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INVESTMENT
AGREEMENT
INVESTMENT AGREEMENT
(this "AGREEMENT"), dated as of December 20, 2007 by and between
Edgeline Holdings, Inc., a Nevada corporation (the "Company"), and
Dutchess Private Equities Fund, Ltd., a Cayman Islands exempted
company (the "Investor").
WHEREAS, the parties
desire that, upon the terms and subject to the conditions contained
herein, the Investor shall invest up to Ten Million dollars
($10,000,000) to purchase the Company's Common Stock, $.08 par
value per share (the "Common Stock");
WHEREAS, such
investments will be made in reliance upon the provisions of Section
4(2) under the Securities Act of 1933, as amended (the "1933 Act"),
Rule 506 of Regulation D, and the rules and regulations promulgated
thereunder, and/or upon such other exemption from the registration
requirements of the 1933 Act as may be available with respect to
any or all of the investments in Common Stock to be made hereunder;
and
WHEREAS,
contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement substantially in the form attached
hereto (the "Registration Rights Agreement") pursuant to which the
Company has agreed to provide certain registration rights under the
1933 Act, and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, in
consideration of the foregoing recitals, which shall be considered
an integral part of this Agreement, the covenants and agreements
set forth hereafter, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
Company and the Investor hereby agree as
follows:
SECTION 1.
DEFINITIONS.
As
used in this Agreement, the following terms shall have the
following meanings specified or indicated below, and such
meanings shall be equally applicable to the singular and
plural forms of such defined terms.
“
1933
Act ” shall have the meaning set forth in the
preamble of this agreement.
“
1934
Act ” shall mean the Securities Exchange Act of
1934, as it may be amended.
“
Affiliate
” shall have the meaning specified in Section 5(H),
below.
“
Agreement
” shall mean this Investment Agreement.
“ By-laws
” shall have
the meaning specified in Section 4(C).
“ Certificate
of Incorporation ” shall have the meaning
specified in Section 4(C).
“
Closing
” shall have the meaning specified in Section
2(G).
“
Closing
Date ” shall mean no more than seven (7) Trading
Days following the Put Notice Date.
“
Common
Stock ” shall have the meaning set forth in the
preamble of this Agreement.
“
Control
” or “ Controls
” shall have the meaning specified in Section
5(H).
“
Effective
Date ” shall mean the date the SEC declares
effective under the 1933 Act the Registration Statement
covering the Securities.
“
Environmental
Laws ” shall have the meaning specified in
Section 4(M).
“Equity Line Transaction Documents ” shall mean
this Agreement, the Registration Rights Agreement.
“
Execution
Date ” shall mean the date indicated in the
preamble to this Agreement.
“
Indemnities
” shall have the meaning specified in Section
11.
“
Indemnified
Liabilities ” shall have the meaning specified in
Section 11.
“
Ineffective
Period ” shall mean any period of time that the
Registration Statement or any Supplemental Registration
Statement (as defined in the Registration Rights Agreement
between the parties) becomes ineffective or unavailable for
use for the sale or resale, as applicable, of any or all of
the Registrable Securities (as defined in the Registration
Rights Agreement) for any reason (or in the event the
prospectus under either of the above is not current and
deliverable) during any time period required under the
Registration Rights Agreement.
“
Investor
” shall have the meaning indicated in the preamble of
this Agreement.
“
Material Adverse
Effect ” shall have the meaning specified in
Section 4(A).
“
Maximum Common
Stock Issuance ” shall have the meaning specified
in Section 2(H).
“
Minimum
Acceptable Price ” with respect to any Put Notice
Date shall mean seventy-five percent (75%) of the lowest
closing bid prices for the three (3) Trading Day period
immediately preceding each Put Notice
Date.”
“
Open
Market Adjustment Amount ” shall have the meaning
specified in Section 2(I).
"
Open
Market Purchase " shall have the meaning specified in
Section 2(I)
“
Open
Market Share Purchase ” shall have the meaning
specified in Section 2(I).
“ Open
Period ” shall mean the period beginning on and
including the Trading Day immediately following the Effective
Date and ending on the earlier to occur of (i) the date
which is thirty-six (36) months from the Effective Date; or
(ii)
termination of the Agreement in accordance with Section 9,
below.
“
Pricing
Period ” shall mean the period beginning on the
Put Notice Date and ending on and including the date that is
five (5) Trading Days after such Put Notice Date.
“
Principal
Market ” shall mean the American Stock Exchange,
Inc., the National Association of Securities Dealers, Inc.
Over-the-Counter Bulletin Board, the NASDAQ National Market
System or the NASDAQ SmallCap Market, whichever is the
principal market on which the Common Stock is
listed.
“
Prospectus
” shall mean the prospectus, preliminary prospectus and
supplemental prospectus used in connection with the
Registration Statement.
“
Purchase
Amount ” shall mean the total amount being paid
by the Investor on a particular Closing Date to purchase the
Securities.
“
Purchase
Price ” shall mean ninety-six percent (96%) of
the lowest VWAP, as defined below of the Common Stock during
the Pricing Period.
“ Put
” shall have
the meaning set forth in Section 2(B)(1)
hereof.
“
Put
Amount ” shall have the meaning set forth in
Section 2(B)(1) hereof.
“
Put
Notice ” shall mean a written notice sent to the
Investor by the Company stating the Put Amount in U.S. dollars
the Company intends to sell to the Investor pursuant to the
terms of the Agreement and stating the current number of
Shares issued and outstanding on such date.
“
Put
Notice Date ” shall mean the Trading Day, as set
forth below, immediately following the day on which the
Investor receives a Put Notice, however a Put Notice shall be
deemed delivered on (a) the Trading
Day it is received by facsimile or otherwise by the Investor
if such notice is received prior to 9:00 am Eastern Time, or
(b)
the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 9:00 am Eastern Time on a Trading
Day. No Put Notice may be deemed delivered on a day
that is not a Trading Day.
“
Put
Restriction ” shall mean the days between the
beginning of the Pricing Period and Closing
Date. During this time, the Company shall not be
entitled to deliver another Put Notice.
“
Put
Shares Due ” shall have the meaning specified in
Section 2(I).
“
Registration
Period ” shall have the meaning specified in
Section 5(C), below.
“
Registration
Rights Agreement ” shall have the meaning set
forth in the recitals, above.
“
Registration
Statement ” means the registration statement of
the Company filed under the 1933 Act covering the Common Stock
issuable hereunder.
“
Related
Party ” shall have the meaning specified in
Section 5(H).
“
Resolution
” shall have the meaning specified in Section
8(E).
“
SEC
” shall mean the U.S. Securities & Exchange
Commission.
“
SEC
Documents ” shall have the meaning specified in
Section 4(F).
“
Securities
” shall mean the shares of Common Stock issued pursuant
to the terms of the Agreement.
“
Shares
” shall mean the shares of the Company’s Common
Stock.
“
Subsidiaries
” shall have the meaning specified in Section
4(A).
“
Trading
Day ” shall mean any day on which the Principal
Market for the Common Stock is open for trading, from the
hours of 9:30 am until 4:00 pm Eastern time.
“
VWAP
” shall mean the Volume Weighted Average
Price of the Common Stock.
SECTION 2. PURCHASE
AND SALE OF COMMON STOCK.
(A) PURCHASE AND SALE
OF COMMON STOCK. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, up to that number of
Shares having an aggregate Purchase Price of Ten Million dollars
($10,000,000).
(B) DELIVERY OF PUT
NOTICES.
(1) Subject to the terms and conditions of the Equity Line
Transaction Documents, and from time to time during the Open
Period, the Company may, in its sole discretion, deliver a Put
Notice to the Investor which states the dollar amount (designated
in U.S. Dollars) (the "Put Amount"), which the Company intends to
sell to the Investor on a Closing Date (the "Put"). The Put Notice
shall be in the form attached hereto as Exhibit C and incorporated
herein by reference. The amount that the Company shall be entitled
to Put to the Investor (the "Put Amount") shall be equal to, at the
Company's election, either: (A) up to Two Hundred percent (200%) of
the average daily volume (U.S. market only) of the Common Stock for
the three (3) Trading Days prior to the applicable Put Notice Date,
multiplied by the average of the three (3) daily closing prices
immediately preceding the Put Date, or (B) up to two hundred fifty
thousand dollars ($250,000). During the Open Period, the Company
shall not be entitled to submit a Put Notice until after the
previous Closing has been completed. The Purchase Price for the
Common Stock identified in the Put Notice shall be equal to
ninety-six percent (96%) of the lowest VWAP of the Common Stock
during the Pricing Period.
(C) COMPANY’S RIGHT TO WITHDRAWAL. The Company
shall reserve the right, but not the obligation, to withdraw that
portion of each Put that is below the Minimum Acceptable Price, by
submitting to the Investor, in writing, a notice to cancel that
portion Put.
(D) CONDITIONS TO
INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything
to the contrary in this Agreement, the Company shall not be
entitled to deliver a Put Notice and the Investor shall not be
obligated to purchase any Shares at a Closing (as defined in
Section 2(G)) unless each of the following conditions are
satisfied:
(I) a Registration Statement
shall have been declared effective and shall remain effective and
available for the resale of all the Registrable Securities (as
defined in the Registration Rights Agreement) at all times until
the Closing with respect to the subject Put
Notice;
(II) at all times during the
period beginning on the related Put Notice Date and ending on and
including the related Closing Date, the Common Stock shall have
been listed on the Principal Market and shall not have been
suspended from trading thereon for a period of two (2) consecutive
Trading Days during the Open Period and the Company shall not have
been notified of any pending or threatened proceeding or other
action to suspend the trading of the Common
Stock;
(III) the Company has complied
with its obligations and is otherwise not in breach of or in
default under, this Agreement, the Registration Rights Agreement or
any other agreement executed in connection herewith which has not
been cured prior to delivery of the Investor’s Put Notice
Date;
(IV) no injunction shall have
been issued and remain in force, or action commenced by a
governmental authority which has not been stayed or abandoned,
prohibiting the purchase or the issuance of the Securities;
and
(V) the issuance of the
Securities will not violate any shareholder approval requirements
of the Principal Market.
If any of the events
described in clauses (I) through (V) above occurs during a Pricing
Period, then the Investor shall have no obligation to purchase the
Put Amount of Common Stock set forth in the applicable Put
Notice.
(E)
RESERVED
(F) MECHANICS OF
PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the
conditions set forth in Sections 2(E), 7 and 8, the closing of the
purchase by the Investor of Shares (a "Closing") shall occur on the
date which is no later than seven (7) Trading Days following the
applicable Put Notice Date (each a "Closing Date"). Prior to each
Closing Date, (I) the Company shall deliver to the Investor
pursuant to this Agreement, certificates representing the Shares to
be issued to the Investor on such date and registered in the name
of the Investor; and (II) the Investor shall deliver to the Company
the Purchase Price to be paid for such Shares, determined as set
forth in Section 2(B). In lieu of delivering physical certificates
representing the Securities and provided that the Company's
transfer agent then is participating in The Depository Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Investor, the Company shall use all
commercially reasonable efforts to cause its transfer agent to
electronically transmit the Securities by crediting the account of
the Investor's prime broker (as specified by the Investor within a
reasonably in advance of the Investor's notice) with DTC through
its Deposit Withdrawal Agent Commission ("DWAC")
system.
The Company
understands that a delay in the issuance of Securities beyond the
Closing Date could result in economic damage to the Investor. After
the Effective Date, as compensation to the Investor for such loss,
the Company agrees to make late payments to the Investor for late
issuance of Securities (delivery of Securities after the applicable
Closing Date) in accordance with the following schedule (where "No.
of Days Late" is defined as the number of trading days beyond the
Closing Date, with the Amounts being
cumulative.):
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LATE PAYMENT FOR EACH
NO. OF DAYS LATE $10,000
WORTH OF COMMON STOCK
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
Over 10 $1,000 + $200 for each
Business Day late beyond 10 days
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The Company shall
make any payments incurred under this Section in immediately
available funds upon demand by the Investor. Nothing herein shall
limit the Investor's right to pursue actual damages for the
Company's failure to issue and deliver the Securities to the
Investor, except that such late payments shall offset any such
actual damages incurred by the Investor, and any Open Market
Adjustment Amount, as set forth below.
(G) OVERALL
LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained
herein to the contrary, if during the Open Period the Company
becomes listed on an exchange that limits the number of shares of
Common Stock that may be issued without shareholder approval, then
the number of Shares issuable by the Company and purchasable by the
Investor, shall not exceed that number of the shares of Common
Stock that may be issuable without shareholder approval (the
"Maximum Common Stock Issuance"). If such issuance of
shares of Common Stock could cause a delisting on the Principal
Market, then the Maximum Common Stock Issuance shall first be
approved by the Company's shareholders in accordance with
applicable law and the By-laws and Amended and Restated Certificate
of Incorporation of the Company, if such issuance of shares of
Common Stock could cause a delisting on the Principal Market. The
parties understand and agree that the Company's failure to seek or
obtain such shareholder approval shall in no way adversely affect
the validity and due authorization of the issuance and sale of
Securities or the Investor's obligation in accordance with the
terms and conditions hereof to purchase a number of Shares in the
aggregate up to the Maximum Common Stock Issuance limitation, and
that such approval pertains only to the applicability of the
Maximum Common Stock Issuance limitation provided in this Section
2(H).
(H) If, by
the third (3rd) business day after the Closing Date, the Company
fails to deliver any portion of the shares of the Put to the
Investor (the "Put Shares Due") and the Investor purchases, in an
open market transaction or otherwise, shares of Common Stock
necessary to make delivery of shares which would have been
delivered if the full amount of the shares to be delivered to the
Investor by the Company (the "Open Market Share Purchase") , then
the Company shall pay to the Investor, in addition to any other
amounts due to Investor pursuant to the Put, and not in lieu
thereof, the Open Market Adjustment Amount (as defined
below). The "Open Market Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Investor's total
purchase price (including brokerage commissions, if any) for the
Open Market Share Purchase minus (y) the net proceeds (after
brokerage commissions, if any) received by the Investor from the
sale of the Put Shares Due. The Company shall pay the
Open Market Adjustment Amount to the Investor in immediately
available funds within five (5) business days of written demand by
the Investor. By way of illustration and not in
limitation of the foregoing, if the Investor purchases shares of
Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover an Open Market Purchase with
respect to shares of Common Stock it sold for net proceeds of
$10,000, the Open Market Purchase Adjustment Amount which the
Company will be required to pay to the Investor will be
$1,000.
(I) LIMITATION
ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the
contrary in this Agreement, in no event shall the Investor be
entitled to purchase that number of Shares, which when added
to the sum of the number of shares of Common Stock
beneficially owned (as such term is defined under Section
13(d) and Rule 13d-3 of the 1934 Act), by the Investor, would
exceed 4.99% of the number of shares of Common Stock
outstanding on the Closing Date, as determined in accordance
with Rule 13d-1(j) of the 1934 Act.
SECTION 3. INVESTOR'S
REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Investor
represents and warrants to the Company, and covenants,
that:
(A) SOPHISTICATED
INVESTOR. The Investor has, by reason of its business and financial
experience, such knowledge, sophistication and experience in
financial and business matters and in making investment decisions
of this type that it is capable of (I) evaluating the merits and
risks of an investment in the Securities and making an informed
investment decision; (II) protecting its own interest; and (III)
bearing the economic risk of such investment for an indefinite
period of time.
(B) AUTHORIZATION;
ENFORCEMENT. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor
in accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement
of applicable creditors' rights and remedies.
(C) SECTION 9 OF THE
1934 ACT. During the term of this Agreement, the Investor will
comply with the provisions of Section 9 of the 1934 Act, and the
rules promulgated thereunder, with respect to transactions
involving the Common Stock. The Investor agrees not to sell the
Company's common stock short, either directly or indirectly through
its affiliates, principals or advisors during the term of this
Agreement.
(D) ACCREDITED
INVESTOR. Investor is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D of the 1933
Act.
(E) NO CONFLICTS. The
execution, delivery and performance of the Transaction Documents by
the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby will not result in a
violation of Partnership Agreement or other organizational
documents of the Investor.
(F) OPPORTUNITY TO
DISCUSS. The Investor has received all materials relating to the
Company's business, finance and operations which it has requested.
The Investor has had an opportunity to discuss the business,
management and financial affairs of the Company with the Company's
management.
(G) INVESTMENT
PURPOSES. The Investor is purchasing the Securities for its own
account for investment purposes and not with a view towards
distribution and agrees to resell or otherwise dispose of the
Securities solely in accordance with the registration provisions of
the 1933 Act (or pursuant to an exemption from such registration
provisions).
(H) NO REGISTRATION
AS A DEALER. The Investor is not and will not be required to be
registered as a "dealer" under the 1934 Act, either as a result of
its execution and performance of its obligations under this
Agreement or otherwise.
(I) GOOD STANDING. The Investor is a
Limited Partnership, duly organized, validly existing and in good
standing in the Cayman Islands.
(J) TAX
LIABILITIES. The Investor understands that it is liable
for its own tax liabilities.
(K) REGULATION
M. The Investor will comply with Regulation M under the
1934 Act, if applicable.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth
in the Schedules attached hereto, or as disclosed on the Company's
SEC Documents, the Company represents and warrants to the Investor
that:
(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized and validly existing in good standing under the laws
of the State of Nevada, and has the requisite corporate
power and authorization to own its properties and to carry on its
business as now being conducted. Both the Company and the companies
it owns or controls (“Subsidiaries”) are duly qualified
to do business and are in good standing in every jurisdiction in
which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of
operations, financial condition or prospects of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability
of the Company to perform its obligations under the Equity Line
Transaction Documents (as defined in Section 1 and 4(B),
below).
(B) AUTHORIZATION;
ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(I) The Company has the requisite
corporate power and authority to enter into and perform this
Investment Agreement and the Registration Rights Agreement
(collectively, the "Equity Line Transaction Documents"), and to
issue the Securities in accordance with the terms hereof and
thereof.
(II) The execution and delivery
of the Equity Line Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and
thereby, including without limitation the reservation for issuance
and the issuance of the Securities pursuant to this Agreement, have
been duly and validly authorized by the Company's Board of
Directors and no further consent or authorization is required by
the Company, its Board of Directors, or its
shareholders.
(III) The Equity Line Transaction
Documents have been duly and validly executed and delivered by the
Company.
(IV) The Equity Line Transaction
Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors' rights
and remedies.
(C) CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 1,500,000,000 shares of Common
Stock, $.08 par value per share, of which as of the date hereof,
41,415,906 shares are issued and
outstanding; 25,000,000 shares of Preferred Stock authorized, none
issued, par value $.001; as of September 30, 2007, and 6,000,000
shares reserved for issuance pursuant to options, warrants and
other convertible securities. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid
and nonassessable.
Except as disclosed
in the Company's publicly available filings with the
SEC:
(I) no shares
of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by the Company; (II) there are no outstanding debt
securities; (III) there are no outstanding shares of capital stock,
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any
of its Subsidiaries; (IV) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (V) there are no
outstanding securities of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
redeem a security of the Company or any of its Subsidiaries; (VI)
there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement; (VII) the Company does
not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (VIII) there is no
dispute as to the classification of any shares of the Company's
capital stock.
The Company has
furnished to the Investor, or the Investor has had access through
EDGAR to, true and correct copies of the Company's Amended and
Restated Certificate of Incorporation, as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "By-laws"), and the
terms of all securities convertible into or exercisable for Common
Stock and the material rights of the holders thereof in respect
thereto.
(D) ISSUANCE OF
SHARES. The Company has reserved 15,000,000 Shares for issuance
pursuant to this Agreement, which have been duly authorized and
reserved those Shares for issuance (subject to adjustment pursuant
to the Company's covenant set forth in Section 5(F) below) pursuant
to this Agreement. Upon issuance in accordance with this Agreement,
the Securities will be validly issued, fully paid for and
non-assessable and free from all taxes, liens and charges with
respect to the issue thereof. In the event the Company cannot
register a sufficient number of Shares for issuance pursuant to
this Agreement, the Company will use its best efforts to authorize
and reserve for issuance the number of Shares required for the
Company to perform its obligations hereunder as soon as reasonably
practicable.
(E) NO CONFLICTS. The
execution, delivery and performance of the Equity Line Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (I) result in
a violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or the By-laws; or (II) conflict
with, or constitute a material default (or an event which with
notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract,
indenture mortgage, indebtedness or instrument to which the Company
or any of its Subsidiaries is a party, or to the Company's
knowledge result in a violation of any law, rule, regulation,
order, judgment or decree (including United States federal and
state securities laws and regulations and the rules and regulations
of the Principal Market or principal securities exchange or trading
market on which the Common Stock is traded or listed) applicable to
the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 4(e), neither the Company
nor its Subsidiaries is in violation of any term of, or in default
under, the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or the By-laws or their
organizational charter or by-laws, respectively, or any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to
the Company or its Subsidiaries, except for possible conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations that would not individually or in the aggregate have
or constitute a Material Adverse Effect. The business of the
Company and its Subsidiaries is not being conducted, and shall not
be conducted, in violation of any law, statute, ordinance, rule,
order or regulation of any governmental authority or agency,
regulatory or self-regulatory agency, or court, except for possible
violations the sanctions for which either individually or in the
aggregate would not have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under
the 1933 Act or any securities laws of any states, to the Company's
knowledge, the Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or
registration (except the filing of a registration statement as
outlined in the Registration Rights Agreement between the Parties)
with, any court, governmental authority or agency, regulatory or
self-regulatory agency or other third party in order for it to
execute, deliver or perform any of its obligations under, or
contemplated by, the Equity Line Transaction Documents in
accordance with the terms hereof or thereof. All consents,
authorizations, permits, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof and are in full force and effect as of the date hereof.
Except as disclosed in Schedule 4(e), the Company and its
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the Principal
Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to
delisting of the Common Stock by the Principal Market in the
foreseeable future.
(F) SEC DOCUMENTS;
FINANCIAL STATEMENTS. As of the date hereof, the Company has 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 1934 Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investor or its
representatives, or they have had access through EDGAR to, true and
complete copies of the SEC Documents. As of their respective filing
dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and
none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates,
the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted
accounting principles and have been reviewed and/or audited by a
firm that is a member of the Public Companies Accounting Oversight
Board ("PCAOB") consistently applied, during the periods involved
(except (I) as may be otherwise indicated in such financial
statements or the notes thereto, or (II) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Investor
which is not included in the SEC Documents, including, without
limitation, information referred to in Section 4(D) of this
Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary to make the statements
therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or
agents have provided the Investor with any material, nonpublic
information which was not publicly disclosed prior to the date
hereof and any material, nonpublic information provided to the
Investor by the Company or its Subsidiaries or any of their
officers, directors, employees or agents prior to any Closing Date
shall be publicly disclosed by the Company prior to such Closing
Date.
(G) ABSENCE OF
CERTAIN CHANGES. Except as otherwise set forth in the SEC
Documents, the Company does not intend to change the business
operations of the Company in any material way. The Company has not
taken any steps, and does not currently expect to take any steps,
to seek protection pursuant to any bankruptcy law nor does the
Company or its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy
proceedings.
(H) ABSENCE OF
LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in
the SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the executive officers of Company or any of its
Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, in which an adverse decision could have a
Material Adverse Effect.
(I) ACKNOWLEDGMENT
REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges
and agrees that the Investor is acting solely in the capacity of an
arm's length purchaser with respect to the Transaction Documents
and the transact
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