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EXHIBIT 2.1
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
October 30, 2000 by and between Beyond.com Corporation, a Delaware corporation
(the "Company"), and Investwell Investments Limited (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "Average Daily Price" shall be the volume weighted average
price (the "VWAP") of the Company's Common Stock on the Principal Market as
reported by Bloomberg Financial L.P., or as reported by such third party as the
parties shall mutually and reasonably agree (based on a trading day from 9:30 am
EST to 4:00 pm EST) using the VAP function for each Trading Day during the Draw
Down Pricing Period.
(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, that the Draw
Down Pricing Period shall not begin before the day on which notice is received
by 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 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.
(g) "Principal Market" shall mean initially the Nasdaq National
Market and shall include the American Stock Exchange, Nasdaq Small-Cap Market,
the New
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York Stock Exchange if the Company is listed and trades on such market or
exchange. Principal Market shall not include the OTC Bulletin Board without the
written consent of the Purchaser.
(h) "Purchase Price" shall mean with respect to Shares purchased
during each applicable Draw Down Pricing Period (excluding Shares issued upon
the exercise of Warrant) ninety-five percent (95%) (the "Purchase Price
Percentage") of the Average Daily Price on the date in question.
(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 Warrant.
(m) "Threshold Price" is the price per share designated by the
Company as 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.
(p) "Warrant" shall have the meaning assigned to such term 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 forty million dollars
($40,000,000) (the "Commitment Amount") of the Company's shares of Common Stock,
$0.001 par value per share (the
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"Common Stock"), and the Warrant, based on Draw Downs of up to five million
dollars ($5,000,000.00) 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 and 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, which
constitute an irrevocable commitment on the part of the Purchaser to purchase up
to the Commitment Amount, subject to the limitations set forth 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 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 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.
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 Delaware 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
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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 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 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 (i) 120,000,000 shares of Common Stock of which 39,104,698 shares
are issued and outstanding and (ii) 15,000,000 shares of preferred stock, of
which none are issued and 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 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
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the Purchaser true and correct copies of the Company's amended and restated
certificate of incorporation as in effect on the date hereof (the "Restated
Certificate"), and the Company's bylaws as in effect on the date hereof (the
"Bylaws"). Except as set forth on Schedule 3.1(c), the Company has not received
any notice from the Principal Market questioning or threatening the continued
inclusion of the Common Stock on such market in the past twelve (12) months.
(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 Restated Certificate 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 (the "SEC") or state securities
administrators subsequent to the Initial Closing and any registration statement
which may be filed pursuant hereto); provided that, for the 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) SEC 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 SEC 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
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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 "SEC
Documents"). The Company has delivered or made available to the Purchaser true
and complete copies of the SEC Documents filed with the SEC since December 31,
1998. 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 SEC 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 SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form 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 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 June 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.
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(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 June 30, 2000,
to the Company's knowledge, 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 and/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 of its
subsidiaries is materially 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.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the Company's knowledge, 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 Company's knowledge, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets. There are no outstanding
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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 December 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 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.
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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 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, except where such conflict does not have a
Material Adverse Effect.
(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, except where
failure to obtain such licenses, registrations and permits do not have a
Material Adverse Effect.
(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
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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 have 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 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 and/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 the Warrant 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) Employees. Neither the Company nor any of its subsidiaries
has any collective bargaining arrangements or agreements covering any of its
employees, except as set forth in the SEC Documents and/or on Schedule 3.1(x)
hereto. Except as set forth in the SEC Documents and/or on Schedule 3.1(x)
hereto, neither the Company nor any subsidiary is in breach of any employment
contract, agreement regarding proprietary information,
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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 Form 10-Q for the fiscal quarter ended
June 30, 2000, 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 June 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;
(viii) made any changes in employee compensation except
in the ordinary course of business and consistent with past practices;
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(ix) made capital expenditures or commitments therefor
that aggregate in excess of $1,250,000;
(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.
(z) Governmental Approvals. Except as set forth in the SEC
Documents and/or on Schedule 3.1(z) hereto, and except for the filing of any
notice prior or subsequent to the Initial 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.
(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.
The 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 the British Virgin Islands.
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(b) Authorization Enforcement. (i) The Purchaser has the
requisite corporate power and corporate authority to enter into and perform this
Agreement and to purchase the Shares being sold to it hereunder and to enter
into and perform the Registration Rights Agreement and the Escrow Agreement,
(ii) the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement and the Escrow Agreement by the Purchaser 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 Purchaser 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 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 by the Purchaser and the consummation by the Purchaser of the
transactions contemplated herein do not and will not (i) result in a violation
of the Purchaser's charter documents, (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 obligations to
which the Purchaser is a party, or (iii) 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 Purchaser or by which any property or asset of the Purchaser
is 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 on the
Purchaser. The Purchaser 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 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.
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(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 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 Warrant 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. The Company will take all
reasonable 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. 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.
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Section 4.4. Registration Rights Agreement. The Company shall cause to
be filed the Registration Statement pursuant to the Registration Rights
Agreement, entered into between the Company and the Purchaser, in the form of
Exhibit A hereto. 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 4.5. 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 of 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 without the express written consent of the Purchaser.
Section 4.8. 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 4.9. Notice of Certain Events Affecting Registration; Suspension
of Right to Request a Draw Down. The Company promptly will notify the Purchaser
of 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
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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. 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 4.10. 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 Purchaser such shares of stock
and/or securities as the Purchaser is 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 then current market price until the earlier of: (i) 12
months from the Effective Date (or 24 months from the Effective Date if the
Company exercises its option to extend the term of this Agreement pursuant to
Section 7.1), or (ii) sixty (60) days after the entire $40,000,000 of Common
Stock has been purchased by the Purchaser, or (iii) sixty (60) days after this
Agreement is terminated pursuant to this Article VII. 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 (not including an equity line type of financing),
(ii) in one or more private placements where the purchasers do not have
registration rights, (iii) in one or more private placements where the
purchasers do have registration rights provided that the sale of securities is
not at a discount to the then current market price, (iv) pursuant to any
presently existing or future employee benefit plan which plan has been or is
approved by the Company's board of directors, (v) pursuant to any compensatory
plan for a full-time employee or key consultant, (vi) in connection with a
strategic partnership or other similar business transaction, the principal
purpose of which is not simply to raise money, (vii) in one or more private
placement with registration rights, provided that for each such private
placement, the Company has drawn down the maximum amount allowed pursuant to the
terms of this Agreement during the three (3) consecutive months immediately
prior to the month during which any such financing is entered into, (viii) in
one or more private placements with registration rights, provided that such
registration rights do not take effect until after this Agreement is terminated,
or (ix) to which Purchaser gives its written approval. Further, in the event
that the Company has agreed with a third party on the principal terms of a
transaction under (ii), (vii), (viii) or (ix) above, the Company shall provide
written notice of such terms to the Purchaser. The Company and the Purchaser
shall negotiate in good faith to permit the Purchaser to provide such financing
in the place of such third party. However, in the event that the Purchaser does
not exercise its right to participate in such financing in writing within seven
(7) Trading Days of the Purchaser's receipt of notice of the proposed terms of
such financing, or if the Company and the Purchaser have not executed the
agreement(s) providing for such financing within five (5) Trading Days of the
Purchaser's delivery of notice to Company that the Purchaser intends to provide
such financing, then the Company shall have the right to enter into such
financing transaction with such third party.
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The Purchaser covenants with the Company as follows:
Section 4.12. No Short Sales. 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) during the term of this Agreement.
Section 4.13. Escrow Arrangement. The Purchaser and the Company 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 4.14. Registration Rights Agreement. The Purchaser and the
Company shall enter into the Registration Rights Agreement in the form of
Exhibit A attached hereto.
Section 4.15. Compliance with Laws. The Purchaser shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
restrict or impair the ability of the Purchaser to perform under this Agreement.
Section 4.16. Other Agreements. The Purchaser shall not enter into any
agreement the terms of which such agreement would restrict or impair the ability
of the Purchaser to perform under this Agreement.
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 perform its
obligations under this Agreement and 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
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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.
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 material respects with all material
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.
(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 as the Purchaser deems necessary.
(f) Warrant. In lieu of a minimum Draw Down commitment by the
Company, the Purchaser shall receive at the Initial Closing, a warrant
certificate to purchase up to 300,000 shares of Common Stock (the "Warrant").
The Warrant shall have a term from its date of issuance of three (3) years. The
exercise price of the Warrant shall equal 125% of the closing
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bid price on the Trading Day immediately prior to the Initial Closing Date. The
Shares underlying the Warrant will be registered in the Registration Statement
referred to in Section 4.3 hereof. The Warrant 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.
(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. On the initial Settlement Date and, if
reasonably requested by the Purchaser, on any subsequent Settlement Date, 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 and an opinion as to the additional items specified in Exhibit C hereto.
(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.
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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 12 months
commencing immediately after the Effective Date (unless extended pursuant to
Section 7.1).
(b) Only one Draw Down shall be allowed in each Draw Down
Pricing Period. 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. (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
is less than the Threshold Price, the Company shall not sell and the Purchaser
shall not be obligated to purchase the Shares otherwise to be purchased for such
day, except that, the Company may, in its discretion, choose to sell and the
Purchaser shall be obligated to purchase the Shares otherwise not purchased on
such below threshold price day at the Average Daily Price, provided that the
Company notifies Purchaser that it will sell such Shares prior to 9:30 am EST on
such Trading Day.
(c) The minimum Investment Amount shall be $100,000 and the
maximum Investment Amount shall be $5,000,000; provided, however, that the
maximum Investment Amount during any Draw Down Pricing Period shall be limited
pursuant to the following formula: 4.5% of the volume 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 to be issued on each Settlement Date
shall be 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 each 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
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(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") that 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; if the Company chooses not to exercise the maximum
permitted Draw Down in a given Draw Down Pricing Period, then the Purchaser
shall not be 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 electronically delivered to The Depository Trust Company
("DTC") on the Purchaser's behalf. Upon the Company electronically 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 electronically
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 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 Seven Hundred Fifty Dollars ($750) per
Settlement Period 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 twelve
(12) months from the Effective Date (the "Initial Termination Date"), except
that, at the election of the Company, the term of this Agreement may be extended
for an additional twelve (12) months, provided that the Company notifies the
Purchaser in writing at least sixty (60) days prior to the Initial Termination
Date that it elects to extend the term of this Agreement an additional twelve
(12) months.
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Section 7.2. Other Termination.
(a) The Purchaser may terminate this Agreement upon one (1)
Trading Day's notice if the Company files for protection from creditors under
any applicable law.
(b) The Company may terminate this Agreement upon one (1)
Trading Day's notice if the Purchaser shall fail to fund more than one properly
noticed Draw Down within three (3) Trading Days of a Settlement Date. In the
event that this Agreement is terminated pursuant to this Section 7.2(b) (the
"Section 7.2(b) Termination"), the Purchaser shall return the Warrant to the
Company for cancellation. To the extent that the Purchaser has purchased a
portion of the Commitment Amount at the time of the Section 7.2(b) Termination,
the Company shall issue a new warrant to the Purchaser, which new warrant shall
permit the Purchaser to purchase, pursuant to the same terms and conditions as
the Warrant, a number of Shares (the "New Warrant Shares") equal to 270,000
times a fraction, the numerator of which shall be the value of the Shares
purchased by the Purchaser pursuant to this Agreement prior to the date of the
Section 7.2(b) Termination, and the denominator of which shall be 40,000,000. At
the time of such Section 7.2(b) Termination:
(i) if the Warrant has been exercised in full, or if the
number of Shares issued pursuant to the partial exercise(s) of the Warrant (or
any new warrants) exceeds the number of New Warrant Shares that Purchaser would
have been entitled to receive under the new warrant described above, then the
Purchaser shall not be entitled to receive such new warrant; or
(ii) if the number of Shares issued pursuant to the
partial exercise(s) of the Warrant (or any new warrants) is less than the number
of New Warrant Shares that Purchaser would have been entitled to receive under
the new warrant described above, then the number of New Warrant Shares issuable
pursuant to the new warrant shall be reduced by the number of Shares received
from the partial exercise(s) of the Warrant (or any new warrants). Upon a
Section 7.2(b) Termination, the Company shall maintain the Registration
Statement in effect for such reasonable period, not to exceed forty-five (45)
Trading Days, as the Purchaser may request in order to dispose of any remaining
Shares.
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.
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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 attorneys' fees, charges and disbursements) incurred by the 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 any amount in excess of the net
proceeds to the 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
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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 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 Draw Downs contemplated by this Agreement. 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. The Purchaser shall pay all reasonable fees and expenses incurred by the
Company 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.
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
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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 deemed to be received (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: 3200 Patrick Henry Drive
Santa Clara, CA 95054
Attn: Ronald Smith
Tel: (408) 855-3000
Fax: (408) 327-6406
With copies to: Morrison & Foerster LLP
notice): 755 Page Mill Road
Palo Alto, CA 94304-1018
Tel: (650) 813-5600
Fax: (650) 494-0792
Attn: Richard Scudellari
If to Purchaser: c/o Michon de Reya Solicitors
21 Southhampton Row
London WC1B5HS England
Attn: Kevin Gold
Fax: 011-441-171-4045982
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
Attn: Robert F. Charron
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
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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.
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 or assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company and the
Purchaser.
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, including the Company's right to seek specific performance of the
Purchaser's obligation to purchase the Commitment Amount of Common Stock
pursuant to this Agreement. 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
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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
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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of this 30th day of
October, 2000.
BEYOND.COM CORPORATION
By: /s/ RONALD S. SMITH
-----------------------------
Ronald Smith, President & CEO
INVESTWELL INVESTMENTS LIMITED
By: /s/ HANS GLASSNER
-----------------------------
Name: Hans Glassner
Title: Director
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