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EXHIBIT 2.7
COMMON STOCK PURCHASE AGREEMENT
Dated as of June __, 2000
by and between
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
and
TORNEAUX LTD.
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS .....................................................................1
SECTION 1.1 Definitions ...................................................................1
ARTICLE II PURCHASE AND SALE OF COMMON STOCK ..............................................3
SECTION 2.1 PURCHASE AND SALE OF STOCK ....................................................3
SECTION 2.2 The Shares ....................................................................3
SECTION 2.3 The Warrants ..................................................................3
SECTION 2.4 Closing .......................................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES ................................................4
SECTION 3.1 Representations and Warranties of the Company .................................4
SECTION 3.2 Representations, Warranties and Covenants of the Purchaser ...................10
ARTICLE IV COVENANTS .....................................................................12
SECTION 4.1 Securities ...................................................................12
SECTION 4.2 Registration and Listing .....................................................12
SECTION 4.3 Registration Statement .......................................................13
SECTION 4.4 Compliance with Laws .........................................................13
SECTION 4.5 Keeping of Records and Books of Account ......................................13
SECTION 4.6 Reporting Requirements .......................................................13
SECTION 4.7 Other Agreements .............................................................13
SECTION 4.8 Non-public Information .......................................................14
SECTION 4.9 No Stop Orders ...............................................................14
SECTION 4.10 Amendments to the Registration Statement ....................................14
SECTION 4.11 Prospectus Delivery .........................................................14
SECTION 4.12 Legends .....................................................................15
ARTICLE V CONDITIONS TO CLOSING, DRAW DOWNS AND WARRANT EXERCISE .........................15
SECTION 5.1 Conditions Precedent to the Obligation of the Company to Close this
Agreement ....................................................................15
SECTION 5.2 Conditions Precedent to the Obligation of the Purchaser to Close this
Agreement ....................................................................16
SECTION 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down
and Purchase the Shares ......................................................16
ARTICLE VI DRAW DOWN TERMS ...............................................................18
SECTION 6.1 Draw Down Terms ..............................................................18
ARTICLE VII LEGENDS ......................................................................20
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SECTION 7.1 Legend ........................................................................20
SECTION 7.2 No Other Legend or Stock Transfer Restrictions.................................21
SECTION 7.3 Purchaser's Compliance ........................................................21
ARTICLE VIII TERMINATION ..................................................................21
SECTION 8.1 Termination by Mutual Consent .................................................21
SECTION 8.2 Other Termination .............................................................21
SECTION 8.3 Effect of Termination......................................................... 22
ARTICLE IX INDEMNIFICATION ................................................................22
SECTION 9.1 General Indemnity..............................................................22
SECTION 9.2 Indemnification Procedures ....................................................23
ARTICLE X MISCELLANEOUS ...................................................................24
SECTION 10.1 Fees and Expenses ............................................................24
SECTION 10.2 Specific Enforcement, Consent to Jurisdiction ................................24
SECTION 10.3 Entire Agreement; Amendment ..................................................25
SECTION 10.4 Notices ......................................................................25
SECTION 10.5 Waivers ......................................................................26
SECTION 10.6 Headings .....................................................................26
SECTION 10.7 Successors and Assigns .......................................................27
SECTION 10.8 Governing Law ................................................................27
SECTION 10.9 Survival .....................................................................27
SECTION 10.10 Counterparts ................................................................27
SECTION 10.11 Publicity ...................................................................27
SECTION 10.12 Severability ................................................................27
SECTION 10.13 Further Assurances ..........................................................27
SECTION 10.14 Confidentiality .............................................................28
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
June __, 2000 by and between ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Colorado corporation (the
"Company") and Torneaux Ltd., a company organized under the laws of the
Commonwealth of The Bahamas (the "Purchaser").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchaser,
from time to time as provided herein, and the Purchaser shall purchase, up to
$10,000,000 of the Company's common stock, par value $0.01 per share (the
"Common Stock"); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) and ("Section 4(2)") and Regulation D ("Regulation D") of the
United States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the purchases of Common Stock to be made hereunder
from time to time.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
(a) "Commission" shall have the meaning assigned to such term in
Section 3.1(f) hereof.
(b) "Commission Documents" shall have the meaning assigned to
such term in Section 3.1(f) hereof.
(c) "Commission Filings" means the Company's Form 10-K for the
fiscal year ended June 30, 1999, its Form 10-Q for the fiscal quarters ended
December 31, 1999 and March 31, 2000, and all other filings made by the Company
after the date hereof pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(d) "Draw Down" shall have the meaning assigned to such term in
Section 6.1(a) hereof.
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(e) "Draw Down Amount" means the actual amount of a Draw Down,
with a minimum amount of $300,000.00 and a maximum amount of $800,000.00.
(f) "Draw Down Discount Percentage" means 88% if the Threshold
Price is equal to or greater than $0.50; provided, however, that for every $0.50
increase of the Threshold Price above $0.50, to a maximum Threshold Price of
$5.50, such draw down discount percentage shall increase by 0.25%,
incrementally, to a maximum of 90.5%.
(g) "Draw Down Exercise Date" shall have the meaning assigned to
such term in Section 5.3 hereof,
(h) "Draw Down Notices" shall have the meaning assigned to such
term in Section 6.1(i) hereof.
(i) "Draw Down Pricing Period" shall mean a period of twenty
(20) consecutive trading days on the over the counter bulletin board ("OTC BB")
starting with the first trading day specified in Draw Down Notice (or such other
period of consecutive trading days as mutually agreed upon by the Company and
the Purchaser).
(j) "Material Adverse Effect" shall mean any effect on the
business, results of operations, prospects, properties, assets or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries and affiliates, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement in any material respect.
(k) "Material Change in Ownership" shall mean that, as of any
particular measurement date, the officers and directors of the Company shall
beneficially own in the aggregate less than 39% of the outstanding Common Stock
of the Company, except that for purposes of making any such calculation, Common
Stock issued to the Purchaser pursuant to this Agreement shall not be included
in such calculation.
(l) "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement, as supplemented from time to
time pursuant to Rule 424(b) of the Securities Act.
(m) "Registration Statement" shall mean the registration
statement on Form S-1, to be filed with the Securities and Exchange Commission
for the registration for resale of the Shares, as such Registration Statement
may be amended from time to time.
(n) "Settlement Date" shall have the meaning assigned to such
term in Section 6.1(d) hereof.
(o) "Shares" shall mean the shares of Common Stock of the Company
that may be purchased hereunder pursuant to a Draw Down and/or upon exercise of
the Warrants (as defined Section 2.3).
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(p) "Threshold Price" is the lowest price at which the Company
will set in the Draw Down Notice in order to sell Shares during each Draw Down
Pricing Period, which Threshold Price may be set in increments of at least $.O1.
(q) "VWAP" shall mean the daily volume weighted average price
(based on a trading day from 9:30 a.m. to 4:00 p.m., eastern time) of the
Company's Common Stock on the OTC BB (or any successor thereto) as reported by
Bloomberg Financial LP using the AQR function.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
SECTION 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company (i) up to $10,000,000 of
Common Stock, based on Draw Downs in accordance with Section 6.1, and (ii) the
Warrants in accordance with Section 2.3 hereof. In no event shall the amount of
Common Stock required to be purchased by the Purchaser be less than $300,000 or
exceed $800,000 per Draw Down during any Draw Down Pricing Period.
SECTION 2.2 The Shares. The Company has authorized and has
reserved and covenants to continue to reserve, subject to Section 4.4(b) hereof,
free of preemptive rights and other similar contractual rights of stockholders,
4,800,000 shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs and the shares of Common Stock issuable pursuant
to the exercise of Warrants.
SECTION 2.3 The Warrants.
(a) Following each Settlement Date, the Company shall issue to
the Purchaser a warrant to purchase up to 25% of the number of shares of Common
Stock purchased in such corresponding Settlement Period (a "Warrant"), each such
warrant being exercisable for a period of three (3) years commencing on the date
of issuance of such Warrant. The exercise price of each Warrant (the "Warrant
Exercise Price") shall be 115% of the price per Share paid by the Purchaser
during the Settlement Period.
(b) No Warrant shall be exercisable if the shares of Common Stock
issuable upon any exercise of such Warrant, when aggregated with all other
shares of Common Stock then owned by the Purchaser, would result in the
Purchaser owning more than 9.99% of all of such Common Stock as would be
outstanding on such date of exercise, as determined in accordance with Section
16 of the Exchange Act and the regulations promulgated thereunder.
SECTION 2.4 Closing. In consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Company agrees to issue and sell to the Purchaser and the
Purchaser agrees to purchase from the Company, that number of the Shares to be
issued in connection with each Draw Down. The closing of the execution and
delivery of this Agreement (the "Closing") shall take place at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, The Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ at 5:00 p.m.
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Eastern Time on (i) June __, 2000, or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Closing Date").
Each party shall deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Colorado and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Company's most recent Form
10-K, including the accompanying financial statements (the "Form 10-K"), or in
the Company's most recent Form 10-Q (the "Form 10-Q"), or on Schedule 3.1(g)
attached hereto. The Company and each such subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction in which the failure to be
so qualified will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Section 3.1(e). This Agreement has been duly executed and delivered by the
Company. This Agreement constitutes, or when executed and delivered shall
constitute, a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of creditor's rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company
and the shares thereof issued and outstanding as of June 1, 2000 are set forth
on Schedule 3.1(c) attached hereto. All of the outstanding shares of the
Company's Common Stock have been duly and validly authorized, and are fully paid
and non-assessable. Except as set forth in this Agreement or on Schedule 3.1(c)
attached hereto, as of June 1, 2000, no shares of Common Stock are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as set forth in this
Agreement, as of the date hereof, there are no contracts, commitments,
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understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities, as of the date hereof,
the Company is not a party to any agreement granting registration rights to any
person with respect to any of its equity or debt securities. The Company is not
a party to, and it has no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. The offer and sale
of all capital stock, convertible securities, rights, warrants, or options of
the Company issued prior to the Closing complied with all applicable federal and
state securities laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a Material Adverse Effect. The Company has
furnished or made available to the Purchaser true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Certificate"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws").
(d) Issuance of Shares. The sale and issuance of the Shares in
accordance with the terms and on the basis of the representations and warranties
set forth in this Agreement will be exempt from the registration requirements of
the Securities Act. The Shares have been duly authorized by all necessary
corporate action and, when paid for or issued in accordance with the terms
hereof, the Shares shall be validly issued and outstanding, fully paid and
non-assessable, and the Purchaser shall be entitled to all rights accorded to a
holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated therein do not (i) violate any provision of the Company's
Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries are bound or affected, except, in all
cases, for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company is not required under federal, state
or local law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, or issue and sell the Shares in accordance with the terms hereof
(other than any filings which may be required to be made by the Company with the
Commission, or Nasdaq subsequent to the Closing, and, any registration statement
which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchaser
herein.
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(f) Commission Documents, Financial Statements. The Common Stock
of the Company is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Securities and Exchange
Commission (the "Commission") pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "Commission Documents"). The Company has
delivered or made available to the Purchaser true and complete copies of the
Commission Documents filed with the Commission since October 13, 1999 and prior
to the Closing Date. The Company has not provided to the Purchaser any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. The
Form 10-K for the year ended June 30, 1999 complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such document, and, as of its date, such Form 10-K
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g)
attached hereto set forth each subsidiary of the Company as of the date hereof,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. Except as set forth in the Commission
Documents or the Commission Filings, none of such subsidiaries is a "significant
subsidiary" as defined in Regulation S-X.
(h) No Material Adverse Change. Since May 5, 2000, the Company
has not experienced or suffered any Material Adverse Effect, except continued
losses from operations.
(i) No Undisclosed Liabilities. Neither the Company nor any of
its subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on
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a balance sheet of the Company or any subsidiary (including the notes thereto)
in conformity with GAAP and are not disclosed in the Commission Documents or
Commission Filings, other than those incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses since May 5, 2000 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect.
(j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect.
(k) Indebtedness. The Commission Documents or the Commission
Filings set forth as of March 30, 2000 all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any
subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required to
be capitalized in accordance with GAAP. Neither the Company nor any subsidiary
is in default with respect to any Indebtedness.
(1) Title to Assets. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances. All leases of the Company and each of
its subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents or the Commission Filings, there is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets and which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or the Commission
Filings or such that do not cause a Material Adverse Effect. The Company and
each of its subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its
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business as now being conducted by it, except for such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, the failure to possess which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Certain Fees. No brokers, finders or financial advisory fees
or commissions will be payable by the Company or any subsidiary with respect to
the transactions contemplated by this Agreement.
(p) Disclosure. Neither this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchaser
by or on behalf of the Company or any subsidiary in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(q) Operation of Business. The Company or one of the subsidiaries
owns or possesses all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations as set forth in the
Commission Documents or the Commission Filings and all rights with respect to
the foregoing, which are necessary for the conduct of its business as now
conducted without any conflict with the rights of others, except to the extent
set forth in the Commission Documents or that a Material Adverse Effect could
not reasonably be expected to result from such conflict.
(r) Environmental Compliance. The Company and each of its
subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, there are no past or present events,
conditions, circumstances, incidents, actions or omissions relating to or in any
way affecting the Company or its subsidiaries that violate or could violate any
Environmental Law after the Closing or that could 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.
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(s) Material Agreements. Neither the Company nor any subsidiary
is a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a Commission Filing (collectively,
"Material Agreements") if the Company or any subsidiary were registering
securities under the Securities Act immediately prior to the effectiveness of
this Agreement. The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and, are not
in default under any Material Agreement now in effect.
(t) Transactions with Affiliates. Except as set forth in the
Commission Documents or the Commission Filings, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company; any
subsidiary or any of their respective customers (excluding agreements related to
the purchase or lease of the Company's products) or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person who would be covered by Item
404(a) of Regulation S-K or any corporation or other entity controlled by such
officer, employee, consultant, director or person.
(u) Securities Act of 1933. The Company has complied in all
material respects with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Shares hereunder. The
Company has not distributed and, prior to the completion of the sale of the
Shares to the Purchaser, will not distribute any offering material in connection
with the offer and sale of the Shares other than the Registration Statement, the
Prospectus or other materials, if any, permitted by the Securities Act.
(v) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers or
sales of any security or solicited any offers to buy any security, other than
pursuant to this Agreement, under circumstances that would require registration
of the Common Stock under the Securities Act. Neither the Company nor any of its
affiliates nor any person acting on its behalf has conducted or will conduct any
general solicitation (as that term is defined in Rule 502(c) of Regulation D) or
general advertising with respect to any of the Shares, the Warrants or any of
the shares of Common Stock issuable pursuant to exercise of the Warrants.
(w) Employees. As of the date hereof, neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth in the Commission Documents or the
Commission Filings. Each of the Company and its subsidiaries requires its
officers, employees and certain consultants to enter into agreements regarding
proprietary information, noncompetition, nonsolicitation, confidentiality, or
other similar agreements containing restrictive covenants. As of the date
hereof, except as disclosed in Schedule 3.1(w), no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or
any subsidiary.
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(x) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for the purposes set forth in
the Prospectus under "Use of Proceeds."
(y) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(z) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which is or would have a Material Adverse Effect. The execution
and delivery of this Agreement and the issue and sale of the Shares will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of
the Purchaser, or any person or entity that owns a beneficial interest in any of
the Purchaser, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 3.1(y), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(aa) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
SECTION 3.2 Representations. Warranties and Covenants of the
Purchaser. The Purchaser hereby makes the following representations, warranties
and covenants to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is
a limited liability company duly organized, validly existing and in good
standing under the laws of the Commonwealth of The Bahamas.
(b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser
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and the consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary corporate action, and no further consent or
authorization of the Purchaser, its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Purchaser.
This Agreement constitutes a valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose any lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provide that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Purchaser. The Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Purchaser has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Shares. Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
(e) Acquisition for Investment. The Purchaser is purchasing the
Shares solely for its own account for the purpose of investment and not with a
view to or for sale in connection with a distribution. The Purchaser has no
present intention to sell the Shares, nor a present arrangement (whether or not
legally binding) to effect any distribution of the Shares to or through any
person or entity; provided, however, that by making the representations herein,
the Purchaser does not agree to hold the Common Stock for any minimum or other
specific term and
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reserves the right to dispose of the Common Stock at any time in accordance with
federal and state securities laws applicable to such disposition.
(f) Sophisticated Investor. The Purchaser is a sophisticated
investor (as described in Rule 506(b) (2) (ii) of Regulation D) and an
accredited investor (as defined in Rule 501 of Regulation D), and the Purchaser
has such experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in Common Stock. The Purchaser
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
(h) General. The Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirement of federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Purchaser to acquire the Shares.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees (as defined
herein).
SECTION 4.1 Securities. The Company shall notify the Commission
and the OTC Bulletin Board, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Shares to the Purchaser
and the resale of the Shares by the Purchaser.
SECTION 4.2 Registration and Listing. The Company will take all
action necessary to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with
its reporting and filing obligations under the Exchange Act, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
take all action necessary to continue the listing or trading of its Common Stock
and the listing of the Shares purchased by Purchaser hereunder on the OTC BB or
any relevant market or system, if applicable, and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the OTC BB or any relevant market or system.
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SECTION 4.3 Registration Statement.
(a) On or before June 30, 2000 (the "Filing Date"), the Company
shall cause to be filed with the Commission a Registration Statement on Form
SB-2 (or any other comparable form) to register for resale the Shares (pursuant
to a Draw Down or the exercise of any Warrant) to be purchased by the Purchaser
pursuant to this Agreement. The Company shall use its reasonable best efforts to
take all steps necessary to cause the Registration Statement to be declared
effective by September 30, 2000, but in no event later than 120 days after the
Filing Date.
(b) Before the Purchaser shall be obligated to accept any Draw
Down request from the Company, the Company shall have caused a sufficient number
of shares of Common Stock to be registered to cover the Shares to be issued in
connection with such Draw Down request (including any Warrants to be exercised
in connection therewith).
(c) The Company shall file a prospectus supplement to its then
current Registration Statement on the first business day immediately following
the end of each Settlement Period, and will deliver a prospectus and a
prospectus supplement to the Purchaser on the corresponding Settlement Date.
SECTION 4.4 Compliance with Laws. The Company shall comply, and
cause each subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which could reasonably be expected to have a
Material Adverse Effect.
SECTION 4.5 Keeping of Records and Books of Account. The Company
shall keep and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
SECTION 4.6 Reporting Requirements. Upon written request, the
Company shall furnish the following to the Purchaser so long as such Purchaser
shall be obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as
soon as available, and in any event within 45 days after the end of each of the
first three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon
as available, and in any event within 90 days after the end of each fiscal year
of the Company.
SECTION 4.7 Other Agreements. The Company is restricted from
entering into any other financing agreement during a Draw Down Pricing Period
(an "Other Financing"), the primary purpose of which would be obtain equity
financing for the Company, without the prior written consent of the Purchaser.
If the Purchaser consents to the Company entering into an Other Financing, the
Purchaser shall have the option (the "Purchase Option"), which option shall
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be exercised within five (5) calendar days of the date the Purchaser gives such
consent, to (i) purchase up to the same number of shares of Common Stock issued
or to be issued in the Other Financing at the price and on such terms as the
Company would issue Shares to the Purchaser during such Draw Down Pricing
Period, (ii) purchase up to the same number of shares of Common Stock issued or
to be issued in the Other Financing at the price and on such terms of the Other
Financing or (iii) elect not to purchase any Shares during such Draw Down
Pricing Period. If the Purchaser does not exercise its Purchase Option in
writing before 5 p.m., eastern time, on such fifth (5th) calendar day following
the Purchaser's consent to the applicable Other Financing, the Company shall
have the right to close such Other Financing on the scheduled closing date with
a third party; provided that all of the financial terms and conditions of such
closing are the same as those provided to the Purchaser prior to the Purchaser
giving its consent to such Other Financing.
SECTION 4.8 Non-Public Information. Neither the Company nor any
of its directors, officers or agents shall disclose any material non-public
information about the Company to the Purchaser.
SECTION 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make commercially reasonable efforts to
obtain the withdrawal of such order at the earliest possible time.
SECTION 4.10 Amendments to the Registration Statement. The
Company will not (i) file any amendment to the Registration Statement or make
any amendment or supplement to the Prospectus of which the Purchaser shall not
previously have been advised or to which the Purchaser shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Purchaser, a Prospectus is required to be delivered in connection with
sales by any Purchaser or dealer, file any information, documents or reports
pursuant to the Exchange Act without delivering a copy of such information,
documents or reports to the Purchaser promptly following such filing.
SECTION 4.11 Prospectus Delivery. Prior to any Settlement Date,
the Company will deliver to the Purchaser, without charge, in such quantities as
reasonably requested by the
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Purchaser, copies of each form of Prospectus. As soon after the Registration
Statement has been declared effective by the Commission and thereafter from time
to time for such period as in the opinion of counsel for the Purchaser a
prospectus is required by the Securities Act to be delivered in connection with
sales by the Purchaser, the Company will expeditiously deliver to the Purchaser,
without charge, as many copies of the Prospectus (and of any amendment or
supplement thereto) as the Purchaser may reasonably request. The Company
consents to the use of the Prospectus (and of any amendment or supplement
thereto) in accordance with the provisions of the Securities Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares may be sold
by the Purchaser, in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Securities
Act to be delivered in connection with sales of the Shares. If during such
period of time any event shall occur that in the judgment of the Company or in
the opinion of counsel for the Purchaser is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus to comply with the Securities Act or any other law, the
Company will forthwith prepare and, subject to the provisions of Section 4.10
above, file with the Commission an appropriate supplement or amendment thereto,
and will expeditiously furnish to the Purchaser a reasonable number of copies
thereof. The Company shall file a prospectus supplement to its current
Registration Statement on the first business day immediately following the end
of each Settlement Period, and the Company shall deliver to the Purchaser an
appropriate Prospectus and prospectus supplement on each Settlement Date.
SECTION 4.12 Legends. The certificates evidencing the Shares and
the shares of Common Stock issuable upon exercise of the Warrants shall be free
of legends, except as provided for in Article VII.
ARTICLE V
CONDITIONS TO CLOSING AND DRAW DOWNS
SECTION 5.1 Conditions Precedent to the Obligation of the Company
to Close this Agreement. The obligation hereunder of the Company to enter into
this Agreement is subject to the satisfaction or waiver, at or before the
Closing, of each of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) No Injunction. No statute, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain,
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prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
SECTION 5.2 Conditions Precedent to the Obligation of the
Purchaser to Close this Agreement. The obligation hereunder of the Purchaser to
enter this Agreement is subject to the satisfaction or waiver, at or before the
Closing, of each of the conditions set forth below. These conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion.
(a) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(b) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(c) Opinion of Counsel, etc. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit A hereto, and such other certificates and documents as
the Purchaser or its counsel shall reasonably require incident to the Closing.
SECTION 5.3 Conditions Precedent to the Obligation of the
Purchaser to Accept a Draw Down and Purchase the Shares. The obligation
hereunder of the Purchaser to accept a Draw Down request and to acquire and pay
for the Shares is subject to the satisfaction or waiver, at or before the date
of each Draw Down request (the "Draw Down Exercise Date"), of each of the
conditions set forth below. The conditions are for the Purchaser's sole benefit
and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Draw
Down Exercise Date as though made at that time except for representations and
warranties that speak as of a particular date.
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission
prior to the initial Draw Down Exercise Date, and such Registration Statement
shall remain effective on each Settlement Date, and shall be amended or
supplemented, as required, to disclose the sale of the Shares at least one (1)
trading day prior to each Settlement Date, and the Company shall have delivered
to the Purchaser an appropriate Prospectus on each Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the NASD (except for any suspension
of trading of
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limited duration agreed to by the Company, which suspension shall be terminated
prior to each Draw Down request), and, at any time prior to such request,
trading in securities generally as reported on the OTC Bulletin Board shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by the American Stock
Exchange, or on the New York Stock Exchange, nor shall a banking moratorium have
been declared either by the United States or New York State authorities, nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Shares. The Common Stock shall not have been delisted from the OTC
Bulletin Board.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing. The Company shall have issued
transfer agent instructions to its transfer agent, and an original copy of the
transfer agent instructions shall have been signed by the transfer agent as
acknowledged and agreed.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(g) Material Adverse Effect; Material Change in Ownership. No
Material Adverse Effect and no Material Change in Ownership shall have occurred.
(h) Ten Percent Limitation. On each Settlement Date, the number
of Shares then to be purchased by the Purchaser shall not exceed the number of
such shares that, when aggregated with all other shares of Common Stock then
owned by the Purchaser beneficially or deemed beneficially owned by the
Purchaser, would result in the Purchaser owning more than 9.9% of all of such
Common Stock as would be outstanding on such Settlement Date, as determined in
accordance with Section 16 of the Exchange Act and the regulations promulgated
thereunder. For purposes of this Section 5.3(h), in the event that the amount of
Common Stock outstanding as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder is greater on a
Settlement Date than on the date upon which the Draw Down Notice associated with
such Settlement Date is given, the amount of Common Stock outstanding on such
Settlement Date shall govern for purposes of determining whether the
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Purchaser, when aggregating all purchases of Common Stock made pursuant to this
Agreement would own more than 9.9% of the Common Stock following such Settlement
Date.
(i) No Knowledge. The Company shall have no knowledge of any
event more likely than not to have the effect of causing the Registration
Statement to be suspended or otherwise ineffective (which event is more likely
than not to occur within the 25 trading days following the trading day on which
the Draw Down Notice is deemed delivered.)
(j) Other. On each Settlement Date, the Purchaser shall have
received a certificate in substantially the form and substance of Exhibit B
hereto, executed by an executive officer of the Company to the effect that all
the conditions to such Settlement Date shall have been satisfied as at the date
of each such certificate.
ARTICLE VI
DRAW DOWN TERMS
SECTION 6.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue a Draw Down
Notice with respect to a draw down (a "Draw Down") of $300,000 if the Threshold
Price is equal to $0.50, and an additional $50,000 for every $0.50 increase of
the Threshold Price above $0.50 up to $5.50 for a maximum Draw Down Amount of
$800,000, which Draw Down the Purchaser will be obligated to accept. Prior to
issuing any Draw Down Notice, the Company shall have Shares representing at
least the Draw Down Amount registered under the Registration Statement.
(b) The number of Shares to be issued in connection with each
Draw Down shall be equal to the sum of the quotients (for each trading day of
the Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction based upon the agreed upon Draw
Down Pricing Period) of the Draw Down Amount divided by (y) (A) the applicable
Draw Down Discount Percentage multiplied by (B) the VWAP for such day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two (2) periods of ten
(10) consecutive trading days (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect
to each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days (or such
other number of trading days mutually agreed upon by the Purchaser and the
Company) between Draw Downs.
(f) There shall be a maximum of twelve (12) Draw Downs during the
Investment Period.
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(g) Each Draw Down will expire on the last trading day of each
Draw Down Pricing Period.
(h) For each trading day during the Draw Down Pricing Period that
the VWAP is at or above the Threshold Price, 1/20th (or such other fraction
based upon the agreed upon Draw Down Pricing Period) of the Draw Down Amount
shall be allocated to purchase Shares at a price equal to the product of (x) the
Draw Down Discount Percentage multiplied by (y) the VWAP for such day. If the
VWAP on a given trading day is less than the Threshold Price, then the amount of
the Draw Down for the relevant Draw Down Pricing Period shall be reduced by
1/20th (or such other fraction, based upon the agreed upon Draw Down Pricing
Period). At no time shall the Threshold Price be set below $0.50 unless agreed
upon by both parties. If trading in the Company's Common Stock is suspended for
any reason for more than three (3) hours in any trading day, the price of the
Common Stock shall be deemed to be below the Threshold Price for that trading
day and the Draw Down Amount for the relevant Draw Down Pricing Period will be
reduced by 1/20th.
(i) The Company must inform the Purchaser via facsimile
transmission as to the Draw Down Amount the Company wishes to exercise before
commencement of trading on the first trading day of the Draw Down Pricing Period
(the "Draw Down Notice"), substantially in the form attached hereto as Exhibit
C. In addition to the Draw Down Amount, the Company shall set the Threshold
Price and shall designate the first trading day of the Draw Down Pricing Period
with each Draw Down Notice.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser during the Settlement Period to the Purchaser or its
designees via the Purchaser's prime broker account through its Deposit
Withdrawal Agent Commission system (DWAC), and upon receipt of the Shares, the
Purchaser shall cause payment therefor to be made to the Company's designated
account by wire transfer of immediately available funds provided that the Shares
are received by the Purchaser no later than 1:00 p.m., eastern time, or next day
available funds if the Shares are received thereafter.
(k) If on the Settlement Date, the Company fails to deliver the
Shares to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay, in cash or restricted shares of Common
Stock (subject to the Company's compliance with applicable securities laws), at
the option of the Purchaser, as liquidated damages and not as a penalty, to the
Purchaser an amount equal to two percent (2%) of the Draw Down Amount for the
initial thirty (30) days and each additional thirty (30) day period thereafter
until such failure has been cured, which shall be pro rated for such periods
less than thirty (30) days (the "Periodic Amount"). Cash payments to be made
pursuant to this Section 6.1(k) shall be due and payable immediately upon demand
in immediately available cash funds. Certificates evidencing the restricted
shares of Common Stock shall be delivered immediately upon demand. The parties
agree that the Periodic Amount represents a reasonable estimate on the part of
the parties, as of the date of this Agreement, of the amount of damages that may
be incurred by the Purchaser if the Company fails to deliver the Shares on the
Settlement Date. If the Purchaser elects to receive shares of Common Stock
instead of cash, the Purchaser shall have the right to demand registration once
within twelve (12) months of the date of issuance of such shares of Common Stock
and piggyback registration rights if the Company files a separate registration
statement.
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(l) Look-Back.
(i) Upon receipt of a Draw Down Notice, the Purchaser, in
its sole discretion, may increase the Draw Down Amount stated in such Draw Down
Notice by 25% if the average volume for the 10 trading days preceding the date
of the Draw Down Notice of the Company's Common Stock (the "Average Volume")
exceeds 200,000 shares per day.
(ii) Upon receipt of a Draw Down Notice, the Purchaser, in
its sole discretion, may increase the Draw Down Amount stated in such Draw Down
Notice by 50% if the Average Volume exceeds 250,000 shares per day.
(m) Escrow. Prior to issuing a Draw Down Notice, the Company shall
place in escrow, with an entity designated by the Purchaser (the "Escrow
Agent"), such number of shares of Common Stock as will equal the maximum number
of Shares which the Purchaser could purchase during the Draw Down Pricing
Period. The shares of Common Stock subject to such escrow shall be released by
the Escrow Agent to the Purchaser only in the event the Company fails to deliver
the Shares on the relevant Settlement Date. The Purchaser's obligation to
purchase the Shares on the Settlement Date shall be contingent upon the
fulfillment of the Company of the escrow requirements contained in this Section
6.1(m). The Purchaser may, at its sole discretion, waive the escrow requirements
contained in this Section 6.1(m) at any time prior to the relevant Settlement
Date.
ARTICLE VII
LEGENDS
SECTION 7.1 Legend. Unless otherwise provided below, each
certificate representing the Shares and the shares of Common Stock issuable upon
exercise of the Warrants shall be stamped or otherwise imprinted with a legend
substantially in the following form (the "Legend"):
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THAT ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. (THE "COMPANY") SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH
SECURITIES UNDER THAT ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
As soon as practicable after the execution and delivery hereof, the
Company shall issue to the transfer agent instructions in substantially the form
of Exhibit D hereto. Such instructions shall be irrevocable by the Company from
and after the date thereof or from and after the
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issuance thereof. It is the intent and purpose of such instructions, as provided
therein, to require the transfer agent to issue to the Purchaser, at the
Purchaser's option, via DWAC or in the form of certificates evidencing the
Shares incident to a Draw Down and issued on a Settlement Date, free of the
Legend, without consultation by the transfer agent with the Company or its
counsel and without the need for any further advice or instruction or
documentation to the Transfer Agent by or from the Company or its counsel or the
Purchaser; provided, that (a) the Registration Statement shall then be
effective, (b) the Purchaser confirms to the transfer agent and the Company that
it has or intends to sell such Shares to a third party that is not an affiliate
of the Purchaser or the Company and the Purchaser agrees to redeliver the
certificate representing such Shares to the transfer agent to add the Legend in
the event the Shares are not sold, and (c) if reasonably requested by the
transfer agent or the Company, the Purchaser confirms to the transfer agent and
the Company that the Purchaser has complied with the prospectus delivery
requirement under the Securities Act. At any time after the date the
Registration Statement has been declared effective by the Commission, upon
surrender of one or more certificates evidencing Common Stock that bear the
Legend, to the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered, the transfer agent
shall reissue such shares of common stock via DWAC or free of Legend. If the
transfer agent fails to deliver the Shares on the Settlement Date, then the
Company shall pay liquidated damages to the Purchaser in the amount of 2% of the
purchase price of the Shares to be delivered on such Settlement Date.
SECTION 7.2 No Other Legend or Stock Transfer Restrictions. No
legend other than the one specified in Section 7.1 has been or shall be placed
on the share certificates representing the Shares and the shares of Common Stock
issuable upon exercise of the Warrants and no instructions or "stop transfer
orders," so called, "stock transfer restrictions," or other restrictions have
been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article VII.
SECTION 7.3 Purchaser's Compliance. Nothing in this Article VII
shall affect in any way the Purchaser's obligations under any agreement to
comply with all applicable securities laws upon resale of the Shares and the
shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by Mutual Consent. The term of this
Agreement shall be fourteen (14) months from the date on which the Commission
declares the Registration Statement effective (the "Investment Period"). This
Agreement may be terminated at any time by mutual consent of the parties.
SECTION 8.2 Other Termination. The Purchaser may terminate this
Agreement upon one (1) day's notice (v) if the Company issues convertible
debentures or enters an equity financing facility without the Purchaser's prior
written consent, or (w) if an event resulting in a Material Adverse Effect or a
Material Change of Control in Ownership has occurred, or (x) the
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Registration Statement is not declared effective within 120 days following the
Filing Date, or (y) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for an aggregate of five (5) trading
days during the Investment Period, for any reason other than deferrals or
suspension during a blackout period as a result of corporate developments
subsequent to the Closing Date that would require such Registration Statement to
be amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act, or (z) the Company shall at any
time fail to comply with the requirements of Section 4.2, 4.3 or 4.4 hereof.
SECTION 8.3 Effect of Termination. In the event of termination by
the Company or the Purchaser, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 8.1 or 8.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 10.9.
Nothing in this Section 8.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify and
hold harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
reasonable attorney's fees) to which the Purchaser and each person, if any, who
controls the Purchaser may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or the Prospectus
relating to the shares being sold to the Purchaser, or any amendment or
supplement to it, or (ii) the omission or alleged omission to state in that
Registration Statement or any document incorporated by reference in the
Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
Company shall not be liable under this Section 9.1(a) to the extent that a court
of competent jurisdiction shall have determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Registration
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Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
The Company will reimburse the Purchaser and each such controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or the controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except that the Company will not be liable to the extent a claim or
action which results in a loss, claim, damage, liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in the Registration Statement or any Prospectus in
reliance upon, and in conformity with, written information furnished by the
Purchaser to the Company for inclusion in the Registration Statement or
Prospectus.
(b) Indemnification by the Purchaser. The Purchaser will indemnify
and hold harmless the Company, each of its directors and officers, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
reasonable attorneys fees) to which the Company and any director or officer of
the Company and each person, if ANY, WHO CONTROLS the Company may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus or (ii) the omission or alleged
omission to state in the Registration Statement or any Prospectus a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, the untrue statement,
alleged untrue statement, omission or alleged omission was made in reliance
upon, and in conformity with, written information furnished by the Purchaser to
the Company for inclusion in the Registration Statement or Prospectus, and the
Purchaser WILL reimburse the Company and each such director, officer or
controlling person promptly upon demand for any legal or other costs or expenses
reasonably incurred by the Company or the other person in investigating,
defending against, or preparing to defend against any such claim, action, suit
or proceeding.
SECTION 9.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 9.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 9.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a claim,
action, suit or proceeding the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying
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party, one or more of the indemnified parties should be separately represented
in connection with a claim, action, suit or proceeding the indemnifying party
will pay the reasonable fees and expenses of one separate counsel for the
indemnified parties. Each indemnified party, as a condition to receiving
indemnification as provided in Paragraph (a) or (b) or Section 9.1, will
cooperate in all reasonable respects with the indemnifying party in the defense
of any action or claim as to which indemnification is sought. No indemnifying
party will be liable for any settlement of any action effected without its prior
written consent. No indemnifying party will, without the prior written consent
of the indemnified party, effect any settlement of a pending or threatened
action with respect to which an indemnified ▇▇▇▇▇ is, or is informed that it may
be, made a party and for which it would be entitled to indemnification, unless
the settlement includes an unconditional release of the indemnified party from
all liability and claims which are the subject matter of the pending or
threatened action.
If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
9.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Fees and Expenses. Except as set forth in Article IX,
the Company shall pay (i) all reasonable fees and expenses related to the
transactions contemplated by this Agreement; provided, that the Company shall
pay, at the Closing, all reasonable attorneys fees and expenses (exclusive of
disbursements and out-of-pocket expenses and reasonably itemized) incurred by
the Purchaser up to $30,000 in connection with the preparation, negotiation,
execution and delivery of this Agreement, (ii) all reasonable fees and expenses
incurred by the Purchaser in connection with any amendments, modifications or
waivers of this Agreement or incurred in connection with the enforcement of this
Agreement, including, without limitation, all reasonable attorneys fees and
expenses, and (iii) all stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto. In addition, if by the
seven (7) month anniversary of the commencement of the Investment Period the
Company has not requested Draw Down Amounts in an aggregate of $1,250,000, the
Company shall either (x) pay to the Purchaser a fee equal to $60,000 in cash or
immediately available funds; or (y) issue warrants to the Purchaser to purchase
60,000 shares of the Company's Common Stock at an exercise price of 100% of the
VWAP of the Common Stock on the Closing Date.
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SECTION 10.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the EVENT that any of the PROVISIONS OF THIS
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 10.2 shall affect or limit any right to serve process in any other
manner permitted by law.
SECTION 10.3 Entire Agreement: Amendment. This Agreement contains
the entire understanding of the parties with respect to the matters covered
hereby and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
SECTION 10.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
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If to the Company: ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
With copies to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (212) 406=3750
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
If to the Purchaser: Torneaux Ltd.
c/o Mees Pierson Fund Services (Bahamas) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days prior written notice of such changed address to
the other party hereto.
SECTION 10.5 Waivers. No waiver by either party of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
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.
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SECTION 10.7 Successors and Assigns. The Purchaser may not assign
this Agreement to any person without the prior written consent of the Company,
which consent will not be unreasonably withheld. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
SECTION 10.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions.
SECTION 10.9 Survival. The representations and warranties of the
Company and the Purchaser contained in Article HI and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article IX of this Agreement shall survive the execution and delivery hereof and
the Closing hereunder. Section 10.14 shall survive the termination of this
Agreement.
SECTION 10.10 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five (5) days of the execution and delivery hereof.
SECTION 10.11 Publicity, Except as required by applicable law, the
Company shall not issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement without the prior consent of the
Purchaser.
SECTION 10.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
SECTION 10.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
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SECTION 10.14 Confidentiality. Purchaser agrees to maintain the
confidentiality of all information about the Company received from any officer,
employee or agent of the Company, until such time as that confidential
information is released to the public generally other than as a result of any
disclosure by Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE
DULY EXECUTED BY THEIR RESPECTIVE AUTHORIZED OFFICER AS OF THE DATE FIRST ABOVE
WRITTEN.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President/CEO
TORNEAUX, LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director
33
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Colorado. The
Company has the requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted. The Company and
each such subsidiary is duly qualified to do business as a foreign corporation
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary.
2. The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Purchase Agreement and to issue
and sell the Common Stock, the Warrants and the Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares"). The execution, delivery and
performance of the Purchase Agreement by the Company and the consummation by it
of the transactions contemplated thereby have been duly and validly authorized
by all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required. The Purchase
Agreement has been duly executed and delivered, and the Common Stock and the
Warrants have been duly executed, issued and delivered by the Company and the
Purchase Agreement constitutes a legal, valid and binding obligations of the
Company enforceable against the Company in accordance with its respective terms.
The Common Stock is not subject to preemptive rights under the Company's
certificate of incorporation or bylaws.
3. The Common Stock and the Warrants have been duly authorized
and the Common Stock, when delivered against payment in full as provided in the
Purchase Agreement, will be validly issued, fully paid and nonassessable. The
Warrant Shares have been duly authorized and reserved for issuance, and, when
delivered upon exercise or against payment in full as provided in the Warrants,
will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with
the terms of the Purchase Agreement and the consummation by the Company of the
transactions contemplated thereby (i) do not violate any provision of the
Company's certificate of incorporation or bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases other than violations pursuant to clause (i)
34
above, for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect.
5. There is no action, suit, claim, investigation or proceeding
pending or threatened against the Company or any subsidiary which questions the
validity of this Agreement or the transactions contemplated hereby or any action
taken or to be taken pursuant hereto or thereto. There is no action, suit,
claim, investigation or proceeding pending or, to our knowledge, threatened,
against or involving the Company, any subsidiary or any of their respective
properties or assets and which, if adversely determined, is reasonably likely to
result in a Material Adverse Effect.
6. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of the Purchase
Agreement, or the offer, sale or issuance of the Common Stock and the Warrants
or the consummation of any other transaction contemplated by the Purchase
Agreement (other than any filings which may be required to be made by the
Company with the Commission, or Nasdaq subsequent to the Closing, and, any
registration statement which may be filed pursuant to the Purchase Agreement).
7. The offer, issuance and sale of the Common Stock and the
Warrants pursuant to the Purchase Agreement, and the issuance of the Warrant
Shares to the Purchaser, to the Purchase Agreement will be exempt from
registration under the Securities Act of 1933, as amended, pursuant to Rule 4(2)
and Regulation D promulgated thereunder.
8. The Company is not a "holding company" or a "public utility
company" as such terms are defined in the Public Utility Holding Company Act of
1935, as amended. The Company is not, and as a result of and immediately upon
Closing will not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
35
EXHIBIT B
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the "Company") pursuant to the Draw Down Notice, dated
________________ delivered by the Company to Torneaux Ltd. (the "Purchaser")
pursuant to Article VI of the Common Stock Purchase Agreement dated June __,
2000, by and between the Company and the Purchaser (the "Agreement"), the
undersigned hereby certifies as follows:
1. The undersigned is the duly elected Chief [Executive/Financial]
Officer of the Company.
2. The representations and warranties of the Company set forth in
Section 3.1 of the Agreement are true and correct in all material respects as
though made on and as of the date hereof, except for representations and
warranties that speak as of a particular date.
3. The Company has performed in all material respects all covenants
and agreements to be performed by the Company on or prior to the Draw Down
Exercise Date and the Settlement Date related to the Draw Down Notice and has
complied in all material respects with all obligations and conditions contained
in Section 5.3 of the Agreement.
The terms used herein but not defined herein shall have the
meanings specified in the Agreement.
The undersigned has executed this Certificate this ______ day of
_____________, 2000.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
36
EXHIBIT C
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF
DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
June ____, 2000 (the "Purchase Agreement") between ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a
Colorado corporation (the "Company") and Torneaux Ltd. 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 6.1 of the Purchase
Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.
Draw Down Amount:
--------------------------------------------
Draw Down Pricing Period start date:
-------------------------
Draw Down Pricing Period end date:
---------------------------
Settlement Date No. 1:
---------------------------------------
Settlement Date No. 2:
---------------------------------------
Threshold Price:
---------------------------------------------
Minimum Threshold Price: $0.50
Dated:
-----------------------
-------------------------------
By:
----------------------------
Name:
Title:
Address:
Facsimile No.:
Wire Instructions:
-------------
Contact Name:
------------------
37
DISCLOSURE SCHEDULES
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF JUNE ___, 2000 BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND
TORNEAUX LTD.
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO
SUCH NUMBERS AND LETTERS AS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT
(THE "AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE
MODIFIED IN THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES
CONTAINED IN THESE DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL
THE DISCLOSURES SHALL BE READ TOGETHER.
38
SCHEDULE 3.1(c)
CAPITALIZATION
Number of authorized shares of Common Stock: 50,000,000
Number of authorized shares of Common Stock
issued and outstanding: 31,812,917
39
SCHEDULE 3.1(g)
SUBSIDIARIES
State of Incorporation
Subsidiary or Organization Ownership
---------- ---------------------- ---------
None.
40
SCHEDULE 3.1(w)
EMPLOYEES
None.