Exhibit 10.21
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
August 1, 2001 by and between UNIVERSE2U, a Nevada corporation (the "Company"),
and FUSION CAPITAL FUND II, LLC, an Illinois limited liability company (the
"Buyer"). Capitalized terms used herein and not otherwise defined herein are
defined in Section 10 hereof.
WHEREAS:
Subject to the terms and conditions set forth in this Agreement, the
Company wishes to sell to the Buyer, and the Buyer wishes to buy from the
Company, up to Twelve Million Dollars ($12,000,000) of the Company's common
stock, par value $.00001 per share (the "Common Stock"). The shares of Common
Stock to be purchased hereunder are referred to herein as the "Purchase Shares."
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE OF COMMON STOCK.
Subject to the terms and conditions set forth in Sections 6, 7 and 9
below, the Company hereby agrees to sell to the Buyer, and the Buyer hereby
agrees to purchase from the Company, shares of Common Stock as follows:
(a) Commencement of Purchases of Common Stock. The purchase and sale of
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Common Stock hereunder shall commence (the "Commencement") within five (5)
Trading Days following the date of satisfaction (or waiver) of the conditions to
the Commencement set forth in Sections 6 and 7 below (the date of such
Commencement, the "Commencement Date").
(b) Buyer's Purchase Rights and Obligations. Subject to the Company's
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right to suspend purchases under Section 1(d)(ii) hereof, the Buyer shall
purchase shares of Common Stock on each Trading Day during each Monthly Period
equal to the Daily Base Amount at the Purchase Price. Within one (1) Trading Day
of receipt of Purchase Shares, the Buyer shall pay to the Company an amount
equal to the Purchase Amount with respect to such Purchase Shares as full
payment for the purchase of the Purchase Shares so received. The Company shall
not issue any fraction of a share of Common Stock upon any purchase. All shares
of Common Stock (including fractions thereof) issuable upon a purchase under
this Agreement shall be aggregated for purposes of determining whether the
purchase would result in the issuance of a fraction of a share of Common Stock.
If, after the aforementioned aggregation, the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up or down to the nearest whole share. All
payments made under this Agreement shall be made in lawful money of the United
States of America by check or wire transfer of immediately available funds to
such account as the Company may from time to time designate by written notice in
accordance with the provisions of this Agreement. Whenever any amount expressed
to be due by the terms of this Agreement is due on any day that is not a Trading
Day, the same shall instead be due on the next succeeding day that is a Trading
Day.
(c) Company's Right to Decrease or Increase the Daily Base Amount.
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(i) Company's Right to Decrease the Daily Base Amount. The Company shall always
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have the right at any time to decrease the amount of the Daily Base Amount by
delivering written notice (a "Daily Base Amount Decrease Notice") to the Buyer
which notice shall specify the amount of the new Daily Base Amount. The decrease
in the Daily Base Amount shall become effective one Trading Day after receipt by
the Buyer of the Daily Base Amount Decrease Notice. Any purchases by the Buyer
which have a Purchase Date on or prior to the first (1st) Trading Day after
receipt by the Buyer of a Daily Base Amount Decrease Notice must be honored by
the Company as otherwise provided herein. The decrease in the Daily Base Amount
shall remain in effect until the Company delivers to the Buyer a Daily Base
Amount Increase Notice (as defined below).
(ii) Company's Right to Increase the Daily Base Amount. The Company shall always
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have the right at any time to increase the amount of the Daily Base Amount up to
the Original Daily Base Amount by delivering written notice to the Buyer stating
the new amount of the Daily Base Amount (a "Daily Base Amount Increase Notice").
If the Closing Sale Price of the Common Stock on each of the five (5)
consecutive Trading Days immediately prior to a Daily Base Amount Increase
Notice is at least $7.00, the Company shall have the right to deliver a Daily
Base Amount Increase Notice which increases the amount of the Daily Base Amount
to any amount above the Original Daily Base Amount. A Daily Base Amount Increase
Notice shall be effective one Trading Day after receipt by the Buyer. Such
increase in the amount of the Daily Base Amount shall continue in effect until
the delivery to the Buyer of a Daily Base Amount Decrease Notice.
Notwithstanding anything to the contrary, if the Daily Base Amount then in
effect is greater than the Original Daily Base Amount and the Sale Price of the
Common Stock during any Trading Day is less than $7.00, the amount of the Daily
Base Amount for such Trading Day on which the Sale Price of the Common Stock is
less than $7.00 and for each Trading Day thereafter shall be the Original Daily
Base Amount or such lesser amount as specified by the Company in a Daily Base
Amount Decrease Notice. Thereafter, the Company shall again have the right to
increase the amount of the Daily Base Amount to any amount above the Original
Daily Base Amount only if the Closing Sale Price of the Common Stock is at least
$7.00 on each of five (5) consecutive Trading Days.
(d) Limitations on Purchases.
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(i) Limitation on Beneficial Ownership. The Company shall not effect any
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purchase under this Agreement and the Buyer shall not have the right to purchase
shares of Common Stock under this Agreement to the extent that after giving
effect to such purchase the Buyer together with its affiliates would
beneficially own in excess of 4.9% of the outstanding shares of the Common Stock
following such purchase. For purposes hereof, the number of shares of Common
Stock beneficially owned by the Buyer and its affiliates or acquired by the
Buyer and its affiliates, as the case may be, shall include the number of shares
of Common Stock issuable in connection with a purchase under this Agreement with
respect to which the determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (1) a purchase of the
remaining Available Amount which has not been submitted for purchase, and (2)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any Warrants as
defined in Section 4(f) hereof) subject to a limitation on conversion or
exercise analogous to the limitation contained
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herein beneficially owned by the Buyer and its affiliates. If the 4.9%
limitation is ever reached the Company shall have the option to increase such
limitation to 9.9% by delivery of written notice to the Buyer. Thereafter, if
the 9.9% limitation is ever reached this shall not effect or limit the Buyer's
obligation to purchase the Daily Base Amount or the Company's Mandatory Purchase
Rights as otherwise provided in this Agreement. For purposes of this Section, in
determining the number of outstanding shares of Common Stock the Buyer may rely
on the number of outstanding shares of Common Stock as reflected in (1) the
Company's most recent Form 10-Q or Form 10-K, as the case may be, (2) a more
recent public announcement by the Company or (3) any other written communication
by the Company or its transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the reasonable written or oral request of the
Buyer, the Company shall promptly confirm orally and in writing to the Buyer the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
any purchases under this Agreement by the Buyer since the date as of which such
number of outstanding shares of Common Stock was reported. Except as otherwise
set forth herein, for purposes of this Section 1(d)(i), beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended.
(ii) Company's Right to Suspend Purchases. The Company may, at any time, give
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written notice (a "Purchase Suspension Notice") to the Buyer suspending
purchases of Purchase Shares by the Buyer under this Agreement. The Purchase
Suspension Notice shall be effective only for purchases that have a Purchase
Date later than one (1) Trading Day after receipt of the Purchase Suspension
Notice by the Buyer. Any purchase by the Buyer that has a Purchase Date on or
prior to the first (1st) Trading Day after receipt by the Buyer of a Purchase
Suspension Notice from the Company must be honored by the Company as otherwise
provided herein. Such purchase suspension shall continue in effect until a
revocation in writing by the Company, at its sole discretion. So long as a
Purchase Suspension Notice is in effect, the Buyer shall not be obligated to
purchase any Purchase Shares from the Company under Section 1 of this Agreement.
(iii) Purchase Price Floor. The Buyer shall not have the right or the obligation
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to purchase any Purchase Shares under this Agreement in the event that the
Purchase Price for any purchases of Purchase Shares would be less than the Floor
Price. The Company may at any time give written notice (a "Floor Price Notice")
to the Buyer increasing or decreasing the Floor Price. The Floor Price Notice
shall be effective only for purchases that have a Purchase Date later than one
(1) Trading Day after receipt of the Floor Price Notice by the Buyer. Any
purchase by the Buyer that has a Purchase Date on or prior to the first Trading
Day after receipt of a Floor Price Notice from the Company must be honored by
the Company as otherwise provided herein.
(e) Records of Purchases. The Buyer and the Company shall each maintain
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records showing the remaining Available Amount at any give time and the dates
and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.
(f) Taxes. The Company shall pay any and all taxes that may be payable with
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respect to the issuance and delivery of any shares of Common Stock to the Buyer
made under of this Agreement.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants to the Company that:
(a) Investment Purpose. The Buyer is entering into this Agreement and acquiring
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the Commitment Shares and the Warrants (as defined in Section 4(f) hereof) (this
Agreement and the Commitment Shares, Warrants and Warrant Shares are
collectively referred to herein as the "Securities"), for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof; provided however, by making the
representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term.
(b) Accredited Investor Status. The Buyer is an "accredited investor" as that
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term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. The Buyer understands that the Securities are being
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offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.
(d) Information. The Buyer has been furnished with all materials relating to the
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business, finances and operations of the Company and materials relating to the
offer and sale of the Securities that have been reasonably requested by the
Buyer, including, without limitation, the SEC Documents (as defined in Section
3(f) hereof). The Buyer understands that its investment in the Securities
involves a high degree of risk. The Buyer (i) is able to bear the economic risk
of an investment in the Securities including a total loss, (ii) has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment in the Securities and
(iii) has had an opportunity to ask questions of and receive answers from the
officers of the Company concerning the financial condition and business of the
Company and others matters related to an investment in the Securities. Neither
such inquiries nor any other due diligence investigations conducted by the Buyer
or its representatives shall modify, amend or affect the Buyer's right to rely
on the Company's representations and warranties contained in Section 3 below.
The Buyer has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.
(e) No Governmental Review. The Buyer understands that no United States federal
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or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(f) Transfer or Resale. The Buyer understands that except as provided in the
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Registration Rights Agreement (as defined in Section 6(a) hereof): (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned
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or transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Securities to be sold, assigned or transferred without
such registration; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.
(g) Validity; Enforcement. This Agreement has been duly and validly authorized,
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executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable against the Buyer in accordance with its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(h) Residency. The Buyer is a resident of the State of Illinois.
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(i) No Prior Short Selling. The Buyer represents and warrants to the Company
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that at no time prior to the date of this Agreement has any of the Buyer, its
agents, associates, representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is
defined in Rule 3b-3 of the 0000 Xxx) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
(a) Organization and Qualification. The Company and its "Subsidiaries" (which
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for purposes of this Agreement means any entity in which the Company, directly
or indirectly, owns 50% or more of the voting stock or capital stock or other
similar equity interests) are corporations duly organized and validly existing
in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authority to own their
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing could not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, "Material Adverse Effect" means any material
adverse effect on any of: (i) the business, properties, assets, operations,
results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
in Section 3(b) hereof). The Company has no Subsidiaries except as set forth on
Schedule 3(a).
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(b) Authorization; Enforcement; Validity. (i) The Company has the requisite
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corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement (as defined in Section 6(a)
hereof) the Warrants and each of the other agreements entered into by the
parties on the Commencement Date and attached hereto as exhibits to this
Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including without
limitation, the issuance of the Commitment Shares and the reservation for
issuance and the issuance of the Purchase Shares issuable under this Agreement,
have been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its shareholders, (iii) this Agreement has been, and each other Transaction
Document shall be on the Commencement Date, duly executed and delivered by the
Company and (iv) this Agreement constitutes, and each other Transaction Document
upon its execution on behalf of the Company, shall constitute, the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
(c) Capitalization. As of the date hereof, the authorized capital stock of
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the Company consists of (i) 100,000,000 shares of Common Stock, of which as of
the date hereof, 37,001,747 shares are issued and outstanding, none are held as
treasury shares, 1,500,000 shares are reserved for issuance pursuant to the
Company's stock option plans of which only approximately 500,000 shares remain
available and no shares are issuable and reserved for issuance pursuant to
securities (other than stock options issued pursuant to the Company's stock
option plans) exercisable or exchangeable for, or convertible into, shares of
Common Stock and (ii) 10,000,000 shares of blank check Preferred Stock, $.00001
par value with such designations as the Board of Directors of the Company may
approve from time to time in accordance with the Certificate of Amendment to the
Company's Articles of Incorporation annexed hereto as an exhibit to Schedule
3(c), of which as of the date hereof 0 shares are issued and outstanding. All of
such outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. Except as disclosed in Schedule 3(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no
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securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities as described in this
Agreement and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Company's By-laws, as amended and
as in effect on the date hereof (the "By-laws"), and summaries of the terms of
all securities convertible into or exercisable for Common Stock, if any, and
copies of any documents containing the material rights of the holders thereof in
respect thereto.
(d) Issuance of Securities. The Commitment Shares and Warrants have been duly
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authorized and, upon issuance in accordance with the terms hereof, the
Commitment Shares and Warrant Shares, respectively, shall be (i) validly issued,
fully paid and non-assessable and (ii) free from all taxes, liens and charges
with respect to the issue thereof. 6,000,000 shares of Common Stock have been
duly authorized and reserved for issuance upon purchase under this Agreement.
Upon issuance and payment therefore in accordance with the terms and conditions
of this Agreement, the Purchase Shares shall be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.
(e) No Conflicts. Except as disclosed in Schedule 3(e), the execution, delivery
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and performance of the Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the reservation for issuance and issuance of the Purchase
Shares) will not (i) result in a violation of the Certificate of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of preferred stock of the Company or the By-laws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market applicable to the Company or any of its
Subsidiaries) or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of conflicts, defaults and
violations under clause (ii), which could not reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in Schedule 3(e), neither the
Company nor its Subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation, any Certificate of Designation, Preferences
and Rights of any outstanding series of preferred stock of the Company or
By-laws or their organizational charter or by-laws, respectively. Except as
disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is
in violation of any term of or is in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted, in violation of any law, ordinance, regulation of
any governmental entity, except for possible violations, the sanctions for which
either individually or in the aggregate could not
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reasonably be expected to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof. Except as disclosed in Schedule 3(e), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence shall be obtained or
effected on or prior to the Commencement Date. Except as disclosed in Schedule
3(e), the Company is not and has not been since January 1, 1999, in violation of
the listing requirements of the Principal Market.
(f) SEC Documents; Financial Statements. Except as disclosed in Schedule 3(f),
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since January 1, 1999, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC Documents"). As of their respective dates (except as they have been
correctly amended), the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC (except as they may have
been properly amended), 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. As of their respective dates (except as they
have been properly amended), the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, 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 exclude 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 its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) Absence of Certain Changes. Except as disclosed in Schedule 3(g), since
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March 31, 2001, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
(h) Absence of Litigation. There is no action, suit, proceeding, inquiry or
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investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
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or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, which
could reasonably be expected to have a Material Adverse Effect. A description of
each action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body which, as
of the date of this Agreement, is pending or threatened in writing against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, is set forth in Schedule 3(h).
(i) Acknowledgment Regarding Buyer's Status. The Company acknowledges and
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agrees that the Buyer is acting solely in the capacity of arm's length purchaser
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the Buyer that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives and
advisors.
(j) No General Solicitation. Neither the Company, nor any of its affiliates,
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nor any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the 0000 Xxx) in connection with the offer or sale of the Securities.
(k) Dilutive Effect. The Company understands and acknowledges that the number
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of Purchase Shares purchasable under this Agreement will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Purchase Shares under this Agreement in accordance with the terms and conditions
hereof is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other shareholders of the
Company.
(l) Intellectual Property Rights. The Company and its Subsidiaries own or
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possess adequate rights or licenses to use all material trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(l), none of the
Company's material trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by
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others and, except as set forth on Schedule 3(l), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret or other infringement,
which could reasonably be expected to have a Material Adverse Effect.
(m) Environmental Laws. The Company and its Subsidiaries (i) are in compliance
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with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Title. The Company and its Subsidiaries have good and marketable title in
-----
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(n) or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and any of its Subsidiaries.
Any real property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(o) Insurance. The Company and each of its Subsidiaries are insured by insurers
---------
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.
(p) Regulatory Permits. The Company and its Subsidiaries possess all material
------------------
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(q) Tax Status. The Company and each of its Subsidiaries has made or filed all
----------
federal and state income and all other material tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set
10
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(r) Transactions With Affiliates. Except as set forth on Schedule 3(r) and
----------------------------
other than the grant or exercise of stock options disclosed on Schedule 3(c),
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has an interest or is an
officer, director, trustee or partner.
(s) Application of Takeover Protections. The Company and its board of directors
-----------------------------------
have taken or will take prior to the Commencement Date all necessary action, if
any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of its incorporation which is or could become
applicable to the Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.
(t) Foreign Corrupt Practices. Neither the Company, nor any of its
-------------------------
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
4. COVENANTS.
(a) Filing of Registration Statement. The Company shall within five (5) Trading
--------------------------------
Days from the date hereof file a new registration statement covering the sale of
at least 6,750,000 shares of Common Stock. The Buyer and its counsel shall
have a reasonable opportunity to review and comment upon such registration
statement or amendment to such registration statement and any related prospectus
prior to its filing with the SEC. The Company shall use its best efforts to have
such registration statement or amendment declared effective by the SEC at the
earliest possible date.
11
(b) Blue Sky. The Company shall, on or before the Commencement Date, take such
--------
action, if any, as the Company shall reasonably determine is necessary in order
to obtain an exemption for or to qualify the Commitment Shares and the Purchase
Shares for sale to the Buyer pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the Buyer on or prior to the
Commencement Date. The Company shall make all filings and reports relating to
the offer and sale of the Commitment Shares and the Purchase Shares required
under applicable securities or "Blue Sky" laws of the states of the United
States following the Commencement Date.
(c) No Variable Priced Financing. Other than pursuant to this Agreement, the
----------------------------
Company agrees that beginning on the date of this Agreement and ending on the
date of termination of this Agreement (as provided in Section 11(k) hereof),
neither the Company nor any of its Subsidiaries shall, without the prior written
consent of the Buyer, contract for any equity financing (including any debt
financing with an equity component) or issue any equity securities of the
Company or any Subsidiary or securities convertible or exchangeable into or for
equity securities of the Company or any Subsidiary (including debt securities
with an equity component) which, in any case (i) are convertible into or
exchangeable for an indeterminate number of shares of common stock, (ii) are
convertible into or exchangeable for Common Stock at a price which varies with
the market price of the Common Stock, (iii) directly or indirectly provide for
any "re-set" or adjustment of the purchase price, conversion rate or exercise
price after the issuance of the security, or (iv) contain any "make-whole"
provision based upon, directly or indirectly, the market price of the Common
Stock after the issuance of the security, in each case, other than reasonable
and customary anti-dilution adjustments for issuance of shares of Common Stock
at a price which is below the market price of the Common Stock.
(d) Listing. The Company shall promptly secure the listing of all of the
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Purchase Shares and Commitment Shares upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all such
securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action that would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall promptly, and in no event later than the following Trading Day,
provide to the Buyer copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section.
(e) Limitation on Short Sales and Hedging Transactions. The Buyer agrees that
--------------------------------------------------
beginning on the date of this Agreement and ending on the date of termination of
this Agreement as provided in Section 11(k), the Buyer and its agents,
representatives and affiliates shall not in any manner whatsoever enter into or
effect, directly or indirectly, any (i) "short sale" (as such term is defined in
Rule 3b-3 of the 0000 Xxx) of the Common Stock or (ii) hedging transaction,
which establishes a net short position with respect to
12
the Common Stock; provided, however, that such restrictions shall not apply (i)
if the Buyer submits after a sale of shares of Common Stock a Purchase Notice
entitling the Buyer to receive a number of shares of Common Stock at least equal
to the number of shares so sold or (ii) if an Event of Default has occurred,
including any failure by the Company to timely issue any Purchase Shares
required to be issued pursuant to the terms of this Agreement.
(f) Issuance of Commitment Shares; Limitation on Sales of Commitment Shares.
-----------------------------------------------------------------------
Immediately upon the execution of this Agreement, the Company shall issue to the
Buyer 375,000 shares of Common Stock (the "Commitment Shares") and 375,000
Common Stock purchase warrants in the form of Exhibit F hereto (the "Warrants")
---------
to purchase 375,000 shares of Common Stock (the "Warrant Shares"). The Warrants
shall have an exercise price of $4.00 per share and shall be exercisable for
five (5) years from the date of issuance. The Commitment Shares shall be issued
in certificated form and (subject to Section 5 hereof) shall bear the following
restrictive legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT."
The Buyer agrees that the Buyer shall not transfer or sell the Commitment
Shares until the earlier of 800 Trading Days (40 Monthly Periods) from the date
hereof or date on which this Agreement has been terminated, provided, however,
that such restrictions shall not apply: (i) in connection with any transfers to
or among affiliates (as defined in the Securities Exchange Act of 1934, as
amended), (ii) in connection with any pledge in connection with a bona fide loan
or margin account, or (iii) if an Event of Default has occurred, or any event
which, after notice and/or lapse of time, would become an Event of Default,
including any failure by the Company to timely issue Purchase Shares under this
Agreement. Notwithstanding the forgoing, the Buyer may transfer Commitment
Shares to a third party in order to settle a sale made by the Buyer where the
Buyer reasonably expects the Company to deliver Purchase Shares to the Buyer
under this Agreement so long as the Buyer maintains ownership of the same
overall number of shares of Common Stock by "replacing" the Commitment Shares so
transferred with Purchase Shares when the Purchase Shares are actually issued by
the Company to the Buyer.
(g) Due Diligence. The Buyer shall have the right, from time to time as the
-------------
Buyer may reasonably deem appropriate, to perform reasonable due diligence on
the Company during normal business hours. The Company and its officers and
employees shall reasonably cooperate with the Buyer in connection with any
reasonable request by the Buyer related to the Buyer's due diligence of the
Company.
13
5. TRANSFER AGENT INSTRUCTIONS.
On the Commencement Date, the Company shall cause any restrictive legend on the
Commitment Shares to be removed and all of the Purchase Shares, and Warrant
Shares to be issued under this Agreement shall be issued without any restrictive
legend. The Company shall issue irrevocable instructions to the Transfer Agent,
and any subsequent transfer agent, to issue Purchase Shares in the name of the
Buyer for the Purchase Shares (the "Irrevocable Transfer Agent Instructions").
The Company warrants to the Buyer that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, will be given by the
Company to the Transfer Agent with respect to the Purchase Shares and that the
Commitment Shares, Warrant Shares and the Purchase Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement subject to the
provisions of Section 4(f) in the case of the Commitment Shares.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE SALES OF SHARES OF
COMMON STOCK.
The obligation of the Company hereunder to commence sales of the Purchase Shares
is subject to the satisfaction of each of the following conditions on or before
the Commencement Date (the date that sales begin) and once such conditions have
been initially satisfied, there shall not be any ongoing obligation to satisfy
such conditions after the Commencement has occurred; provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing the Buyer with prior written
notice thereof:
(a) The Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company including the Registration
Rights Agreement substantially in the form of Exhibit A hereto (the
"Registration Rights Agreement").
(b) Subject to the Company's compliance with Section 4(a), a registration
statement covering the sale of all of the Commitment Shares ,Warrant Shares and
at least 6,000,000 Purchase Shares shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect to the Registration
Statement shall be pending or threatened by the SEC.
(c) The representations and warranties of the Buyer shall be true and correct
in all material respects as of the date when made and as of the Commencement
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Commencement Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO COMMENCE PURCHASES OF SHARES OF
COMMON STOCK.
The obligation of the Buyer to commence purchases of Purchase Shares under this
Agreement is subject to the satisfaction of each of the following conditions on
or before the Commencement Date (the date that sales begin) and
14
once such conditions have been initially satisfied, there shall not be any
ongoing obligation to satisfy such conditions after the Commencement has
occurred; provided that these conditions are for the Buyer's sole benefit and
may be waived by the Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(a) The Company shall have executed each of the Transaction Documents and
delivered the same to the Buyer including the Registration Rights Agreement
substantially in the form of Exhibit A hereto.
---------
(b) The Company shall have issued to the Buyer the Commitment Shares and
Warrants and shall have removed the restrictive transfer legend from the
Commitment Shares.
(c) The Common Stock shall be authorized for quotation on the Principal Market,
trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the Principal Market and the Purchase Shares and the
Commitment Shares shall be approved for listing upon the Principal Market.
(d) The Buyer shall have received the opinions of the Company's legal counsel
dated as of the Commencement Date in the form of Exhibit B attached hereto.
---------
(e) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties is already qualified as to materiality in Section 3 above, in
which case, such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Commencement Date. The Buyer shall have
received a certificate, executed by the CEO, President or CFO of the Company,
dated as of the Commencement Date, to the foregoing effect in the form attached
hereto as Exhibit C.
---------
(f) The Board of Directors of the Company shall have adopted resolutions in the
form attached hereto as Exhibit D which shall be in full force and effect
---------
without any amendment or supplement thereto as of the Commencement Date.
(g) As of the Commencement Date, the Company shall have reserved out of its
authorized and unissued Common Stock, (i) the Warrant Shares issuable under the
Warrants and (ii) solely for the purpose of effecting purchases of Purchase
Shares hereunder, at least 6,000,000 shares of Common Stock.
(h) The Irrevocable Transfer Agent Instructions, in form acceptable to the
Buyer shall have been delivered to and acknowledged in writing by the Company
and the Company's Transfer Agent.
(i) The Company shall have delivered to the Buyer a certificate evidencing the
incorporation and good standing of the Company in the State of Nevada issued by
the Secretary of State of the State of Nevada as of a date within ten (10)
Trading Days of the Commencement Date.
15
(j) The Company shall have delivered to the Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State of the State
of Nevada within ten (10) Trading Days of the Commencement Date.
(k) The Company shall have delivered to the Buyer a secretary's certificate
executed by the Secretary of the Company, dated as of the Commencement Date, in
the form attached hereto as Exhibit E.
---------
(l) A registration statement covering the sale of all of the Commitment Shares,
Warrant Shares and at least 6,000,000 Purchase Shares shall have been declared
effective under the 1933 Act by the SEC and no stop order with respect to the
registration statement shall be pending or threatened by the SEC. The Company
shall have prepared and delivered to the Buyer a final form of prospectus to be
used by the Buyer in connection with any sales of any Commitment Shares, Warrant
Shares or any Purchase Shares. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Commitment Shares, Warrant Shares and the Purchase Shares
pursuant to this Agreement in compliance with such laws.
(m) No Event of Default has occurred, or any event which, after notice and/or
lapse of time, would become an Event of Default has occurred.
(n) On or prior to the Commencement Date, the Company shall take all necessary
action, if any, and such actions as reasonably requested by the Buyer, in order
to render inapplicable any control share acquisition, business combination,
shareholder rights plan or poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the Certificate
of Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.
8. INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Buyer and all of its
affiliates, shareholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim
16
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
other than with respect to Indemnified Liabilities which directly and primarily
result from the gross negligence or willful misconduct of the Indemnitee. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
9. EVENTS OF DEFAULT.
An "Event of Default" shall be deemed to have occurred at any time as any of the
following events occurs:
(a) while any registration statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness of
such registration statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to the Buyer for
sale of all of the Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of ten (10) consecutive
Trading Days or for more than an aggregate of thirty (30) Trading Days in any
365-day period;
(b) the suspension from trading or failure of the Common Stock to be listed on
the Principal Market for a period of ten (10) consecutive Trading Days or for
more than an aggregate of thirty (30) Trading Days in any 365-day period;
(c) the failure of the Company or the Common Stock to fully meet the
requirements for continued listing on the Principal Market for a period of ten
(10) consecutive Trading Days or for more than an aggregate of thirty (30)
Trading Days in any 365-day period;
(d) the failure for any reason by the Transfer Agent to issue Purchase Shares
to the Buyer within five (5) Trading Days after the applicable Purchase Date
which the Buyer is entitled to receive;
(e) the Company breaches any representation, warranty, covenant or other term
or condition under any Transaction Document if such breach could have a Material
Adverse Effect and except, in the case of a breach of a covenant which is
reasonably curable, only if such breach continues for a period of at least ten
(10) Trading Days;
(f) except as set forth on Schedule 9(g), any payment default under any
contract whatsoever or any acceleration prior to maturity of any mortgage,
indenture, contract or instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness for money borrowed by the
Company or for money borrowed the repayment of which is guaranteed by the
Company, whether such indebtedness or guarantee now exists or shall be created
hereafter, which, with respect to any such payment default or acceleration prior
to maturity, is in excess of $1,000,000;
(g) if any Person commences a proceeding against the Company pursuant to or
within the meaning of any Bankruptcy Law;
17
(h) if the Company pursuant to or within the meaning of any Bankruptcy Law; (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors, (E) becomes insolvent, or
(F) is generally unable to pay its debts as the same become due; or
(i) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary.
In addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, or so long as the Purchase Price is below the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of
Common Stock under this Agreement. If pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case or any Person commences a
proceeding against the Company, a Custodian is appointed for the Company or for
all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event of
Default as described in Sections 9(g), 9(h) and 9(i) hereof) this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person. No such termination of this
Agreement under Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.
10. CERTAIN DEFINED TERMS.
For purposes of this Agreement, the following terms shall have the following
meanings:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "Available Amount" means initially Twelve Million Dollars ($12,000,000) in
the aggregate which amount shall be reduced by the Purchase Amount each time the
Buyer purchases shares of Common Stock pursuant to Section 1 hereof.
(c) "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state
law for the relief of debtors.
(d) "Closing Sale Price" means, for any security as of any date, the last
closing trade price for such security on the Principal Market as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing trade price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg.
(e) "Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
18
(f) "Daily Base Amount" means initially Fifteen Thousand Dollars ($15,000) per
Trading Day, which amount may be increased or decreased from time to time
pursuant to Section 1(c) hereof.
(g) "Floor Price" means initially $2.50, which amount may be increased or
decreased from time to time pursuant to Section 1(d)(iii) hereof, except that in
no case shall the Floor Price be less than $.50 without the consent of the
Buyer.
(h) "Maturity Date" means the date that is 800 Trading Days (40 Monthly Periods)
from the Commencement Date which such date may be extended by up to an
additional six (6) Monthly Periods by the Company, in its sole discretion, by
written notice to the Buyer.
(i) "Monthly Base Amount" means Three Hundred Thousand Dollars ($300,000) per
Monthly Period.
(k) "Monthly Period" means each successive 20 Trading Day period commencing with
the Commencement Date.
(l) "Original Daily Base Amount" means Three Hundred Thousand Dollars ($300,000)
per Trading Day.
(m) "Person" means an individual or entity including any limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(n) "Principal Market" means The Nasdaq OTC/ Bulletin Board market, provided,
however, that in the event the Company's Common Stock is ever listed for trading
on the Nasdaq National Market, Nasdaq SmallCap Market or the American Stock
Exchange, than the "Principal Market" shall mean such other market on which the
Company's Common Stock is then listed, and (ii) for purposes of Section 9(c)
hereof only, "Principal Market" shall mean The Nasdaq SmallCap Market in respect
of the requirements for continued listing on the Principal Market.
(o) "Purchase Amount" means the portion of the Available Amount to be purchased
by the Buyer pursuant to Section 1 hereof.
(p) "Purchase Date" means the actual date that the Buyer is to buy Purchase
Shares pursuant to Section 1 hereof.
(q) "Purchase Price" means, as of any Purchase Date the lower of the (A) the
lowest Sale Price of the Common Stock on the Purchase Date or such other date of
determination and (B) the arithmetic average of the three (3) lowest Closing
Sale Prices for the Common Stock during the fifteen (15) consecutive Trading
Days ending on the Trading Day immediately preceding such Purchase Date or other
date of determination (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).
(r) "Sale Price" means, for any security as of any date, any trade price for
such security on the Principal Market as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the trade price of such security on the principal
19
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg.
(s) "SEC" means the United States Securities and Exchange Commission.
(t) "Trading Day" means any day on which the Principal Market is open for
customary trading.
11. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of
---------------------------------------
Nevada shall govern all issues concerning the relative rights of the Company and
its shareholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the other Transaction
Documents shall be governed by the internal laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of Chicago, for the
adjudication of any dispute hereunder or under the other Transaction Documents
or in connection herewith or therewith, or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
(c) Headings. The headings of this Agreement are for convenience of reference
--------
and shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
20
(e) Entire Agreement; Amendments. This Agreement supersedes all other prior
----------------------------
oral or written agreements between the Buyer, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement, the other Transaction Documents and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Buyer, and no provision hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is sought.
(f) Notices. Any notices, consents, waivers or other communications required or
-------
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Trading Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Universe2U, Inc.
00 Xxxx Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxx X0X 0X0
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxx Xxxxx
With a copy to:
Wuersch & Xxxxxx, LLP
00 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to the Buyer:
Fusion Capital Fund II, LLC
000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
If to the Transfer Agent:
American Stock Transfer & Trust
0000 00xx Xxxxxx, 0xx Xx.
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxxxxx
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Trading Days prior to the effectiveness
21
of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally recognized
overnight delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to
----------------------
the benefit of the parties and their respective successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Buyer, including by merger or
consolidation. The Buyer may not assign its rights or obligations under this
Agreement.
(h) No Third Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Publicity. The Buyer shall have the right to approve before issuance any
---------
press releases or any other public disclosure (including any filings with the
SEC) with respect to the transactions contemplated hereby; provided, however,
that the Company shall be entitled, without the prior approval of any Buyer, to
make any press release or other public disclosure (including any filings with
the SEC) with respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(j) Further Assurances. Each party shall do and perform, or cause to be done and
------------------
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k) Termination. This Agreement may be terminated only as follows:
-----------
(i) By the Buyer any time an Event of Default exists without any liability or
payment to the Company. However, if pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case or any Person commences a
proceeding against the Company, a Custodian is appointed for the Company or for
all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event of
Default as described in Sections 9(g), 9(h) and 9(i) hereof) this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person. No such termination of this
Agreement under this Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.
22
(ii) In the event that the Commencement shall not have occurred, the Company
shall have the option to terminate this Agreement for any reason or for no
reason without liability of any party to any other party.
(iii) In the event that the Commencement shall not have occurred on or before
October 31, 2001, due to the failure to satisfy the conditions set forth in
Sections 6 and 7 above with respect to the Commencement (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement at the close of business on
such date or thereafter without liability of any party to any other party.
(iv) If by the Maturity Date (including any extension thereof by the Company
pursuant to Section 10(g) hereof), for any reason or for no reason the full
Available Amount under this Agreement has not been purchased as provided for in
Section 1 of this Agreement, by the Buyer without any liability or payment to
the Company.
(v) At any time after the Commencement Date, the Company shall have the option
to terminate this Agreement for any reason or for no reason by delivering notice
(a "Company Termination Notice") to the Buyer electing to terminate this
Agreement without any liability or payment to the Buyer. The Company Termination
Notice shall not be effective until one (1) Trading Day after it has been
received by the Buyer.
(vi) This Agreement shall automatically terminate on the date that the Company
sells and the Buyer purchases Twelve Million Dollars ($12,000,000) as provided
herein, without any action or notice on the part of any party.
Except as set forth in Sections 11(k)(i) and 11(k)(vi), any termination of this
Agreement pursuant to this Section 11(k) shall be effected by written notice
from the Company to the Buyer, or the Buyer to the Company, as the case may be,
setting forth the basis for the termination hereof. The representations and
warranties of the Company and the Buyer contained in Sections 2 and 3 hereof,
the indemnification provisions set forth in Section 8 hereof and the agreements
and covenants set forth in Section 11, shall survive the Commencement and any
termination of this Agreement. No termination of this Agreement shall affect the
Company's or the Buyer's obligations under this Agreement with respect to
pending purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.
(l) No Financial Advisor, Placement Agent, Broker or Finder. The Company
-------------------------------------------------------
represents and warrants to the Buyer that it has not engaged any financial
advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Buyer represents and warrants to the Company that it
has not engaged any financial advisor, placement agent, broker or finder in
connection with the transactions contemplated hereby. The Company shall be
responsible for the payment of any fees or commissions, if any, of any financial
advisor, placement agent, broker or finder relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold the Buyer
harmless against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.
(m) No Strict Construction. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties to express their mutual
23
intent, and no rules of strict construction will be applied against any party.
(n) Remedies, Other Obligations, Breaches and Injunctive Relief. The Buyer's
-----------------------------------------------------------
remedies provided in this Agreement shall be cumulative and in addition to all
other remedies available to the Buyer under this Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy of the Buyer contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit the
Buyer's right to pursue actual damages for any failure by the Company to comply
with the terms of this Agreement. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Buyer and that
the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Buyer
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(o) Changes to the Terms of this Agreement. This Agreement and any
--------------------------------------
provision hereof may only be amended by an instrument in writing signed by the
Company and the Buyer. The term "Agreement" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.
(p) Enforcement Costs. If: (i) this Agreement is placed by the Buyer in
-----------------
the hands of an attorney for enforcement or is enforced by the Buyer through any
legal proceeding; or (ii) an attorney is retained to represent the Buyer in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Buyer in any other proceedings whatsoever
in connection with this Agreement, then the Company shall pay to the Buyer, as
incurred by the Buyer, all reasonable costs and expenses including attorneys'
fees incurred in connection therewith, in addition to all other amounts due
hereunder.
(q) Failure or Indulgence Not Waiver. No failure or delay in the exercise
--------------------------------
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
* * * * *
24
IN WITNESS WHEREOF, the Buyer and the Company have caused this Common Stock
Purchase Agreement to be duly executed as of the date first written above.
THE COMPANY:
------------
UNIVERSE2U, INC.
By:______________________
Name:
Title:
BUYER:
------
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS, LLC
BY: SGM HOLDINGS CORP.
By:_______________________
Name: Xxxxxx X. Xxxxxx
Title: President
25
