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EXHIBIT 10.11
SECURITIES PURCHASE AGREEMENT
BETWEEN
CETALON CORPORATION
AND
THE INVESTORS LISTED ON SCHEDULE 1
THIS SECURITIES PURCHASE AGREEMENT is dated as of September 11, 2001
(this "Agreement"), between the Investors listed on Schedule 1 (individually, an
"Investor" and, collectively, the "Investors") and Cetalon Corporation, a Nevada
corporation (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may issue and sell to Investors from
time to time, and Investors shall purchase, up to $3,000,000 of shares of Common
Stock (as defined below). Unless otherwise specified herein, all references
herein to dollars or $ shall be to U.S. dollars (US$).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Business Day" shall mean any day (other than a day that is a Saturday,
Sunday, or legal holiday in any of the State of California, the United Kingdom,
or Hong Kong) on which banks are open for business in each of Los Angeles,
California, the United Kingdom, and Hong Kong.
"Capital Shares" means the Common Stock and any shares of any other
class of common stock whether now or hereafter authorized, having the right to
participate in the distribution of earnings and assets of the Company.
"Capital Shares Equivalents" means any securities, rights, or
obligations that are directly or indirectly convertible into or exchangeable for
or give any right to subscribe for or otherwise receive Capital Shares of the
Company or any warrants, options or other rights to subscribe for or purchase
Capital Shares.
"Common Stock" means the Company's common stock, par value $.0001 per
share, or such securities into which such stock shall hereafter be reclassified.
"Discount Rate" means 90% on any Put Date (as defined in Section 2.2)
in respect of a single Investment Amount of $250,000 in a Put Notice, or 87.5%
on any Put Date in respect of a single Investment Amount in excess of $250,000
in a Put Notice, in either case subject to a "Minimum Purchase Price Per Put
Share" (as that term is defined hereinbelow).
"Effective Date" means September 11, 2001.
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"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Investment Amount" means the dollar amount to be invested by the
Investors to purchase Put Shares as specified in a Put Notice.
"Irrevocable Commitment Period" means the period commencing on the
Effective Date and expiring on the earlier to occur of (x) the date on which the
Investors shall have paid an aggregate of $3,000,000 in Investment Amounts for
Put Shares pursuant to this Agreement or (y) the date occurring one year from
the Effective Date.
"Market Price" on any date means the average of the ten VWAP's during
the Valuation Period relating to such date, subject to equitable adjustment in
the event of any Valuation Event that occurs between the date of the applicable
Put Notice and the Closing Date pertaining thereto, the scope and nature of
which equitable adjustment shall be determined in the sole and absolute
discretion of the Company.
"Material Adverse Effect" means any effect on the business, operations,
properties, prospects, 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
impair the ability of the Company to enter into or timely perform any of its
obligations under this Agreement.
"Minimum Purchase Price Per Put Share" means the price as specified in
a Put Notice below which the Company would not be obligated to issue Shares and
the Investor would not be obligated to purchase Shares under such Put Notice,
which Minimum Purchase Price Per Put Share shall not be lower than $3.27 unless
otherwise agreed upon in writing by the Company and the Investors, which Minimum
Purchase Price Per Put Share shall be subject to equitable adjustment in the
event of a Valuation Event that occurs between the date of the applicable Put
Notice and the Closing Date pertaining thereto, the scope and nature of which
equitable adjustment shall be determined in the sole and absolute discretion of
the Company.
"Outstanding" when used with reference to shares of Common Stock or
Capital Shares, means, at any date as of which the number of such Capital Shares
is to be determined, all issued and outstanding shares of Common Stock or
Capital Shares, and shall include all such shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
shares; provided, that "Outstanding" shall not mean any shares of Common Stock
or Capital Shares directly or indirectly owned or held by or for the account of
the Company.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Principal Market" means whichever of the OTC Bulletin Board, Nasdaq
National Market, Nasdaq SmallCap Market, American Stock Exchange, or New York
Stock Exchange that is then the principal trading exchange, market, or quotation
system for the Common Stock.
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"Purchase Price" means the product of (i) the applicable Discount Rate
and (ii) the Market Price during the Valuation Period for a Put; provided,
however, that the Purchase Price shall be not less than the Minimum Purchase
Price Per Put Share, subject to equitable adjustment in the event of any
Valuation Event that occurs between the date of the applicable Put Notice and
the Closing Date pertaining thereto, the scope and nature of which equitable
adjustment shall be determined in the sole and absolute discretion of the
Company.
"Put" means the exercise by the Company of its right to require the
Investors to purchase Put Shares pursuant to the terms and conditions of this
Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Principal Market on which the Common Stock is then listed or quoted, or (b)
if the Common Stock is not listed or quoted for trading on a Principal Market, a
day on which the Common Stock is traded in the over - the - counter market, as
reported by Pink Sheets LLC (or any similar organization or agency succeeding
its functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading
Day shall mean a Business Day.
"Valuation Event" means an action by the Company during the Irrevocable
Commitment Period to:
(a) subdivide or combine the Common Stock; or
(b) pay a dividend on its Capital Shares or make any
other distribution of its Capital Shares.
"Valuation Period" means the period of ten consecutive Trading Days
concluding on the Put Date.
"VWAP" means the daily volume - weighted average price (as reported by
Bloomberg Financial using AQR function) of the Common Stock on the Principal
Market on the date in question, or, if there is no such price on such date, then
the closing bid price on the date nearest preceding such date.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments.
(a) Puts. Upon the terms and conditions set forth
herein, the Company has the right, but not the obligation, to make a Put, which
may be made by the physical or facsimile delivery of a duly completed written
notice to the Investors in the form attached hereto as Exhibit A (each, a "Put
Notice"), specifying therein the Investment Amount that the Company
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intends to sell to the Investors, the Purchase Price thereof, the Valuation
Period applicable thereto, and the account of the Company into which the
Investment Amount for such Put is to be paid. The number of shares of Common
Stock that the Investors shall receive pursuant to a Put ("Put Shares") shall be
determined by dividing the Investment Amount (as may be adjusted pursuant to the
terms hereof) specified in the Put Notice by the Purchase Price for the
Valuation Period for such Put.
The Investors shall "Close" a Put
transaction in the manner and on the schedule set forth in Sections 2.3 and 6.1,
below.
(b) Limitations on Puts.
(i) The maximum aggregate Investment Amount
for all Puts is $3,000,000.
(ii) The Investment Amount for each Put
shall be $250,000; provided, however, that the single Investment Amount for any
Put may be in excess thereof upon the Company's request in a Put Notice
therefor; provided, further, that any requested single Investment Amount in
excess of $250,000 in a Put Notice shall be permissive for the Investors but
that $250,000 of each single Investment Amount in a Put Notice shall be
mandatory.
(iii) There may not occur in excess of 12
Closings hereunder.
Section 2.2 Mechanics.
(a) Put Notice. Subject to the conditions and
limitations herein, at any time during the Irrevocable Commitment Period, the
Company has the right, but not the obligation, to deliver a Put Notice to the
Investors.
(b) Execution of Put Notice: A Put Notice shall be
executed jointly by the Company's Chief Executive Officer and one other duly
authorized officer.
(c) Date of Delivery of Put Notice. A Put Notice
shall be deemed delivered on (i) the Trading Day it is received by physical or
facsimile delivery or otherwise by the Investors if such notice is received
prior to 12:00 noon Pacific Time or (ii) the immediately succeeding Trading Day
if it is received by physical or facsimile delivery or otherwise after 12:00
noon Pacific Time on a Trading Day or at any time on a day that is not a Trading
Day. The Trading Day on which a Put Notice is deemed delivered pursuant to this
Section is the "Put Date."
Section 2.3 Closings.
(a) Subject to the satisfaction of the conditions set
forth in this Agreement, the closing of a purchase by the Investors of Put
Shares following a Put (a "Closing") shall occur on the fifth Business Day
following the conclusion of the Valuation Period for such Closing (or such other
date as is mutually agreed to by the Company and the Investors) (a "Closing
Date") at the offices of Xxxxx Xxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxxxx 00000
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("Xxxxx Xxxx"), or such other place to which the parties may agree. At least one
Business Day prior to each Closing Date, the Company shall deliver (or cause to
be delivered) into escrow with Xxxxx Xxxx (or such other escrow agent to which
the parties may agree) such documents, instruments, and writings required to be
delivered by it pursuant to this Agreement in order to effect a Closing
hereunder (the "Company Required Items").
(b) Xxxxx Xxxx (or such other escrow agent to which
the parties may agree) shall notify each of the Company and the Investors on the
Business Day it receives all of the Company Required Items relating to such
Closing. If Xxxxx Xxxx (or such other escrow agent to which the parties may
agree) together with the Company's Chief Executive Officer and one other duly
authorized officer shall have provided such notice by the Closing, the Investors
shall deliver (or cause to be delivered) to the Company, the Investment Amount
for the Put Shares to be issued and sold at such Closing. In the event that any
Company Required Item shall not have been delivered, then, at the option of the
Investors, such Closing shall be canceled and any Company Required Items
delivered to Xxxxx Xxxx (or such other escrow agent to which the parties may
agree) in connection with such Closing shall be returned to or delivered as
directed by the Company. The parties hereto understand and agree that Xxxxx Xxxx
(or such other escrow agent to which the parties may agree) will not release the
Company Required Items to the Investors prior to its receipt of written
confirmation from the Company that the Company has received the net proceeds
from the sale of the Put Shares to have been sold at such Closing; provided,
however, if the Company does not confirm such receipt by 5:00 p.m. Pacific Time
on the Business Day following the Closing Date, the parties hereby direct Xxxxx
Xxxx (or such other escrow agent to which the parties may agree) to deliver the
Company Required Items to the Investors at such time as Xxxxx Xxxx (or such
other escrow agent to which the parties may agree) receives written evidence
from the institution from which the Investment Amount was delivered on behalf of
the Investors that funds equal to the amount required hereunder to be delivered
to the Company at such Closing were delivered in accordance with the wire
instructions provided by the Company for such purpose (a federal wire number for
the correct amount and in accordance with the wire instructions provided by the
Company for such purpose shall be conclusive evidence of the Company's receipt).
(c) Each of the parties hereby agrees jointly and
severally to indemnify and hold harmless Xxxxx Xxxx and its partners, employees,
agents, and representatives from any and all claims, liabilities, costs, or
expenses in any way arising from or relating to the performance of its duties
hereunder and agrees that Xxxxx Xxxx shall not have any liability hereunder
other than as arising solely from its willful misconduct in performing its
duties hereunder. The parties understand and agree that Xxxxx Xxxx may, at any
time upon two Business Days prior written notice to the parties, resign from its
duties and obligations hereunder without recourse to any party. The Company
further understands and agrees that Xxxxx Xxxx acts as legal counsel to the
Company in connection with the transactions contemplated hereby and may, from
time to time, represent the Company in other matters, including such matters as
may directly or indirectly be adverse to the interests of the Company. The
Investors consent to such representation and waive any claim that such
representation represents a conflict of interest on the part of Xxxxx Xxxx. The
Company understands that the Investors and Xxxxx Xxxx are relying explicitly on
the foregoing provision in connection with the Company entering into this
Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR
Each Investor severally, but not jointly, represents and warrants to
the Company as follows:
Section 3.1 Intent. Each Investor is entering into this Agreement for
its own account and has no present arrangement (whether or not legally binding)
at any time to sell the Common Stock to or through any person or entity;
provided, however, that by making the representations herein, each Investor does
not agree to hold Put Shares for any minimum or other specific term and reserves
the right to dispose of Put Shares at any time so long as any such dispositions
have been registered under the Securities Act and qualified under relevant state
securities laws or in accordance with exemptions from such registration and
qualification requirements.
Section 3.2 Sophisticated Investors. Each Investor is a "sophisticated
investor" (as that term is described in Rule 506(b)(2)(ii) of Regulation D) and
an "accredited investor" (as that term is defined in Rule 501 of Regulation D),
and has such experience in business and financial matters that it has the
capacity to protect its own interests in connection with this transaction and is
capable of evaluating the merits and risks of an investment in the Put Shares.
Each Investor acknowledges that an investment in the Put Shares is speculative
and involves a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by the Investors and constitutes a valid and
binding agreement of each Investor enforceable against it in accordance with its
terms.
Section 3.4 Not an Affiliate. Each Investor is not an officer,
director, or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
Section 3.5 Organization and Standing. Each Investor is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization.
Section 3.6 Disclosure; Access to Information. Each Investor has
received and reviewed all documents, records, books, and other publicly
available information pertaining to such Investor's investment in the Company
that was requested by such Investor. The Company is subject to the periodic
reporting requirements of the Exchange Act, and each Investor has reviewed
copies of any such reports that have been requested by it.
Section 3.7 Manner of Sale. At no time was any Investor presented with
or solicited by or through any leaflet, public promotional meeting, television
advertisement, or any other form of general solicitation or advertising in
connection with its investment in the Put Shares.
Section 3.8 Financial Capacity. Each Investor currently has the
financial capacity to meet its obligations to the Company hereunder, and each
Investor has no present knowledge of any circumstances that could cause it to
become unable to meet such obligations in the future.
Section 3.9 Disclosure. Each Investor understands and confirms that the
Company shall be relying on the foregoing representations in connection with the
transactions contemplated by this Agreement. The foregoing representations are
true and correct and do not contain
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any untrue statement of material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as follows:
Section 4.1 Organization. The Company is duly incorporated and existing
in good standing under the laws of Nevada, and has all requisite corporate
authority to own its properties and to carry on its business as now being
conducted. The Company does not have any subsidiaries and does not own more that
50% of or control any other business entity except as set forth in the SEC
Documents. The Company is duly qualified and is in good standing as a foreign
corporation to do business in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those in which the failure so to qualify could not have or result in
a Material Adverse Effect.
Section 4.2 Authority; Reservation of Common Stock.
(a) Corporate Power. The Company has the requisite
corporate power and corporate authority to enter into and perform its
obligations under this Agreement and to issue the Put Shares.
(b) The execution, issuance, and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
by the Company, and, subject to the delivery of a Put Notice, executed by the
Company's Chief Executive Officer and one other duly authorized officer, no
further authorization on behalf of the Company is required to consummate the
transactions contemplated hereby.
(c) This Agreement has been duly executed and
delivered by the Company and, when issued and delivered in accordance with the
terms hereof, shall constitute valid and binding obligations of the Company
enforceable against the Company in accordance with its terms. The Company has
duly and validly authorized and reserved for issuance shares of Common Stock
sufficient in number for the issuance of the Put Shares.
Section 4.3 Capitalization. Schedule 4.3 sets forth the number of
authorized and issued and outstanding shares of capital stock of the Company as
of the date hereof. Except as specifically set forth in Schedule 4.3, there are
no outstanding Capital Share Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and non - assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(g) of the Exchange Act.
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Section 4.5 SEC Documents. The Company has not provided to the
Investors any information that, according to applicable law, rule, or
regulation, should have been disclosed publicly prior to the date hereof by the
Company, but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents 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 SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except (i) as may be otherwise specified in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they exclude footnotes or may be condensed or
summary statements. Such financial statements fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended subject, in the case of unaudited interim statements, to
normal, immaterial, year - end audit adjustments. Neither the Company nor any of
its subsidiaries has any indebtedness, obligations, or liabilities of any kind
(whether accrued, absolute, contingent, or otherwise) that would have been
required to be reflected in, reserved against, or otherwise described in the
financial statements or in the notes thereto in accordance with GAAP, which was
not fully reflected in, reserved against, or otherwise described in the
financial statements or the notes thereto included in the SEC Documents or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the last date of such financial statements. Since February
28, 2001, there has been no event, occurrence or development relative to the
Company or its subsidiaries that could have or result in a Material Adverse
Effect.
Section 4.6 Valid Issuances. When issued and paid for in accordance
with the terms hereof, the Put Shares will have been duly and validly issued,
fully paid, and non - assessable, free and clear of all liens, claims, charges,
encumbrances or rights of first refusal or preemptive rights (collectively,
"Liens"). The Put Shares shall not subject the Investors to personal liability
to the Company or its creditors by reason of the possession thereof.
Section 4.7 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) conflict with or
violate any provision of the Company's Articles of Incorporation, Bylaws, or
other charter documents (each as amended through the date hereof), (ii) subject
to obtaining the Required Approvals (as defined below), 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 (with or without notice, lapse of time,
or both) of, any agreement, credit facility, debt, or other instrument
(evidencing a Company or subsidiary debt or otherwise) or other understanding to
which the Company or any subsidiary is a party or by which any property or asset
of the Company or any subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree, or
other restriction of any court or governmental authority to which the Company or
a subsidiary is subject (including federal and state and foreign securities laws
and regulations), or by which any property or asset of the Company or a
subsidiary thereof is
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bound or affected; except in the case of each of clauses (ii) and (iii), as
could not, individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being conducted in material
violation of any law, ordinance, or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.
Section 4.8 Filings, Consents, and Approvals. Neither the Company nor
any subsidiary thereof is required to obtain any consent, waiver, authorization,
or order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local, or other governmental authority or other
Person in connection with the execution, delivery, and performance by the
Company of this Agreement, other than where the failure to obtain such consent,
waiver, authorization, or order, or to give such notice or make such filing or
registration would not have or result in, individually or in the aggregate, a
Material Adverse Effect (collectively, the "Required Approvals").
Section 4.9 No Undisclosed Events or Circumstances. Since February 28,
2001, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations, or financial
condition, that, under applicable law, rule, or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.10 Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding, or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local, or foreign) (collectively, an "Action") which
(i) adversely affects or challenges the legality, validity, or enforceability of
this Agreement or any of the Put Shares or (ii) could, individually or in the
aggregate, have or resulted in a Material Adverse Effect.
Section 4.11 No Default or Violation. Neither the Company nor any
subsidiary thereof (i) is in default under or in violation of (and no event has
occurred which has not been waived which, with notice or lapse of time or both,
would result in a default by the Company or any such subsidiary under), nor has
the Company or any such subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan, or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgement or order of
any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, in each case of
clauses (i), (ii), or (iii) above, except as could not individually or in the
aggregate, have or result in a Material Adverse Effect.
Section 4.12 Certain Fees. Other than a ten percent fee payable to the
Xxxxxx Group LLC in accordance with its standard engagement with the Company, no
fees or commissions will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank, or
other Person, with respect to the transactions contemplated by this Agreement.
The Investors shall have no obligation with respect to any fees or with respect
to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by this Agreement. The Com-
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pany shall indemnify and hold harmless the Investors, their employees, officers,
directors, agents, and partners, and their respective affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees), and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
Section 4.13 Solicitation Materials. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell any of the
Put Shares by means of any form of general solicitation or advertising.
Section 4.14 Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided the Investors or their agents or
counsel with any information that constitutes material non - public information
that (i) if disclosed publicly, would reasonably be expected to have a material
effect on the price of the Common Stock or (ii) according to applicable law,
rule, or regulation, should have been disclosed publicly by the Company prior to
the date hereof but for which has not been disclosed. The Company understands
and confirms that the Investors shall be relying on the foregoing
representations in effecting transactions in Put Shares of the Company. All
disclosure provided to the Investors and their counsel regarding the Company,
its business, and the transactions contemplated hereby, including Schedule 4.3
hereto, and the representations and warranties contained herein, furnished by or
on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE V
OTHER AGREEMENTS OF THE PARTIES
Section 5.1 Listing of Common Stock. The Company shall maintain the
listing of the Common Stock for trading on a Principal Market. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Principal Market, that it will include in such application the issued and
issuable Put Shares. The Company will take all action to continue the listing
and trading of its Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing, and other obligations under the
bylaws or rules of the Principal Market and shall provide Investors with copies
of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within one Trading Day of the Company's
receipt thereof.
Section 5.2 Rule 144 Compliance. During the Irrevocable Commitment
Period, the Company will notify the Investors immediately following each filing
by the Company under the Exchange Act. Until two years from the Expiration Date,
if the Company is not required to file reports pursuant to Section 12(g) of the
Exchange Act, it will prepare and furnish to the Investors and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
such information as is required for the Investors to sell the Put Shares under
Rule 144 promulgated under the Securities Act. The Company further covenants
that it will take such further action as any holder of Put Shares may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Put Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including causing its attorneys to render and deliver any legal
opinion required in order to
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permit such Person to sell its Put Shares under Rule 144 upon notice of an
intention to sell or other form of notice having a similar effect. Upon the
request of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
Section 5.3 Legends. The certificates evidencing the Common Stock to be
sold to the Investors hereunder shall be issued with the Company's standard
restrictive legend affixed thereupon and with the Company's standard stock
transfer restrictions provided to the Company's transfer agent with respect
thereto.
Section 5.4 Integration. The Company shall not, and shall use its best
efforts to ensure that no affiliate of the Company shall, sell, offer for sale,
or solicit offers to buy or otherwise negotiate in respect of any "security" (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Put Shares in a manner that would require registration
under the Securities Act of the sale of the Put Shares hereunder to the
Investors.
Section 5.5 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on each Closing Date, issue a press release acceptable to the
Investors disclosing the transactions contemplated hereby, (ii) file with the
Commission a Current Report on Form 8-K disclosing the transactions contemplated
hereby within ten Business Days after the date of this Agreement, and (iii)
timely file with the Commission such reports as may periodically be required in
order to effect issuances of Put Shares hereunder and provide a copy thereof to
the Investors promptly after the filing thereof. The Company shall, no less than
one Business Day prior to the filing of any disclosure required by clauses (ii)
and (iii) above, provide a copy thereof to the Investors. The Company and the
Investors shall consult with each other in issuing any other press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or stock market or trading facility with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement, filings or
other communications without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except that no prior
consent shall be required if such disclosure is required by law or stock market
regulations, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Section 5.6 Certain Trading Restrictions. Each Investor agrees that,
during the Irrevocable Commitment Period, it and its affiliates may sell any
Capital Shares owned of record or beneficially by it; however, during the
Irrevocable Commitment Period, it and its affiliates shall not enter into any
short sales in respect of Capital Shares acquired under the terms of this
Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE;
IRREVOCABLE OBLIGATION OF THE INVESTORS TO CLOSE
Section 6.1 Conditions Precedent to the Right of the Company to Deliver
a Put Notice; Irrevocable Obligation of the Investors to Close. In addition to
the specific conditions contained elsewhere in this Agreement, the right of the
Company to deliver a Put Notice and the obligation
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12
of the Investors to perform their obligations at any Closing hereunder is
subject to the satisfaction, on both (i) the date of delivery of such Put Notice
and (ii) the applicable Closing Date (each a "Condition Satisfaction Date"), of
each of the following conditions, or the waiver by the Investors of such
conditions:
(a) Representations and Warranties. The
representations and warranties of the Company in this Agreement shall be true
and correct as of the date hereof.
(b) Performance by the Company. The Company shall
have performed, satisfied, and complied in all material respects with all
covenants and agreements required by this Agreement to be performed, satisfied,
or complied with by the Company as of the date hereof.
(c) Delivery of Shares. The Company shall have
delivered the Put Shares to Xxxxx Xxxx pursuant to Section 2.3 and the other
conditions to such Closing as set forth in such Section shall have been
satisfied.
(d) Timing. At least 15 Trading Days shall have
elapsed since the immediately preceding Closing Date.
(e) Other. The Investors shall have received such
other certificates and documents as shall have been reasonably requested by the
Investors in order for the Investors to confirm the Company's satisfaction of
the conditions set forth herein.
ARTICLE VII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 7.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investors, and their advisors and representatives
all publicly available corporate documents and properties of the Company as may
be reasonably necessary for the purpose of such review. The review contemplated
hereby is solely to enable the Investors and such Persons to conduct initial and
ongoing due diligence with respect to the Company.
Section 7.2 Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public
information to the Investors or their advisors or representatives unless prior
to disclosure of such information the Company identifies such information as
being non-public information and provides the Investors, such advisors, and
representatives with the opportunity to accept or refuse to accept such non-
public information for review. The Company may, as a condition to disclosing any
non-public information hereunder, require the Investors to enter into a
confidentiality agreement in form mutually acceptable to the Company and the
Investors.
(b) The Company represents that it does not
disseminate non-public information to any Investor who purchase stock in the
Company in a public offering, to money managers or to securities analysts.
Nothing contained in this Section shall be construed to mean
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13
that such Persons other than the Investors may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Governing Law. All questions concerning the construction,
validity, enforcement, and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of Los Angeles, County of Los Angeles, State
of California, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of this Agreement), and hereby
irrevocably waives, and agrees not to assert in any suit, action, or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action, or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action, or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
transmission) 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 contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Section 8.2 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second Business Day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Cetalon Corporation
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: Chief Executive Officer
With copies to: Xxxxx Xxxx LLP
(which shall not 0000 Xxxx Xxxxxx, Xxxxx 000
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14
constitute notice) Xxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
If to the Investors: X/x Xxxxxxxx & Xx.
00 Xxxxxxxx Xxxxxx
Xxxxxx X0X 0XX
Facsimile No.: (000)00-00-0000-0000
Attn: Xxxxxx Xxxxxxxx
With copies to: Xxxxxxxx & Co.
(which shall not 00 Xxxxxxxx Xxxxxx
xxxxxxxxxx xxxxxx) Xxxxxx X0X 0XX
Facsimile No.: (000)00-00-0000-0000
Attn: Xxxxxx Xxxxxxxx, Esq.
A party may from time to time change its address or facsimile number for notices
under this Section by giving at least ten days' prior written notice of such
changed address or facsimile number to the other party hereto.
Section 8.3 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg Financial or any successor to its function of reporting share
prices. The written mutual consent of the Investors and the Company shall be
required to employ any other reporting entity.
Section 8.4 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing any Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate or Security of like
tenor.
Section 8.5 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
Section 8.6 Entire Agreement. This Agreement, together with Schedules 1
and 4.3 and Exhibit A, contains the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits, and schedules.
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15
Section 8.7 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Investors or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver 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 provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 8.8 Survival. The representations, warranties, agreements, and
covenants contained herein shall survive each Closing and the delivery and
exercise of all Put Shares issuable hereunder.
Section 8.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. Neither party may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party.
Section 8.10 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the parties will be entitled to specific performance of the obligations of the
other parties under this Agreement. The Company and the Investors agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of their respective obligations described in this Agreement
and hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
Section 8.11 Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 8.12 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 8.13 Fees and Expenses. Except as otherwise set forth in this
Section 8.13, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall bear the legal fees and
expenses incurred in connection with the preparation and review of Closing
items. The Company shall bear all expenses incurred by Xxxxx Xxxx in respect of
its duties as Escrow Agent. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Put Shares issuable
hereunder.
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16
Section 8.14 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
Section 8.15 Publicity. The Company agrees that it will not issue any
press release or other public announcement of the transactions contemplated by
this Agreement without the prior consent of the Investors, which shall not be
unreasonably withheld nor delayed by more than two Trading Days from its receipt
of such proposed release, provided, that if the Company is advised by its
outside counsel that it is required by law or the applicable rules of any
Principal Market to issue any such press release or public announcement, then,
it may do so without the prior consent of the Investors, although it shall be
required to provide prior notice (which may be by telephone) to the Investors
that it intends to issue such press release or public announcement. However,
notwithstanding the foregoing, no release shall name any Investor without its
express consent.
[SIGNATURE PAGES FOLLOW]
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17
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
CETALON CORPORATION
By:
A. Xxxx X. Xxxxx, Chief Executive Officer
By:
Xxxx Xxxxxxxx, Chief Financial Officer
[SIGNATURE PAGE FOR INVESTORS FOLLOWS]
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18
SIGNATURE PAGE FOR INVESTORS
POINTE CAPITAL LIMITED]
By:
,
SONNET INVESTMENTS LIMITED
By:
,
JACKER INVESTMENTS LIMITED
By:
,
XXXXXX HIGH YIELD FUND LIMITED
By:
,
GLOBAL MASTER INVESTMENTS LIMITED
By:
,
ARCHANGEL (SINGAPORE) PTE LIMITED
By:
,
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19
SCHEDULE 1
NAME AND ADDRESS OF, AND ALLOCATION AMONG, THE INVESTORS
Pointe Capital Limited
00 Xxxxxxxx Xxxxxx
Xxxxxx X0X 0XX
Allocation of Put Shares: 25%
Sonnet Investments Limited
Xxxxx 0000x, Xxxxxxx Xxxxx
00 Xxxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Allocation of Put Shares: 25%
Jacker Investments Limited
Xxxxx 0000x, Xxxxxxx Xxxxx
00 Xxxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Allocation of Put Shares: 16.66%
Xxxxxx High Yield Fund Ltd.
Villa l'Abeille
1264 St Cergue
Switzerland
Allocation of Put Shares: 16.66%
Global Master Investments Limited
X/x Xxxxxxxx & Xx.
00 Xxxxxxxx Xxxxxx
Xxxxxx X0X 0XX
Allocation of Put Shares: 8.33%
Archangel (Singapore) Pte. Limited
Xxxxxxx Waterfront Plaza
Main Street, Memorial Square
Nevis, West Indies
Allocation of Put Shares: 8.33%
20
SCHEDULE 4.3
AUTHORIZED CAPITAL STOCK
GRANTED CAPITAL SHARE EQUIVALENTS
CETALON CORPORATION
[INSERT CAPITAL STRUCTURE HERE: number of authorized and issued and outstanding
shares of capital stock of Cetalon]
[INSERT OPTION, WARRANT, RIGHT SCHEDULE HERE: number of outstanding options,
warrants, and rights of Cetalon]
21
EXHIBIT A
PUT NOTICE
CETALON CORPORATION
Cetalon Corporation, a Nevada corporation (the "Company"), hereby
elects to exercise its right pursuant to the Securities Purchase Agreement dated
as of September 11, 2001 (the "Agreement"), to require the purchase Put Shares
pursuant to terms of the Agreement. Capitalized terms used and not otherwise
delivered in this Put Notice that are defined in the Agreement shall have the
meanings set forth in the Agreement.
The Company hereby certifies that:
1. The Investment Amount is: $_______________.
2. The Valuation Period ran from _________ __, 200__, to __________ __,
200__.
3. The Purchase Price applicable to this Put Notice is $_______,
subject to equitable adjustment in the event of any Valuation Event
that occurs between the date of this Put Notice and the Closing Date
pertaining hereto, the scope and nature of which equitable adjustment
shall be determined in the sole and absolute discretion of the Company.
The undersigned has executed this Put Notice as of this ___ day of
____________, 200__.
CETALON CORPORATION
By:
A. Xxxx X. Xxxxx, Chief Executive Officer
By:
Xxxx Xxxxxxxx, Chief Financial Officer