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EXHIBIT 10.30
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is
dated as of September 7, 2000 by and between Bionutrics, Inc., a Nevada
corporation (the "Company"), and Justicia Holdings Limited (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "Average Daily Price" shall be the price based on the
VWAP of the Company on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term
in Section 6.1(a) hereof.
(c) "Draw Down Pricing Period" shall mean a period of
twenty-two (22) consecutive Trading Days beginning on the date specified in the
Draw Down Notice (as defined in Section 6.1(e) hereof); provided, however, the
Draw Down Pricing Period shall not begin before the day on which such notice is
tendered to the Purchaser.
(d) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby is
declared effective.
(e) "Investment Amount" shall have the meaning assigned to
such term in Section 6.1(e) hereof.
(f) "Material Adverse Effect" shall mean any adverse effect
on the business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or 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 initially the Nasdaq
SmallCap Market and shall include the American Stock Exchange, Nasdaq National
Market or the New York Stock Exchange if the Company is listed and trades on
such market or exchange. The Principal
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Market shall not include the OTC Bulletin Board without the express written
consent of the Purchaser.
(h) "Purchase Price" shall mean with respect to Shares
purchased during each applicable Settlement Period (excluding Shares issued upon
the exercise of Warrants):
(i) if the Company's average market cap,
calculated by multiplying the number of shares of Common Stock issued and
outstanding by the VWAP of the Common Stock (the "Market Cap"), is less than
$72,500,000, ninety percent (90%) (the "Purchase Price Percentage") of the
Average Daily Price on the date in question; and
(ii) for each $12,500,000 increase in
the Market Cap over $60,000,000 during a Market Cap Period, the Purchase Price
Percentage shall be increased by 0.25% on the date in question until the
Purchase Price Percentage equals 93%; provided, however, each increase in the
Purchase Price Percentage shall only occur if each corresponding increase in the
Market Cap is maintained for at least the twenty-two (22) consecutive Trading
Days prior to the date the applicable Settlement Period commences (a "Market Cap
Period".)
(i) "Registration Statement" shall mean the registration
statement under the Securities Act of 1933, as amended, to be filed with the
Securities and Exchange Commission for the registration of the Shares pursuant
to the Registration Rights Agreement attached hereto as Exhibit A (the
"Registration Rights Agreement).
(j) "SEC Documents" shall mean the Company's latest Form
10-K or 10-KSB as of the time in question, all Forms 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.
(k) "Settlement Period" shall have the meaning assigned to
such term in Section 6.1(b).
(l) "Shares" shall mean, collectively, the shares of Common
Stock of the Company being subscribed for hereunder and those shares of Common
Stock issuable to the Purchaser upon exercise of the Warrants.
(m) "Threshold Price" is the lowest Average Daily Price
during any Draw Down Pricing Period at which the Company will sell its Common
Stock with respect to this Agreement.
(n) "Trading Day" shall mean any day on which the Principal
Market is open for business.
(o) "VWAP" shall mean the daily volume weighted average
price of the Company's Common Stock on the Principal Market as reported by
Bloomberg Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm
EST) using the VAP function.
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(p) "Warrants" shall mean both the Initial Warrants and the
Purchaser Warrants as those terms are defined in Section 5.2(f) hereof.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company may issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to 4,000,000 shares of the
Company's Common Stock (the "Commitment Amount"), $0.001 par value per share
(the "Common Stock"), and the Warrants, based on Draw Downs of up to One Million
Dollars ($1,000,000.00) per Draw Down.
Section 2.2. The Shares. The Company has authorized and has reserved
and 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, (i) at no time will
the Company request a Draw Down which would result in the issuance of an
aggregate number of shares of Common Stock pursuant to this Agreement which
exceeds 19.9% of the number of shares of Common Stock issued and outstanding on
the Initial Closing Date without obtaining stockholder approval of such excess
issuance, and (ii) the Company may not make a Draw Down to the extent that,
after such purchase by the Purchaser, the sum of the number of shares of Common
Stock beneficially owned by the Purchaser and its affiliates would result in
beneficial ownership by the Purchaser and its affiliates of more than 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 Exchange Act of 1934, as amended (the "Exchange
Act").
Section 2.3. Purchase Price and Initial Closing. The Company agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser agrees to purchase that number of the Shares to be
issued in connection with each Draw Down. The delivery of executed documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article II of the Escrow Agreement, attached as Exhibit
B hereto, (the "Initial Closing") shall take place (i) at the offices of Epstein
Becker & Green, P.C., 250 Park Avenue, New York, New York 10177 within fifteen
(15) days from the date hereof, or (ii) such other time and place or on such
date as the Purchaser and the Company may agree upon (the "Initial 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 Initial Closing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation 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 than fifty percent (50%) of or control any other business entity except as
set forth in the SEC Documents. The Company is duly qualified to do business and
is in good standing as a foreign corporation 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
corporate power and 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 and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) 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 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 of 45,000,000 shares of Common Stock, of which 20,936,252 shares are
issued and outstanding as of August 31, 2000 and 5,000,000 shares of preferred
stock, none of which are outstanding. 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 the SEC Documents. 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
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no contracts, 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. Except as set forth in Schedule 3.1(c), 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. Except as set forth in Schedule 3.1(c),
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 sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued prior to the Initial 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 Purchaser true and correct copies of the
Company's Restated 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 Company has not received any notice from the Principal 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 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 Purchaser shall
be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
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 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 or state 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
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(the "SEC") or state securities administrators subsequent to the Initial 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 Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Exchange Act and,
except as disclosed in the Commission Documents or on Schedule 3.1(f) hereto,
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 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 Purchaser true
and complete copies of the Commission Documents filed with the SEC since October
31, 1999. The Company has not provided to the Purchaser 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 filing dates, the Commission Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to such documents, and, as of their
respective filing dates, none of the Commission 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 SEC 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 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 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
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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 April 30, 2000 no Material
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.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC
Documents or on Schedule 3.1(i) hereto, neither the Company nor any of its
subsidiaries 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 SEC Documents, other than those incurred in the
ordinary course of the Company's or its subsidiaries' respective businesses
since such date 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 April 30, 2000, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
(k) Indebtedness. The SEC Documents or Schedule 3.1(k) hereto sets
forth 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 and marketable title to all of its real and personal property reflected in
the SEC 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
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.
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(m) Actions Pending. There is no action, suit, claim, investigation
or 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
3.1(m) hereto, there is no action, suit, claim, investigation or proceeding
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 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 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
which it is required to file under applicable laws; all such Tax Returns are
true and accurate and have been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing 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 October 31, 1999, 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 Section 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 Section 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
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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 Section 897(c)(2) of the Internal Revenue Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Internal Revenue Code.
The Company has not made an election under Section 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. Section
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 not obligated to make payments nor is it a party to an
agreement that could obligate it to make any payments that would not be
deductible under Section 280G of the Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign,
or 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
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with 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 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 Agreement or the Schedules hereto nor any other documents,
certificates or instruments furnished to the Purchaser 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 or possesses all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth in the SEC Documents
or on Schedule 3.1(r) hereto, and all rights with respect to the foregoing,
which are necessary for the conduct of its business as now conducted without any
conflict with the rights of others.
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(s) Regulatory Compliance. The Company has all necessary
licenses, 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 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 on Schedule 3.1(u) hereto, neither the Company nor any subsidiary
is a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the SEC 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"). Except as set forth in Schedule 3.1(u), 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, instrument, 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.
(v) Transactions with Affiliates. Except as set forth in the
SEC Documents or on Schedule 3.1(v) hereto, there are no loans, leases,
agreements, contracts, 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 immediate 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 Laws. The Company has complied and will
comply with 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 Purchaser), so as
to bring the issuance and sale of the Shares and/or Warrants 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.
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(x) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the SEC Documents or on Schedule 3.1(x) hereto. Except as
set forth in the SEC Documents or on Schedule 3.1(x) hereto, neither the Company
nor any 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
October 31, 1999, Form 10-K, 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.
(y) Absence of Certain Developments. Except as provided in SEC
Documents or in Schedule 3.1(y) hereto, since April 30, 2000, neither the
Company nor 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 Purchaser or its 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;
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(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
(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 Purchaser's Purchase of Shares. Company
acknowledges and agrees that Purchaser is acting solely in the capacity of arm's
length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the 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 by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares. The
Company further represents to the Purchaser 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 the Purchaser. The Purchaser
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 British Virgin Islands.
(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.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby or
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relating hereto do not and will not (i) result in a violation of such
Purchaser's Articles 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 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.
(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 Purchaser as follows:
Section 4.1. Securities Compliance.
If applicable, 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
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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 Purchaser 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 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 or in the
Registration Rights Agreement. The Company will take all action necessary to
continue the listing or trading of its Common Stock on the Principal Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and the Principal Market and
shall provide the Purchasers with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within three (3) Trading Days of the Company's receipt thereof, until the
Purchasers have disposed of all of their Registrable Securities.
Section 4.3. Registration Statement. The Company shall cause to be
filed the Registration Statement, which Registration Statement shall provide for
the resale of the Shares by the Purchaser to the public in accordance with this
Agreement. The Company shall cause such Registration Statement to be declared
effective by the SEC as expeditiously as practicable. Before the Purchaser 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 Purchaser shall
enter into an escrow arrangement with Epstein Becker & Green, P.C. (the "Escrow
Agent") in the Form of Exhibit B hereto respecting payment against delivery of
the Shares.
Section 4.5. Registration Rights Agreement. The Company and the
purchaser shall enter into the Registration Rights Agreement in the Form of
Exhibit A hereto.
Section 4.6. 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 4.7. 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.
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Section 4.8. Amendments. The Company shall not amend or waive any
provision in the Articles or Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.9. Other Agreements. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the ability
of the Company or any subsidiary to perform under this Agreement.
Section 4.10. Notice of Certain Events Affecting Registration;
Suspension of Right to Request a Draw Down. The Company will immediately notify
the Purchaser 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 SEC or any other
federal or state governmental authority during the period of 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 SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the 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 Purchaser any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Purchaser any Draw Down Notice during the
continuation of any of the foregoing events.
Section 4.11. 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 Purchaser such shares of stock
and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 4.12. Limitation on Future Financing. The Company agrees that,
until the earlier of (i) 24 months from the effective date of the Registration
Statement or (ii) sixty (60) days after the entire 4,000,000 Shares have been
purchased by Purchaser, (A) it will not enter into any sale of its securities
for cash at a discount to the then current market price pursuant to any equity
line type financing, and (B) the Purchaser shall have a right of first refusal
to elect to
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participate in any subsequent financing for cash at a discount to market price
of the Company's securities by the Company. Such right of first refusal must be
exercised in writing within five (5) Trading Days of the Purchaser's receipt of
notice of the proposed terms of such financing.
ARTICLE V
CONDITIONS TO INITIAL 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 the Purchaser is subject to the satisfaction or waiver, at or before
the Initial Closing, and as of each Settlement Date, of each of the conditions
set forth below. 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 Initial Closing and as
of each Settlement 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 Initial Closing
and as of each Settlement 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 the Purchaser to
Close. The obligation hereunder of the Purchaser to perform its obligations
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the 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 Initial 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 Initial Closing.
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(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.
(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 Purchaser 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 Initial Closing, the Purchaser
shall have received an opinion of counsel to the Company, dated the date of the
Initial Closing, in the form of Exhibit C hereto, and such other certificates
from officers of the Company relating to the representations herein as the
Purchaser deems necessary.
(f) Warrants. In lieu of a minimum Draw Down commitment by the
Company, the Purchaser shall receive (i) at the Initial Closing, a warrant
certificate to purchase up to 200,000 shares of Common Stock (the "Initial
Warrant") and (ii) at each Settlement Date, a warrant certificate to purchase up
to a number of shares of Common Stock equal to 17.5% of the Investment Amount
divided by the weighted average of the Purchase Prices during the applicable
Settlement Period (each a "Purchaser Warrant")(the Initial Warrant and the
Purchaser Warrants hereinafter collectively referred to as the "Warrants"). The
Initial Warrant shall have a term from its date of issuance of three (3) years.
The Purchaser Warrants shall have a term from their date of issuance of 35
calendar days. The exercise price of the Initial Warrant shall be 120% of the
average VWAP on the fifteen Trading Days immediately prior to the Initial
Closing Date. The exercise price of the Purchaser Warrants shall be the weighted
average of the Purchase Prices of the Common Stock during the applicable
Settlement Period. 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 the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction, at or before each Settlement Date, of each of the
conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company shall
have satisfied, or the Purchaser shall have waived at the Initial Closing, 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 SEC and shall
remain effective on each Settlement Date.
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(c) No Suspension. Trading in the Company's Common Stock shall not
have been suspended by the SEC or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the delivery of each Draw Down Notice),
and, at any time prior to such Draw Down Notice, trading in securities generally
as reported on the Principal Market shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported on the Principal Market unless the general suspension or limitation
shall have been terminated prior to the delivery of such Draw Down Notice.
(d) Material Adverse Effect. No Material Adverse Effect and no
Consolidation Event where the successor entity has not agreed to perform the
Company's obligations shall have occurred.
(e) Opinion of Counsel. The Purchaser 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.
(f) Future Financing.The Company shall have not completed any
financing prohibited by Section 4.11 unless, prior to the Company delivering the
first Draw Down Notice after any such financing, the Company pays the Purchaser
the sum of $100,000 as liquidated damages.
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") during each Draw Down Pricing Period, which Draw Down the
Purchaser will be obligated to accept for a period of 24 months commencing
immediately after the Effective Date.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. There shall be at least seven (7) Trading Days between Draw Down Pricing
Periods. The number of shares of Common Stock purchased by the Purchaser with
respect to each Draw Down shall be determined as set forth in Section 6.1(d)
herein and settled on, (i) as to the 1st through the 11th Trading Days after a
Draw Down Pricing Period commences (the "First Settlement Period"), on the 13th
Trading Day after a Draw Down Pricing Period commences and (ii) as to the 12th
through the 22nd Trading Days after a Draw Down Pricing Period commences (the
"Second Settlement Period"), the 24th Trading Day after a Draw Down Pricing
Period commences (each, a "Settlement Date" and the First and Second Settlement
Periods collectively referred to as "Settlement Periods"). In connection with
each Draw Down Pricing Period, the Company may set the Threshold Price. If the
Average Daily Price on any day within the Draw Down Pricing Period
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is less than the Threshold Price, the Company shall not be obligated to sell and
the Purchaser shall not be obligated to purchase the Shares otherwise to be
purchased for such day.
(c) The minimum Investment Amount shall be $100,000 and the maximum
Investment Amount shall be $1,000,000; provided, however, the maximum Investment
Amount during any Draw Down Pricing Period shall be limited pursuant to the
following formula: 4.5% of the weighted average price for the Common Stock for
the three (3) month period immediately prior to the Commencement Date (defined
below) multiplied by the total trading volume in respect of the Common Stock for
the three (3) month period immediately prior to the Commencement Date.
(d) The number of Shares of Common Stock to be issued on each
Settlement Date shall be a number of shares equal to the sum of the quotients
(for each trading day within the Settlement Period) of (x) 1/22nd of the
Investment Amount and (y) the Purchase Price on the applicable Trading Day
within the Settlement Period, subject to the following adjustments:
(i) if the Average Daily Price on a given Trading Day is less
than the Threshold price, then the Investment Amount will be reduced by 1/22nd
and that day shall be withdrawn from the Settlement Period; and
(ii) trading of the Common Stock on the Principal Market is
suspended for more than three (3) hours, in the aggregate, on any Trading Day
during the Settlement Period, the Investment Amount shall be reduced by 1/22nd
and that day shall be withdrawn from the applicable Settlement Period.
(e) The Company must inform the Purchaser by delivering a draw down
notice, in the form of Exhibit D hereto (the "Draw Down Notice"), via facsimile
transmission in accordance with Section 9.4 as to the amount of the Draw Down
(the "Investment Amount") the Company wishes to exercise before the first day of
the Draw Down Pricing Period (the "Commencement Date"). If the Commencement Date
is to be the date of the Draw Down Notice, the Draw Down Notice must be
delivered to and receipt confirmed by the Purchaser at least one hour before
trading commences on such date. At no time shall the Purchaser be required to
purchase more than the maximum Draw Down amount for a given Draw Down Pricing
Period so that if the Company chooses not to exercise the maximum permitted Draw
Down in a given Draw Down Pricing Period the Purchaser is not obligated to and
shall not purchase more than the scheduled maximum amount in a subsequent Draw
Down Pricing Period.
(f) On or before each Settlement Date, the Shares purchased by the
Purchaser shall be delivered to The Depository Trust Company ("DTC") on the
Purchaser's behalf. Upon the Company delivering whole shares of Common Stock to
the Purchaser or its designees via DWAC by 1:00 pm EST, the Purchaser shall wire
transfer immediately available funds to the Company's designated account on such
day. Upon the Company delivering whole shares of Common Stock to the Purchaser
or its designees via DWAC after 1:00 pm EST, the Purchaser shall wire transfer
next day available funds to the Company's designated account on
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such day. In the event the Purchaser elects to use the Escrow Agent, the Shares
shall be credited by the Company to the DTC account designated by the Purchaser
upon receipt by the Escrow Agent of 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 the purchase price to the Company, net of One Thousand
Five Hundred Dollars ($1,500) as escrow expenses to the Escrow Agent and any
brokerage or placement agent fees as set forth in the Escrow Agreement. The
delivery of the Shares into the Purchaser's DTC account in exchange for payment
therefor shall be referred to herein as "Settlement".
ARTICLE VII
TERMINATION
Section 7.1. Termination. The term of this Agreement shall be
twenty-four (24) months from the Effective Date.
Section 7.2. Other Termination. The Purchaser may terminate 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 Principal Market unless such de-listing is in connection with the listing of
the Common Stock on the Nasdaq National Market, Nasdaq SmallCap Market, the
American Stock Exchange or the New York Stock Exchange or (iii) the Company
files for protection from creditors under any applicable law.
(a) The Company may terminate this Agreement (i) upon one (1)
Trading Day's notice if the Purchaser shall fail to fund a properly noticed Draw
Down within three (3) Trading Days of a Settlement Date.
Section 7.3. Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 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. Nothing in this Section 7.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights of the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. General Indemnity. The Company agrees to indemnify and
hold harmless 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 the
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Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. The Purchaser agrees 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 Purchaser herein. Notwithstanding anything to the contrary
herein, the Purchaser shall be liable under this Section 8.1 for only that
amount as does not exceed the net proceeds to such Purchaser 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, 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
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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 Initial Closing, all attorneys and escrow
fees and expenses (inclusive of disbursements and out-of-pocket expenses)
incurred by the Purchaser of $25,000 in cash or stock, as set forth in the
Escrow Agent, 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
Purchaser in connection with any subsequent amendments, modifications or waivers
of this Agreement, the Escrow Agreement or the Registration Rights Agreement or
incurred in connection with the enforcement of this Agreement, the Escrow
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 Purchaser
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 Purchaser
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 and no condition to closing any Draw Down in favor
of the Purchaser may be waived by the Purchaser.
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
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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:
<TABLE>
<S> <C>
If to the Company: 2425 E. Camelback Road, Suite 650
Phoenix, AZ 85016
Attn: Ronald Lane, Ph.D.
Tel: (602) 508-0112
Fax: (602) 508-0115
With copies to: Greenberg Traurig, LLP
notice): 1 East Camelback Suite 1100
Phoenix, Arizona 85012
Attn: Jean E. Harris, Esq.
Telephone: (602) 263-2512
Facsimile: (602) 263-2350
If to Purchaser: c/o Dr. Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz, Liechtenstein
Fax: 011-075-236-0405
Attention: Hans Gassner
with copies to: Epstein Becker & Green P.C.
250 Park Avenue
New York, New York 10177-1211
Telephone: (212) 351-3771
Fax: (212) 661-0989
Attention: Robert F. Charron
</TABLE>
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.
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.
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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 Initial 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.
Section 9.11. Publicity. Prior to the Initial Closing, neither the
Company nor the Purchaser 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
Initial Closing, the Company may issue a press release or otherwise make a
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public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided,
however, that prior to issuing any such press release, making any such public
statement or announcement, the Company obtains the prior consent of the
Purchaser, 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 or officials of any regulatory agency
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, so long as such
construction does not materially adversely effect the economic rights of either
party hereto.
Section 9.13. Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser 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. Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of this 7th day of
September, 2000.
BIONUTRICS, INC.
By: /s/Ronald Lane
------------------------------------
Ronald Lane, President & CEO
JUSTICIA HOLDINGS LIMITED
By: /s/Iwan Ackermann
------------------------------------
Iwan Ackermann, Authorized Signatory
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