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PRIVATE EQUITY LINE OF CREDIT AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
ENVIRONMENTAL REMEDIATION HOLDING CORP.
dated as of March 23, 1998
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PRIVATE EQUITY LINE OF CREDIT AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
ENVIRONMENTAL REMEDIATION HOLDING CORP.
dated as of March 23, 1998
This PRIVATE EQUITY LINE OF CREDIT AGREEMENT is entered into as of the
23rd day of March, 1998 (this "Agreement"), by and between Kingsbridge Capital
Limited (the "Investor"), an entity organized and existing under the laws of the
British Virgin Islands, and Environmental Remediation Holding Corp., a
corporation organized and existing under the laws of the State of Colorado (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase, up to
$10,000,000 of the Common Stock (as defined below) and the Warrant (as defined
below); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2) ") and Regulation D ("Regulation D") of the
United States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in Common Stock to be made
hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Adjustment Period" See Section 2.4(b).
Section 1.2 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.3 "Blackout Shares" shall have the meaning assigned to them
in Section 2.7.
Section 1.4 "Capital Shares" shall mean the Common Stock and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of dividends (as and when
declared) and assets (upon liquidation of the Company).
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Section 1.5 "Closing" shall mean one of the closings of a purchase
and sale of the Common Stock pursuant to Section 2. 1
Section 1.6 "Closing Date" shall mean, with respect to a Closing, the
third Trading Day following the Put Date related to such Closing, provided all
conditions to such Closing have been satisfied on or before such Trading Day.
Section 1.7 "Commitment Amount" shall mean the $10,000,000 up to
which the Investor has agreed to provide to the Company in order to purchase Put
Shares pursuant to the terms and conditions of this Agreement.
Section 1.8 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earlier to occur of (x) the date on which the Investor shall have purchased Put
Shares pursuant to this Agreement for an aggregate Purchase Price of
$10,000,000, (y) the date this Agreement is terminated pursuant to Section 2.5,
or (z) the date occurring twenty four (24) months from the date of commencement
of the Commitment Period.
Section 1.9 "Common Stock" shall mean the Company's common stock,
$0.0001 par value per share.
Section 1.10 "Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
Section 1.11 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2 of this Agreement.
Section 1.12 "Damages" mean any losses, claims, damages, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.13 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and the rules and regulations promulgated thereunder.
Section 1.15 "Floor Price" shall mean one dollar ($1.00) per share.
Section 1.16 "Investment Amount" shall mean the dollar amount (within
the range specified in Section 2.2) to be invested by the Investor to purchase
Put Shares with respect to any Put Date as notified by the Company to the
Investor in accordance with Section 2.2 hereof.
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Section 1.17 "Investor Note" shall mean the Subordinated Note with a
principal amount of $200,000 issued by the Company to Banque Franck on behalf of
the Investor.
Section 1.18 "Legend" shall have the meaning set forth in Section 8.1.
Section 1.19 "Market Price" on any given date shall mean the average of
the lowest intra-day trade prices of the Common Stock over the Valuation Period.
"Lowest intra-day price" shall mean the lowest price of the Common Stock (as
reported by Bloomberg L.P.) during any Trading Day.
Section 1.20 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
its obligations under any of (a) this Agreement, (b) the Registration Rights
Agreement, and (c) the Warrant.
Section 1.21 "Maximum Put Amount" shall mean, with respect to any Put,
(i) two hundred fifty thousand dollars ($250,000) if the average trading volume
for the Common Stock over the twenty (20) Trading Days preceding the applicable
Put Date equals or exceeds twenty thousand (20,000) shares per Trading Day and
is less than or equal to forty thousand (40,000) shares per Trading Day and (ii)
five hundred thousand dollars ($500,000) if the average trading volume for the
Common Stock over the twenty (20) Trading Days preceding the applicable Put Date
exceeds forty thousand (40,000) shares per Trading Day.
Section 1.22 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.23 "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not refer to any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.24 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.25 "Preferred Stock" shall mean the Company's preferred
stock, par value $.0001 per share.
Section 1.26 "Principal Market" shall mean the OTC Bulletin Board (the
"Bulletin Board"), the Nasdaq National Market, the Nasdaq Small-Cap Market, the
American Stock Exchange or the New York Stock Exchange, whichever is at the time
the principal trading exchange or market for the Common Stock.
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Section 1.27 "Purchase Price" shall mean, with respect to a Put,
seventy-nine percent (79%) of the Market Price on a the applicable Put Date (or
such other date on which the Purchase Price is calculated in accordance with the
terms and conditions of this Agreement).
Section 1.28 "Put" shall mean each occasion the Company elects to
exercise its right to tender a Put Notice requiring the Investor to purchase a
discretionary amount of the Company's Common Stock, subject to the terms and
conditions of this Agreement.
Section 1.29 "Put Date" shall mean the Trading Day during the
Commitment Period that a Put Notice to sell Common Stock to the Investor is
deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.30 "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to require the
Investor to purchase pursuant to the terms of this Agreement.
Section 1.31 "Put Shares" shall mean all shares of Common Stock issued
or issuable pursuant to a Put that has been exercised or may be exercised in
accordance with the terms and conditions of this Agreement.
Section 1.32 "Registrable Securities" shall mean the (i) Put Shares,
(ii) the Warrant Shares, (iii) the Blackout Shares and (iv) any securities
issued or issuable with respect to any of the foregoing by way of exchange,
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (w) the Registration Statement has been
declared effective by the SEC and all Registrable Securities have been disposed
of pursuant to the Registration Statement, (x) all Registrable Securities have
been sold under circumstances under which all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (y) such time as all Registrable Securities have been
otherwise transferred to holders who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive legend
or (z) in the opinion of counsel to the Company, which counsel shall be
reasonably acceptable to the Investor, all Registrable Securities may be sold
without registration or the need for an exemption from any registration
requirements and without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
Section 1.33 "Registration Rights Agreement" shall mean the agreement
entered into as of the date hereof between the Investor and the Company
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor as of
the Subscription Date.
Section 1.34 "Registration Statement" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
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the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement, and the Warrant
and in accordance with the intended method of distribution of such securities),
for the registration of the resale by the Investor of the Registrable Securities
under the Securities Act.
Section 1.35 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.36 "SEC" shall mean the Securities and Exchange Commission.
Section 1.37 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.38 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.39 "SEC Documents" shall mean the Company's latest Form 10-K
as of the time in question, all Forms 10-Q and 8-K filed thereafter, and the
Proxy Statement for its latest fiscal year as of the time in question until such
time the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.40 "Subordinated Notes" shall mean the Convertible Senior
Subordinated Secured Notes issued by the Company to certain purchasers
(including the Investor) as of October 15, 1997, with an aggregate principal
amount of $4,300,000.
Section 1.41 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.42 "Trading Cushion" shall mean the mandatory twenty (20)
Trading Days between Put Dates.
Section 1.43 "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.44 "Underwriter" shall mean any underwriter participating
in any disposition of the Registrable Securities on behalf of the Investor
pursuant to the Registration Statement.
Section 1.45 "Valuation Event" shall mean an event in which the
Company at any time during a Valuation Period takes any of the following
actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares, except for dividends paid with
respect to the Preferred Stock;
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(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a)
and (b) above, at a price per share less, or for other consideration
lower, than the Bid Price in effect immediately prior to such issuance,
or without consideration, except as a result of conversion of any or
all of the Subordinated Notes;
(d) issues any warrants, options or other rights to subscribe
for or purchase any Additional Capital Shares and the price per share
for which Additional Capital Shares may at any time thereafter be
issuable pursuant to such warrants, options or other rights shall be
less than the Bid Price in effect immediately prior to such issuance,
except issuances to employees in connection with the proposed 1998
Stock Option Plan as described in the Form S- I Registration Statement,
filed by the Company with the SEC on January 8, 1998,
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional
Capital Shares may at any time hereafter be issuable pursuant to the
terms of such convertible or exchangeable securities shall be less than
the Bid Price in effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in
liquidation or by way of return of capital or other than as a dividend
payable out of earnings or surplus legally available for dividends
under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets
(other than under the circumstances provided for in the foregoing
subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing
Subsections (a) through (f) hereof, inclusive, which in the opinion of
the Company's Board of Directors, determined in good faith. would have
a materially adverse effect upon the rights of the Investor at the time
of a Put or exercise of the Warrant.
Section 1.46 "Valuation Period" shall mean the period of four (4)
Trading Days during which the Purchase Price of the Common Stock is valued,
which period shall be with respect to the Purchase Price on any Put Date, the
one (1) Trading Day preceding and the two (2) Trading Days following the Trading
Day on which a Put Notice is deemed to be delivered, as Agreement as well as the
Trading Day on which such notice is deemed to be delivered; provided, however,
that if a Valuation Event occurs during any Valuation Period, a new Valuation
Period shall begin on the Trading Day immediately after the occurrence of such
Valuation Event and end on the fourth Trading Day thereafter.
Section 1.47 "Warrant" shall have the meaning set forth in. Section 2.6
of this Agreement.
Section 1.48 "Warrant Shares" shall mean all shares Of Common Stock
issued or issuable pursuant to exercise of the Warrant.
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ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments.
(a) Puts. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII hereof),
on any Put Date the Company may exercise a Put by the delivery of a Put
Notice. The number of Put Shares that the Investor shall receive
pursuant to such Put shall be determined by dividing the Investment
Amount specified in the Put Notice by the Purchase Price on such Put
Date.
(b) Minimum Amount of Puts. The Company shall, in accordance
with Section 2.2(a), issue and sell Put Shares to the Investor and the
Investor shall purchase Put Shares from the Company totaling (in
aggregate Purchase Prices) at least $3,000,000. If the Company for any
reason fails to issue and deliver such Put Shares during the Commitment
Period, on the first Trading Day after the expiration of the Commitment
Period, the Company shall deliver to Investor a sum in cash equal to
$100,000 minus the product of (x) $100,000 and (y) a fraction, the
numerator of which is aggregate Investment Amounts of the Put Shares
delivered to the Investor hereunder (up to $3,000,000) and the
denominator of which is $3,000,000.
(c) Maximum Amount of Puts. Unless the Company obtains the
requisite approval of its shareholders in accordance with the corporate
laws of Colorado and the applicable rules of the Principal Market, no
more than 19.9 % of the Outstanding shares of Common Stock may be
issued and sold pursuant to Puts.
Section 2.2 Mechanics.
(a) Put Notice. At any time during the Commitment Period,
the Company may deliver a Put Notice to the Investor, subject to the
conditions set forth in Section 7.2; provided, however, the Investment
Amount for each Put as designated by the Company in the applicable Put
Notice shall be neither less than $200,000 nor more than the Maximum
Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00
noon New York time, or (ii) the immediately succeeding Trading Day if
it is received by facsimile or otherwise after 12:00 noon New York time
on a Trading Day or at any time on a day which is not a Trading Day. No
Put Notice may be deemed delivered, on a day that is not a Trading Day.
Section 2.3 Closings; Prepayment of the Investor Note.
(a) On each Closing Date for a Put, (i) the Company shall
deliver into escrow one or more certificates, at the Investor's option,
representing the Put Shares to be purchased by the Investor pursuant to
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Section 2.1 herein, registered in the name of the Investor and (ii)
subject to Section 2.3(b) below, the Investor shall deliver into escrow
the Investment Amount specified in the Put Notice by wire transfer of
immediately available funds to an account designated by the Company on
or before the Closing Date. In addition, on or prior to such Closing
Date, each of the Company and the Investor shall deliver to the other
all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in
order to implement and effect the transactions contemplated herein.
Payment of the Investment Amount to the Company and delivery of the
certificate(s) to the Investor shall occur out of escrow in accordance
with the escrow agreement referred to in Section 7.2(p); provided,
however, that to the extent the Company has not paid the fees, expenses
and disbursements of the Investor's counsel in accordance with Section
12.1, the amount of such fees, expenses and disbursements shall be paid
in immediately available funds, at the direction of the Investor, to
Investor's counsel with no reduction in the number of Put Shares
issuable to the Investor on such Closing Date.
(b) If any portion of the Investor Note is outstanding on
any Put Date, the Company shall deliver to the Investor at the same
time as it delivers the applicable Put Notice, a prepayment Notice (as
defined in the Investor Note) providing for the prepayment of all or a
portion of the Investor Note, in accordance with the terms of the
Investor Note, in an amount equal to the following portion of the
Investment Amount: (i) if the Investment Amount specified in the
applicable Put Notice is $300,000 or less, twenty-five percent (25%) of
such Investment Amount shall be applied for such prepayment, (ii) if
the Investment Amount specified in the applicable Put Notice is greater
than $300,000, thirty-five percent (35%) of such Investment Amount
shall be applied for such prepayment and (iii) a lesser percentage of
such Investment Amount shall be applied for such prepayment if
sufficient to prepay in full the Investor Note in accordance with the
terms of the Investor Note (the "Prepayment Amount").
The Investor shall deliver into escrow in connection with the Closing
of the applicable Put the Investment Amount specified in the Put Notice minus
the Prepayment Amount, and there shall be no reduction in the number of Put
Shares issued to the Investor on the Closing Date for the applicable Put. For
purposes only of implementing prepayment of the Investor Note pursuant to this
Section 2.3, the Investor hereby waives (i) the thirty-day period required
between the Prepayment Notice and the Prepayment Date, as provided for in
Sections 4(a) and (c) of the Investor Note and (ii) the requirement to provide
evidence of the availability of funds, as provided for in Section 4(d) of the
Investor Note.
Section 2.4 Special Circumstances; Adjustment Period.
(a) Adjustment Period Notice. In the event that the Company
shall in good faith anticipate executing an agreement of acquisition,
merger or consolidation within ninety (90) days after giving the
Investor Adjustment Period Notice (as defined below), the Company may,
at its sole discretion, give the Investor at least twenty-one (21)
days' irrevocable advance notice, in the form of Exhibit A hereto
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("Adjustment Period Notice"), that the Company shall initiate an
Adjustment Period (as defined below). The Company shall not give such
Adjustment Period Notice if it constitutes the disclosure of material
non-public information to the Investor.
(b) During the Adjustment Period:
1. the Purchase Price shall be seventy-four percent
(74%) of the Market Price on the applicable Put Date;
2. the duration of the Trading Cushion shall be
shortened to ten (10) Trading Days until the expiration of
five (5) consecutive weeks after the date on which the
Adjustment Period Notice was given (the "Adjustment Period ");
and
3. the Company may not deliver a Put Notice such
that the number of Put Shares to be purchased by the Investor
upon the applicable Closing, when aggregated with all other
shares of Common Stock then owned by the Investor beneficially
or deemed beneficially owned by the Investor, would result in
the Investor owning more than 4.9 % of all of such Common
Stock as would be outstanding on such Closing Date, as
determined in accordance with Section 13(d) of the Exchange
Act and the regulations promulgated thereunder. For purposes
of this Section 2.4(c), in the event that the amount of Common
Stock outstanding as determined in accordance with Section
13(d) of the Exchange Act is greater on a Closing Date than on
the date upon which the Put Notice associated with such
Closing Date is given, the amount of Common Stock outstanding
on such Closing Date shall govern for purposes of determining
whether the Investor, when aggregating all purchases of Common
Stock made pursuant to this Agreement and. if any, Warrant
Shares, would own more than 4.9% of the Common Stock,
following such Closing Date.
Section 2.5 Termination of Investment Obligation. The obligation of
the Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for an aggregate of thirty (30)
Trading Days during the Commitment Period, for any reason other than deferrals
or suspension in accordance with Section 1. 1 (f) of the Registration Rights
Agreement, as a result of corporate development subsequent to the Subscription
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 (ii) the Company shall at any time fail to comply with
the requirements of Section 6.3, 6.4, 6.5 or 6.6.
Section 2.6 The Warrant. On the Subscription Date, the Company shall
issue to the Investor a warrant (the "Warrant"), exercisable beginning on the
181st day after the Subscription Date and continuing to be exercisable at any
time and from time to time over the three-year period thereafter, to purchase an
aggregate of 100,000 Warrant Shares at the Exercise Price (as defined in the
Warrant). The Warrant shall be delivered by the Company to the Investor upon
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execution of this Agreement by the parties hereto. The Warrant Shares shall be
registered for resale pursuant to the Registration Rights Agreement.
Section 2.7 Blackout Shares. In the event that, (a) within five
Trading Days following any Closing Date, the Company gives a Blackout Notice to
the Investor of a Blackout Period in accordance with Section 1. 1 (e) of the
Registration Rights Agreement, and (b) the Bid Price on the Trading Day
immediately preceding such Blackout Period ("Old Bid Price") is greater than the
Bid Price on the first Trading Day following such Blackout Period that the
Investor may sell its Registrable Securities pursuant to an effective
Registration Statement ("New Bid Price"), then the Company shall issue to the
Investor the number of additional shares of Registrable Securities (the
"Blackout Shares") equal to the difference between (X) the product of the number
of Registrable Securities held by Investor immediately prior to the Blackout
Period multiplied by the Old Bid Price, divided by the New Bid Price, and (Y)
the number of Registrable Securities held by Investor immediately prior to the
Blackout Period.
Section 2.8 Liquidated Damages
1 1. The parties hereto acknowledge and agree that the sum payable
under Section 2. 1 (b) and the requirement to issue Blackout Shares under
Section 2.7 above shall give rise to liquidated damages and not penalties. The
parties further acknowledge that (a) the amount of loss or damages likely to be
incurred is incapable or is difficult to precisely estimate, (b) the amounts
specified in such Sections bear a reasonable proportion and am not plainly or
grossly disproportionate to the probable loss likely to be incurred by the
Investor in connection with the failure by the Company to make Puts with
aggregate Purchase Prices totaling at least S3,000,000 or in connection with a
Blackout Period under Section 1. 1 (e) of the Registration Rights Agreement, and
(c) the parties are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement
at arm's length.
ARTICLE III
Representations and Warranties of Investor
The Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for
its own account and the Investor 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, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
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the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the company.
Section 3.5 Organization and Standing.Investor is duly organized,
validly existing, and in good standing under the laws of the British Virgin
Islands.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not (a) violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor, or, to the
Investor's knowledge, (b) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets, is bound, (c) conflict with or constitute a material default
thereunder, (d) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (e) require the
approval of any third-party (that has not been obtained) pursuant to any
material contract to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received
all documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. The Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investor that:
Section 4.1 Organization of the Company. The Company is a corporation
duly organized and existing in good standing under the laws of the State of
Colorado and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. Except as set forth in the SEC
Documents, the Company does not have any subsidiaries. Except as set forth in
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the SEC Documents, the Company does not own more than fifty percent (50%) of or
control any other business entity. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, and the Warrant and to issue the
Put Shares, the Warrant, the Warrant Shares and the Blackout Shares; (ii) the
execution and delivery of this Agreement and the Registration Rights Agreement,
and the execution, issuance and delivery of the Warrant, by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required; and (iii) each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered, and the Warrant has been duly executed,
issued and delivered, by the Company and constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 4.3 Capitalization. As of December 31, 1997, the authorized
capital stock of the Company consisted of 950,000,000 shares of Common Stock, of
which 23,965,625 shares were issued and outstanding, and 10,000,000 shares of
Preferred Stock, none of which were issued and outstanding. Except for the (i)
options to purchase shares of Common Stork that are described in the SEC
Documents; and (ii) warrants to purchase not more than 258,000 shares of Common
Stock with purchase prices of not less than $2.83 per share, there are no
options, warrants, or rights to subscribe to, securities, rights or obligation
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company. All of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued and are
fully paid and nonassessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Bulletin Board.
Section 4.5 SEC Documents. The Company has delivered or made
available to the Investor true and complete copies of the SEC Documents
(including, without limitation. proxy information and solicitation materials).
The Company has not provided to the Investor any information that, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
12
requirements of the Securities Act or the Exchange Act, as the case may be, and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
Section 4.6 Exemption from Registration; Valid Issuances. The sale
and issuance of the Warrant, the Warrant Shares, the Put Shares and any Blackout
Shares in accordance with the terms and on the bases of the representations and
warranties set forth in this Agreement, may and shall be properly issued
pursuant to Rule 4(2), Regulation D and/or any applicable state law. When issued
and paid for as herein provided, the Put Shares, the Warrant Shares and any
Blackout Shares shall be duly and validly issued, fully paid, and nonassessable.
Neither the sales of the Put Shares, the Warrant, the Warrant Shares or any
Blackout Shares pursuant to, nor the Company's performance of its obligations
under, this Agreement, the Registration Rights Agreement, or the Warrant shall
(i) result in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrant Shares, any Blackout Shares or any
of the assets of the Company, or (ii) entitle the holders of Outstanding Capital
Shares to preemptive or other rights to subscribe to or acquire the Capital
Shares or other securities of the Company, except as provided for in the
Subordinated Notes. The Put Shares, the Warrant Shares and any Blackout Shares
shall not subject the Investor to personal liability by reason of the ownership
thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, the Warrant, the-
Warrant Shares or any Blackout Shares, or (ii) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
13
Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including, without limitation, the issuance of
the Put Shares, the Warrant, the Warrant Shares and the Blackout Shares do not
and will not (i) result in a violation of the Certificate or By-Laws or (ii)
conflict with, or constitute a material default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and sure securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not individually or in the aggregate, have a Material Adverse Effect) nor is the
Company otherwise in violation of, conflict with or in default under any of the
foregoing; provided, however, that for purposes of the Company's representations
and warranties as to violations of foreign law, rule or regulation referenced in
clause (iii), such representations and warranties are made only to the best of
the Company's knowledge insofar as the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby axe or may be affected by the status of the
Investor under or pursuant to any such foreign law, rule or regulation. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do nor and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock or the Warrant in accordance with
the terms hereof (other than any SEC, NASD or state securities filings that may
be required to be made by the Company subsequent to any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on the Nasdaq Small Cap Market); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
Section 4.10 No Material Adverse Change. Since September 30, 1997,
no event has occurred that would have a Material Adverse Effect on the Company,
except as disclosed in the SEC Documents.
Section 4.11 No Undisclosed Liabilities. The Company has no
liabilities or obligations that are material, individually or in the aggregate,
and that are not disclosed in the SEC Documents or otherwise publicly announced,
other than those incurred in the ordinary course of the Company's businesses
since September 30, 1997 and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.
14
Section 4.12 No Undisclosed Events or Circumstances. Since September
30, 1997, no event or circumstance has occurred or exists with respect to the 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 4.13 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other-Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which might have a Material Adverse Effect, Except as set
forth in the SEC Documents, no judgment, order, writ, injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which might result in a Material
Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company, any
Person representing the Company, and, to the knowledge of the Company, any other
Person selling or, offering to sell the Put Shares, the Warrant, the Warrant
Shares or the Blackout Shares in connection with the transactions contemplated
by this Agreement, have not made, at any time, any oral communication in
connection with the offer or sale of the same which contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.
Section 4.16 Material Non-Public Information. The Company is not in
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, a negative effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation. should have been
disclosed publicly by the Company prior to the date hereof but which has been so
disclosed.
ARTICLE V
Covenants of the Investor
The Investor's trading activities with respect to shares of the
Company's Common Stock will be in compliance with all applicable state and
federal securities laws, rules and regulations and the rules and regulations of
the Principal Market on which the Company's Common Stock is listed.
15
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Put Shares, the
Warrant Shares and the Blackout Shares; such amount of shares of Common Stock to
be reserved shall be calculated based upon the minimum Purchase Price for the
Put Shares under the terms and conditions of this Agreement and the Exercise
price of the Warrant and a good faith estimate by the Company in consultation
with the Investor of the number of Blackout Shares that will need to be issued.
The number of shares so reserved from time to time, as theretofore increased or
reduced as hereinafter provided, may be reduced by the number of shares actually
delivered hereunder.
Section 6.3 Listing of Common Stock. The Company shall maintain the
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) will cause
the Put Shares, the Warrant Shares and any Blackout Shares to be listed on the
Principal Market. The Company further shall, if the Company applies to have the
Common Stock traded on any other Principal Market, include in such application
the Put Shares, the Warrant Shares and any Blackout Shares, and shall take such
other action as is necessary or desirable in the opinion of the Investor to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible. The Company shall take use its reasonable best efforts to continue
the listing and trading of its Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and the Principal Market.
Section 6.4 Exchange Act Registration. The Company shall (i) cause
its Common Stock to continue to be registered under Section 12(g) or 12(b) of
the Exchange Act, will comply in all respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act. The Company shall take all reasonable 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 NASD and the Principal Market.
Section 6.5 Legends. The certificates evidencing the Put Shares, the
Warrant Shares and the Blackout Shares shall be free of legends, except as
provided for in Article VIII.
Section 6.6 Corporate Existence. The Company shall take a steps
necessary to preserve and continue the corporate existence of the Company.
16
Section 6.7 Additional SEC Documents. The Company shall deliver to
the Investor, as and when the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 Notice of Certain Events Affecting Registration;
Suspension of Right to Make a Put. The Company shall immediately notify the
Investor upon the occurrence of any of the following events in respect of a
registration statement or related prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination dig a post-effective amendment to the registration
statement would be appropriate, and the Company shall promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.
Section 6.9 Expectations Regarding Put Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify the
Investor as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter. if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate with
respect to such calendar quarter and shall in no way obligate the Company to
raise such amount during such calendar quarter or otherwise limit its ability to
deliver Put Notices during such calendar quarter. The failure by the Company to
comply with this provision can be cured by the Company's notifying the Investor
at any time as to its reasonable expectations with respect to the current
calendar quarter.
Section 6.10 Consolidation; Merger. The Company shall not, at any
time after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all of the assets of the
Company to, another entity unless the resulting successor or acquiring entity
(if not the Company) assumes by written instrument the obligation to deliver to
17
the Investor such shares of stock and/or securities as the Investor is entitled
to receive pursuant to this Agreement and the Warrant.
Section 6.11 Issuance of Put Shares, Blackout Shares and Warrant
Shares. The sale of the Put Shares, the issuance of the Warrant Shares pursuant
to exercise of the Warrant and the issuance of any Blackout Shares shall be made
in accordance with the provisions and requirements of Regulation D and any
applicable state law. Issuance of the Warrant Shares pursuant to exercise of the
Warrant through a cashless exercise shall be made in accordance with the
provisions and requirements of Section 3(a)(9) under the Securities Act and any
applicable state law.
Section 6.12 Legal Opinion on Subscription Date. The Company's
independent counsel shall deliver to the Investor upon execution of this
Agreement an opinion in the form of Exhibit B, except for paragraph 7 thereof.
ARTICLE VII
Conditions to Delivery of
Put Notices and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Put Shares to the Investor incident to each Closing is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and
Warranties. The representations and Warranties of the Investor shall be
true and correct in all material respects as of the date of this
Agreement and as of the date of each such Closing as though made at
each such time.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to
Deliver a Put Notice and the Obligation of the Investor to Purchase Put Shares.
The right of the Company to deliver a Put Notice and the obligation of the
Investor hereunder to acquire and pay for the put Shares incident to a Closing
is subject to the satisfaction, on (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:
(a) Registration of the Registrable Securities with the SEC.
As set forth in the Registration Rights Agreement, the Company shall
have filed with the SEC a Registration Statement with respect to the
18
resale of the Registrable Securities by the Investor that shall have
been declared effective by the SEC prior to the first Put Date, but in
no event later than ninety (90) days after Subscription Date.
(b) Effective Registration Statement. As set forth in the
Registration Rights Agreement, the Registration Statement shall have
previously become effective and shall remain effective on each
Condition Satisfaction Date and (i) neither the Company nor the
Investor shall have received notice that the SEC has issued or intends
to issue a stop order with respect to the Registration Statement or
that the SEC otherwise has suspended or withdrawn the effectiveness of
the Registration Statement, either temporarily or permanently, or
intends or has threatened to do so (unless the SEC's concerns have been
addressed and the Investor is reasonably satisfied that the SEC no
longer is considering or intends to take such action), and (ii) no
other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist.
(c) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company shall be
true and correct as of each Condition Satisfaction Date as though made
at each such time (except for representations and warranties
specifically made as of a particular date) with respect to all periods,
and as to all events and circumstances occurring or existing to and
including each Condition Satisfaction Date, except for any conditions
which have temporarily caused any representations or warranties herein
to be incorrect and which have been corrected with no continuing
impairment to the Company or the Investor.
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement, the Registration
Rights Agreement and the Warrant to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of
competent jurisdiction that prohibits or directly and adversely affects
any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of
prohibiting or adversely affecting any of the transactions contemplated
by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's
most recent SEC Document, no event that had or is reasonably likely to
have a Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting Of Common
Stock. The trading of the Common Stock shall not have been suspended by
the SEC, the Principal Market or the NASD and the Common Stock shall
have been approved for listing or quotation on and shall not have been
delisted from the Principal Market. The issuance of shares of Common
Stock with respect to the applicable Closing, if any, shall not violate
the shareholder approval requirements of the Principal Market.
19
(h) Legal Opinion. The Company shall have caused to be
delivered to the Investor, within five (5) Trading Days of the
effective date of the Registration Statement, an opinion of the
Company's independent counsel in the form of Exhibit B hereto,
addressed to the Investor.
(i) Due Diligence. No dispute between the Company and the
Investor shall exist pursuant to Section 7.3 as to the adequacy of the
disclosure contained in the Registration Statement.
(j) Ten Percent Limitation. On each Closing Date, the number
of Put Shares then to be purchased by the Investor shall not exceed the
number of such shares that, when aggregated with all other shares of
Registrable Securities then owned by the Investor beneficially or
deemed beneficially owned by the Investor, would result in the Investor
owning no more than 9.9% of all of such Common Stock as would be
outstanding on such Closing Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated
thereunder. For purposes of this Section 7.2(j), 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 Closing Date than on the date upon which the
Put Notice associated with such Closing Date is given, the amount of
Common Stock outstanding on such Closing Date shall govern for purposes
of determining whether the Investor, when aggregating all purchases of
Common Stock made pursuant to this Agreement and, if any, Warrant
Shares and Blackout Shares, would own more than 9.9% of the Common
Stock following such Closing Date.
(k) Minimum Bid Price. The Bid Price equals or exceeds the
Floor Price from the Trading Day immediately preceding the date on
which such Notice is deemed delivered until the Trading Day immediately
preceding the Closing Date (as adjusted for stock splits, stock
dividends, reverse stock splits, and similar events).
(l) Minimum Average Trading Volume. The average trading
volume for the Common Stock over the previous twenty (20) Trading Days
equals or exceeds (i) twenty thousand (20,000) shares per Trading Day
if the Investment Amount for the applicable Put is $250,000 or less and
(ii) forty thousand (40,000) shares per Trading Day if the Investment
Amount for the applicable Put is greater than $250,000 and is equal to
or less than $500,000.
(m) No Knowledge. The Company shall have no knowledge of any
event more likely than not to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective (which
event is more likely than not to occur within the fifteen Trading Days
following the Trading Day on which such Notice is deemed delivered).
(n) Trading Cushion. The Trading Cushion shall have elapsed
since the immediately preceding Put Date.
20
(o) Shareholder Vote. The issuance of shares of Common Stock
with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(p) Escrow Agreement. The parties hereto shall have entered
into an escrow agreement in the form of Exhibit C hereto.
(q) Other. On each Condition Satisfaction Date, the Investor
shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by
the Investor in order for the Investor to confirm the Company's
satisfaction of the conditions set forth in this Section 7.2.,
including, without limitation, a certificate in substantially the form
and substance of Exhibit D hereto, executed in either case by an
executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of
each such certificate.
Section 7.3 Due Diligence Review; Non-Disclosure of Non-Public
Information.
(a) The Company shall make available for inspection and
review by the Investor, advisors to and representatives of the Investor
(who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), and any Underwriter, the
following: any Registration Statement or amendment or supplement
thereto or any blue sky, NASD or other filing, all financial and other
records, all SEC Documents and other filings with the SEC, and all
other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such
information reasonably requested by the Investor or any such
representative, advisor or Underwriter in connection with such
Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any
of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of
enabling the Investor and such representatives, advisors and
Underwriters and their respective accountants and attorneys to conduct
initial and ongoing due diligence with respect to the Company and the
accuracy of the Registration Statement.
(b) Each of the Company, its officers, directors, employees
and agents shall in no event disclose non-public information to the
Investor, advisors to or representatives of the Investor (including,
without limitation, in connection with the giving of the Adjustment
Period Notice pursuant to Section 2.4) unless prior to disclosure of
such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to
disclosing any nonpublic information hereunder, require the Investor's
advisors and representatives to enter into a confidentiality agreement
in form reasonably satisfactory to the Company and the Investor.
21
(c) Nothing herein shall require the Company to disclose
non-public information to the Investor or its advisors or
representatives, and the Company represents that it does not
disseminate non-public information to any investors who purchase stock
in the Company in a public offering, to money managers or to securities
analysts; provided, however, that notwithstanding anything herein to
the contrary, the Company shall, as hereinabove provided, immediately
notify the advisors and representatives of the Investor and any
Underwriters of any event or the existence of any circumstance (without
any obligation to disclose the specific event or circumstances) of
which it becomes aware, constituting non public information (whether or
not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were
made, not misleading. Nothing contained in this Section 7.3 shall be
construed to mean that such persons or entities other than the Investor
(without the written consent of the Investor prior to disclosure of
such information) may not obtain non-public information in the course
of conducting due diligence in accordance with the terms and conditions
of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such
due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of a material fact or omits a
material fact required to be stated in the Registration Statement or
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE VIII
Legends
Section 8.1 Legends. Each of the Warrant and, unless otherwise
provided below, each certificate representing Registrable Securities will bear
the following legend (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY
22
SET FORTH IN A PRIVATE EQUITY LINE OF CREDIT AGREEMENT BETWEEN
ENVIRONMENTAL REMEDIATION HOLDING CORP. AND KINGSBRIDGE CAPITAL LIMITED
DATED AS OF MARCH 23, 1998. A COPY OF THE PORTION OF THE AFORESAID
AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE 0BTAINED FROM THE
COMPANY'S EXECUTIVE OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit E hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions. as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) At any time after the Effective Date, upon surrender of
one or more certificates evidencing Common Stock that bear the Legend,
to the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered; provided
that (i) the Registration Statement shall then be effective; and (ii)
if requested by the transfer agent the Investor confirms to the
transfer agent that the Investor has Complied with the prospectus
delivery requirement of the Securities Act.
(b) At any time upon any surrender of one or more
certificates evidencing Registrable Securities that bear the Legend, to
the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered and
containing representations that (i) the Investor is permitted to
dispose of such Registrable Securities without limitation as to amount
or manner of sale pursuant to Rule 144(k) under the Securities Act or
(ii) the Investor has sold, pledged or otherwise transferred or agreed
to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who shall upon such transfer be entitled to freely tradeable
securities.
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders, " so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
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Section 8.3 Investor's Compliance. Nothing in this Article VIII shall
affect in any way the Investor' s obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
Choice of Law
Section 9.1 Choice of Law. This Agreement shall be construed under the
laws of the State of New York.
ARTICLE X
Assignment: Entire Agreement, Amendment; Termination
Section 10.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investor hereunder with respect to
the Common Stock held by such person, and (b) the Investor's interest in this
Agreement may be assigned at any time, in whole or in part, to any entity
controlled by the Investor or to one of its principals, without the prior
consent of the Company or, in the Company's sole discretion, to any other person
or entity upon the prior written consent of the Company.
Section 10.2 Termination. This Agreement shall terminate twenty four
(24) months after the commencement of the Commitment Period; provided, however,
that the provisions of Articles VI, VIII. IX, X, and XI and Section 7.3 shall
survive the termination of this Agreement.
Section 10.3 Entire Agreement, Amendment; Waiver. This Agreement, the
Registration Rights Agreement and the Warrant constitute the fall and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by both parties hereto. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion.
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ARTICLE XI
Notices; Indemnification
Section 11.1 Notices. Except as set forth in the last sentence of
this Section 11.1, all notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to. such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
if to the Company
▇▇▇ ▇. ▇▇▇▇, ▇▇.
Chairman and Chief Executive Officer
Environmental Remediation Holding Corp.
1686 General ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which communication shall not constitute notice) to:
Greenberg, Traurig, Hoffman, Lipoff, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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and if to the Investor:
▇▇▇▇ ▇▇▇▇▇▇
Kingsbridge Capital Limited
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇-▇▇▇-▇▇▇
Facsimile: 011-353-45-482-003
with a copy (which communication shall not constitute notice) to:
▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇. ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 11.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto. Notwithstanding anything to the contrary set forth above, only Put
Notices and other communications related to Puts and Closings will be deemed to
have been duly given if delivered by facsimile in accordance with the above
procedures.
Section 11.2 Indemnification. The Company agrees to indemnify and
hold harmless the Investor, its partners, affiliates, officers, directors,
employees, and duly authorized agents, and each Person or entity, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which the Investor, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, unless such
Damages result primarily from the Investor's breach of its representations and
warranties under this agreement or its gross negligence, recklessness or bad
faith in performing its obligations under this Agreement; provided, however,
that Company shall have no liability for indemnification hereunder in excess of
(i) the amount of such Damages actually incurred to the extent they include only
losses, claims, liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements and costs and expenses of expert
witnesses and investigation) of the Investor, its partners, affiliates,
officers, directors, employees, and duly authorized agents, and any such
26
Controlling Person, plus (ii) one hundred and twenty-seven percent (127%) of the
aggregate Investment Amounts of Puts made hereunder, with respect to Damages not
covered by clause (i).
Section 11.3 Method of Asserting Indemnification Claims. All claims
for indemnification by any Indemnified Party (as defined below) under Section
11.2 shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section 11.2 (an
"Indemnified Party") might seek indemnity under Section 11.2 is
asserted against or sought to be collected from such Indemnified Party
by a person other than the Company, the Investor or any affiliate of
the Company or (a "Third Party Claim"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served,
if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is
being asserted under any provision of Section 12.2 against any person
(the "Indemnifying Party"), together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails to
provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to such third party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced
by such failure of the Indemnified Party. The Indemnifying Party shall
notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying
Party of either a Claim Notice or an Indemnity Notice (as defined
below) (the "Dispute Period") whether the Indemnifying Party disputes
its liability or the amount of its liability to the Indemnified Party
under Section 11.2 and whether the Indemnifying Party desires, at its
sole cost and expense, to defend the Indemnified Party against such
Third Party Claim.
1. If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Indemnified Party
with respect to the Third Party Claim pursuant to this Section
11.3(a), then the Indemnifying Party shall have the right to
defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the
Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and
diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides
for any relief other than the payment of monetary damages or
that provides for the payment of monetary damages as to which
the Indemnified Party shall not be indemnified in full
pursuant to Section 11.2). The Indemnifying Party shall have
full control of such defense and proceedings, including any
compromise or settlement thereof, provided, however, that the
Indemnified Party may, at the sole cost and expense of the
Indemnified Party, at any time prior to the Indemnifying
27
Party's delivery of the notice referred to in the first
sentence of this clause (i), file any motion, answer or other
pleadings or take any other action that the Indemnified Party
reasonably believes to be necessary or appropriate to protect
its interests; and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnifying Party in contesting any Third
Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by
the Indemnifying Party pursuant to this clause W, and except
as provided in the preceding sentence, the Indemnified Party
shall bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement
of a Third Party Claim at any time if it irrevocably waives
its right to indemnity under Section 11.2 with respect to such
Third Party Claim.
2. If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 11.3 (a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within
the Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party
(with the consent of the Indemnifying Party, which consent
will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including
any compromise or settlement thereof; provided, however, that
if requested by the Indemnified Party, the Indemnifying Party
will, at the sole cost and expense of the Indemnifying Party,
provide reasonable cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that
the Indemnifying Party disputes its liability or the amount of
its liability hereunder to the Indemnified Party with respect
to such Third Party Claim and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided in
clause (iii) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause (ii) or of the
Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with
such litigation. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the
28
Indemnified Party pursuant to this clause (ii), and the
Indemnifying Party shall bear its own costs and expenses with
respect to such participation.
3. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability or
the amount of its liability to the Indemnified Party with
respect to the Third Party Claim under Section 11.2 or fails
to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party with respect
to such Third Party Claim, the Loss in the amount specified in
the Claim Notice shall be conclusively deemed a liability of
the Indemnifying Party under Section 11.2 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party
shall proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (c) of this Section
11.3.
(b) In the event any Indemnified Party should have a claim
under Section 11.2 against the Indemnifying Party that does not involve
a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under Section 11.2 specifying the
nature of and basis for such claim, together with the amount or, if not
then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness
to the Indemnifying Party. The failure by any Indemnified Party to give
the Indemnity Notice shall not impair such party's rights hereunder
except to the extent that the Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or
the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the Loss in the amount specified in
the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 11.2 and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of
its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party shall proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (c) of this Section 11.3.
(c) Any dispute under this Agreement or the Warrant shall be
submitted to arbitration (including, without limitation, pursuant to
this Section 12.3) and shall be finally and conclusively determined by
the decision of a board of arbitration consisting of three (3) members
(the "Board of Arbitration") selected as hereinafter provided. Each of
the Indemnified Party, and the Indemnifying Party shall select one (1)
member and the third member shall be selected by mutual agreement of
29
the other members, or if the other members fail to reach agreement on a
third member within twenty (20) days after their selection, such third
member shall thereafter be selected by the American Arbitration
Association upon application made to it for such purpose by the
Indemnified Party. The Board of Arbitration shall meet on consecutive
business days in New York County, New York or such other place as a
majority of the members of the Board of Arbitration determines more
appropriate, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of Arbitration)
with respect to the amount. if any, which the Indemnifying Party is
required to pay to the Indemnified Party in respect of a claim filed by
the Indemnified Party. In connection with rendering its decisions, the
Board of Arbitration shall adopt and follow such rules and procedures
as a majority of the members of the Board of Arbitration deems
necessary or appropriate. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30)
calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to
be delivered to the Indemnified Party and the Indemnifying Party. Any
decision made by the Board of Arbitration (either prior to or after the
expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the Indemnified Party and the Indemnifying
Party and entitled to be enforced to the fullest extent permitted by
law and entered in any court of competent jurisdiction. Each party to
any arbitration shall bear its own expense in relation thereto,
including but not limited to such party's attorneys' fees, if any, and
the expenses and fees of the Board of Arbitration shall be divided
between the Indemnifying Party and the Indemnified Party in the same
proportion as the portion of the related claim determined by the Board
of Arbitration to be payable to the Indemnified Party bears to the
portion of such claim determined not to be so payable.
ARTICLE XII
Miscellaneous
Section 12.1 Fees and Expenses. Each of the Company and the Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of the Investor's counsel in an amount not to exceed $25,000.
Section 12.2 Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any persons claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 12.3 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
30
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 12.4 Entire Agreement. This Agreement, the Annex and Exhibits
hereto, the Warrant, and the Registration Rights Agreement set forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as if fully set forth herein.
Section 12.5 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision, provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 12.6 Title and Subtitles. The titles and subtitles used in
this Agreement arc used for the convenience of reference and are not to be
considered in construing or interpreting this Agreement.
Section 12.7 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, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
31
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
KINGSBRIDGE CAPITAL LIMITED
By: /s/ Valentine ▇'▇▇▇▇▇▇▇▇
------------------------
Valentine ▇'▇▇▇▇▇▇▇▇
Director
ENVIRONMENTAL REMMEDIATION
HOLDING CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
32
