall have the meaning assigned to such term in the recitals
hereof.
"REQUIRED DELIVERY DATE" shall have the meaning assigned to such term in
Section 10.1(iv) hereto.
vii
"RESTRICTED PERIOD" shall have the meaning assigned to such term in Section
6.13(i) hereof.
"RESTRICTED PERSON" shall have the meaning assigned to such term in Section
6.13(i) hereof.
"RESTRICTED PERSONS" shall have the meaning assigned to such term in
Section 6.13(i) hereof.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect.
"SECTION 4(A)(2)" shall have the meaning assigned to such term in the
recitals hereof.
"SECURITIES" means, collectively, the Shares and the Commitment Shares.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"SETTLEMENT DATE" shall have the meaning assigned to such term in Section
3.5 hereof.
"SHARES" shall mean the whole shares of Common Stock that are and/or may be
purchased by the Investor under this Agreement pursuant to one or more Draw
Downs, and not the Commitment Shares.
"SHORT SALES" shall mean "short sales" as defined in Rule 200 promulgated
under Regulation SHO under the Exchange Act.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company that would
constitute a Significant Subsidiary of the Company within the meaning of Rule
1-02 of Regulation S-X of the Commission.
"SIMILAR FINANCING" shall have the meaning assigned to such term in Section
6.7(iii) hereof.
"SOXA" shall mean the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and
regulations of the Commission thereunder.
"SUBSIDIARY" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power 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.
"TOTAL COMMITMENT" shall have the meaning assigned to such term in Section
2.1 hereof.
viii
"TRADING DAY" shall mean a full trading day (beginning at 9:30 a.m., New
York City time, and ending at 4:00 p.m., New York City time) on the Trading
Market.
"TRADING MARKET" means the OTC Bulletin Board; provided, however, that in
the event the Common Stock is ever listed or quoted on the NASDAQ Global Market,
the NASDAQ Global Select Market, the NASDAQ Capital Market, the New York Stock
Exchange, NYSE Arca, the NYSE MKT, or the OTCQX Marketplace or the OTCQB
Marketplace operated by OTC Markets Group Inc., than the "TRADING MARKET" shall
mean such other market or exchange or any successor to the foregoing on which
the Common Stock is then listed or quoted.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement (as qualified
by the Disclosure Schedule) and the exhibits hereto, the Registration Rights
Agreement and each of the other agreements, documents, certificates and
instruments entered into or furnished by the parties hereto in connection with
the transactions contemplated hereby and thereby.
"VWAP" means the volume weighted average price (the aggregate sales price
of all trades of Common Stock during a Trading Day divided by the total number
of shares of Common Stock traded during such Trading Day) of the Common Stock
during a Trading Day as reported by Bloomberg L.P. using the AQR function.
"WARRANT VALUE" shall mean the fair value of all warrants, options and
other similar rights issued to a third party in connection with an Alternate
Transaction, determined by using a standard Black-Scholes option-pricing model
using a reasonable and appropriate expected volatility percentage based on
applicable volatility data from an investment banking firm of nationally
recognized reputation.
ix
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
(See Exhibit 10.2)
EXHIBIT B-1 TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF FIXED DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
February 18, 2014 (the "PURCHASE AGREEMENT") between Tungsten Corp., a
corporation organized and existing under the laws of the State of Nevada (the
"COMPANY"), and Hanover Holdings I, LLC, a New York limited liability company.
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement. In accordance with and pursuant to
Section 3.1(a) of the Purchase Agreement, the Company hereby issues this Fixed
Draw Down Notice to exercise a Draw Down for the Draw Down Amount Requested
indicated below.
Draw Down Amount Requested (number of Shares):
--------------------------
Fixed Purchase Price Per Share (indicate whether
lowest trade price on date hereof or average of
three lowest daily VWAPs in prior 10 Trading Days):
--------------------------
Total Aggregate Purchase Price:
--------------------------
Settlement Date:
--------------------------
On behalf of the Company, the undersigned hereby certifies to the Investor
that (i) the above Draw Down Amount Requested does not exceed the Maximum Fixed
Draw Down Amount Requested, (ii) the sale of Shares pursuant to this Fixed Draw
Down Notice shall not cause the Company to sell or the Investor to purchase
shares of Common Stock which, when aggregated with all purchases made by the
Investor pursuant to all prior Draw Down Notices issued under the Purchase
Agreement, would exceed the Aggregate Limit, (iii) to the Company's Knowledge,
the sale of Shares pursuant to this Fixed Draw Down Notice shall not cause the
Company to sell or the Investor to purchase shares of Common Stock which would
cause the aggregate number of shares of Common Stock then beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3
promulgated thereunder) by the Investor and its Affiliates to exceed the
Ownership Limitation, (iv) as of the date hereof, the Company does not possess
any material non-public information, and (v) the Company has performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Purchase Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to the date hereof and shall perform, satisfy and comply in all material
respects with all covenants, agreements and conditions required by the Purchase
Agreement and the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to the applicable settlement date,
including without limitation, delivery of all certificates and bring down
opinions required to be delivered by the Purchase Agreement.
Dated: By:
-----------------------------
Name
Title:
Address:
Facsimile No.
AGREED AND ACCEPTED
By:
-----------------------------
Name
Title:
B-1
EXHIBIT B-2 TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF REGULAR DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
February 18, 2014 (the "PURCHASE AGREEMENT") between Tungsten Corp., a
corporation organized and existing under the laws of the State of Nevada (the
"COMPANY"), and Hanover Holdings I, LLC, a New York limited liability company.
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement. In accordance with and pursuant to
Section 3.1(b) of the Purchase Agreement, the Company hereby issues this Regular
Draw Down Notice to exercise a Draw Down for the Draw Down Amount Requested
indicated below.
Draw Down Amount Requested (number of Shares):
--------------------------
Pricing Period start date:
--------------------------
Pricing Period end date:
--------------------------
Floor Price (calculated per Floor Price definition):
--------------------------
Settlement Date:
--------------------------
On behalf of the Company, the undersigned hereby certifies to the Investor
that (i) the above Draw Down Amount Requested does not exceed the Maximum
Regular Draw Down Amount Requested, (ii) the sale of Shares pursuant to this
Regular Draw Down Notice shall not cause the Company to sell or the Investor to
purchase shares of Common Stock which, when aggregated with all purchases made
by the Investor pursuant to all prior Draw Down Notices issued under the
Purchase Agreement, would exceed the Aggregate Limit, (iii) to the Company's
Knowledge, the sale of Shares pursuant to this Regular Draw Down Notice shall
not cause the Company to sell or the Investor to purchase shares of Common Stock
which would cause the aggregate number of shares of Common Stock then
beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act
and Rule 13d-3 promulgated thereunder) by the Investor and its Affiliates to
exceed the Ownership Limitation, (iv) as of the date hereof, the Company does
not possess any material non-public information, and (v) the Company has
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Purchase Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with by the
Company at or prior to the date hereof and shall perform, satisfy and comply in
all material respects with all covenants, agreements and conditions required by
the Purchase Agreement and the Registration Rights Agreement to be performed,
satisfied or complied with by the Company at or prior to the applicable
settlement date, including without limitation, delivery of all certificates and
bring down opinions required to be delivered by the Purchase Agreement.
Dated: By:
-----------------------------
Name
Title:
Address:
Facsimile No.
AGREED AND ACCEPTED
By:
-----------------------------
Name
Title:
B-2
EXHIBIT C TO THE
COMMON STOCK PURCHASE AGREEMENT
CERTIFICATE OF THE COMPANY
CLOSING CERTIFICATE
_________ 20__
The undersigned, the [___________] of Tungsten Corp., a corporation
organized and existing under the laws of the State of Nevada (the "COMPANY"),
delivers this certificate in connection with the Common Stock Purchase
Agreement, dated as of February 18, 2014 (the "AGREEMENT"), by and between the
Company and Hanover Holdings I, LLC, a New York limited liability company (the
"INVESTOR"), and hereby certifies on the date hereof that (capitalized terms
used herein without definition have the meanings assigned to them in the
Agreement):
1. Attached hereto as EXHIBIT A is a true, complete and correct copy of the
Articles of Incorporation of the Company as filed with the Secretary of State of
the State of Nevada. The Articles of Incorporation of the Company have not been
further amended or restated, and no document with respect to any amendment to
the Articles of Incorporation of the Company has been filed in the office of the
Secretary of State of the State of Nevada since the date shown on the face of
the state certification relating to the Company's Articles of Incorporation,
which is in full force and effect on the date hereof, and no action has been
taken by the Company in contemplation of any such amendment or the dissolution,
merger or consolidation of the Company.
2. Attached hereto as EXHIBIT B is a true and complete copy of the Bylaws
of the Company, as amended and restated through, and as in full force and effect
on, the date hereof, and no proposal for any amendment, repeal or other
modification to the Bylaws of the Company has been taken or is currently pending
before the Board of Directors or stockholders of the Company.
3. The Board of Directors of the Company has approved the transactions
contemplated by the Transaction Documents; said approval has not been amended,
rescinded or modified and remains in full force and effect as of the date
hereof.
4. Each person who, as an officer of the Company, or as attorney-in-fact of
an officer of the Company, signed the Transaction Documents to which the Company
is a party, was duly elected, qualified and acting as such officer or duly
appointed and acting as such attorney-in-fact, and the signature of each such
person appearing on any such document is his genuine signature.
IN WITNESS WHEREOF, I have signed my name as of the date first above
written.
----------------------------------------
Name:
Title:
C-1
EXHIBIT D TO THE
COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of Tungsten
Corp., a corporation organized and existing under the laws of the State of
Nevada (the "COMPANY"), pursuant to the Draw Down Notice, dated [_____________],
delivered by the Company to Hanover Holdings I, LLC, a New York limited
liability company (the "INVESTOR") pursuant to Article III of the Common Stock
Purchase Agreement, dated February 18, 2014, by and between the Company and the
Investor (the "AGREEMENT"), the undersigned hereby certifies to the Investor as
follows:
1. The undersigned is the duly appointed [_____________] of the Company.
2. Except as set forth in the attached Disclosure Schedule, the
representations and warranties of the Company set forth in Article V of the
Agreement (i) that are not qualified by "materiality" or "Material Adverse
Effect" are true and correct in all material respects as of [insert Draw Down
Exercise Date] and as of the date hereof with the same force and effect as if
made on such dates, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties are true
and correct in all material respects as of such other date and (ii) that are
qualified by "materiality" or "Material Adverse Effect" are true and correct as
of [insert Draw Down Exercise Date] and as of the date hereof with the same
force and effect as if made on such dates, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties are true and correct as of such other date.
3. The Company has performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the Agreement
and the Registration Rights Agreement to be performed, satisfied or complied
with by the Company at or prior to [insert Draw Down Exercise Date] and the date
hereof.
4. The Shares issuable on the date hereof in respect of the Draw Down
Notice referenced above shall be delivered electronically by crediting the
Investor's or its designees' account at DTC through its Deposit/Withdrawal at
Custodian (DWAC) system, and shall be freely tradable and transferable and
without restriction on resale. To the extent requested by the Investor pursuant
to Section 10.1(iv) under the Agreement, the legend set forth in Section
10.1(iii) of the Agreement has been removed from the certificate representing
the Initial Commitment Shares in accordance with Section 10.1(iv) of the
Agreement.
5. As of [insert Draw Down Exercise Date] and the date hereof, the Company
did not and does not possess any material non-public information.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
The undersigned has executed this Certificate this [___] day of
[___________], 20[__].
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
D-1
DISCLOSURE SCHEDULE
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF FEBRUARY 18, 2014
BETWEEN TUNGSTEN CORP. AND HANOVER HOLDINGS I, LLC
This disclosure schedule is made and given pursuant to Article V of the
Common Stock Purchase Agreement, dated as of February 18, 2014 (the
"AGREEMENT"), by and between Tungsten Corp., a Nevada corporation (the
"Company"), and Hanover Holdings I, LLC, a New York limited liability company.
Unless the context otherwise requires, all capitalized terms are used herein as
defined in the Agreement. The numbers below correspond to the section numbers of
representations and warranties in the Agreement most directly modified by the
below exceptions.
D-2
FORM OF OPINION OF OUTSIDE COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 7.2(XV) OF THE COMMON STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 18, 2014 BETWEEN TUNGSTEN CORP. AND
HANOVER HOLDINGS I, LLC
[Company Counsel's Letterhead]
1. The Company has been duly incorporated and is validly existing and in good
standing under the laws of the State of Nevada, with full corporate power
and authority to own its properties and to conduct its business as
described in the Registration Statement and the Prospectus. The Company is
duly qualified to do business as a foreign corporation and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except for any jurisdiction in which the failure to be so qualified would
not have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents to
which it is a party and to issue the Securities in accordance with the
terms thereof. The execution and delivery by the Company of the Transaction
Documents to which it is a party, and the consummation by the Company of
the transactions contemplated thereby (including, without limitation, the
issuance of the Securities) have been duly and validly authorized by all
necessary corporate action and, except for any consent or authorization of
the Company's Board of Directors or a committee thereof in connection with
the delivery of a Draw Down Notice to the Investor, no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required.
3. Each of the Transaction Documents to which the Company is a party has been
duly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
4. The execution, delivery and performance by the Company of the Transaction
Documents to which it is a party and the consummation by the Company of the
transactions contemplated thereby (including, without limitation, the
issuance of the Securities) do not and will not: (i) violate the Company's
Articles of Incorporation or bylaws (the "Governing Documents"); (ii)
violate the Nevada Revised Statutes, or any federal or Florida statute,
rule or regulation applicable to the Company; (iii) require any consents,
approvals, or authorizations to be obtained by the Company, or any
registrations, declarations or filings to be made by the Company, in each
case, under the Nevada Revised Statutes or any federal or Florida statute,
rule or regulation applicable to the Company that have not been obtained or
made; (iv) 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
D-3
others any rights of termination, amendment, acceleration or cancellation
of, any material agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is
a party or is bound that has been filed as an exhibit to the Jumbo 8-K or
any other Commission Document filed after the Jumbo 8-K; (v) create or
impose a lien, charge or encumbrance on any property of the Company under
any agreement or commitment to which the Company is a party or is bound
that has been filed as an exhibit to the Jumbo 8-K or any other Commission
Document filed after the Jumbo 8-K; or (vi) to our knowledge, result in a
violation of any federal or state order, judgment or decree 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.
5. Assuming the accuracy of the representations and warranties made by you in
the Purchase Agreement and your compliance with the covenants made by you
in the Purchase Agreement and the Registration Rights Agreement, the
offering, sale and issuance of the Securities in accordance with the
Transaction Documents is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act").
6. When issued in accordance with the Purchase Agreement, the Initial
Commitment Shares and the Additional Commitment Shares will be duly
authorized and validly issued, fully paid and nonassessable, free and clear
of all liens, charges, taxes, security interests, encumbrances, rights of
first refusal, preemptive or similar rights and other encumbrances under
the Company's Governing Documents, the laws of the State of Nevada or any
material agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is
a party or is bound that has been filed as an exhibit to the Jumbo 8-K or
any other Commission Document filed after the Jumbo 8-K. When issued and
paid for in accordance with the Purchase Agreement, the Shares will be duly
authorized and validly issued, fully paid and nonassessable, free and clear
of all liens, charges, taxes, security interests, encumbrances, rights of
first refusal, preemptive or similar rights and other encumbrances under
the Company's Governing Documents, the laws of the State of Nevada or any
material agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is
a party or is bound that has been filed as an exhibit to the Jumbo 8-K or
any other Commission Document filed after the Jumbo 8-K. To our knowledge,
the execution and delivery of the Registration Rights Agreement do not, and
the performance by the Company of its obligations thereunder shall not,
give rise to any rights of any other person for the registration under the
Securities Act of any shares of Common Stock or other securities of the
Company which have not been waived.
7. There is no action, suit, claim, investigation or proceeding pending or, to
our knowledge, threatened against the Company or any Subsidiary which
questions the validity of any of the Transaction Documents or the
transactions contemplated thereby or any action taken or to be taken
pursuant thereto. Except as set forth in the Commission Documents, to our
D-4
knowledge, there is no action, suit, claim, investigation or proceeding
pending or threatened against or involving the Company, any Subsidiary or
any of their respective properties or assets.
8. The Company is not an "investment company" or any entity controlled by an
"investment company," as such term is defined in the Investment Company Act
of 1940, as amended.
9. The Registration Statement has become effective under the Securities Act.
With your consent, based solely on a telephonic confirmation by a member of
the Staff of the Commission on [__________], 2014, no stop order suspending
the effectiveness of the Registration Statement has been issued under the
Securities Act and no proceedings therefor have been initiated or, to our
knowledge threatened, by the Commission, and the Registrable Securities may
be resold under the Securities Act pursuant to the Registration Statement.
Any required filing of the Prospectus and a Prospectus Supplement pursuant
to Rule 424 under the Securities Act has been made in accordance with Rule
424 under the Securities Act.
10. The Registration Statement, as of the date it became effective, and the
Prospectus and each Prospectus Supplement, as of its date, complied as to
form in all material respects with the requirements for registration
statements on Form S-1 under the Act; it being understood, however, that we
express no opinion with respect to Regulation S-T or the financial
statements, schedules or other financial data included in or incorporated
by reference in or omitted from the Registration Statement, the Prospectus
or any Prospectus Supplement. For purposes of this paragraph, we have
assumed that the statements made in the Registration Statement, the
Prospectus and each Prospectus Supplement are correct and complete.
In addition, we have participated in conferences with officers and other
representatives of the Company and representatives of the independent registered
public accounting firm for the Company, at which the contents of the
Registration Statement, the Prospectus and each Prospectus Supplement, and the
Commission Documents incorporated by reference therein, and related matters were
discussed and, although we are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained or incorporated by reference in the Registration Statement, the
Prospectus, each Prospectus Supplement, or the Commission Documents incorporated
by reference therein, and have not made any independent check or verification
thereof, during the course of such participation, no facts came to our attention
that caused us to believe that the Registration Statement, at the time it became
effective and as of the date hereof, together with the Commission Documents
incorporated by reference therein, at such time and as of the date hereof,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus, as of its date and as of the date
hereof, together with the Commission Documents incorporated by reference
therein, at that date and as of the date hereof, contained an untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; it being understood that we express no belief with respect to
the financial statements, the notes and schedules thereto, other financial data,
or exhibits included in, incorporated by reference in, or omitted from, the
Registration Statement or the Prospectus.
D-5
FORM OF OPINION "BRING DOWN" OF OUTSIDE COUNSEL TO BE DELIVERED
PURSUANT TO SECTION 7.2(XV) OF THE COMMON STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 18, 2014 BETWEEN TUNGSTEN CORP.
AND HANOVER HOLDINGS I, LLC
[Company Counsel's Letterhead]
1. The Registration Statement has become effective under the Securities Act.
With your consent, based solely on a telephonic confirmation by a member of
the Staff of the Commission on [_____] [___], 20[_], no stop order
suspending the effectiveness of the Registration Statement has been issued
under the Securities Act and no proceedings therefor have been initiated
or, to our knowledge threatened, by the Commission, and the Registrable
Securities may be resold under the Securities Act pursuant to the
Registration Statement. Any required filing of the Prospectus and a
Prospectus Supplement pursuant to Rule 424 under the Securities Act has
been made in accordance with Rule 424 under the Securities Act.
2. Based on our inquiry of the Company's [______________], no facts have come
to our attention that cause us to believe that any of the opinions
expressed in our opinion letter to you dated [_______], 2014 are not true
and correct as of the date hereof.
In addition, we have participated in conferences with officers and other
representatives of the Company and representatives of the independent registered
public accounting firm for the Company, at which the contents of the
Registration Statement, the Prospectus and each Prospectus Supplement, and the
Commission Documents incorporated by reference therein, and related matters were
discussed and, although we are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained or incorporated by reference in the Registration Statement, the
Prospectus, each Prospectus Supplement, or the Commission Documents incorporated
by reference therein, and have not made any independent check or verification
thereof, during the course of such participation, no facts came to our attention
that caused us to believe that the Registration Statement, at the time it became
effective and as of the date hereof, together with the Commission Documents
incorporated by reference therein, at such time and as of the date hereof,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus, as of its date and as of the date
hereof, together with the Commission Documents incorporated by reference
therein, at that date and as of the date hereof, contained an untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; it being understood that we express no belief with respect to
the financial statements, the notes and schedules thereto, other financial data,
or exhibits included in, incorporated by reference in, or omitted from, the
Registration Statement or the Prospectus.
D-6