Exhibit 10.1
Form of Restricted Common Stock Purchase Agreement (each signature
page differed with respect to the name, address, amount and other
information for each individual investor) CONFIDENTIAL
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▇.▇▇▇▇▇▇▇
▇.▇▇▇▇▇▇▇ CORPORATION
RESTRICTED COMMON STOCK PURCHASE AGREEMENT
February 24, 2006
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CONFIDENTIAL
RESTRICTED COMMON STOCK PURCHASE AGREEMENT
THIS RESTRICTED COMMON STOCK PURCHASE AGREEMENT dated as of February 24,
2006 (this "Agreement"), among ▇.▇▇▇▇▇▇▇ Corporation, a Delaware corporation
(the "Company"), and each of the individual purchasers listed on Exhibit A to
this Agreement who have executed the signature page hereof (the "Purchasers").
WHEREAS, the Company wishes to sell and issue to the Purchasers shares of
Common Stock (the "Common Stock") of the Company, and the Purchasers wish to
purchase such shares from the Company, pursuant to the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants set forth herein, and other valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. PURCHASE AND SALE.
1.1. Sale and Issuance of Shares to Purchasers. Subject to the terms and
conditions of this Agreement, and upon the basis of the representations and
warranties contained in this Agreement, the Company agrees to sell and issue to
the Purchasers, free and clear of any liens, claims, charges and encumbrances
whatsoever, and the Purchasers agree to purchase, severally and not jointly,
from the Company, an aggregate of 18,750,000 shares of Common Stock, par value
$.001 per share, of the Company, for the aggregate purchase price of
$1,500,000.00 (the "Purchase Price") or $0.08 per share.
1.2. Issuance of Warrants to Purchasers. Subject to satisfaction of the
terms and conditions specified in Section 1.1, the Company agrees to issue to
each Purchaser, without payment of additional consideration, (i) a Common Stock
purchase warrant in an amount equal to twenty-five percent (25%) of the shares
of Common Stock purchased, in the form of Exhibit B-1, registered in the name of
such Purchaser, (collectively, the "Series A Warrants") and (ii) a Common Stock
purchase warrant in an amount equal to twenty-five percent (25%) of the shares
of Common Stock purchased, in the form of Exhibit B-2, registered in the name of
such Purchaser (collectively, the "Series B Warrants", and together with the
Series A Warrants, the "Warrants"). The Series A Warrants shall have an exercise
price ("Exercise Price") of $0.10 per share and shall be exercisable for a
period from issuance to February 28, 2009. The Series B Warrants shall have an
Exercise Price of $0.09 per share and shall be exercisable for a period ending
on the earlier of (a) of six months following the effectiveness of the
registration statement ("Registration Statement") to be filed with the
Securities and Exchange Commission ("SEC") for the benefit of the Purchasers or
(b) July 31, 2008. The Warrants shall provide the Purchasers with anti-dilution
protection such that whenever the Company issues or sells any shares of its
Common Stock for consideration per share that is less than the Exercise Price in
effect immediately prior to the time of such issue, then immediately upon such
issue or sale the Exercise Price shall be reduced to the consideration per share
received in exchange for such issuance of Common Stock. Notwithstanding the
foregoing, such anti-dilution provisions shall not apply to (i) securities
issued to employees, consultants, officers or directors of the Company pursuant
to any stock option, stock purchase or stock bonus plan, agreement or
arrangement approved by the Board of Directors; (ii) securities issued pursuant
to the acquisition of another business entity or business segment of any such
entity by the Company by merger, purchase of substantially all of the assets or
other reorganization whereby the Company will own more than fifty (50%) of the
voting power of such business segment of any such entity; (iii) securities
issued to vendors or customers or to other persons in similar commercial
situations with the Company if such issuance is approved by the Board of
Directors; (iv) securities issued in corporate partnering transactions on terms
approved by the Board of Directors; (v) securities issued in accordance with the
terms of any of the Company's preferred stock or warrants outstanding on the
date hereof, if any; and (vi) borrowings, direct or indirect, from financial
institutions regularly engaged in the business of lending money, whether or not
presently authorized with an equity component which is not a major component of
such borrowing; (vii) the first $100,000 in proceeds received by the Company
from the sale of any Common Stock or any securities convertible into or
exercisable for Common Stock or similar equity securities sold in any successive
180-day period beginning on the date of the Warrants and continuing through the
expiration date thereof.
1.3. Closing; Payment and Delivery. The name and address of each
Purchaser, the number of shares of Common Stock to be sold to each Purchaser,
the Purchase Price and the number of shares issuable upon exercise of each of
the Warrants is set forth on Exhibit A. Payment for and delivery of the
certificates evidencing the Common Stock to be sold to the Purchasers (the
"Closing") shall be effected at the offices of the Company, at 10:00 a.m.
Pacific Standard time contemporaneously with the execution and delivery of this
Agreement, or at such other place, time or date upon which the Company and the
Purchasers shall agree. At the Closing, the Purchase Price shall be paid in
immediately available funds against delivery by the Company to the Purchasers
(within three business days) of the stock certificates (representing the Common
Stock) and the Warrants. The Closing is subject to receipt by the Company of
minimum aggregate proceeds of $800,000.
Section 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
represents, warrants and covenants to the Purchasers as follows:
2.1. Organization and Qualification. The Company is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware with the requisite legal and corporate power to own its property and to
carry on its business as proposed to be conducted by it. The Company is
qualified and authorized to transact business and is in good standing as a
foreign corporation in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business, properties, prospects or
financial condition.
2.2. Power. The Company has all requisite legal power to enter into this
Agreement and to carry out and perform its obligations under the terms hereof
and thereof. The Company has all requisite legal power to issue the Common Stock
and the Warrants.
2.3. Capitalization.
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(a) The authorized capital stock of the Company consists of: (i)
300,000,000 shares of Common Stock ("Common Stock"), and (ii) 5,000,000 shares
of Preferred Stock. As of December 31, 2005, the total number of shares of
Common Stock outstanding (fully-diluted) is 205,351,842, consisting of
175,260,876 shares of Common Stock issued and outstanding, 7,906,491 shares of
Common Stock issuable upon conversion of outstanding shares of Series D
Preferred Stock, 2,485,573 shares of Common Stock issuable upon conversion of
outstanding shares of Series EE Preferred Stock, 7,894,736 shares of Common
Stock issuable upon conversion of outstanding 12% Convertible Subordinated
Promissory Notes, 6,182,500 shares of Common Stock issuable upon the exercise of
warrants and 5,621,666 shares of Common Stock issuable upon the exercise of
options (December 31, 2005 options outstanding less cancellations).
(b) No person is entitled to any preemptive right or right of first
refusal with respect to the issuance of the Common Stock as contemplated by this
Agreement. There are no outstanding preemptive rights, options, warrants,
conversion rights, agreements or other rights to purchase any of the authorized
but unissued stock of the Company other than those identified above or issued,
reserved or committed to be issued pursuant to this Agreement.
(c) The Company has not issued or obligated itself to issue
securities other than as listed above or otherwise contemplated by this
Agreement.
2.4. Company Authorizations. All corporate action on the part of the
Company and its directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby, and for the authorization,
issuance and delivery of the Common Stock and the Warrants has been taken. This
Agreement is a legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except (a) as limited by bankruptcy, insolvency or
other laws affecting the enforcement of creditors rights generally and (b) that
the availability of equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
2.5. Validity of Securities. Except for liens, charges, claims or
encumbrances created by or through the Purchasers, imposed by this Agreement or
restrictions generally imposed by applicable securities laws, the Common Stock,
when issued, sold and delivered in accordance with the terms of this Agreement,
will be duly and validly issued, fully paid, non-assessable and free and clear
of all liens, charges, claims and encumbrances.
2.6. No Breach. The execution, delivery and performance of this Agreement
by Purchasers and the Company will not contravene, breach or otherwise cause a
default under the Company's Certificate of Incorporation, bylaws or any
agreement to which the Company is a party or of which the Company is aware.
Section 3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser
represents to the Company as follows:
3.1. Authority. Such Purchaser has full power and authority to purchase
the Common Stock from the Company as provided herein and to otherwise execute,
deliver and perform this Agreement.
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3.2. Adequate Information. Such Purchaser acknowledges that he or it has
reviewed the reports filed by the Company with the Securities and Exchange
Commission ("SEC") pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (collectively, the "SEC Documents") and
has been afforded the opportunity to request and receive from the Company such
other documents, materials and information as he or it deems necessary or
appropriate for evaluating the purchase of the Common Stock. Such Purchaser
confirms that he or it has made such investigation as he or it deemed
appropriate to evaluate the merits and risks of this purchase. Such Purchaser
has had the opportunity to ask questions of and receive answers from the
Company, or their representatives, concerning the terms and conditions of this
sale and such Purchaser confirms that he or it has taken advantage of such
opportunity to the extent he or it deems necessary.
3.3. Investment Intent. Such Purchaser: (a) is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended; (b) has such knowledge and experience in financial and business matters
that he or it is capable of evaluating the merits and risks of an investment in
the Company; (c) is able to bear the economic risks (including a complete loss)
of an investment in the Company; (d) is purchasing the Common Stock for his or
its own account and not with a view towards the sale or other distribution
thereof; (e) understands that there is currently no public market for the Common
Stock and that the Common Stock may have to be held indefinitely without
possibility of liquidation.
3.4. General Solicitation. Purchaser is not purchasing the Common Stock or
the Warrants as a result of or subsequent to any advertisement, article, notice
or other communication regarding such securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
3.5. Reliance. Each Purchaser understands and acknowledges that (i) the
Common Stock and Warrants are being offered and sold to Purchaser without
registration under the Securities Act of 1933, as amended (the "Securities Act")
in a private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption, depends in part on,
and the Company will rely upon the accuracy and truthfulness of, the foregoing
representations and such Purchaser hereby consents to such reliance.
Section 4. OTHER AGREEMENT OF THE PARTIES.
4.1. Transfer Restrictions.
(a) The securities acquired hereunder or pursuant to the exercise of
the Warrants may only be disposed of pursuant to an effective registration
statement under the Securities Act, to the Company or pursuant to an available
exemption from or in a transaction not subject to the registration requirements
of the Securities Act, and in compliance with any applicable federal and state
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or to the Company, except as
otherwise set forth herein, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act.
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(b) Each Purchaser agrees to the imprinting, so long as is required
by this Section 4.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
4.2. Use of Proceeds. The Company shall use the net proceeds from the sale
of the Common Stock hereunder for general working capital purposes.
4.3. Fees and Expenses. Each party hereto hereby agrees to be responsible
for his or its own fees and expenses in connection with the transactions
contemplated hereby.
4.4. Brokers' Commissions. Each party hereto hereby agrees to indemnify,
defend, and hold harmless the other party from and against any and all expenses,
costs, liabilities, losses, damages, claims, causes of action, or other
proceedings which result from any broker, agent, or finder, licensed or
otherwise, claiming through, under, or by reason of the conduct of the
indemnifying party in connection with the transactions contemplated hereby.
4.5. Registration Statement. The Company shall utilize its best efforts to
prepare and file, on or before March 31, 2006, a Registration Statement on Form
S-1 (or other comparable form) to register for resale the shares of Common Stock
issued at Closing and to be issued to the Purchasers upon exercise of the
Warrants. All costs and expenses incurred in connection with the preparation and
filing of the Registration Statement shall be borne by the Company. Purchasers
acknowledge that additional securities of the Company may be included in the
Registration Statement pursuant to existing piggyback registration rights.
Section 5. MISCELLANEOUS.
5.1. Representations, Warranties and Covenants to Survive Closing. All
representations, warranties and covenants contained herein shall survive the
execution and delivery of this Agreement and the sale and issuance of the Common
Stock.
5.2. Successors and Assigns. All representations, warranties, covenants
and agreements of the parties contained in this Agreement or made in writing in
connection herewith, shall, except as otherwise provided herein, be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
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5.3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to conflicts
of laws principles.
5.4. Counterparts. This Agreement may be executed in two or more
counterparts, each which shall be deemed an original but all of which shall
together constitute one and the same Agreement.
5.5. Headings. The headings used herein are solely for the convenience of
the parties and shall not serve to modify or interpret the text of the Sections
at the beginning of which they appear.
5.6. Further Assurances. Each party will execute all documents and take
such other actions as the other parties may reasonably request in order to
consummate the transactions provided for herein and to accomplish the purposes
of this Agreement.
5.7. Notices. Any notice to any of the parties hereunder must be in
writing and shall be deemed sufficiently given if (i) given by personal
delivery, (ii) mailed by U.S. registered or certified mail, postage prepaid,
return receipt requested, or (iii) deposited with a recognized overnight
delivery service for next business day delivery, delivery charge prepaid, return
receipt requested, if to the Purchasers addressed as set forth on Exhibit A, and
if to the Company, addressed as follows:
To the Company: ▇.▇▇▇▇▇▇▇ Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President,
With copy to: Higham, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or at such other address or addresses as the respective parties may from time to
time specify or give in the manner provided herein. Such notice shall be deemed
given (i) when received, if given by personal delivery, (ii) the third business
day after mailing, if sent by certified or registered mail or (iii) the next
business day after deposit with a recognized overnight delivery service for next
business day delivery.
5.8. Entire Agreement. This Agreement and, including any agreements
referred to herein, set forth the entire understanding of the parties hereto and
supersede any prior oral or written agreements and understandings with respect
to the subject matter hereof.
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5.9. Construction and Representation. The parties understand and
acknowledge that they have each been represented by (or have been advised to
retain and have had the opportunity to be represented by) counsel in connection
with the preparation, execution and delivery of this Agreement. This Agreement
shall not be construed against any party for having drafted it. The parties
further understand and acknowledge that Higham, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP has
represented only the Company in connection with this Agreement.
5.10. Amendment. Any term of this Agreement may be amended with the
written consent of the Company and Purchasers representing a majority of the
shares of Common Stock purchased hereunder. Any amendment effected in accordance
with this Section 5.10 shall be binding upon each Purchaser.
5.11. Arbitration. Any action to enforce or interpret this Agreement shall
be settled by arbitration by the American Arbitration Association ("AAA") in San
Diego County, California. Any party may commence arbitration by sending a
written demand for arbitration to the other party. Such demand shall set forth
the nature of the matter to be resolved by arbitration. The substantive law of
the State of California shall be applied by the arbitrator to the resolution of
the dispute, and the procedural rules shall be governed by AAA. The parties
shall share equally all initial costs of arbitration. The prevailing party shall
be entitled to reimbursement of attorney fees, costs, and expenses incurred in
connection with the arbitration. All decisions of the arbitrator shall be final,
binding, and conclusive on all parties.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK;
INDIVIDUAL SIGNATURE PAGE(S) FOLLOW)
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▇.▇▇▇▇▇▇▇ CORPORATION
SIGNATURE PAGE TO
RESTRICTED COMMON STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement on the day and year first above written.
"COMPANY" "PURCHASER"
▇.▇▇▇▇▇▇▇ CORPORATION
13114 Evening Creek Drive South --------------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Name
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By:
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Its: Sr. Vice President and Secretary Title:
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Street Address:
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Phone #:
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E-mail:
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PURCHASE AMOUNT
$:
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EXHIBIT A
PURCHASERS
Shares Aggregate Series A Series B
Name of Purchaser & Address Acquired Purchase Price Warrant Shares Warrant Shares
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Total