<SEC-DOCUMENT>0001004878-12-000298.txt : 20120911
<SEC-HEADER>0001004878-12-000298.hdr.sgml : 20120911
<ACCEPTANCE-DATETIME>20120911140052
ACCESSION NUMBER: 0001004878-12-000298
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20120815
ITEM INFORMATION: Entry into a Material Definitive Agreement
ITEM INFORMATION: Financial Statements and Exhibits
FILED AS OF DATE: 20120911
DATE AS OF CHANGE: 20120911
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TransBiotec, Inc.
CENTRAL INDEX KEY: 0001425627
STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721]
IRS NUMBER: 260731818
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0112
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-53316
FILM NUMBER: 121085280
BUSINESS ADDRESS:
STREET 1: 3030 OLD RANCH PARKWAY, SUITE 350
STREET 2: SUITE 350
CITY: SEAL BEACH
STATE: CA
ZIP: 90740
BUSINESS PHONE: (562) 280-0483
MAIL ADDRESS:
STREET 1: 3030 OLD RANCH PARKWAY, SUITE 350
STREET 2: SUITE 350
CITY: SEAL BEACH
STATE: CA
ZIP: 90740
FORMER COMPANY:
FORMER CONFORMED NAME: IMAGINE MEDIA LTD
DATE OF NAME CHANGE: 20080130
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>form8kinvestagree9-12.txt
<DESCRIPTION>FORM 8-K RE INVEST AGREE
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 15, 2012
TRANSBIOTEC, INC.
-----------------
(Exact name of Registrant as specified in its charter)
Delaware 000-53316 26-0731818
--------------------------------------------------------------------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
3030 Old Ranch Parkway, Suite 350
Seal Beach, CA 90740
-------------------------------------------
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (562) 280-0483
N/A
------------------------------------------------
(Former name or former address if changed since last report)
<PAGE>
Item 1.01. Entry Into a Material Definitive Agreement.
Equity Line of Credit
---------------------
On August 15, 2012, the Company entered into an Investment Agreement (the
"Agreement") with Kodiak Capital Group, LLC ("Kodiak") in order to establish a
possible source of funding for the Company. The Agreement establishes what is
sometimes referred to as an equity line of credit.
Under the Agreement, Kodiak will provide the Company with up to $3,000,000
of funding. During the term of the equity line, the Company may request a
drawdown under the equity line by selling shares of its common stock to Kodiak,
and Kodiak will be obligated to purchase the shares. However, the Company is
under no obligation to request any drawdowns under the equity line. There must
be a minimum of seven trading days between each drawdown request. Kodiak will
only be obligated to purchase the shares if a Registration Statement registering
the shares has been declared effective by the Securities and Exchange
Commission.
The Company may request a drawdown by sending a drawdown notice to Kodiak,
stating the dollar amount of the shares it will sell to Kodiak. The purchase
price for the shares to be sold will be equal to 75% of the lowest closing bid
price of the Company's common stock during the five days following a drawdown
request. Within seven days of the drawdown request, the Company will issue
shares to Kodiak in an amount equal to the dollar amount of the drawdown divided
by the purchase price.
There is no minimum amount the Company can draw down at any one time. The
maximum amount the Company can draw down at any one time is $3,000,000.
Notwithstanding the above, in no event shall Kodiak be required to purchase that
number of shares which, when added to the number of shares of common stock
beneficially owned by Kodiak, would exceed 9.99%of the number of shares of the
Company's common stock outstanding on any closing date.
Termination of the Agreement
----------------------------
The Agreement will be terminated:
o When Kodiak has purchased $3,000,000 of the Company's common stock
pursuant to the Agreement;
o 12 months following the date that a Registration Statement registering
the shares becomes effective with the Securities and Exchange
Commission; or
o Upon written notice of the Company to Kodiak.
The Agreement may be terminated:
o In the event that either party commits a material breach of the
Agreement; or
o Either party becomes insolvent.
2
<PAGE>
General
-------
Upon execution of the Agreement, the Company agreed to:
o issue Kodiak 1,500,000 shares of its common stock; and
o pay Kodiak a $5,000 document preparation fee.
Pursuant to the Agreement each of the parties will indemnify one another
and the respective party's shareholders, officers, directors, employees and
agents from and against any actions arising from a party's breach of the
Agreement.
Item 9.01. Financial Statements and Exhibits.
Exhibit Number Description
-------------- -----------
10.3 Investment Agreement
10.4 Registration Rights Agreement
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 11, 2012
TRANSBIOTEC, INC.
By: /s/ Scott Painter
--------------------------------------
Scott Painter, Chief Executive Officer
4
<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>form8kinvestexh103sept-12.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
EXHIBIT 10.3
46
<PAGE>
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (hereinafter referred to as the "Agreement"), dated as
of August 15th, 2012 ("Execution Date") by and between
TransBiotec, Inc.. a Delaware corporation (hereinafter referred to as the
"Company"),
and
Kodiak Capital Group, LLC, a Delaware limited liability company (hereinafter
referred to as the "Investor").
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to three million dollars
($3,000,000) to purchase the Company's Common Stock, at no par value per share
(the "Common Stock"); and
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:
1
<PAGE>
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.
"Commitment Shares" shall mean 1,500,000 shares of Common Stock payable by
the Company to the Investor upon the execution of the Agreement.
"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).
"Document Preparation Fee" shall mean a cash fee of $5,000 payable by the
Company to the Investor upon the execution of the Agreement.
"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.
2
<PAGE>
"Execution Date" shall mean the date indicated in the preamble to this
Agreement.
"Facility Amount" shall mean the amount of the equity line as per the terms
of the Term Sheet.
"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).
"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 twelve (12) 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.
3
<PAGE>
"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 seventy five (75%) of the lowest closing bid
price 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).
4
<PAGE>
"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).
"Term Sheet" shall mean an executed instrument between the parties hereto
containing the terms of this and other agreements between the parties, and is
hereby incorporated by reference.
"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.
5
<PAGE>
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 three million dollars ($3,000,000).
(B) DELIVERY OF PUT NOTICES. 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 up to three million dollars ($3,000,000).
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 seventy five percent
(75%) of the lowest closing bid price of the Common Stock during the Pricing
Period.
(C) RESERVED
(D) RESERVED
(E) 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
6
<PAGE>
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.
(F) RESERVED.
(G) 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). The Company
shall 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
7
<PAGE>
trading days beyond the Closing Date, with the Amounts being cumulative.):
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
-------------------------------------------------------------------------------
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.
(H) 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
8
<PAGE>
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).
(I) ADDITIONAL PENALTIES. 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.
(J) 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 9.99% 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.
9
<PAGE>
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 stock short, either directly or
indirectly through its affiliates, principals or advisors, the Company's common
stock 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
Limited Liability Company Operating 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.
10
<PAGE>
(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 Liability Company, duly organized,
validly existing and in good standing in the State of Delaware.
(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.
11
<PAGE>
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 Delaware,
USA 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.
12
<PAGE>
(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.
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;
13
<PAGE>
(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 30,000,000 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
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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
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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, 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
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Equity Line Transaction
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Documents and the transactions contemplated hereby and thereby and any advice
given by the Investor or any of its respective representatives or agents in
connection with the Equity Line Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investor's purchase
of the Securities, and is not being relied on by the Company. The Company
further represents to the Investor that the Company's decision to enter into the
Equity Line Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as
set forth in the SEC Documents, as of the date hereof, no event, liability,
development or circumstance has occurred or exists, or to the Company's
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company's employ or
otherwise terminate such officer's employment with the Company.
(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth in the SEC Documents, none of the Company's
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
necessary to conduct its business as now or as proposed to be conducted have
expired or terminated, or are expected to expire or terminate within two (2)
years from the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth in the SEC Documents, there is no claim, action or proceeding being made
or brought against, or to the Company's knowledge, being threatened against, the
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Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the
knowledge of the management and directors of the Company and its Subsidiaries,
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"); (II) have, to the knowledge of the
management and directors of the Company, received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses; and (III) are in compliance, to the knowledge of the
management and directors of the Company, with all terms and conditions of any
such permit, license or approval where, in each of the three (3) foregoing
cases, the failure to so comply would have, individually or in the aggregate, a
Material Adverse Effect.
(N) TITLE. The Company and its Subsidiaries have good and marketable title to
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(O) INSURANCE. Each of the Company's Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company reasonably believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any of its Subsidiaries has been refused any
insurance coverage sought or applied for and neither the Company nor its
Subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and
effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
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comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
(Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (I) transactions are executed in accordance with
management's general or specific authorizations; (II) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles by a firm with membership to the PCAOB
and to maintain asset accountability; (III) access to assets is permitted only
in accordance with management's general or specific authorization; and (IV) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all
United States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at
least ten (10) days prior to the date hereof and except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
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disinterested third parties and other than the grant of stock options disclosed
in the SEC Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect on the shareholders of the Company. The Board of
Directors of the Company has concluded, in its good faith business judgment, and
with full understanding of the implications, that such issuance is in the best
interests of the Company. The Company specifically acknowledges that, subject to
such limitations as are expressly set forth in the Equity Line Transaction
Documents, its obligation to issue shares of Common Stock upon purchases
pursuant to this Agreement is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
(V) LOCK-UP. The Company shall cause its officers, insiders, directors, and
affiliates or other related parties under control of the Company, to refrain
from buying and/or selling Common Stock during each Pricing Period.
(W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor
any person acting on its behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D) in connection with
the offer or sale of the Common Stock to be offered as set forth in this
Agreement.
(X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers,
finders or financial advisory fees or commissions will be payable by the
Company, its agents or Subsidiaries, with respect to the transactions
contemplated by this Agreement, except as otherwise disclosed in this Agreement.
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SECTION 5. COVENANTS OF THE COMPANY
-----------------------------------
(A) BEST EFFORTS. The Company shall use all commercially reasonable efforts to
timely satisfy each of the conditions set forth in Section 7 of this Agreement.
(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each
of the Closing Dates, take such action as the Company shall reasonably determine
is necessary to qualify the Securities for, or obtain exemption for the
Securities for, sale to the Investor at each of the Closings pursuant to this
Agreement under applicable securities or "Blue Sky" laws of such states of the
United States, as reasonably specified by the Investor, and shall provide
evidence of any such action so taken to the Investor on or prior to the Closing
Date.
(C) REPORTING STATUS. Until one of the following occurs, the Company shall file
all reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status, or take an action or fail to take any
action, which would terminate its status as a reporting company under the 1934
Act: (i) this Agreement terminates pursuant to Section 9 and the Investor has
the right to sell all of the Securities without restrictions pursuant to Rule
144(k) promulgated under the 1933 Act, or such other exemption (ii) the date on
which the Investor has sold all the Securities and this Agreement has been
terminated pursuant to Section 9.
(D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Shares (excluding amounts paid by the Company for fees as set forth in the
Equity Line Transaction Documents) for general corporate and working capital
purposes and acquisitions or assets, businesses or operations or for other
purposes that the Board of Directors, in its good faith deem to be in the best
interest of the Company.
(E) FINANCIAL INFORMATION. During the Open Period, the Company agrees to make
available to the Investor via EDGAR or other electronic means the following
documents and information on the forms set forth: (I) within five (5) Trading
Days after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any Registration Statements or amendments filed pursuant to the 1933 Act; (II)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders; and (III) within two (2)
calendar days of filing or delivery thereof, copies of all documents filed with,
and all correspondence sent to, the Principal Market, any securities exchange or
market, or the National Association of Securities Dealers, Inc., unless such
information is material nonpublic information.
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(F) RESERVATION OF SHARES. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the issuance of the Securities
to the Investor as required hereunder. In the event that the Company determines
that it does not have a sufficient number of authorized shares of Common Stock
to reserve and keep available for issuance as described in this Section 5(F),
the Company shall use all commercially reasonable efforts to increase the number
of authorized shares of Common Stock by seeking shareholder approval for the
authorization of such additional shares.
(G) LISTING. The Company shall promptly secure and maintain the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
on the Principal Market and each other national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, such listing
of all Registrable Securities from time to time issuable under the terms of the
Equity Line Transaction Documents. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market
(excluding suspensions of not more than one (1) trading day resulting from
business announcements by the Company). The Company shall promptly provide to
the Investor copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 5(G).
(H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of
its Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two (2) years, shareholders who beneficially own 5% or more of the
Common Stock, or Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (I) customary employment arrangements and benefit programs on
reasonable terms, (II) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a disinterested third party other than such Related Party, or
(III) any agreement, transaction, commitment or arrangement which is approved by
a majority of the disinterested directors of the Company. For purposes hereof,
any director who is also an officer of the Company or any Subsidiary of the
Company shall not be a disinterested director with respect to any such
agreement, transaction, commitment or arrangement. "Affiliate" for purposes
hereof means, with respect to any person or entity, another person or entity
that, directly or indirectly, (I) has a 5% or more equity interest in that
person or entity, (II) has 5% or more common ownership with that person or
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entity, (III) controls that person or entity, or (IV) is under common control
with that person or entity. "Control" or "Controls" for purposes hereof means
that a person or entity has the power, directly or indirectly, to conduct or
govern the policies of another person or entity.
(I) FILING OF FORM 8-K. On or before the date which is four (4) Trading Days
after the Execution Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transaction contemplated by the Equity
Line Transaction Documents in the form required by the 1934 Act, if such filing
is required.
(J) CORPORATE EXISTENCE. The Company shall use all commercially reasonable
efforts to preserve and continue the corporate existence of the Company.
(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE
A PUT. The Company shall promptly notify the Investor upon the occurrence of any
of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities: (I) receipt of any
request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for 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 any
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 Securities for sale
in any jurisdiction or the initiation or notice of any proceeding for such
purpose; (IV) the happening of any event that makes any statement made in such
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 a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (V) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate, and the Company
shall promptly make available to Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events in this Section 5(K).
(L) REIMBURSEMENT. If (I) the Investor becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Equity Line Transaction Documents, or if the Investor is
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impleaded in any such action, proceeding or investigation by any person (other
than as a result of a breach of the Investor's representations and warranties
set forth in this Agreement); or (II) the Investor becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC against
or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by the Equity Line Transaction
Documents (other than as a result of a breach of the Investor's representations
and warranties set forth in this Agreement), or if this Investor is impleaded in
any such action, proceeding or investigation by any person, then in any such
case, the Company will reimburse the Investor for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which the Investor is a named party, the Company
will pay to the Investor the charges, as reasonably determined by the Investor,
for the time of any officers or employees of the Investor devoted to appearing
and preparing to appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries, hearing,
trials, and other proceedings relating to the subject matter of this Agreement.
The reimbursement obligations of the Company under this section shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliates of the Investor that are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees, attorneys, accountants, auditors and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors of the Company,
the Investor and any such affiliate and any such person.
(M) TRANSFER AGENT. Upon effectiveness of the Registration Statement, and for so
long as the Registration Statement is effective, the Company shall deliver
instructions to its transfer agent to issue Shares to the Investor that are
covered for resale by the Registration Statement free of restrictive legends.
(N) ACKNOWLEDGEMENT OF TERMS. The Company hereby represents and warrants to the
Investor that: (i) it is voluntarily entering into this Agreement of its own
freewill, (ii) it is not entering this Agreement under economic duress, (iii)
the terms of this Agreement are reasonable and fair to the Company, and (iv) the
Company has had independent legal counsel of its own choosing review this
Agreement, advise the Company with respect to this Agreement, and represent the
Company in connection with this Agreement.
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SECTION 6. RESERVED
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SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------------------
The obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following 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) The Investor shall have executed this Agreement and the Registration Rights
Agreement and delivered the same to the Company.
(B) The Investor shall have delivered to the Company the Purchase Price for the
Securities being purchased by the Investor between the end of the Pricing Period
and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D).
After receipt of confirmation of delivery of such Securities to the Investor,
the Investor, by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company will disburse the funds constituting
the Purchase Amount.
(C) 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.
26
<PAGE>
SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
------------------------------------------------------------------------
The obligation of the Investor hereunder to purchase Shares is subject to the
satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
(A) The Company shall have executed the Equity Line Transaction Documents and
delivered the same to the Investor.
(B) The Common Stock shall be authorized for quotation on the Principal Market
and trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of not more than
one (1) Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).
(C) The representations and warranties of the Company shall be true and correct
as of the date when made and as of the applicable Closing Date as though made at
that time and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Equity Line Transaction
Documents to be performed, satisfied or complied with by the Company on or
before such Closing Date. The Investor may request an update as of such Closing
Date regarding the representation contained in Section 4(C) above.
(D) The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer of,
the Securities (in such denominations as the Investor shall request) being
purchased by the Investor at such Closing.
(E) The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4(B)(II) above (the "Resolutions") and such Resolutions
shall not have been amended or rescinded prior to such Closing Date.
(F) RESERVED
(G) 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
27
<PAGE>
consummation of any of the transactions contemplated by this Agreement.
(H) The Registration Statement shall be effective on each Closing Date and no
stop order suspending the effectiveness of the Registration statement shall be
in effect or to the Company's knowledge shall be pending or threatened.
Furthermore, on each Closing Date (I) neither the Company nor the Investor shall
have received notice that the SEC has issued or intends to issue a stop order
with respect to such Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action), and (II) no other
suspension of the use or withdrawal of the effectiveness of such Registration
Statement or related prospectus shall exist.
(I) At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall 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 or which would require public
disclosure or an update supplement to the prospectus.
(J) If applicable, the shareholders of the Company shall have approved the
issuance of any Shares in excess of the Maximum Common Stock Issuance in
accordance with Section 2(H) or the Company shall have obtained appropriate
approval pursuant to the requirements of the State of Delaware and the Company's
Articles of Incorporation and By-laws.
(K) The conditions to such Closing set forth in Section 2(E) shall have been
satisfied on or before such Closing Date.
(L) The Company shall have certified to the Investor the number of Shares of
Common Stock outstanding when a Put Notice is given to the Investor. The
Company's delivery of a Put Notice to the Investor constitutes the Company's
certification of the existence of the necessary number of shares of Common Stock
reserved for issuance.
28
<PAGE>
SECTION 9. TERMINATION.
----------------------
A. This Agreement shall terminate upon any of the following events:
(I) when the Investor has purchased an aggregate of three million dollars
($3,000,000) in the Common Stock of the Company pursuant to this Agreement;
or,
(II) on the date which is twelve (12) months after the Effective Date; or,
(III) upon written notice of the Company to the Investor. Any and all shares, or
penalties, if any, due under this Agreement shall be immediately payable
and due upon termination of the Line.
B. This Agreement may terminate upon any of the following events:
(I) Termination for Default. In the event that either party commits a material
breach of its obligations hereunder, the other party may, at its option,
terminate this Agreement by written notice of termination specifying such
material breach; provided, however, that if such default is subject to
cure, then such notice shall be subject to a twenty (20) day cure period
from the date thereof, and if the defaulting party cures such default prior
to expiration of such period, termination shall not take place.
(II) Termination for Insolvency. Either party hereto may, at its option, upon
five (5) days written notice, terminate this Agreement should the other
party hereto (i) admit in writing its inability to pay its debts generally
as they become due; (ii) make a general assignment for the benefit of
creditors; (iii) institute proceedings to be adjudicated a voluntary
bankrupt, or consent to the filing of a petition of bankruptcy against it;
(iv) be adjudicated by a court of competent jurisdiction as being bankrupt
or insolvent; (v) seek reorganization under any bankruptcy act, or consent
to the filing of a petition seeking such reorganization, or (vi) have a
decree entered against it by a court of competent jurisdiction appointing a
receiver, liquidator, trustee or assignee in bankruptcy or in insolvency
covering all or substantially all of such party's property or providing for
the liquidation of such party's property or business affairs.
29
<PAGE>
C. Survival of Termination. The obligations of the parties under this Agreement
that by their nature would continue beyond expiration, termination or
cancellation of this Agreement (including, without limitation, the warranties,
indemnification obligations, confidentiality requirements and ownership and
property rights) shall survive any such expiration, termination or cancellation.
30
<PAGE>
SECTION 10. SUSPENSION
-----------------------
This Agreement shall be suspended upon any of the following events, and shall
remain suspended until such event is rectified:
(I) the trading of the Common Stock is suspended by the SEC, the Principal
Market or the NASD for a period of two (2) consecutive Trading Days during the
Open Period; or,
(II) The Common Stock ceases to be registered under the 1934 Act or listed
or traded on the Principal Market. Immediately upon the occurrence of one of the
above-described events, the Company shall send written notice of such event to
the Investor.
31
<PAGE>
SECTION 11. INDEMNIFICATION.
---------------------------
In consideration of the parties mutual obligations set forth in the Transaction
Documents, each of the parties (in such capacity, an "Indemnitor") shall defend,
protect, indemnify and hold harmless the other and all of the other party's
shareholders, officers, directors, employees, counsel, and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and reasonable expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (I)
any misrepresentation or breach of any representation or warranty made by the
Indemnitor or any other certificate, instrument or document contemplated hereby
or thereby; (II) any breach of any covenant, agreement or obligation of the
Indemnitor contained in the Equity Line Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby; or (III) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party and arising out of or resulting from the execution, delivery,
performance or enforcement of the Equity Line Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, except
insofar as any such misrepresentation, breach or any untrue statement, alleged
untrue statement, omission or alleged omission is made in reliance upon and in
conformity with information furnished to Indemnitor which is specifically
intended for use in the preparation of any such Registration Statement,
preliminary prospectus, prospectus or amendments to the prospectus. To the
extent that the foregoing undertaking by the Indemnitor may be unenforceable for
any reason, the Indemnitor shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. The indemnity provisions contained herein shall be in
addition to any cause of action or similar rights Indemnitor may have, and any
liabilities the Indemnitor or the Indemnitees may be subject to.
32
<PAGE>
SECTION 12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION.
------------------------------------------------------------
(A) ARBITRATION CLAUSE. All disputes arising under this agreement shall be
governed by and interpreted in accordance with the laws of New York, without
regard to principles of conflict of laws. The parties to this agreement will
submit all disputes arising under this agreement to arbitration in New York
City, New York before a single arbitrator of the American Arbitration
Association ("AAA"). The arbitrator shall be selected by application of the
rules of the AAA, or by mutual agreement of the parties, except that such
arbitrator shall be an attorney admitted to practice law New York. No party to
this agreement will challenge the jurisdiction or venue provisions as provided
in this section. No party to this agreement will challenge the jurisdiction or
venue provisions as provided in this section. Nothing contained herein shall
prevent the party from obtaining an injunction.
(B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the
Equity Line Transaction Documents, each party shall pay the fees and expenses of
its advisers, counsel, the accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any attorneys' fees and
expenses incurred by either the Company or the Investor in connection with the
preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of any Securities.
(C) COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original signature.
(D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.
33
<PAGE>
(E) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between
the Company and the Investor with respect to the terms and conditions set forth
herein, and, the terms of this Agreement may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the Parties. No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Investor, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. The execution and delivery of the Equity Line Transaction
Documents shall not alter the force and effect of any other agreements between
the Parties, and the obligations under those agreements.
(G) NOTICES. Any notices or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (I) upon receipt, when delivered personally; (II) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (III) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
TransBioTec, Inc.
3030 Old Ranch Parkway
Suite 350
Seal Beach, CA 90740
If to the Investor:
Kodiak Capital Group, LLC
260 Newport Center Drive
Suite 100
Newport Beach, CA 92660
Each party shall provide five (5) days prior written notice to the other party
of any change in address or facsimile number.
(H) NO ASSIGNMENT. This Agreement may not be assigned.
34
<PAGE>
(I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of
the parties hereto and is not for the benefit of, nor may any provision hereof
be enforced by, any other person, except that the Company acknowledges that the
rights of the Investor may be enforced by its general partner.
(J) SURVIVAL. The representations and warranties of the Company and the Investor
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4 and 5, and the indemnification provisions set forth in Section 11,
shall survive each of the Closings and the termination of this Agreement.
(K) PUBLICITY. The Company and the Investor shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior consent of
the other party, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other party with
prior notice of such public statement. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of the Investor without the prior
consent of the Investor, except to the extent required by law. The Investor
acknowledges that this Agreement and all or part of the Equity Line Transaction
Documents may be deemed to be "material contracts" as that term is defined by
Item 601(b)(10) of Regulation S-B, and that the Company may therefore be
required to file such documents as exhibits to reports or registration
statements filed under the 1933 Act or the 1934 Act. The Investor further agrees
that the status of such documents and materials as material contracts shall be
determined solely by the Company, in consultation with its counsel.
(L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(M) COMMITMENT FEES; OTHER FEES RELATED TO THE TRANSACTION. In addition to the
shares to be issued pursuant to the Facility Amount, the Company agrees to:
(I) issue Investor Commitment Shares equal to 1,500,000 shares of Common Stock
upon the execution of the Agreement; and,
35
<PAGE>
(II) pay Investor a Document Preparation Fee of $5,000 in cash upon the
execution of the Agreement; and,
(III) the Company shall be solely responsible for all commissions, fees and / or
transaction costs associated and / or related to, in any way, with the
transaction and / or transactions herein contemplated and or agreed to
under this Agreement.
(N) NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party, as the parties
mutually agree that each has had a full and fair opportunity to review this
Agreement and seek the advice of counsel on it. The normal rule that ambiguities
shall be interpreted against the drafting party shall not apply in the instant
case.
(O) REMEDIES. The Investor shall have all rights and remedies set forth in this
Agreement and the Registration Rights Agreement and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which the Investor has by law. Any person having
any rights under any provision of this Agreement shall be entitled to enforce
such rights specifically (without posting a bond or other security), to recover
damages by reason of any default or breach of any provision of this Agreement,
including the recovery of reasonable attorneys fees and costs, and to exercise
all other rights granted by law.
(P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to the Investor hereunder or under the Registration Rights Agreement or
the Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
(Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the lowest closing
bid price of the Common Stock shall be as reported on Bloomberg.
36
<PAGE>
SECTION 13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
-----------------------------------------------------
(a) The Company shall not disclose non-public information to the Investor, its
advisors, or its representatives.
(b) Nothing herein shall require the Company to disclose non-public information
to the Investor or its advisors or representatives, and the Company represents
that it does not disseminate non-public information to any investors who
purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 13 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
37
<PAGE>
ARTICLE 14 ACKNOWLEDGEMENTS OF THE PARTIES.
-------------------------------------------
Notwithstanding anything in this Agreement to the contrary, the parties hereto
hereby acknowledge and agree to the following:
(i) the Investor makes no representations or covenants that it will not engage
in trading in the securities of the Company, other than the Investor will
not sell short the Company's common stock at any time during this
Agreement;
(ii) the Company shall, by 8:30 a.m. Eastern US Time on the trading day
following the date hereof, file a current report on Form 8-K disclosing the
material terms of the transactions contemplated hereby and in the other
Equity Line Transaction Documents;
(iii) the Company has not and shall not provide material non-public information
to the Investor unless prior thereto the Investor shall have executed a
written agreement regarding the confidentiality and use of such
information; and
(iv) the Company understands and confirms that the Investor will be relying on
the acknowledgements set forth in clauses (i) through (iii) above if the
Investor effects any transactions in the securities of the Company.
38
<PAGE>
SIGNATURE PAGE OF INVESTMENT AGREEMENT
--------------------------------------
Your signature on this Signature Page evidences your agreement to be bound by
the terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.
The undersigned signatory hereby certifies that he has read and understands the
Investment Agreement, and the representations made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound by its terms.
KODIAK CAPITAL GROUP, LLC
/s/ Ryan C. Hodson
-----------------------------------
Ryan C. Hodson, Managing Director
TRANSBIOTEC, INC.
/s/ J. Scott Painter
-----------------------------------
J. Scott Painter, CEO
39
<PAGE>
LIST OF EXHIBITS
-------------------------------------------------------------------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Opinion of Company's Counsel
EXHIBIT C Put Notice
EXHIBIT D Put Settlement Sheet
-------------------------------------------------------------------------
40
<PAGE>
EXHIBIT A
41
<PAGE>
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Date: __________
[TRANSFER AGENT]
Re:
-------------------
Ladies and Gentlemen:
We are counsel to _________________, a ___________corporation (the
"Company"), and have represented the Company in connection with that certain
Investment Agreement (the "Investment Agreement") entered into by and among the
Company and _________________________ (the "Investor") pursuant to which the
Company has agreed to issue to the Investor shares of the Company's common
stock, without par value per share (the "Common Stock") on the terms and
conditions set forth in the Investment Agreement. Pursuant to the Investment
Agreement, the Company also has entered into a Registration Rights Agreement
with the Investor (the "Registration Rights Agreement") pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock issued or issuable under the Investment Agreement under the Securities Act
of 1933, as amended (the "1933 Act"). In connection with the Company's
obligations under the Registration Rights Agreement, on _________, 2012 the
Company filed a Registration Statement on Form S- ___ (File No. 333-________)
(the "Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names the Investor as a
selling shareholder thereunder.
In connection with the foregoing, we advise you that [ a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective ] [the Registration Statement has
become effective] under the 1933 Act at [enter the time of effectiveness] on
[enter the date of effectiveness] and to the best of our knowledge, after
telephonic inquiry of a member of the SEC's staff, no stop order suspending its
effectiveness has been issued and no proceedings for that purpose are pending
before, or threatened by, the SEC and the Registrable Securities are available
for resale under the 1933 Act pursuant to the Registration Statement.
Very truly yours,
[Company Counsel]
42
<PAGE>
EXHIBIT C
Date:
RE: Put Notice Number __
Dear Mr. Hodson,
This is to inform you that as of today, TransBiotec, Inc., a Delaware
corporation (the "Company"), hereby elects to exercise its right pursuant to the
Investment Agreement to require Kodiak Capital Group, LLC to purchase shares of
its common stock. The Company hereby certifies that:
The amount of this put is $__________.
The Pricing Period runs from ________ until _______.
The current number of shares issued and outstanding as of the Company are:
The number of shares currently available for issuance on the S-1 for the Equity
Line are:
-------------------------
Regards,
-------------
43
<PAGE>
EXHIBIT D
PUT SETTLEMENT SHEET
Date:
Dear Mr. _________,
Pursuant to the Put given by TransBiotec, Inc., to Kodiak Capital Group, LLC on
_________________ 2012 we are now submitting the amount of common shares for you
to issue to Kodiak.
Please have a certificate bearing no restrictive legend totaling __________
shares issued to Kodiak Capital Group, LLC. immediately and send via DWAC to the
following account:
XXXXXXXXXXXXXXX
Once these shares are received by us, we will have the funds wired to the
Company.
Regards,
Ryan C. Hodson
--------------------------------------------------------------------------------
DATE. . . . . . . . . . . . . . . . . . . . PRICE
Date of Day 1 . . . . . . . . . . . . . . . Closing Bid
Date of Day 2 . . . . . . . . . . . . . . . Closing Bid
Date of Day 3 . . . . . . . . . . . . . . . Closing Bid
Date of Day 4 . . . . . . . . . . . . . . . Closing Bid
Date of Day 5 . . . . . . . . . . . . . . . Closing Bid
LOWEST CLOSING BID IN PRICING PERIOD
------------
PUT AMOUNT
------------
AMOUNT WIRED TO COMPANY
------------
PURCHASE PRICE SEVENTY FIVE PERCENT (75%)
------------
AMOUNT OF SHARES DUE
------------
--------------------------------------------------------------------------------
44
<PAGE>
The undersigned has completed this Put as of this ___th day of _________, 2012.
------------------------------
LIST OF SCHEDULES
-----------------
SCHEDULE 4(a) SUBSIDIARIES
SCHEDULE 4(c) CAPITALIZATION
SCHEDULE 4(e) CONFLICTS
SCHEDULE 4(g) MATERIAL CHANGES
SCHEDULE 4(h) LITIGATION
SCHEDULE 4(l) INTELLECTUAL PROPERTY
SCHEDULE 4(n) LIENS
SCHEDULE 4(t) CERTAIN TRANSACTIONS
45
<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>form8kinvestexh104sept-12.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
EXHIBIT 10.4
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (hereinafter referred to as the "Agreement"),
dated August 15, 2012 by and between
TransBiotec, Inc., a Delaware Corporation (hereinafter referred to as the
"Company"),
and
Kodiak Capital Group, LLC, a Delaware Limited Liability Company (hereinafter
referred to as the "Holder").
WHEREAS, in connection with the Investment Agreement by and between the
Company and the Investor of equal date as the Agreement hereto (the "Investment
Agreement"), the Company has agreed to issue and sell to the Investor an
indeterminate number of shares of the Company's Common Stock without par value
per share (the "Common Stock"), to be purchased pursuant to the terms and
subject to the conditions set forth in the Investment Agreement, which is hereby
incorporated by reference; and
WHEREAS, to induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of Common Stock
issuable pursuant to the Investment Agreement.
NOW THEREFORE, in consideration of the foregoing promises and the mutual
covenants contained hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are 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:
"Execution Date" means the date of this Agreement set forth above.
"Investor" means Kodiak Capital Group, LLC, a Delaware Limited Liability
Company.
"Person" means a corporation, a limited liability company, an association,
a partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
1
<PAGE>
"Potential Material Event" means any of the following: (i) the possession
by the Company of material information not ripe for disclosure in the
Registration Statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the Registration Statement would be detrimental to the business and affairs of
the Company, or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in the Registration Statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the Registration Statement would be
materially misleading absent the inclusion of such information.
"Principal Market" shall mean The American Stock Exchange, National
Association of Securities Dealer's, Inc., Over-the-Counter electronic bulletin
board, the Nasdaq National Market or The Nasdaq SmallCap Market whichever is the
principal market on which the Common Stock of the Company is listed.
"Register," "Registered," and "Registration" refer to the Registration
effected by preparing and filing one (1) or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis
(hereinafter referred to as "Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United States Securities
and Exchange Commission (hereinafter referred to as the "SEC").
"Registrable Securities" means (i) the shares of Common Stock issued or
issuable pursuant to the Investment Agreement, and (ii) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, if any, as
a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, which have not been (x) included in the Registration
Statement that has been declared effective by the SEC, or (y) sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 1933 Act.
"Registration Statement" means the registration statement of the Company
filed under the 1933 Act covering the Registrable Securities.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Investment
Agreement.
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Section 2. REGISTRATION.
------------
(a) The Company shall, within fifteen (15) days of the date of this
Agreement, file with the SEC the Registration Statement or Registration
Statements (as is necessary) on Form S-1 (or, if such form is unavailable for
such a registration, on such other form as is available for such registration),
covering the resale of all of the Registrable Securities, which Registration
Statement(s) shall state that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon stock splits,
stock dividends or similar transactions. The Company shall initially register
for resale 30,000,000 shares of Common Stock which would be issuable on the date
preceding the filing of the Registration Statement based on the closing bid
price of the Company's Common Stock on such date and the amount reasonably
calculated that represents Common Stock issuable to other parties as set forth
in the Investment Agreement except to the extent that the SEC requires the share
amount to be reduced as a condition of effectiveness.
(b) The Company shall use all commercially reasonable efforts to have the
Registration Statement(s) declared effective by the SEC within sixty (60)
calendar days after the Execution Date.
(c) The Company agrees not to include any other securities in the
Registration Statement covering the Registrable Securities without Investor's
prior written consent which Investor may withhold in its sole discretion.
Furthermore, the Company agrees that it will not file any other Registration
Statement for other securities, until thirty calendar days after the
Registration Statement for the Registrable Securities is declared effective by
the SEC.
Section 3. RELATED OBLIGATIONS.
-------------------
At such time as the Company is obligated to prepare and file the
Registration Statement with the SEC pursuant to Section 2(a), the Company will
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, with respect thereto, the Company
shall have the following obligations:
(a) The Company shall use all commercially reasonable efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective within ninety (90) days after the Execution Date and shall keep such
Registration Statement effective until the earlier to occur of the date on which
(A) the Investor shall have sold all the Registrable Securities; or (B) the
Investor has no right to acquire any additional shares of Common Stock under the
Investment Agreement (hereinafter referred to as the "Registration Period"). The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. The Company shall use all commercially
reasonable efforts to respond to all SEC comments within seven (7) business days
from receipt of such comments by the Company. The Company shall use all
commercially reasonable efforts to cause the Registration Statement relating to
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the Registrable Securities to become effective no later than five (5) business
days after notice from the SEC that the Registration Statement may be declared
effective. The Investor agrees to provide all information which it is required
by law to provide to the Company, including the intended method of disposition
of the Registrable Securities, and the Company's obligations set forth above
shall be conditioned on the receipt of such information.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the Investor
thereof as set forth in such Registration Statement. In the event the number of
shares of Common Stock covered by the Registration Statement filed pursuant to
this Agreement is at any time insufficient to cover all of the Registrable
Securities, the Company shall amend such Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within thirty (30) calendar days after the
necessity therefor arises (based on the then Purchase Price of the Common Stock
and other relevant factors on which the Company reasonably elects to rely),
assuming the Company has sufficient authorized shares at that time, and if it
does not, within thirty (30) calendar days after such shares are authorized. The
Company shall use commercially reasonable efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof.
(c) The Company shall make available to the Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge:
(i) promptly after the same is prepared and filed with the SEC at least
one (1) copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus
included in such Registration Statement (including each preliminary
prospectus) and, with regards to such Registration Statement(s), any
correspondence by or on behalf of the Company to the SEC or the staff
of the SEC and any correspondence from the SEC or the staff of the SEC
to the Company or its representatives;
(ii) upon the effectiveness of any Registration Statement, the Company
shall make available copies of the prospectus, via EDGAR, included in
such Registration Statement and all amendments and supplements
thereto; and
(iii) such other documents, including copies of any preliminary or final
prospectus, as the Investor may reasonably request from time to time
in order to facilitate the disposition of the Registrable Securities.
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(d) The Company shall use commercially reasonable efforts to:
(i) register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or "blue sky" laws
of such states in the United States as the Investor reasonably
requests;
(ii) prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness
thereof during the Registration Period;
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to:
a. qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), or
b. subject itself to general taxation in any such jurisdiction.
The Company shall promptly notify the Investor who holds Registrable Securities
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such event, the
Company shall notify Investor in writing of the happening of any event as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission 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 (hereinafter referred to as "Registration Default") and use all
diligent efforts to promptly prepare a supplement or amendment to such
Registration Statement and take any other necessary steps to cure the
Registration Default (which, if such Registration Statement is on Form S-3, may
consist of a document to be filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be
incorporated by reference in the prospectus) to correct such untrue statement or
omission, and make available copies of such supplement or amendment to the
Investor. The Company shall also promptly notify the Investor:
(i) When a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when the Registration Statement or any
post-effective amendment has become effective (the Company will
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<PAGE>
prepare notification of such effectiveness which shall be delivered to
the Investor on the same day of such effectiveness and by overnight
mail), additionally, the Company will promptly provide to the
Investor, a copy of the effectiveness order prepared by the SEC once
it is received by the Company;
(ii) Of any request by the SEC for amendments or supplements to the
Registration Statement or related prospectus or related information;
(iii) Of the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate;
(iv) In the event the Registration Statement is no longer effective; and /
or
(v) If the Registration Statement is stale as a result of the Company's
failure to timely file its financials or otherwise.
The Company acknowledges that its failure to cure the Registration Default
within ten (10) business days will cause the Investor to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to quantify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. It is the intention of the parties
that interest payable under any of the terms of this Agreement shall not exceed
the maximum amount permitted under any applicable law. If a law, which applies
to this Agreement, which sets the maximum interest amount, is finally
interpreted so that the interest in connection with this Agreement exceeds the
permitted limits, then: (1) any such interest shall be reduced by the amount
necessary to reduce the interest to the permitted limit; and (2) any sums
already collected (if any) from the Company which exceed the permitted limits
will be refunded to the Company. The Investor may choose to make this refund by
reducing the amount that the Company owes under this Agreement or by making a
direct payment to the Company. If a refund reduces the amount that the Company
owes the Investor, the reduction will be treated as a partial payment.
(f) The Company shall use all commercially reasonable efforts to prevent
the issuance of any stop order or other suspension of effectiveness of the
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Investor holding Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
concerning the effectiveness of the registration statement.
(g) The Company shall permit the Investor and one (1) legal counsel,
designated by the Investor, to review and comment upon the Registration
Statement and all amendments and supplements thereto at least one (1) calendar
day prior to their filing with the SEC. However, any postponement of a filing of
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<PAGE>
a Registration Statement or any postponement of a request for acceleration or
any postponement of the effective date or effectiveness of a Registration
Statement by written request of the Investor (collectively, the "Investor's
Delay") shall not act to trigger any penalty of any kind, or any cash amount due
or any in-kind amount due the Investor from the Company under any and all
agreements of any nature or kind between the Company and the Investor. The
event(s) of an Investor's Delay shall act to suspend all obligations of any kind
or nature of the Company under any and all agreements of any nature or kind
between the Company and the Investor.
(h) At the request of the Investor, the Company's counsel shall furnish to
the Investor an opinion letter confirming the effectiveness of the registration
statement. Such opinion letter shall be issued as of the date of the
effectiveness of the registration statement and be in a form suitable to the
Investor.
(i) The Company shall hold in confidence and not make any disclosure of
information concerning the Investor unless:
(i) Disclosure of such information is necessary to comply with federal or
state securities laws;
(ii) The disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement;
(iii) The release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction; or
(iv) Such information has been made generally available to the public other
than by disclosure in violation of this Agreement or any other
agreement.
The Company agrees that it shall, upon learning that disclosure of such
information concerning the Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to the Investor and allow the Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order covering such information.
(j) The Company shall use all commercially reasonable efforts to maintain
designation and quotation of all the Registrable Securities covered by any
Registration Statement on the Principal Market. If, despite the Company's
commercially reasonable efforts, the Company is unsuccessful in satisfying the
preceding sentence, it shall use commercially reasonable efforts to cause all
the Registrable Securities covered by any Registration Statement to be listed on
each other national securities exchange and automated quotation system, if any,
on which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange or system. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(j).
7
<PAGE>
(k) The Company shall cooperate with the Investor to facilitate the prompt
preparation and delivery of certificates representing the Registrable Securities
to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
Investor may reasonably request (and after any sales of such Registrable
Securities by the Investor, such certificates not bearing any restrictive
legend).
(l) The Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first Registration Statement
filed pursuant hereto.
(m) If requested by the Investor, the Company shall:
(i) As soon as reasonably practical incorporate in a prospectus supplement
or post-effective amendment such information as the Investor
reasonably determines should be included therein relating to the sale
and distribution of Registrable Securities, including, without
limitation, information with respect to the offering of the
Registrable Securities to be sold in such offering;
(ii) Make all required filings of such prospectus supplement or
post-effective amendment as soon as reasonably possible after being
notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and
(iii) Supplement or make amendments to any Registration Statement if
reasonably requested by the Investor.
(n) The Company shall use all commercially reasonable efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to facilitate the disposition of such Registrable
Securities.
(o) The Company shall otherwise use all commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
(p) Within one (1) business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver to the transfer agent for such Registrable Securities, with copies
to the Investor, confirmation that such Registration Statement has been declared
effective by the SEC.
(q) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to the Registration Statement.
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<PAGE>
Section 4. OBLIGATIONS OF THE INVESTOR.
---------------------------
(a) At least five (5) calendar days prior to the first anticipated filing
date of the Registration Statement the Company shall notify the Investor in
writing of the information the Company requires from the Investor for the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities and the Investor agrees to furnish to the Company
that information regarding itself, the Registrable Securities and the intended
method of disposition of the Registrable Securities as shall reasonably be
required to effect the registration of such Registrable Securities and the
Investor shall execute such documents in connection with such registration as
the Company may reasonably request. The Investor covenants and agrees that, in
connection with any sale of Registrable Securities by it pursuant to the
Registration Statement, it shall comply with the "Plan of Distribution" section
of the then current prospectus relating to such Registration Statement.
(b) The Investor, by its acceptance of the Registrable Securities, agrees
to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless the Investor has notified the Company in writing of an
election to exclude all of the Investor's Registrable Securities from such
Registration Statement.
(c) The Investor agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3(f) or
the first sentence of 3(e), the Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until the Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(f) or the
first sentence of 3(e).
Section 5. EXPENSES OF REGISTRATION.
------------------------
All expenses, other than underwriting discounts and commissions and other
than as set forth in the Investment Agreement, incurred in connection with or in
any way related to registrations including comments, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printing and accounting fees, and fees and
disbursements of counsel for the Company or for the Investor shall be paid by
the Company.
Section 6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in the Registration
Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company, under this
Agreement, will, and hereby does, indemnify, hold harmless and defend the
Investor who holds Registrable Securities, the directors, officers, partners,
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employees, counsel, agents, representatives of, and each Person, if any, who
controls, any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (hereinafter referred to as the "1934 Act")
(each, hereinafter referred to as an "Indemnified Person"), against any and all
losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, attorneys' fees, amounts paid in settlement or expenses, joint or several
(collectively, hereinafter referred to as "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may be
a party thereto (hereinafter referred to as "Indemnification Damages"), to which
any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon:
(i) Any untrue statement or alleged untrue statement of a material fact in
the Registration Statement or any post-effective amendment thereto or
in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any
jurisdiction in which the Investor has requested in writing that the
Company register or qualify the Shares (hereinafter referred to as
"Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the
statements therein were made, not misleading;
(ii) Any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not
misleading, or
(iii) Any violation or alleged violation by the Company of the 1933 Act,
the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the
offer or sale of the Registrable Securities pursuant to the
Registration Statement (the matters in the foregoing clauses (i)
through (iii) being, collectively, hereinafter referred to as
"Violations").
Subject to the restrictions set forth in Section 6(c) the Company shall
reimburse the Investor and each such controlling person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a):
1) Shall not apply to a Claim arising out of or based upon a Violation
which is due to the inclusion in the Registration Statement of the
information furnished to the Company by any Indemnified Person
expressly for use in connection with the preparation of the
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Registration Statement or any such amendment thereof or supplement
thereto;
2) Shall not be available to the extent such Claim is based on:
a. A failure of the Investor to deliver or to cause to be delivered
the prospectus made available by the Company; or
b. The Indemnified Person's use of an incorrect prospectus despite
being promptly advised in advance by the Company in writing not
to use such incorrect prospectus; or
c. Any claims based on the manner of sale of the Registrable
Securities by the Investor or of the Investor's failure to
register as a dealer under applicable securities laws; or
d. Any omission of the Investor to notify the Company of any
material fact that should be stated in the Registration Statement
or prospectus relating to the Investor or the manner of sale; or
e. Any amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Investor pursuant
to the Registration Statement.
(b) In connection with any Registration Statement in which Investor is
participating, the Investor agrees to severally and jointly indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in Section 6(a), the Company, each of its directors, each of its officers who
signs the Registration Statement, each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act and the Company's agents
(collectively and together with an Indemnified Person, hereinafter referred to
as an "Indemnified Party"), against any Claim or Indemnified Damages to which
any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
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Violation is due to the inclusion in the Registration Statement of the written
information furnished to the Company by the Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), the
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) and the agreement
with respect to contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall only be liable
under this Section 6(b) for that amount of a Claim or Indemnified Damages as
does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the resale of the
Registrable Securities by the Investor pursuant to the Registration Statement.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
were corrected on a timely basis in the prospectus, as then amended or
supplemented. This indemnification provision shall apply separately to each
Investor and liability hereunder shall not be joint and several.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, the representation by counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one (1) separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such counsel shall be selected by the Investor, if the Investor is entitled
to indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation 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 or Indemnified Person which relates to such action or
Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding affected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim. Following indemnification
as provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
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relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
(d) The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
Section 7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
Section 8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investor to sell securities of the Company
to the public without registration ("Rule 144"), provided that the Investor
holds any Registrable Securities are eligible for resale under Rule 144 (k), the
Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144; and
(b) File with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under
Section 5(c) of the Investment Agreement) and the filing of such
reports and other documents is required for the applicable provisions
of Rule 144; and
(c) Furnish to the Investor, promptly upon request:
a. A written statement by the Company that it has complied with the
reporting requirements of Rule 144, the 1933 Act and the 1934
Act,
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b. A copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
requested to permit the Investor to sell such securities pursuant
to Rule 144 without registration.
Section 9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
------------------------------------
The rights and obligations under this Agreement shall not be assignable.
Section 10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
The provisions of this Agreement may be amended only with the written
consent of the Company and Investor.
Section 11. MISCELLANEOUS.
-------------
(a) Any notices or other communications required or permitted to be given
under the terms of this Agreement that must be in writing will be deemed to have
been delivered (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided a confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company:
TransBioTec, Inc.
3030 Old Ranch Parkway
Suite 350
Seal Beach, CA 90740
If to the Investor:
Kodiak Capital Group, LLC
260 Newport Center Drive
Suite 100
Newport Beach, CA 92660
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
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(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(c) This Agreement and the Transaction Documents constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein.
(d) This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
(e) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. Whenever required by
the context of this Agreement, the singular shall include the plural and
masculine shall include the feminine. This Agreement shall not be construed as
if it had been prepared by one of the parties, but rather as if all the parties
had prepared the same.
(f) This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(g) Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(h) In case any provision of this Agreement is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Agreement will not in any way be affected or
impaired thereby. The normal rule of construction and contractual interpretation
that ambiguities should be held against the drafting party is not operative
under this agreement.
Section 12. DISPUTES SUBJECT TO ARBITRATION GOVERNED BY NEW YORK LAW
--------------------------------------------------------
All disputes arising under this agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to principles of conflict of laws. The parties to this agreement will submit all
disputes arising under this agreement to arbitration in New York City, State of
New York before a single arbitrator of the American Arbitration Association
("AAA"). The arbitrator shall be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
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an attorney admitted to practice law in New York, New York. No party to this
agreement will challenge the jurisdiction or venue provisions as provided in
this section. Nothing contained herein shall prevent the party from obtaining an
order to compel arbitration under NY CPLR Article 75. Nothing contained herein
shall prevent the party from obtaining injunctive relief.
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SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT
Your signature on this Signature Page evidences your agreement to be bound by
the terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above. The undersigned signatory hereby
certifies that he has read and understands the Registration Rights Agreement,
and the representations made by the undersigned in this Registration Rights
Agreement are true and accurate, and agrees to be bound by its terms.
KODIAK CAPITAL GROUP, LLC
/s/ Ryan C. Hodson
----------------------------------
Ryan C. Hodson, Managing Director
TRANSBIOTEC, INC.
/s/ J. Scott Painter
----------------------------------
J. Scott Painter, CEO
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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>