EXHIBIT 10.27
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement') is dated as of
April 24, 2000 between XxXxxxxx.xxx, a Nevada corporation (the "Company") and
the Purchasers signatory hereto (each a "Purchaser" and together the
"Purchasers")
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Definitions.
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(a) "Average Daily Price" shall be the price based on the VWAP of the
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Company on the OTC Bulletin Board or, if the OTC Bulletin Board is not the
Principal Market, on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term in Section
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6.1(a) hereof.
(c) "Draw Down Exercise Date" shall have the meaning assigned to such term
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in Section 6.1(b) hereof.
(d) "Effective Date" shall mean the date the Registration Statement of the
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Company covering the Shares being subscribed for hereby is declared effective.
(e) "First Draw Down Pricing Period" shall mean a period of fifteen (15)
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consecutive Trading Days preceding the first Draw Down Exercise Date.
(f) "Material Adverse Effect" shall mean any adverse effect on the
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business, operations, properties or financial condition of the Company that
materially impairs the ability of the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement or the
Registration Rights Agreement or to perform its obligations under any other
material agreement.
(g) "Principal Market" shall mean the Nasdaq National Market, the Nasdaq
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SmallCap Market, the American Stock Exchange, the New York Stock Exchange or the
OTC Bulletin Board, whichever is at the time the principal trading exchange or
market for the Common Stock, based upon share volume.
(h) "Registration Statement" shall mean the registration statement under
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the Securities Act of 1933, as amended, to be filed with the Securities and
Exchange Commission for
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the registration of the Shares pursuant to the Registration Rights Agreement
attached hereto as Exhibit A.
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(i) "SEC Documents" shall mean the Company's Registration Statement on
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Form SB-2 filed on November 2, 1999 and all Forms 10-K or 10-KSB, 10-Q or 10-QSB
and 8-K filed thereafter, and the Proxy Statement for its latest fiscal year as
of the time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
(j) "Second Draw Down Pricing Period" shall mean a period of forty-five
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(45) consecutive Trading Days preceding the second Draw Down Exercise Date.
(k) "Shares" shall mean, collectively, the shares of Common Stock of the
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Company being subscribed for hereunder.
(l) "Threshold Price" is the lowest Average Daily Price at which the
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Company will sell its Common Stock with respect to this Agreement.
(m) "Trading Day" shall mean any day on which the Principal Market is open
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for business.
(n) "VWAP" shall mean the daily volume weighted average price of the
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Company' Common Stock on the OTC Bulletin Board or on any Principal Market as
reported by Bloomberg Financial using the AQR function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
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conditions of this Agreement, the Company may issue and sell to the Purchasers
and the Purchasers shall purchase from the Company up to Five Million Dollars
($5,000,000) of the Company's Common Stock, $0.001 par value per share (the
"Common Stock"), based on (i) one Draw Down of up to an aggregate of $2,000,000,
(ii) one Draw Down of up to an aggregate of Three Million Dollars ($3,000,000)
and (iii) up to as many additional Draw Downs as the Company, in its sole
discretion, shall choose to exercise until the aggregate amount purchased under
this Agreement equals Five Million Dollars ($5,000,000).
Section 2.2 The Shares. The Company has authorized and has reserved and
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covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs requested under this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Company may not make a Draw Down
to a Purchaser to the extent that, after such purchase by such Purchaser, the
sum of the number of shares of Common Stock beneficially owned by such Purchaser
and its affiliates would result in beneficial ownership by such Purchaser and
its affiliates of more than
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9.9% of the then outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities and Exchange Act of 1934, as
amended.
Section 2.3 Purchase Price and Closing. The Company agrees to issue and
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sell to the Purchasers and, in consideration of and in express reliance upon the
representation, warranties, covenants, terms and conditions of this Agreement,
each Purchaser agrees, severally and not jointly, to purchase half of the number
of the Shares to be issued in connection with each Draw Down. The closing under
this Agreement shall take place at the offices of Xxxxxxx Xxxxxx & Green, P.C.,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Closing") at 10:00 a.m. E.S.T.
on (i) April __, 2000, or (ii) such other time and place or on such date as the
Purchasers and the Company may agree upon (the "Closing Date"). Each party shall
deliver all documents, instruments and writings required to be delivered by such
party pursuant to this Agreement at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representation and Warranties of the Company. The Company
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hereby makes the following representations and warranties to the Purchasers:
(a) Organization, Good Standing and Power. The Company is a corporation
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duly incorporated, validly existing and in good standing under the laws of the
State of Nevada and has all requisite corporate authority to own, lease and
operate its properties and assets and to carry on its business as now being
conducted. The Company does not have any subsidiaries and does not own more that
fifty percent (50%) of or control any other business entity except as set forth
in the SEC Documents. The Company is duly qualified and is in good standing as a
foreign corporation to do business in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have a
Material Adverse Effect on the Company's financial condition.
(b) Authorization, Enforcement. (i) The Company has the requisite
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corporate power and corporate authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the Escrow
Agreement and to issue the Draw Down Shares pursuant to their respective terms,
(ii) the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement and the Escrow Agreement by the Company and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) this
Agreement, the Registration Rights Agreement and the Escrow Agreement have been
duly executed and delivered by the Company and at the initial Closing shall
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement
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of, creditors' rights and remedies or by other equitable principles of general
application. The Company has duly and validly authorized and reserved for
issuance shares of Common Stock sufficient in number for the issuance of the
Draw Down Shares.
(c) Capitalization. The authorized capital stock of the Company consists
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of 50,000,000 shares of Common Stock, $0.001 par value per share, of which
9,976,365 shares are issued and outstanding as of February 28, 2000 and
1,000,000 shares of preferred stock, $0.001 par value per share, 204 of which
shares are issued and outstanding as of March 15, 2000. All of the outstanding
shares of the Company's Common Stock have been duly and validly authorized and
are fully-paid and non-assessable. Except as set forth in this Agreement and the
Registration Rights Agreement and as set forth in the SEC Documents, or on
Schedule 3.1(c) hereto, no shares of Common Stock are entitled to preemptive
rights or registration rights and there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth in this Agreement and as
set forth in the SEC Documents or on Schedule 3.1(c), there are no contracts,
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commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company. The Company is not a party to any agreement granting registration
rights to any person with respect to any of its equity or debt securities. The
Company is not a party to, and it has no knowledge of, any agreement restricting
the voting or transfer of any shares of the capital stock of the Company. Except
as set forth in the SEC Documents or on Schedule 3.1(c) hereto, the offer and
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sale of all capital stock, convertible securities, rights, warrants, or options
of the Company issued prior to the Closing complied with all applicable federal
and state securities laws, and no stockholder has a right of rescission or
damages with respect thereto which would have a Material Adverse Effect on the
Company's financial condition or operating results. The Company has made
available to the Purchasers true and correct copies of the Company's Articles of
Incorporation as in effect on the date hereof (the "Articles"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws"). The Principal
Market for the Common Stock in the United States is the OTC Bulletin Board, and
the Company has not received any notice from such market questioning or
threatening the continued inclusion of the Common Stock on such market.
(d) Issuance of Shares. The Shares to be issued under this Agreement have
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been duly authorized by all necessary corporate action and, when paid for or
issued in accordance with the terms hereof, the Shares shall be validly issued
and outstanding, fully paid and non-assessable, and the Purchasers shall be
entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not and will not (i) violate any provision of the
Company's Articles or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party, (iii) create or impose a
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lien, charge or encumbrance on any property of the Company under any agreement
or any commitment to which the Company is a party or by which the Company is
bound or by which any of its respective properties or assets are bound, or (iv)
result in a violation of any federal, state, local or other foreign statute,
rule, regulation, order, judgment or decree (including any federal and state or
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases, for such conflicts,
defaults, termination, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company and its subsidiaries is not being conducted in
violation of any laws, ordinances or regulations of any governmental entity,
except for possible violations which singularly or in the aggregate do not and
will not have a Material Adverse Effect. The Company is not required under any
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or issue and sell the Shares in accordance
with the terms hereof (other than any filings which may be required to be made
by the Company with the Securities and Exchange Commission (the "Commission") or
state securities administrators subsequent to the Closing and any registration
statement which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchasers
herein.
(f) Commission Documents, Financial Statements. The Common Stock of the
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Company is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, except as disclosed in the SEC
Documents or on Schedule 3.1(f) hereto, the Company has timely filed all
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reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing including filings incorporated by reference therein
being referred to herein as the "Commission Documents"). The Company has
delivered or made available to the Purchasers true and complete copies of the
Commission Documents filed with the Commission since November 2, 1999. The
Company has not provided to the Purchasers any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such documents, and, as of their respective dates, 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 Commission Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may
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be otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries. The SEC Documents or Schedule 3.1(g) hereto sets forth
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each subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership of the
outstanding stock or other interests of such subsidiary. For the purposes of
this Agreement, "subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interests having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and non-assessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is a party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.
(h) No Material Adverse Effect. Since December 31, 1999, no Material
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Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents or on Schedule 3.1(h) hereof.
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(i) No Undisclosed Liabilities. Except as disclosed in the SEC Documents
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or on Schedule 3.1(i) hereto, neither the Company nor any of its subsidiaries
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has any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise)
that would be required to be disclosed on a balance sheet of the Company or any
subsidiary (including the notes thereto) in conformity with GAAP which are not
disclosed in the Commission Documents, other than those incurred in the ordinary
course of the Company's or its subsidiaries respective businesses since December
31, 1999 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Since December 31, 1999, no
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event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
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(k) Indebtedness. The SEC Documents or Schedule 3.1(k) hereto sets forth
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as of the date hereof all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $250,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $250,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has good
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and marketable title to all of its real and personal property reflected in the
Commission Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC Documents
or on Schedule 3.1(1) hereto or such that do not cause a Material Adverse Effect
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on the Company's financial condition or operating results. All said leases of
the Company and each of its subsidiaries are valid and subsisting and in full
force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation or
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proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the SEC Documents or on Schedule
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3.1(m) hereto, there is no action, suit, claim, investigation or proceeding
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pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or
any subsidiary.
(n) Compliance with Law. The business of the Company and the subsidiaries
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has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the SEC Documents or on Schedule 3.1(n) hereto or such
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that do not cause a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of their respective businesses as now being conducted by them unless the
failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. The Company and each subsidiary has filed all Tax Returns
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which it is required to file under applicable laws; all such Tax Returns are
true and accurate and has been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing
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by it or any subsidiary (whether or not such Taxes are required to be shown on a
Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which it is required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties; and since
December 31, 1998, the charges, accruals and reserves for Taxes with respect to
the Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company or any subsidiary from any foreign, federal, state or local
taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to (S) 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; and (B) has not agreed to or is required to make any
adjustments pursuant to (S) 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of (S) 897(c)(2) of the Internal Revenue Code
during the applicable period specified in (S) 897(c)(1)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election under (S) 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. (S) 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under (S) 280G of the Internal
Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
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"Tax" or "Taxes" means federal, state, county, local, foreign, or
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other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
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limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
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respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
(p) Certain Fees. Except as set forth on Schedule 3.1(p) hereto, no
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brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither this
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Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and each of the subsidiaries owns
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or possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents and on Schedule
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3.1(r) hereto, and all rights with respect to the foregoing, which are necessary
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for the conduct of its business as now conducted without any conflict with the
rights of others.
(s) Regulatory Compliance. The Company has all necessary licenses,
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registrations and permits to conduct its business as now being conducted in all
states where the Company conducts its business.
(t) Books and Records. The records and documents of the Company and its
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subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any subsidiary.
(u) Material Agreements. Except as set forth in the SEC Documents, or
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on Schedule 3.1(u) hereto, neither the Company nor any subsidiary is a party to
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any written or oral contract, instrument, agreement, commitment, obligation,
plan or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to a registration statement on Form S-1 or other
applicable form (collectively, "Material Agreements") if the Company or any
subsidiary were registering securities under the Securities Act of 1933, as
amended (the "Securities Act"). The Company and each of its subsidiaries has in
all material respects performed all the obligations required to be performed by
them to date under the foregoing agreements, have received no notice of default
and, to the best of the Company's knowledge are not in default under any
Material Agreement now in effect, the result of which could cause a Material
Adverse Effect. No written or oral contract, instruments, agreement, commitment,
obligation, plan or arrangement of the Company or of any subsidiary limits or
shall limit the payment of dividends on the Company's Common Stock.
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(v) Transactions with Affiliates. Except as set forth in the SEC Documents
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or on Schedule 3.1(v) hereto, there are no loans, leases, agreements, contracts,
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royalty agreements, management contracts or arrangements or other continuing
transactions exceeding $100,000 between (a) the Company, any subsidiary or any
of their respective customers or suppliers on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person owning any capital stock of the Company or any
subsidiary or any member of the immediately family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
(w) Securities Act of 1933. The Company has complied and will comply with
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all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder. Neither the Company nor anyone acting
on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy the Shares or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Purchasers), so
as to bring the issuance and sale of the Shares under the registration
provisions of the Securities Act and applicable state securities laws. Neither
the Company nor any of its affiliates, 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 Securities Act) in connection with
the offer or sale of the Shares.
(x) Governmental Approvals. Except as set forth in the SEC Documents or
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on Schedule 3.1(x) hereto, and except for the filing of any notice prior or
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subsequent to the Closing that may be required under applicable federal or state
securities laws (which if required, shall be filed on a timely basis), including
the filing of a registration statement or statements pursuant to this Agreement,
no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Shares, or for the
performance by the Company of its obligations under this Agreement.
(y) Employees. Neither the Company nor any subsidiary has any collective
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bargaining arrangements or agreements covering any of its employees, except as
set forth in the SEC Documents or on Schedule 3(y) hereto. Except as set forth
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in the SEC Documents or on Schedule 3(y) hereto, neither the Company nor any
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subsidiary is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since the date of the
November 2, 1999 Form SB-2, no officer, consultant or key employee of the
Company or any subsidiary whose termination, either individually or in the
aggregate, could have a Material Adverse Effect, has terminated or, to the
knowledge of the Company, has any present intention of terminating his or her
employment or engagement with the Company or any subsidiary.
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(z) Absence of Certain Developments. Except as provided in SEC Documents
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or in Schedule 3.1(z) hereto, since December 31, 1999 neither the Company nor
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any subsidiary has:
(i) issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature and
volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or canceled
any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the
Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in
excess of $500,000;
(x) entered into any other material transaction, whether or not in the
ordinary course of business;
(xi) suffered any material damage, destruction or casualty loss, whether
or not covered by insurance;
(xii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
11
(xiii) effected any two or more events of the foregoing kind which in
the aggregate would be material to the Company or its subsidiaries.
(aa) Use of Proceeds. The proceeds from the sale of the Shares will be
---------------
used by the Company and its subsidiaries for general corporate purposes.
(bb) Acknowledgment Regarding Purchasers' Purchase of Shares. Company
-------------------------------------------------------
acknowledges and agrees that each Purchaser is acting solely in the capacity of
an arm's length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that each Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given each Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to each Purchaser's purchase of the Shares. The
Company further represents to the Purchasers that the Company's decision to
enter into this Agreement has been based solely on the independent evaluation by
the Company and its own representatives and counsel.
Section 3.2 Representations and Warranties of each Purchaser. Each
------------------------------------------------
Purchaser, severally and not jointly, hereby makes the following representations
and warranties to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of its place of incorporation.
(b) Authorization and Power. The Purchaser has the requisite power and
-----------------------
authority to enter into and perform this Agreement and to purchase the Shares
being sold to it hereunder. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement, the Registration Rights Agreement and the Escrow Agreement have
been duly executed and delivered by the Purchaser and at the initial Closing
shall constitute valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
------------
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby or relating hereto do not and will not (i) result in a violation of such
Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument to which
the Purchaser is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to the Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
Material
12
Adverse Effect on Purchaser). The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Financial Risks. The Purchaser acknowledges that it is able to bear
---------------
the financial risks associated with an investment in the Shares and that it has
been given full access to such records of the Company and the subsidiaries and
to the officers of the Company and the subsidiaries as it has deemed necessary
or appropriate to conduct its due diligence investigation. The Purchaser is
capable of evaluating the risks and merits of an investment in the Shares by
virtue of its experience as an investor and its knowledge, experience, and
sophistication in financial and business matters and the Purchaser is capable of
bearing the entire loss of its investment in the Shares.
(e) Accredited Investor The Purchaser is an "accredited investor" as
-------------------
defined in Regulation D promulgated under the Securities Act.
(f) Compliance With Law. The Purchaser's trading and distribution
-------------------
activities with respect to the Shares will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules and
regulations of the Principal Market. The Purchaser and its affiliates shall not
engage in short sales of the Company's Common Stock (as defined in applicable
SEC and NASD rules) so long as the Purchaser holds any Shares during the term of
this Agreement.
(g) General. The Purchaser understands that the Company is relying upon
-------
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the suitability of the Purchaser to acquire the Shares.
ARTICLE IV
Covenants
The Company covenants with the Purchasers as follows:
Section 4.1 Securities Compliance.
---------------------
The Company shall notify The NASD in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Shares and the Warrants to the Purchasers or subsequent holders.
Section 4.2 Registration and Listing. The Company will cause its Common
------------------------
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all
13
requirements related to any registration statement filed pursuant to this
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the OTC Bulletin Board or another
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.
Section 4.3 Registration Statement. The Company shall cause to be filed
----------------------
the Registration Statement, which Registration Statement shall provide for the
sale of the Shares to the Purchasers and resale by the Purchasers to the public
in accordance with this Agreement. The Company shall cause such Registration
Statement to be declared effective by the Commission as expeditiously as
practicable. Before the Purchasers shall be obligated to accept a Draw Down
request from the Company, the Company shall have caused a sufficient number of
shares of Common Stock to be registered to cover the Shares to be issued in
connection with such Draw Down.
Section 4.4 Escrow Arrangement. The Company and the Purchasers shall
------------------
enter into an escrow arrangement with Xxxxxxx Xxxxxx & Green, P.C. (the "Escrow
Agent") in the Form of Exhibit B hereto respecting payment against delivery of
---------
the Shares.
Section 4.5 Compliance with Laws. The Company shall comply, and cause
--------------------
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 4.6 Keeping of Records and Books of Account. The Company shall
---------------------------------------
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.7 Amendments. The Company shall not amend or waive any
----------
provision the Articles of Incorporation, Bylaws of the Company in any way that
would adversely affect the dividend rights or voting rights of the holders of
the Shares.
Section 4.8 Other Agreements. The Company shall not enter into any
----------------
agreement the terms of which such agreement would restrict or impair the right
to perform of the Company or any subsidiary under this Agreement or the Articles
of Incorporation of the Company.
Section 4.9 Notice of Certain Events Affecting Registration; Suspension
-----------------------------------------------------------
of Right to Request a Draw Down. The Company will immediately notify the
-------------------------------
Purchasers upon the occurrence of any of the following events in respect of the
Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the Commission or any
other federal or state governmental authority during the period of
14
effectiveness of the Registration Statement the response to which would require
any amendments or supplements to the Registration Statement or related
prospectus; (ii) the issuance by the Commission 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 Shares 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 the
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 that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Purchasers any such supplement or amendment
to the related prospectus. The Company shall not deliver to the Purchasers any
Draw Down Notice during the continuation of any of the foregoing events.
Section 4.10 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 (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Purchasers such shares of
stock and/or securities as the Purchasers are entitled to receive pursuant to
this Agreement.
Section 4.11 Limitation on Future Financing. The Company agrees that,
------------------------------
except as set forth below, it will not enter into any sale of its securities for
cash at a discount to the current market price until the earlier of (i) twelve
(12) months from the effective date of the Registration Statement, or (ii) sixty
(60) days after the entire $5,000,000 of Shares has been purchased by
Purchasers. The foregoing shall not prevent or limit the Company from engaging
in any sale of securities (i) in a registered public offering by the Company
which is underwritten by one or more established investment banks, (ii) in one
or more private placements where the purchasers do not have registration rights,
(iii) pursuant to any presently existing or future employee benefit plan which
plan has been or is approved by the Company's stockholders, (iv) pursuant to any
compensatory plan for a full-time employee or key consultant, (v) in connection
with a strategic partnership or other business transaction, the principal
purpose of which is not simply to raise money, (vi) pursuant to any transaction
with Crescent International, Xxxxxx Institutional Finance, Premier Technology
and subsidiaries, Softbank and Commtouch or (vii) to which all of the Purchasers
give their written approval.
15
ARTICLE V
Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company to
--------------------------------------------------------
Sell the Shares. The obligation hereunder of the Company to issue and sell the
---------------
Shares to each Purchaser is subject to the satisfaction or waiver, at or before
the Closing, of each of the conditions set forth below; provided, however, a
-------- -------
failure by one of the Purchasers to satisfy such conditions does not relieve the
Company's obligations to the other Purchaser provided that the other Purchaser
has satisfied the conditions set forth below or such conditions have been waived
by the Company as to that Purchaser. These conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
----------------------------------------------------------
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the Closing and as of each
Draw Down Exercise Date as though made at that time, except for representations
and warranties that speak as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have performed,
----------------------------
satisfied and complied in all material respects with all material covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing and as of each Draw
Down Exercise Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
-------------
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
Section 5.2 Conditions Precedent to the Obligation of each Purchaser to
-----------------------------------------------------------
Close. The obligation hereunder of each Purchaser to enter this Agreement is
-----
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the each Purchaser's sole
benefit and may be waived by such Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
--------------------------------------------------------
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing as though
made at that time (except for representations and warranties that speak as of a
particular date).
(b) 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 to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
-------------
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or
16
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before
----------------------------
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Purchasers or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(e) Opinion of Counsel, Etc. At the Closing, the Purchasers shall have
-----------------------
received an opinion of counsel to the Company, dated the date of Closing, in the
form of Exhibit C hereto, and such other certificates and documents as the
Purchasers or its counsel shall reasonably require incident to the Closing.
(f) Warrants. In lieu of a minimum Draw Down commitment by the Company,
--------
the Purchasers shall receive warrant certificates to purchase up to an aggregate
of 100,000 shares of Common Stock (the "Warrants"). The Warrants will have a
three (3) year term from their date of issuance. The Warrant strike price shall
be 120% of the closing bid price of the Common Stock on the Trading Day
immediately prior to the Closing Date. The Common Stock underlying the Warrants
will be registered in the Registration Statement referred to in Section 4.3
hereof. The Warrants shall be in the form of Exhibit E hereto.
---------
Section 5.3 Conditions Precedent to the Obligation of each Purchaser to
-----------------------------------------------------------
Accept a Draw Down and Purchase the Shares. The obligation hereunder of each
------------------------------------------
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before each Draw Down Exercise
Date, of each of the conditions set forth below. The conditions are for each
Purchaser's sole benefit and may be waived by each Purchaser at any time in its
sole discretion.
(a) Satisfaction of Conditions to Closing. The Company shall have
-------------------------------------
satisfied, or the Purchaser shall have waived, the conditions set forth in
Section 5.2 hereof
(b) Effective Registration Statement. The Registration Statement
--------------------------------
registering the Shares shall have been declared effective by the Commission and
shall remain effective on each Draw Down Exercise Date.
(c) No Suspension. Trading in the Company's Common Stock shall not have
-------------
been suspended by the Commission or the NASD (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to each Draw Down request), and, at any time prior to such
request, trading in securities generally as reported on the OTC Bulletin Board
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported on the OTC Bulletin Board.
(d) Material Adverse Effect. No Material Adverse Effect and no
-----------------------
Consolidation Event shall have occurred.
17
(e) Opinion of Counsel The Purchasers shall have received a "down-to-date"
------------------
letter from the Company's counsel, confirming that there is no change from the
counsel's previously delivered opinion, or else specifying with particularity
the reason for any change.
ARTICLE VI
Draw Down Terms
Section 6.1 Draw Down Terms. Subject to the satisfaction of the
---------------
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise
a draw down (a "Draw Down") (i) during each of the First and Second Draw Down
Pricing Period and (ii) during each subsequent period of fifteen (15)
consecutive Trading Days preceding an additional Draw Down Exercise Date
("Additional Draw Down Pricing Period"), which Draw Down each Purchaser will be
obligated to accept.
(b) Only one Draw Down shall be allowed in each of the First,
Second and Additional Draw Down Pricing Periods. The price per share paid by the
Purchasers shall be based on the Average Daily Price on each separate Trading
Day during each of the First, Second and Additional Draw Down Pricing Periods.
The number of shares of Common Stock purchased by the Purchasers with respect to
each Draw Down shall be determined on a daily basis during each of the First,
Second and Additional Draw Down Pricing Period and on a weekly basis. In
connection with each of the First, Second and Additional Draw Down Pricing
Period, the Company may set an Average Daily Price below which the Company will
not sell any Shares (the "Threshold Price"). If the Average Daily Price on any
day within the First, Second or Additional Draw Down Pricing Period, as
applicable, is less than the Threshold Price, the Company shall not sell and the
Purchasers shall not be obligated to purchase the Shares otherwise to be
purchased for such day.
(c) The Company shall have the right to issue and exercise (i) a
first Draw Down of up to $2,000,000 of the Company's Common Stock, (ii) a second
Draw Down of up to $3,000,000 of the Company's Common Stock and (iii) additional
Draw Downs thereafter of up to $500,000 of the Company's Stock, subject to the
limitations set forth immediately below and to the overall limitation of
$5,000,000. The minimum Draw Down shall be $250,000 unless otherwise agreed by
Purchasers.
(d) The maximum dollar amount of the Draw Down during the First
and Additional Draw Down Pricing Periods shall be limited pursuant to the
following formula: Average Stock Price = Average of the Average Daily Prices for
the 15 Trading Days prior to the applicable Draw Down Notice date. Average
Trading Volume = Average daily trading volume for the 15 Trading Days prior to
the applicable Draw Down Notice date. Maximum dollar amount of each Draw Down:
20% of (Average Stock Price x (Average Trading Volume x 15)) the number of
Shares of Common Stock to be issued in connection with each Draw Down shall be
equal to the sum of the quotients (for each trading day within the First or
Additional Draw Down Pricing Period, as applicable) of (x) 1/15th of the Draw
Down amount and (y) 90% of the
18
Average Daily Price of the Common Stock on each Trading Day within each of the
First and Additional Draw Down Pricing Periods, as applicable. If the Average
Daily Price on a given Trading Day is less than the Threshold Price, then each
Purchaser's Draw Down payment will be reduced by 1/15th and that day shall be
withdrawn from the First or Additional Draw Down Pricing Period, as applicable.
(e) The maximum dollar amount of the Draw Down during the Second
Draw Down Pricing Period shall be limited pursuant to the following formula:
Average Stock Price: Average of the Average Daily Prices for the 45 Trading Days
prior to the Draw Down Notice date. Average Trading Volume: Average daily
trading volume for the 45 Trading Days prior to the Draw Down Notice date.
Maximum dollar amount of second Draw Down: 20% of (Average Stock Price x
(Average Trading Volume x 45)) the number of Shares of Common Stock to be issued
in connection with the Draw Down shall be equal to the sum of the quotients (for
each trading day within the Second Draw Down Pricing Period) of (x) 1/45th of
the Draw Down amount and (y) 90% of the Average Daily Price of the Common Stock
on each Trading Day within the Second Draw Down Pricing Period. If the Average
Daily Price on a given Trading Day is less than the Threshold Price, then each
Purchaser's Draw Down payment will be reduced by 1/45th and that day shall be
withdrawn from the Second Draw Down Pricing Period.
(f) The Company must inform the Purchasers by delivering a Draw
Down Notice to each Purchaser, in the form of Exhibit D hereto, via facsimile
---------
transmission as to the amount of the Draw Down the Company wishes to exercise
before the first day of the First, Second and Additional Draw Down Pricing
Period, as applicable (the "Draw Down Notice"). The Company may set the
Threshold Price, if any, prior to each Draw Down request. At no time shall the
Purchasers be required to purchase more than the scheduled Draw Down amount for
a given Second or Additional Draw Down Pricing Period so that if the Company
chooses not to exercise the maximum permitted Draw Down in a given First, Second
or Additional Draw Down Pricing Period the Purchasers are not obligated to
purchase more than the scheduled maximum amount in a subsequent Second or
Additional Draw Down Pricing Period.
(g) On or before three Trading Days after each Draw Down
Exercise Date, the Shares purchased by the Purchasers shall be delivered to The
Depository Trust Company ("DTC") on the Purchasers' behalf. The Shares shall be
credited by the Company to the DTC account designated by each Purchaser upon
receipt by the Escrow Agent of such Purchaser's payment for the Draw Down into
the Escrow Agent's trust account as provided in the Escrow Agreement. The Escrow
Agent shall be directed to pay 95% of the purchase price to the Company, net of
an aggregate of One Thousand Five Hundred Dollars ($1,500) as escrow expenses to
the Escrow Agent, and of an aggregate of 5% of such Purchaser's paid portion of
the Draw Down to the placement agent. The delivery of the Shares into the
Purchasers' DTC accounts in exchange for payment therefor shall be referred to
herein as "Settlement".
ARTICLE VII
Termination
19
Section 7.1 Termination by Mutual Consent. The term of this Agreement
-----------------------------
shall be twelve (12) months from the Effective Date. This Agreement may be
terminated at any time by mutual consent of the parties.
Section 7.2 Other Termination. (a) Each Purchaser may terminate its
-----------------
obligations under this Agreement upon one (1) Trading Day's notice if (i) an
event resulting in a Material Adverse Effect has occurred, (ii) the Common Stock
is de-listed from the OTC Bulletin Board unless such de-listing is in connection
with the listing of the Common Stock on the Nasdaq SmallCap Market, Nasdaq
National Market, the New York or American Stock Exchanges, (iii) the Company
files for protection from creditors under any applicable law, (iv) the Company
completes any financing prohibited by Section 4.11, or (v) the Registration
Statement is not effective by August 31, 2000. In the event the Company
materially breaches any of the terms of this Agreement, a Purchaser may
terminate this Agreement as to such Purchaser if the Company fails to cure such
breach upon ten (10) days prior written notice to the Company.
(b) The Company may terminate this Agreement as to a Purchaser
upon one (1) Trading Day's notice if such Purchaser shall fail to fund more than
one properly noticed Draw Down within three (3) Trading Days of the date payment
for such Draw Down is due. In the event a Purchaser materially breaches any of
the other terms of this Agreement, the Company may terminate this Agreement as
to such Purchaser if the Purchaser fails to cure such breach upon ten (10) days
prior written notice to the Purchaser.
Section 7.3 Effect of Termination. In the event of termination by the
---------------------
Company or either Purchaser, written notice thereof shall forthwith be given to
the other parties. If this Agreement is terminated as provided in Section 7.1 or
7.2(a) herein, this Agreement shall become void and of no further force and
effect, except for Sections 9.1 and 9.2, and Article VIII herein. If this
Agreement is terminated as to one Purchaser only, as provided for in Section
7.2(b), this Agreement shall become void and of no further force and effect as
to such terminated Purchaser only, except for Sections 9.1 and 9.2, and Article
VIII herein, and the remaining Purchaser shall not be obligated to fund that
portion of any Draw Downs not funded by the terminated Purchaser during such
Draw Down, except that, at the option of the Company and subject to Sections
6.1(d) and (e) above, any subsequent Draw Downs may exceed the maximum amounts
set forth in Section 6.1(c) to the extent that such additional amounts in the
aggregate shall not exceed the amounts unfunded by the terminated Purchaser. The
remaining Purchaser shall also be obligated to purchase the entire amount of any
Draw Downs made by the Company subsequent to the termination of the terminated
Purchaser. Nothing in this Section 7.3 shall be deemed to release the Company or
the Purchasers from any liability for any breach under this Agreement, or to
impair the rights to the Company and the Purchasers to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VIII
Indemnification
20
Section 8.1 General Indemnity. The Company agrees to indemnify and hold
-----------------
harmless each the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by such
Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. The Purchasers, severally
and not jointly, agree to indemnify and hold harmless the Company and its
directors, officers, affiliates, agents, successors and assigns from and against
any and all losses, liabilities, deficiencies, costs, damages and expenses
(including, without limitation, reasonable attorneys fees, charges and
disbursements) incurred by the Company as result of any inaccuracy in or breach
of the representations, warranties or covenants made by the Purchasers herein.
Notwithstanding anything to the contrary herein, the Purchasers, severally and
not jointly, shall be liable under this Section 8.1 for only that amount as does
not exceed the net proceeds to such Purchasers as a result of the sale of Shares
pursuant to the Registration Statement.
Section 8.2 Indemnification Procedure. Any party entitled to
-------------------------
indemnification under this Article VIII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the indemnified party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VIII to the contrary, the indemnifying
party shall not,
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without the indemnified party's prior written consent, settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes any
future obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article VIII shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, within ten
(10) Trading Days of written notice thereof to the indemnifying party so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses. The Company shall pay all fees and
-----------------
expenses related to the transactions contemplated by this Agreement; provided,
that the Company shall pay, at the Closing, all attorneys and escrow fees and
expenses (exclusive of disbursements and out-of-pocket expenses) incurred by
Plumrose Holdings, Ltd. of $35,000 in connection with the preparation,
negotiation, execution and delivery of this Agreement and the transactions
contemplated hereunder. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchasers in connection with any amendments,
modifications or waivers of this Agreement or the Registration Rights Agreement
or incurred in connection with the enforcement of this Agreement and the
Registration Rights Agreement, including, without limitation, all reasonable
attorneys fees and expenses. The Company shall pay all stamp or other similar
taxes and duties levied in connection with issuance of the Shares pursuant
hereto.
Section 9.2 Specific Enforcement. The Company and the Purchasers
--------------------
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 9.3 Entire Agreement; Amendment. This Agreement, together with
---------------------------
the Registration Rights Agreement and the Escrow Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Purchasers
makes any representations, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other than
by a written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
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Section 9.4 Notices. Any notice, demand, request, waiver or other
-------
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: XxXxxxxx.xxx
0000 Xxxxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone Number: (000) 000-0000
Fax:
Attention: Xxxxxxx Xxxx
If to a Purchaser: c/o Dr. Xx. Xxxxxxxx & Partner
Xxxxxxxxxxxx 00
XX-0000 Xxxxx, Xxxxxxxxxxxxx
Tel: 000-000-000-0000
Fax: 000-000-000-0000; and
WEC Global Telecom Ltd.
X/x XXXX Xxxxxxxxx Xxxxxxxx Xxx.
X.X. Xxx 0000 GT, Xxxx Street
Grand Cayman, Cayman Islands, BWI
Telephone Number:
Fax:
Attention:
with copies to: Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto in
accordance herewith.
Section 9.5 Waivers. No waiver by either party of any default with
-------
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
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Section 9.6 Headings. The article, section and subsection headings in
--------
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their successors and assigns.
The parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
Section 9.8 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.
Section 9.9 Governing Law/Arbitration. This Agreement shall be governed
-------------------------
by and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. Any dispute under this
Agreement or any Exhibit attached hereto shall be submitted to arbitration under
the American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, 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 losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. 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 all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. 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 parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
Section 9.10 Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
24
Section 9.11 Publicity. Prior to the Closing, neither the Company nor
---------
the Purchasers shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. After the Closing, the
Company may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; provided, that prior to issuing any
such press release, making any such public statement or announcement, the
Company obtains the prior consent of all of the Purchasers, which consent shall
not be unreasonably withheld or delayed.
Section 9.12 Severability. The provisions of this Agreement are severable
------------
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 9.13 Further Assurances. From and after the date of this
------------------
Agreement, upon the request of the Purchasers or the Company, each of the
Company and the Purchasers shall execute and deliver such instruments, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.
Section 9.14 Number and Gender. There may be one or more Purchasers as
-----------------
parties to this Agreement. All references to plural purchasers shall apply
equally to a single Purchaser if there is only one Purchaser.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorize officer as of the
date first above written.
XXXXXXXX.XXX
By: /s/ XXXXXXX XXXX
------------------------------------
Xxxxxxx Xxxx, President & CEO
PLUMROSE HOLDINGS, LTD.
By: /s/ XXXX XXXXXXX
------------------------------------
Xxxx Xxxxxxx, Authorized Signatory
WEC GLOBAL TELECOM LTD.
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By: /s/ XXXXXXX XXXXXXX
------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Director
26
