EXHIBIT 10.1
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PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
GLOBAL MATRECHS, INC.
AND
BRITTANY CAPITAL MANAGEMENT LTD.
Dated
January 10, 2006
THIS PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 10th day of
January 2006 (this "AGREEMENT"), by and between BRITTANY CAPITAL MANAGEMENT
LTD., a limited liability company organized and existing under the laws of The
Bahamas ("INVESTOR"), and GLOBAL MATRECHS, INC f/ka HOMECOM COMUNICATIONS, INC.,
a corporation organized and existing under the laws of the State of Delaware
(the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, up to Fifteen
Million Dollars ($15,000,000) of the Common Stock (as defined below);
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933 and Regulation D,
and the rules and regulations promulgated thereunder (the "SECURITIES ACT"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in Common Stock to be made hereunder; and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS as used in this Agreement, the following terms
shall have the following meanings specified or indicated (such meanings to be
equally applicable to both the singular and plural forms of the terms defined)
"ADDITIONAL CLOSING DATE" shall mean the date of the closing of the
purchase and sale of the Additional Common Stock.
"AGREEMENT" shall have the meaning specified in the preamble hereof.
"BID PRICE" shall mean, for any Trading Day, the closing bid price of the
Common Stock on the Principal Market for such Trading Day.
"BLACKOUT NOTICE" shall have the meaning specified in the Registration
Rights Agreement.
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"BLACKOUT SHARES" shall have the meaning specified in Section 2.6
"BY-LAWS" shall have the meaning specified in Section 4.8.
"CERTIFICATE" shall have the meaning specified in Section 4.8
"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).
"CLOSING" shall mean one of the closings of a purchase and sale of shares
of Common Stock pursuant to Section 2.3.
"CLOSING DATE" shall mean, as applicable, an Interim Closing Date or a
Remainder Closing Date.
"COMMITMENT PERIOD" shall mean the period commencing on the Effective Date,
and ending on the earlier of (i) the date on which Investor shall have purchased
Put Shares pursuant to this Agreement for an aggregate Purchase Price of the
Maximum Commitment Amount, (ii) the date this Agreement is terminated pursuant
to Section 2.5, or (iii) the date occurring thirty-six (36) months from the date
of commencement of the Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, $.0001 par value per
share, and any shares of any other class of common stock whether now or
hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are convertible
into or exchangeable for Common Stock or any options or other rights to
subscribe for or purchase Common Stock or any such convertible or exchangeable
securities.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"CONDITION SATISFACTION DATE" shall have the meaning specified in Section
7.2.
"DAMAGES" shall mean any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements and
costs and expenses of expert witnesses and investigation).
"DISCOUNT" shall mean eight (8%) percent.
"DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).
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"DTC" shall the meaning specified in Section 2.3.
"DWAC" shall the meaning specified in Section 2.3.
"EFFECTIVE DATE" shall mean the date on which the SEC first declares
effective a Registration Statement registering resale of the Registrable
Securities as set forth in Section 7.2(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FAST" shall the meaning specified in Section 2.3.
"INDEMNIFIED PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNITY NOTICE" shall have the meaning specified in Section 9.3(b).
"INITIAL REGISTRABLE SECURITIES" shall have the meaning specified in the
Registration Rights Agreement.
"INITIAL REGISTRATION STATEMENT" shall have the meaning specified in the
Registration Rights Agreement.
"INTERIM CLOSING DATE" shall mean, with respect to a Closing, the fifth
(5th) Trading Day following the Put Date related to a Closing provided all
conditions to a Closing have been satisfied on or before such Trading Day.
"INTERIM INVESTMENT AMOUNT" shall mean fifty percent (50%) of the
INVESTMENT AMOUNT with respect to each Put Notice.
"INTERIM MARKET PRICE" on any given Put shall mean the average of the
closing Bid Prices for the first three (3) Trading Days during the Valuation
Period.
"INTERIM PURCHASE PRICE" shall mean, with respect to Interim Put Shares,
the Interim Market Price less the product of the Discount and the Interim Market
Price.
"INTERIM PUT SHARES" shall be the number of Put Shares deliverable on an
Interim Closing Date equal to the Interim Investment Amount divided by the
Interim Purchase Price.
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"INVESTMENT AMOUNT" shall mean the dollar amount (within the range
specified in Section 2.2) to be invested by Investor to purchase Put Shares with
respect to any Put Date as notified by the Company to Investor in accordance
with Section 2.2.
"INVESTOR" shall have the meaning specified in the preamble to this
Agreement.
"LEGEND" shall have the meaning specified in Section 8.1.
"MARKET PRICE" on any given date shall mean the average of the three lowest
of the Bid Prices for the ten (10) Trading Days immediately following the Put
Date.
"MAXIMUM COMMITMENT AMOUNT" shall mean Fifteen Million Dollars ($
15,000,000).
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to enter into and perform
its obligations under any of (a) this Agreement and (b) the Registration Rights
Agreement. "MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the lesser
of (a) Five Hundred Thousand Dollars ($500,000), or (b)Five Hundred (500%)
percent of the Weighted Average Volume for the twenty (20) Trading Days
immediately preceding the Put Date.
"MINIMUM COMMITMENT AMOUNT" shall mean One Million Dollars ($1,000,000).
"MINIMUM PUT AMOUNT" shall mean, with respect to any Put, Twenty-Five
Thousand Dollars ($25,000).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
"NEW BID PRICE" shall have the meaning specified in Section 2.6.
"OLD BID PRICE" shall have the meaning specified in Section 2.6.
"OUTSTANDING" shall mean, with respect to the Common Stock, at any
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date as of which the number of shares of Common Stock is to be determined, all
issued and outstanding shares of Common Stock, including all shares of Common
Stock issuable in respect of outstanding convertible securities, scrip or any
certificates representing fractional interests in shares of Common Stock;
provided, however, that Outstanding shall not include any shares of Common Stock
then directly or indirectly owned or held by or for the account of the Company.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"PRINCIPAL MARKET" shall mean the Nasdaq National Market, the Nasdaq Small
Cap Market, the Over the Counter Bulletin Board, the American Stock Exchange or
the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean, with respect to Interim Put Shares, the
Interim Market Price less the product of the Discount and the Interim Market
Price, and with respect to Remainder Put Shares, the Remainder Market Price less
the product of the Discount and the Remainder Market Price.
"PUT" shall mean each occasion that the Company elects to exercise its
right to tender a Put Notice requiring Investor to purchase shares of Common
Stock, subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean the Trading Day during the Commitment Period that a
Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the form of
Exhibit B hereto, to Investor setting forth the Investment Amount with respect
to which the Company intends to require Investor to purchase shares of Common
Stock pursuant to the terms of this Agreement.
"PUT SHARES" shall mean the Interim Put Shares and the Remainder Put
Shares.
"REGISTRABLE SECURITIES" shall mean the (a) Put Shares, (b) the Blackout
Shares and (c) any securities issued or issuable with respect to any of the
foregoing by way of exchange, stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to a Registration
Statement, (ii) such
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Registrable Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 are met, (iii) such time as such Registrable
Securities have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to Investor, such Registrable Securities
may be sold without registration under the Securities Actor the need for an
exemption from any such registration requirements and without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement in the form of Exhibit A hereto.
"REGISTRATION STATEMENT" shall mean a registration statement on Form
SSB-__2 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by Investor of the Registrable Securities under the Securities Act.
"REGULATION D" shall have the meaning specified in the recitals of this
Agreement.
"REMAINDER CLOSING DATE" shall mean, with respect to a Closing, the
eleventh (11h) Trading Day following the Put Date related to a Closing, provided
all conditions to a Closing have been satisfied on or before such Trading Day.
"REMAINDER INVESTMENT AMOUNT" shall mean the Investment Amount less the
Interim Investment Amount.
"REMAINDER MARKET PRICE" on any given Put shall mean the average of the
lowest closing Bid Prices (not necessarily consecutive) for any three (3)
Trading Days during the Valuation Period.
"REMAINDER PURCHASE PRICE" shall mean with respect to Remainder Put Shares,
the Remainder Market Price less the product of the Discount and the Remainder
Market Price.
"REMAINDER PUT SHARES" shall be the number of Put Shares deliverable on a
Remainder Closing Date equal to the Investment Amount divided by the Remainder
Purchase
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Price minus the Interim Put Shares.
"REMAINING PUT SHARES" shall have the meaning specified in Section 2.6.
"RULE 144" shall mean Rule 144 under the Securities Act or any similar
provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECTION 4(2)" shall have the meaning specified in the recitals of this
Agreement.
"SECURITIES ACT" shall have the meaning specified in the recitals of this
Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all reports and other
documents filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since the beginning of the Company's then most recently completed
fiscal year as of the time in question (provided that if the date in question is
within ninety days of the beginning of the Company's fiscal year, the term shall
include all documents filed since the beginning of the second preceding fiscal
year).
"SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed
and delivered by the Company and Investor.
"THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).
"TRADING DAY" shall mean any day during which the Principal Market shall be
open for business.
"TRANSACTION DOCUMENTS" means the Private Equity Credit Agreement, the
Registration Rights Agreement, Closing Certificate, and the Transfer Agent
Instructions.
"TRANSFER AGENT" shall mean the transfer agent for the Common Stock (and to
any substitute or replacement transfer agent for the Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent).
"TRANSFER AGENT INSTRUCTIONS" shall mean the instructions for the Transfer
Agent attached hereto as Exhibit E.
"UNDERWRITER" shall mean any underwriter participating in any
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disposition of the Registrable Securities on behalf of Investor pursuant to a
Registration Statement. "VALUATION EVENT" shall mean an event in which the
Company at any time during a Valuation Period takes any of the following
actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common
Stock or makes any other distribution of
shares of Common Stock, except for
dividends paid with respect to the
Preferred Stock;
(c) issues any options or other rights to
subscribe for or purchase shares of
Common Stock and the price per share for
which shares of Common Stock may at any
time thereafter be issuable pursuant to
such options or other rights shall be
less than the Bid Price in effect
immediately prior to such issuance;
(d) issues any securities convertible into
or exchangeable for shares of Common
Stock and the consideration per share
for which shares of Common Stock may at
any time thereafter be issuable pursuant
to the terms of such convertible or
exchangeable securities shall be less
than the Bid Price in effect immediately
prior to such issuance;
(e) issues shares of Common Stock otherwise
than as provided in the foregoing
subsections (a) through (d), at a price
per share less, or for other
consideration lower, than the Bid Price
in effect immediately prior to such
issuance, or without consideration;
(f) makes a distribution of its assets or
evidences of indebtedness to the holders
of Common Stock as a dividend in
liquidation or by way of return of
capital or other than as a dividend
payable out of earnings or surplus
legally available for dividends under
applicable law or any distribution to
such holders made in respect of the sale
of all or substantially all of the
Company's assets (other than under the
circumstances provided for in the
foregoing subsections (a) through (e);
or
(g) takes any action affecting the number of
Outstanding Common Stock, other than an
action described in any of the foregoing
subsections (a) through (f) hereof,
inclusive, which in the opinion of the
Company's Board of Directors, determined
in good faith, would have a materially
adverse effect upon the rights of
Investor at the time of a Put.
"VALUATION PERIOD" shall mean the period of ten (10) Trading Days
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immediately following the date on which the applicable Put Notice is deemed to
be delivered and during which the Purchase Price of the Common Stock is valued;
provided, however, that if a Valuation Event occurs during any Valuation Period,
a new Valuation Period shall begin on the Trading Day immediately after the
occurrence of such Valuation Event and end on the tenth (10th) Trading Day
thereafter.
"WEIGHTED AVERAGE VOLUME" shall mean the average of the Weighted Volume for
the relevant days.
"WEIGHTED VOLUME" shall mean the product of (a) the Closing Bid Price times
(b) the volume on the Principal Market.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII), on any Put
Date the Company may exercise a Put by the delivery of a Put Notice.
(b) MINIMUM AMOUNT OF PUTS. The Company shall, in
accordance with Section 2.2(a), deliver to Investor during the Commitment
Period, Put Notices with an aggregate Investment Amount at least equal to
the Minimum Commitment Amount. If the Company for any reason fails to issue
and deliver such Put Shares during the Commitment Period, on the first
Trading Day after the expiration of the Commitment Period, the Company
shall wire to Investor a sum in immediately available funds equal to the
product of (i) the Minimum Commitment Amount minus the aggregate Investment
Amounts of the Put Notices delivered to Investor hereunder, and (ii) the
Discount.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period,
the Company may deliver a Put Notice to Investor, subject to the conditions
set forth in Section 7.2; provided, however, the Investment Amount for each
Put as designated by the Company in the applicable Put Notice shall be
neither less than the Minimum Put Amount nor more than the Maximum Put
Amount.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by Investor if such notice is received on or prior to 12:00 noon
New York time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon New
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York time on a Trading Day or at anytime on a day which is not a Trading
Day.
Section 2.3 CLOSINGS. On or prior to each Interim Closing Date, or
Remainder Closing Date, for a Put, (a) the Company shall deliver to the Investor
one or more certificates representing the Interim Put Shares or Remainder Put
Shares, as applicable, to be purchased by Investor pursuant to Section 2.1
herein, registered in the name of Investor and (b) provided all conditions to
Closing have been satisfied by the Company, Investor shall deliver to the
Company the Interim Investment Amount, or Remainder Investment Amount, as
applicable, by wire transfer of immediately available funds within 24 hours
after each Interim Closing Date, or Remainder Closing Date, as applicable. In
lieu of delivering physical certificates representing the Common Stock issuable
in accordance with clause (a) of this Section 2.3, and provided that the
Transfer Agent then is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer ("FAST") program, upon request of Investor,
the Company shall use its commercially reasonable efforts to cause the Transfer
Agent to electronically transmit, prior to the Closing Date, the Put Shares by
crediting the account of the Investor's prime broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system, and provide proof
satisfactory to the Investor of such delivery. In addition, on or prior to such
Closing Date, each of the Company and Investor shall deliver all documents,
instruments and writings required to be delivered or reasonably requested by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein.
Section 2.4 [INTENTIONALLY OMITTED]
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of
Investor pursuant to this Agreement to purchase shares of Common Stock shall
terminate permanently (including with respect to a Closing Date that has not yet
occurred) in the event that (a) there shall occur any stop order or suspension
of the effectiveness of any Registration Statement for an aggregate of thirty
(30) Trading Days during the Commitment Period, for any reason other than
deferrals or suspension during a Blackout Period in accordance with the
Registration Rights Agreement, as a result of corporate developments subsequent
to the Subscription Date that would require such Registration Statement to be
amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act, or (b) the Company shall at any
time fail to comply with the requirements of Section 6.3, 6.4, or 6.6 and such
failure shall continue for more than thirty (30) days.
Section 2.6 BLACKOUT SHARES. In the event that, (a) within fifteen (15)
Trading Days following any Closing Date, the Company gives a Blackout Notice to
Investor of a Blackout Period in accordance with the Registration Rights
Agreement, and (b) the Bid Price on the Trading Day immediately preceding such
Blackout Period ("OLD BID PRICE") is greater than the Bid Price on the first
Trading Day following such Blackout Period that Investor may sell its
Registrable Securities pursuant to an effective Registration Statement ("NEW BID
PRICE"), then the Company shall issue to Investor the number of additional
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shares of Registrable Securities (the "BLACKOUT SHARES") equal to the difference
between (i) the product of the number of Put Shares held by Investor immediately
prior to the Blackout Period that were issued on the most recent Closing
Date(the "REMAINING PUT SHARES") multiplied by the Old Bid Price, divided by the
New Bid Price, and (ii) the Remaining Put Shares that were issued on the most
recent Closing Date.
Section 2.7 [INTENTIONALLY LEFT BLANK]
Section 2.8 LIQUIDATED DAMAGES. Each of the Company and Investor
acknowledge and agree that the requirement to issue Blackout Shares under
Section 2.6 shall give rise to liquidated damages and not penalties. Each of the
Company and Investor further acknowledge that (a) the amount of loss or damages
likely to be incurred is incapable or is difficult to precisely estimate, (b)
the amount specified in such Section bears a reasonable proportion and is not
plainly or grossly disproportionate to the probable loss likely to be incurred
by Investor in connection with the failure by the Company to make Puts with
aggregate Purchase Prices totaling at least the Minimum Commitment Amount or in
connection with a Blackout Period under the Registration Rights Agreement, and
(c) each of the Company and Investor are sophisticated business parties and have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for its own
account and Investor has no present arrangement (whether or not legally binding)
at any time to sell the Common Stock to or through any person or entity;
provided, however, Investor reserves the right to dispose of the Common Stock at
any time in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 SOPHISTICATED INVESTOR. Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Common Stock. Investor acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.
Section 3.3 AUTHORITY. (a) Investor has the requisite power and authority
to enter into and perform its obligations under this Agreement and the
transactions contemplated hereby in accordance with its terms; (b) the execution
and delivery of this Agreement and the Registration Rights Agreement, and the
consummation by it of the transactions contemplated
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hereby and thereby have been duly authorized by all necessary action and no
further consent or authorization of Investor or its partners is required; and
(c) this Agreement has been duly authorized and validly executed and delivered
by Investor and is a valid and binding agreement of Investor enforceable against
it in accordance with its terms, subject to applicable bankruptcy, insolvency,
or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application.
Section 3.4 NOT AN AFFILIATE. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 ORGANIZATION AND STANDING. Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the Cayman Islands, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Investor is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a material adverse
effect on Investor.
Section 3.6 ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the requirements hereof and thereof, will not (a) violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on
Investor, (b) violate any provision of any indenture, instrument or agreement to
which Investor is a party or is subject, or by which Investor or any of its
assets is bound, or conflict with or constitute a material default thereunder,
(c) result in the creation or imposition of any lien pursuant to the terms of
any such indenture, instrument or agreement, or constitute a breach of any
fiduciary duty owed by Investor to any third party, or (d) require the approval
of any third-party (that has not been obtained) pursuant to any material
contract, instrument, agreement, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management may
be subject.
Section 3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that has been requested by Investor. Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 MANNER OF SALE. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
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Section 3.9 FINANCIAL CAPABILITY. Investor presently has the financial
capacity and the necessary capital to perform its obligations hereunder and
shall and has provided to the Company such financial and other information that
the Company has requested to demonstrate such capacity.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that, except as disclosed
in the SEC Documents:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware, and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, other than those in
which the failure so to qualify would not have a Material Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and to issue the Put Shares and the Blackout
Shares, if any; (b) the execution and delivery of this Agreement and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (c) each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
Section 4.3 CAPITALIZATION. As of December 31, 2005, the authorized capital
stock of the Company consisted of the following:
Common stock, $.0001 par value, 300,000,000 shares authorized, 148,274,286
shares issued and outstanding at December 31, 2005
Redeemable Preferred stock, Series B, $.01 par value, 125 shares
authorized; 0 shares at December 31, 2005 (Retired).
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Preferred stock, Series C, $.01 par value, 175 shares authorized; 0.99
shares outstanding at December31, 2005.
Preferred stock, Series D, $.01 par value, 75 shares authorized; 0 shares
issued as of December 31, 2005 (Retired).
Preferred stock, Series E, $.01 par value, 106.4 shares authorized 106.4
shares outstanding at December 31, 2005.
Preferred Stock Series G, $.01 par value, 1069 shares authorized; 1069
shares outstanding at December 31, 2005.
Preferred stock Series H, $.01 par value, 13,500 shares authorized, 12,582
shares are outstanding at December 31, 2005.
Preferred stock Series I, $.01 par value 1000 shares authorized; 490.5
shares issued and outstanding as of December 31, 2005.
All of the outstanding shares of Common Stock of the Company have been duly
and validly authorized and issued and are fully paid and nonassessable.
Section 4.4 COMMON STOCK. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of the Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date of this Agreement, the Principal Market is the OTC
Bulletin Board.
Section 4.5 SEC DOCUMENTS. The Company has delivered or made available to
Investor true and complete copies of the SEC Documents on file as of December
31, 2005. To the best of Company's knowledge, the Company has not provided to
Investor any information that, according to applicable law, rule or regulation
should have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and other federal, state and local laws,
rules and regulations applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect
15
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such financial
statements or the notes thereto or (b) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Section 4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. To the best of
Company's knowledge, the sale and issuance of the Put Shares and the Blackout
Shares, if any, in accordance with the terms and on the bases of the
representations and warranties set forth in this Agreement, may and shall be
properly issued by the Company to Investor pursuant to an exemption from
registration pursuant to the Securities Act and/or any applicable state law.
When issued and paid for as herein provided, the Put Shares, and the Blackout
Shares, if any, shall be duly and validly issued, fully paid, and nonassessable.
Neither the sales of the Put Shares or the Blackout Shares, if any, pursuant to,
nor the Company's performance of its obligations under, this Agreement or the
Registration Rights Agreement shall (a) result in the creation or imposition of
any liens, charges, claims or other encumbrances upon the Put Shares or the
Blackout Shares, if any, or any of the assets of the Company, or (b) entitle the
holders of Outstanding Common Stock to preemptive or other rights to subscribe
to or acquire the Common Stock or other securities of the Company. The Put
Shares and the Blackout Shares, if any, shall not subject Investor to personal
liability by reason of the ownership thereof.
Section 4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (a) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Put Shares or the Blackout Shares, if
any, or (b) made any offers or sales of any security or solicited any offers to
buy any security under any circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.8 CORPORATE DOCUMENTS. The Company has furnished or made
available to Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "CERTIFICATE"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"BY-LAWS").
Section 4.9 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put Shares
and the Blackout Shares, if any, do not and will not (a) result in a violation
of the Certificate or By-Laws or (b) conflict with, or constitute a material
default (or an event that with notice or
16
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, indenture, instrument or any "lock-up" or similar provision
of any underwriting or similar agreement to which the Company is a party, or (c)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations)applicable to the Company or by which any property or asset
of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect) nor is
the Company otherwise in violation of, conflict with or in default under any of
the foregoing; provided, however, that for purposes of the Company's
representations and warranties as to violations of foreign law, rule or
regulation referenced in clause (c), such representations and warranties are
made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock in accordance with the terms
hereof(other than any SEC, NASD or state securities filings that may be required
to be made by the Company subsequent to any Closing, any registration statement
that may be filed pursuant hereto, and any shareholder approval required by the
rules applicable to companies whose common stock trades on the Over The Counter
Bulletin Board); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of Investor herein.
Section 4.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 2005, no event
has occurred that would have a Material Adverse Effect on the Company, except as
disclosed in the SEC Documents on file on the date hereof.
Section 4.11 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents on file on the date hereof or otherwise
publicly announced, other than those incurred in the ordinary course of the
Company's businesses since September 30, 2005 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since September 30,
2005, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that,
17
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents on file on the date hereof.
Section 4.13 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may be set forth
in the SEC Documents on file on the date hereof, there are no lawsuits or
proceedings pending or to the best knowledge of the Company threatened, against
the Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which would have a Material Adverse
Effect. Except as set forth in the SEC Documents on file on the date hereof, no
judgment, order, writ, injunction or decree or award has been issued by or, so
far as is known by the Company, requested of any court, arbitrator or
governmental agency which would have a Material Adverse Effect.
Section 4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company, any Person
representing the Company, and, to the knowledge of the Company, any other Person
selling or offering to sell the Put Shares or the Blackout Shares, if any, in
connection with the transactions contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer or sale of the
same which contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities with respect
to shares of the Common Stock will be in compliance with all applicable state
and federal securities laws, rules and regulations and the rules and regulations
of the NASD and the Principal Market on which the Common stock is listed.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the Registration
18
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. Not later than February 15, 2006,
the Company shall have available and the Company shall reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Put
Shares and the Blackout Shares, if any; such amount of shares of Common Stock to
be reserved shall be calculated based upon a minimum Purchase Price of $.05 for
the Put Shares under the terms and conditions of this Agreement and a good faith
estimate by the Company in consultation with Investor of the number of Blackout
Shares, if any, that will need to be issued. The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered hereunder.
Section 6.3 LISTING OF COMMON STOCK. The Company shall maintain the listing
of the Common Stock on a Principal Market and, if applicable, will cause the Put
Shares and the Blackout Shares, if any, to be listed on the Principal Market.
The Company further shall, if the Company applies to have the Common Stock
traded on any other Principal Market, include in such application the Put Shares
and the Blackout Shares, if any, and shall take such other action as is
necessary or desirable in the reasonable opinion of Investor to cause the Common
Stock to be listed on such other Principal Market as promptly as possible. The
Company shall use its commercially reasonable efforts to continue the listing
and trading of the Common Stock on the Principal Market (including, without
limitation, maintaining sufficient net tangible assets) and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASD and the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any action or
file any document (whether or not permitted by said Act or the rules
thereunder)to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Put Shares and the
Blackout Shares, if any, shall be free of legends, except as provided for in
Article VIII.
Section 6.6 CORPORATE EXISTENCE. The Company shall take all commercially
reasonable steps necessary to preserve and continue the corporate existence of
the Company.
Section 6.7 [INTENTIONALLY OMITTED]
Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION;
19
SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify 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 Registrable
Securities: (a) 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; (b) 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; (c) receipt of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (d) 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 (e) 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.
Section 6.9 EXPECTATIONS REGARDING PUT NOTICES. Within fifteen (15)
business days after the commencement of each calendar quarter occurring
subsequent to the commencement of the Commitment Period, the Company undertakes
to notify Investor as to its reasonable expectations as to the dollar amount it
intends to raise during such calendar quarter, if any, through the issuance of
Put Notices. Such notification shall constitute only the Company's good faith
estimate with respect to such calendar quarter and shall in no way obligate the
Company to raise such amount during such calendar quarter or otherwise limit its
ability to deliver Put Notices during such calendar quarter. The failure by the
Company to comply with this provision can be cured by the Company's notifying
Investor at any time as to its reasonable expectations with respect to the
current calendar quarter.
Section 6.10 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to Investor
such shares of Common Stock and/or securities as Investor is entitled to receive
pursuant to this Agreement.
20
Section 6.11 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of the
Put Shares and the issuance of the Blackout Shares, if any, shall be made in
accordance with the provisions and requirements of Regulation D (or shall
otherwise be exempt from the registration requirements of the Securities Act)
and any applicable state law.
Section 6.12 DILUTION. The number of shares of Common Stock issuable as Put
Shares may increase substantially 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
Commitment 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. The board of
directors of the Company has concluded, in its good faith business judgment that
such issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Put Shares is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell
the Put Shares to Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time, except for changes
which have not had a Material Adverse Effect.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A
PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE
21
PUT SHARES. The right of the Company to deliver a Put Notice and the obligation
of Investor hereunder to acquire and pay for the Put Shares incident to a
Closing is subject to the satisfaction, on (a) the date of delivery of such Put
Notice and (b) the applicable Closing Date (each a "CONDITION SATISFACTION
DATE"), of each of the following conditions:
(a) REGISTRATION OF REGISTRABLE SECURITIES WITH THE SEC. As
set forth in the Registration Rights Agreement, the Company shall have
filed with the SEC the Initial Registration Statement with respect to the
resale of the Initial Registrable Securities by Investor and such
Registration Statement shall have been declared effective by the SEC prior
to the first Put Date. For the purposes of any Put Notice with respect to
the Registrable Securities other than the Initial Registrable Securities,
the Company shall have filed with the SEC a Registration Statement with
respect to the resale of such Registrable Securities by Investor which
shall have been declared effective by the SEC prior to the Put Date
therefore.
(b) EFFECTIVE REGISTRATION STATEMENT. As set forth in the
Registration Rights Agreement, a Registration Statement shall have
previously become effective for the resale by Investor of the Registrable
Securities subject to such Put Notice and such Registration Statement shall
remain effective on each Condition Satisfaction Date and (i) neither the
Company nor 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.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct
in all material respects as of each Condition Satisfaction Date as though
made at each such time (except for representations and warranties
specifically made as of a particular date) with respect to all periods, and
as to all events and circumstances occurring or existing to and including
each Condition Satisfaction Date, except for any conditions which have
temporarily caused any representations or warranties herein to be incorrect
and which have been corrected with no continuing material impairment to the
Company or Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with
by the Company at or prior to each Condition Satisfaction Date.
22
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of competent
jurisdiction that prohibits or directly and materially adversely affects
any of the transactions contemplated by this Agreement, and no proceeding
shall have been commenced that may have the effect of prohibiting or
materially adversely affecting any of the transactions contemplated by this
Agreement.
(f) [INTENTIONALLY OMITTED]
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common Stock shall not have been suspended by the SEC,
the Principal Market or the NASD and the Common Stock shall have been
approved for listing or quotation on and shall not have been delisted from
the Principal Market.
(h) LEGAL OPINION. The Company shall have caused to be
delivered to Investor, within five (5) Trading Days of the effective date
of the Initial Registration Statement and each subsequent Registration
Statement, an opinion of the Company's legal counsel in the form of Exhibit
C hereto, addressed to Investor.
(i) [INTENTIONALLY OMITTED]
(j) Notwithstanding anything to the contrary contained herein,
if, on any Closing Date, the number of Put Shares then to be purchased
pursuant to a Put Notice by Investor would, when aggregated with all other
shares of Common Stock then held by Investor (including, for the purposes
of this Section 7.2(j), Common Stock issuable upon conversion, exercise or
exchange, as applicable, of Common Stock Equivalents then held by
Investor), cause Investor to beneficially own in excess of 9.999% of the
total number of issued and outstanding shares of Common Stock after giving
effect to the Put (the "Percentage Cap"), then the number of Put Shares
shall be reduced to the extent necessary for Investor's beneficial
ownership of Common Stock, after giving effect to the Put, not to exceed
the Percentage Cap. For such purposes, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder. In the event the number of
Put Shares with respect to any Put are required to be reduced pursuant to
this Section 7.2(j), Investor shall provide, via facsimile, as soon as
possible on the Closing Date, and in no event later than 12:00 p.m. EST, a
notice to the Company setting forth the maximum number of shares issuable
pursuant to such put which would not result in Investor's beneficial
ownership exceeding the Percentage Cap.
(k) NO KNOWLEDGE. The Company shall have no knowledge of any
event more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is more
likely than not to occur within the fifteen Trading Days following the
Trading Day on which such Notice is deemed delivered.
23
(l) SHAREHOLDER VOTE. The issuance of shares of Common Stock
with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(m) OTHER. On each Condition Satisfaction Date, Investor shall
have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by Investor in order
for Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2., including, without limitation, a certificate in
substantially the form and substance of Exhibit D hereto, executed by an
executive officer of the Company and to the effect that all the conditions
to such Closing shall have been satisfied as at the date of each such
certificate.
Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall make available for inspection and review
by Investor, advisors to and representatives of Investor (who may or may
not be affiliated with Investor and who are reasonably acceptable to the
Company), and any Underwriter, any Registration Statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all
other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such information
reasonably requested by Investor or any such representative, advisor or
Underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to
time after the filing and effectiveness of such Registration.
(b) Each of the Company, its officers, directors, employees
and agents shall in no event disclose non-public information to Investor,
advisors to or representatives of Investor.
(c) Nothing herein shall require the Company to disclose
non-public information to 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 shall, as
hereinabove provided, immediately notify the advisors and representatives
of Investor and 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 a 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
24
light of the circumstances in which they were made, not misleading. Nothing
contained in this Section 7.3 shall be construed to mean that such persons
or entities other than Investor (without the written consent of 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 and conditions 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, any
Registration Statement contains an untrue statement of a material fact or
omits a material fact required to be stated in such Registration Statement
or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE VIII
LEGENDS
Section 8.1 LEGENDS. (a) Except as otherwise provided below, each
certificate representing Registrable Securities will bear the following legend
(the "LEGEND"):
The securities represented by this certificate have not
been registered under the Securities Act of 1933 (the
"Securities Act") or qualified under applicable state
securities laws. These securities may not be offered,
sold, pledged, hypothecated, transferred or otherwise
disposed of except pursuant to (i) an effective
registration statement and qualification in effect with
respect thereto under the Securities Act and under any
applicable state securities law, (ii) to the extent
applicable, Rule 144 under the Securities Act, or (iii) an
opinion of counsel reasonably acceptable to the Company
that such registration and qualification is not required
under applicable federal and state securities laws."
(b) As soon as practicable after the execution and
delivery hereof, the Company shall issue to the Transfer Agent the Transfer
Agent Instructions. Such instructions shall be irrevocable by the Company
from and after the date thereof or from and after the issuance thereof
except as otherwise expressly provided in the Registration Rights
Agreement. It is the intent and purpose of such instructions, as provided
therein, to require the Transfer Agent to issue to Investor certificates
evidencing shares of Common Stock incident to a Closing, free of the
Legend, without consultation by the transfer agent with the Company or its
counsel and without the need for any further advice or instruction or
documentation to the Transfer Agent by or from the Company or its counsel
or Investor; provided that (a) a Registration Statement shall then be
effective, (b) Investor confirms to the Transfer Agent and the Company that
it has or intends to sell such Common Stock to a third
25
party which is not an affiliate of Investor or the Company and Investor
agrees to redeliver the certificate representing such shares of Common
Stock to the Transfer Agent to add the Legend in the event the Common Stock
is not sold, and (c) Investor confirms to the transfer agent and the
Company that Investor has complied with the prospectus delivery requirement
under the Securities Act. At any time after the Effective Date, upon
surrender of one or more certificates evidencing Common Stock that bear the
Legend, to the extent accompanied by a notice requesting the issuance of
new certificates free of the Legend to replace those surrendered.
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 8.1 has been or shall be placed on the share
certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3 COVER. If the Company fails for any reason to deliver the Put
Shares on such Closing Date and the holder of the Put Shares (a "Investor")
purchases, in an open market transaction or otherwise, shares of Common Stock
(the "Covering Shares") in order to make delivery in satisfaction of a sale of
Common Stock by such Investor (the "Sold Shares"), which delivery such Investor
anticipated to make using the Put Shares (a "Buy-In"), then the Company shall
pay to such Investor, in addition to all other amounts contemplated in other
provisions of the Transaction Documents, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) such Investor's total purchase price
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds (after brokerage commissions, if any) received by such Investor
from the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment
Amount to such Investor in immediately available funds immediately upon demand
by such Investor. By way of illustration and not in limitation of the foregoing,
if such Investor purchases Covering Shares having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock that it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount that the Company will be required to pay to such Investor will
be $1,000.
Section 8.4 INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall
affect in any way Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents, approvals,
and other
26
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (a) personally served,(b) deposited in the
mail, registered or certified, return receipt requested, postage prepaid, (c)
delivered by reputable air courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice given in accordance herewith. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company: Global Matrechs, Inc.
90 Grove Street, Suite 201
Ridgefield, CT 06877
Telephone No.: (203) 431-6665
Telecopier No.: (203) 431-8304
if to Investor: Brittany Capital Management Ltd.
Cumberland House
27 Cumberland Street
PO Box N-10818
Nassau, New Providence
Bahamas
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 9.1 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the
other party hereto.
Section 9.2 INDEMNIFICATION.
The Company agrees to indemnify and hold harmless Investor
and its officers, directors, employees, and agents, and each Person or
entity, if any, who controls Investor within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, together with the
Controlling Persons (as defined in the Registration Rights Agreement) from
and against any Damages, joint or several, and any action in respect
thereof to which Investor, its partners, affiliates, officers, directors,
employees, and duly authorized agents, and any such Controlling Person
becomes subject to, resulting from, arising out of or relating
27
to any misrepresentation, breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Company
contained in this Agreement, as such Damages are incurred, except to the
extent such Damages result primarily from Investor's failure to perform any
covenant or agreement contained in this Agreement or Investor's or its
officer's, director's, employee's, agent's or Controlling Person's
negligence, recklessness or bad faith in performing its obligations under
this Agreement.
Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.2
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
any person claiming indemnification under any provision of this Article (an
"INDEMNIFIED PARTY") might seek indemnity under this Article is asserted
against or sought to be collected from such Indemnified Party by a person
other than a party hereto or an affiliate thereof (a "THIRD PARTY CLAIM"),
the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis
for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of this Article
against any person (the "INDEMNIFYING PARTY"), together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in
good faith, of such Third Party Claim (a "CLAIM NOTICE") with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails to
provide the Claim Notice with reasonable promptness after the Indemnified
Party receives notice of such Third Party Claim, the Indemnifying Party
shall not be obligated to indemnify the Indemnified Party with respect to
such Third Party Claim to the extent that the Indemnifying Party's ability
to defend has been prejudiced by such failure of the Indemnified Party. The
Indemnifying Party shall notify the Indemnified Party as soon as
practicable within the period ending thirty (30) calendar days following
receipt by the Indemnifying Party of either a Claim Notice or an Indemnity
Notice (as defined below) (the "DISPUTE PERIOD") whether the Indemnifying
Party disputes its liability or the amount of its liability to the
Indemnified Party under this Article and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party
against such Third Party Claim.(i)If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to the Third Party
Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall
have the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying Party,
such Third Party Claim by all appropriate proceedings, which proceedings
shall be vigorously and diligently prosecuted by the Indemnifying Party to
a final conclusion or will be settled at the discretion of the Indemnifying
Party (but only with the consent of the Indemnified Party in the case of
any settlement that provides for any relief other than the payment of
monetary damages or that provides for the payment of monetary damages as to
which the Indemnified Party shall not be indemnified in full pursuant to
this Article). The Indemnifying Party shall have full control of such
defense and proceedings,
28
including any compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified
Party, at any time prior to the Indemnifying Party's delivery of the notice
referred to in the first sentence of this clause (i), file any motion,
answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying
Party, the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party
elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by
the Indemnifying Party pursuant to this clause (i), and except as provided
in the preceding sentence, the Indemnified Party shall bear its own costs
and expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may takeover the control of the defense or
settlement of a Third Party Claim at any time if it irrevocably waives its
right to indemnity under this Article with respect to such Third Party
Claim. (ii) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or
settle the Third Party Claim, or if the Indemnifying Party fails to give
any notice whatsoever within the Dispute Period, then the Indemnified Party
shall have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings,
which proceedings shall be prosecuted by the Indemnified Party in a
reasonable manner and in good faith or will be settled at the discretion of
the Indemnified Party(with the consent of the Indemnifying Party, which
consent will not be unreasonably withheld). The Indemnified Party will have
full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified Party
and its counsel in contesting any Third Party Claim which the Indemnified
Party is contesting. Notwithstanding the foregoing provisions of this
clause (ii), if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its
liability or the amount of its liability hereunder to the Indemnified Party
with respect to such Third Party Claim and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided in clause (iii)
below, the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this clause (ii) or
of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The Indemnifying
Party may participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this clause (ii), and the
Indemnifying Party shall bear its own costs and expenses with respect to
such participation. (iii) If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability or the amount of
its liability to the Indemnified Party with respect to the Third Party
Claim under this Article or fails to notify the Indemnified Party within
the
29
Dispute Period whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party with respect to such Third
Party Claim, the amount of Damages specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under this
Article and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in
good faith to negotiate a resolution of such dispute; provided, however,
that if the dispute is not resolved within thirty (30) days after the Claim
Notice, the Indemnifying Party shall be entitled to institute such legal
action as it deems appropriate.
(b) In the event any Indemnified Party should have a claim
under this Article against the Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under this Article specifying the
nature of and basis for such claim, together with the amount or, if not
then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "INDEMNITY NOTICE") with reasonable promptness to
the Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to
the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim or the amount of the claim described in such Indemnity Notice, the
amount of Damages specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under this Article and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its
liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that if the
dispute is not resolved within thirty (30) days after the Claim Notice, the
Indemnifying Party shall be entitled to institute such legal action as it
deems appropriate.
(c) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar rights of the Indemnified
Party against the Indemnifying Party or others, and (ii) any liabilities
the Indemnifying Party may be subject to.
Section 9.4 REIMBURSEMENT. (i) any Investor, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any stockholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if such Investor is impleaded in
any such action, proceeding or investigation by any Person, or (ii) any
Investor, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
30
the federal securities laws, 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 Transaction Agreements, or if such Investor is impleaded in
any such action, proceeding or investigation by any Person, then in any such
case, the Company will reimburse such 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 such Investor is a named party,
the Company will pay such Investor the charges, as reasonably determined by such
Investor, for the time of any officers or employees of such 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 paragraph
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 who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Investor and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Investor and any such Affiliate and any such
Person. The Company also agrees that neither any Investor nor any such
Affiliate, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Agreements except to the extent that any losses, claims,
damages, liabilities or expenses incurred by the Company result from the gross
negligence or willful misconduct of such Investor.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York without
regard to the principles of conflicts of law. Each of the Company and Investor
hereby submit to the exclusive jurisdiction of the United States Federal and
state courts located in New York with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section 10.2 JURY TRIAL WAIVER. The Company and the Investor hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter arising out of or in
connection with the Transaction Documents.
31
Section 10.3 SPECIFIC ENFORCEMENT. The Company and the Investor acknowledge
and agree that irreparable damage would occur to the Investor in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the Investor shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 10.4 ASSIGNMENT. Neither this Agreement nor any rights of Investor
or the Company hereunder may be assigned by either party to any other person.
Section 10.5 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the Company and Investor, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
Section 10.6 TERMINATION. This Agreement shall terminate at the end of the
Commitment Period or as otherwise provided herein(unless extended by the
agreement of the Company and Investor); provided, however, that the provisions
of Article VI, VIII, IX and Sections 10.2, 10.3 and 10.4 shall survive the
termination of this Agreement.
Section 10.7 ENTIRE AGREEMENT,. This Agreement and the instruments
referenced herein contain the entire understanding of the Company and Investor
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor Investor makes
any representation, warranty, covenant or undertaking with respect to such
matters.
Section 10.8 FEES AND EXPENSES. Except as otherwise provided in this
Agreement or any of the Exhibits thereto, each of the Company and Investor
agrees to pay its own expenses in connection with the preparation of this
Agreement and performance of its obligations hereunder. The Company shall pay
all stamp or other similar taxes and duties levied in connection with issuance
of the Shares pursuant hereto.
Section 10.9 NO BROKERS. Each of the Company and Investor represents that
it has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party,
except that the company agrees to pay the consultant, Greenfield Capital
Partners, LLC., a fee in the amount of 1% of any money funded pursuant to a Put
Notice. The Company on the one hand, and Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any persons claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
32
Section 10.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the Company and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 10.11 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the Company hereto shall survive each Closing
hereunder for a period of one (1) year thereafter. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this
Agreement to any party.
Section 10.12 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.
Section 10.13 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.
Section 10.14 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.15 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price of the Common Stock on
any given Trading Day for the purposes of this Agreement shall be Bloomberg L.P.
or any successor thereto.
Section 10.16 PUBLICITY. The Company and 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
written consent of the other parties, 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 parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Investor without the prior
33
written consent of such Investor, except to the extent required by law. Investor
acknowledges that this Agreement and all or part of the Transaction Documents
may be deemed to be "material contracts" as that term is defined by Item
601(b)(10) of Regulation S-K, and that the Company may therefore be required to
file such documents as exhibits to reports or registration statements filed
under the Securities Act or the Exchange Act. 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.
[REMAINDER OF PAGE LEFT BLANK]
34
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
GLOBAL MATRECHS, INC.
By: /s/ Michael Sheppard
----------------------------
Name: Michael Sheppard
Title: President
BRITTANY CAPITAL MANAGEMENT LTD.
By: /s/ Barry W. Herman
----------------------------
Name: Barry W. Herman
Title: President
35
EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Put Notice
EXHIBIT C Opinion
EXHIBIT D Closing Certificate
EXHIBIT E Transfer Agent Instructions
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