STOCK PURCHASE AGREEMENT
This Stock Purchase agreement (the "Agreement"), dated as of April 2003, among
ChampionLyte Holdings, Inc. (the "Seller"), and Advantage Fund I, LLC hereto
("Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement in accordance with Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), the Seller desires to issue and sell to the
Purchaser desires to purchase from the Seller (i) up to $ 1,000,000 of the
common stock (the "Common Stock") of ChampionLyte Holdings, Inc. (the "Company"
a/k/a the "Seller" if and only if the Company is selling the Common Stock to the
Purchaser), as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Seller and the Purchaser agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing
(a) The Closing. Subject to the terms and conditions set forth
in this Agreement, the Seller shall issue and sell to the Purchaser and the
Purchaser shall purchase from the Seller the Common Stock for an aggregate
installment payment purchase price of $ 1,000,000. The closing of the purchase
and sale of the Common Stock (the "Closing") shall take place at the offices of
Anslow & Jaclin, LLP, Attorneys at Law ("Anslow & Jaclin"), immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Closing is hereinafter referred to as the "Closing Date."
(ii) On the Closing Date, the parties shall deliver or
shall cause to be delivered the following: (A) the
Seller shall deliver to Anslow & Jaclin: (1) Common
Stock in the aggregate principal equal to 100% of the
Purchased Stock (as defined hereafter) plus the
Security Deposit Stock, as defined hereafter. (2) a
Power of Attorney, in the form of Exhibit A, (3) an
executed Registration Rights Agreement, dated the
date hereof, among the Seller and the Purchaser, in
the form of Exhibit B (the "Registration Rights
Agreement"), and (4) Transfer Agent Instructions, in
the form of Exhibit C, delivered to and acknowledged
by the transfer agent for the Common Stock (the
"Transfer Agent Instructions"), and (B) each
Purchaser will deliver to Anslow & Jaclin: (1) 100%
of the installment of the purchase price indicated
below such Purchaser's name on the signature page to
this Agreement in United States dollars in
immediately available funds by wire transfer or check
to Anslow & Jaclin, who shall act as escrow agent in
this transaction in addition to acting as legal
counsel to Purchaser.
(iii) Anslow & Jaclin shall act as escrow agent and upon
its receipt of the Common Stock and installment
purchase price and its confirmation of the validity
of receipt of the same, Anslow & Jaclin shall release
the installment purchase price to the Seller and the
Common Stock that has been prorata purchased to the
Purchaser. Any Common Stock which has not been fully
paid for by the Purchaser based on the fact that the
total purchase price is being paid in installments,
shall be held in escrow by Anslow & Jaclin and shall
only be released as is discussed hereafter.
(iv) The purchase price for the Common Stock is calculated
based on the closing bid price of the Common Stock on
the date that Anslow & Jaclin received said Common
Stock in escrow (the "Closing Date Price"). The
Purchaser intends on purchasing $ 1,000,000 worth of
Common Stock, which shall be paid for in forty equal
installments of twenty five thousand dollars each
(the "Installment"). The exact number of shares of
Common Stock purchased shall be calculated on the
Closing Date (the "Purchased Stock"). In addition to
the Purchased Stock, the Seller shall deliver to
Anslow & Jaclin Common Stock in the amount of 200% of
the number of shares of the Purchased Stock to be
held in escrow by Anslow & Jaclin, (the "Security
Deposit Stock").
(v) The Security Deposit Stock shall be held by Anslow &
Jaclin in escrow until all of the Purchased Stock has
been sold by the Purchaser, thereafter, the Security
Deposit Stock shall only be transferred to the
Purchaser to the extent that the net proceeds
received by the Purchaser for the sales of the
Purchased Stock do not yield the "Return", as
hereafter defined. All shares of stock of the
Security Deposit Stock which remain after the
Purchaser has received the Return shall be returned
to the Seller or be transferred as directed by the
Seller. The Purchaser must provide to the Seller
written proof of its return on investment with
regards to this transaction in order to be permitted
to receive stock from the Security Deposit Stock.
(vi) The Return shall mean thirty percent for each
calendar quarter in which Purchaser owns any of the
Purchased Stock. There is no guarantee that the
Purchaser will hold any stock for the long term. If
the Return is achieved by the Purchaser after selling
the Purchased Stock and any applicable Security
Deposit Stock or other stock provided to guarantee
the Return, then the Purchaser shall again purchase
an additional Installment under the same terms and
conditions set forth in this agreement.
1.2 Defined Terms. The Purchased Stock and Security Deposit Stock
shall collectively be known as the "Shares" or "Securities".
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Seller. The Seller hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Seller is an
individual or a corporation duly incorporated, validly existing and in good
standing under the laws of its state of incorporation with the requisite
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. The Seller is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Securities (as defined below) or any of this Agreement, the Registration
Rights Agreement, the Transfer Agent Instructions, or the Power of Attorney
(collectively, the "Transaction Documents"), (y) have or result in a material
adverse effect on the results of operations, assets, prospects, or condition
(financial or otherwise) of the public company whose stock is being purchased
under this Agreement, or (z) adversely impair the Seller's ability to perform
fully on a timely basis its obligations under any of the Transaction Documents
(any of (x), (y) or (z), a "Material Adverse Effect").
(b) Authorization; Enforcement. The Seller has the requisite
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Seller and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Seller and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Seller enforceable against the Seller in accordance
with its terms. Neither the Seller nor any related entity is in violation of any
of the provisions of its respective certificate or articles of incorporation,
by-laws or other organizational or charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is accurately set forth in the public
filings of the Company, or, if it is not, then the Seller has attached hereto as
Exhibit D the accurate information. Except as disclosed in Exhibit D, the
Company owns all of the capital stock of each Subsidiary. No shares of Common
Stock are entitled to preemptive or similar rights, nor is any holder of the
securities of the Company or any Subsidiary entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company, the
Seller or any Subsidiary by virtue of any of the Transaction Documents. Except
as disclosed in Exhibit D, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company, the Seller or any Subsidiary is or may become
bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. This Agreement will not
obligate the Seller or the Company to issue shares of Common Stock or other
securities to any
Person other than the Purchasers and will not result in a right of any holder of
Company securities to adjust the exercise or conversion or reset price under
such securities.
(d) Issuance of this Agreement. The Seller will have (and
will, at all times while this Agreement is outstanding, maintain) an adequate
reserve of duly authorized shares of Common Stock, reserved for issuance to the
Purchaser, to enable it to perform its conversion, exercise and other
obligations under this Agreement. Such number of reserved and available shares
of Common Stock shall not be less than the sum of 250% of the number of shares
of the Purchased Stock.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Seller and the consummation by the Seller of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Seller or Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Seller,
Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Seller or the Company of the Transaction
Documents, other than (i) the filings required pursuant to Section 3.10, (ii)
the filing with the Securities and Exchange Commission (the "Commission") of a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Shares, (iii) applicable Blue
Sky filings, and (iv) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (the items described in clauses (i)-(iv)
are collectively, the "Required Approvals").
(g) Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Seller, threatened against or affecting the Seller or the
Company or any of its Subsidiaries or any of their respective properties before
or by any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an "Action")
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, individually or in the aggregate,
have or result in a Material
Adverse Effect. Neither the Seller, Company nor any Subsidiary, nor any director
or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. The Seller or Company does not have pending before
the Commission any request for confidential treatment of information and the
Seller and Company has no knowledge of any expected such request that would be
made prior to the Effectiveness Date (as defined in the Registration Rights
Agreement). There has not been, and to the best of the Seller and Company's
knowledge there is not pending or contemplated, any investigation by the
Commission involving the Seller or the Company or any current or former director
or officer of the Company.
(h) No Default or Violation. Neither the Seller, Company nor
any Subsidiary (i) is in default under or in violation of (and no event has
occurred which has not been waived which, with notice or lapse of time or both,
would result in a default by the Seller, Company or any Subsidiary under), nor
has the Seller, Company or any Subsidiary received notice of a claim that it is
in default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any judgment
or order of any court, arbitrator or governmental body, or (iii) is in violation
of any statute, rule or regulation of any governmental authority, in each case
of clauses (i), (ii) or (iii) above, except as could not individually or in the
aggregate, have or result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchaser set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchaser as
contemplated hereby are exempt from the registration requirements of the
Securities Act. Neither the Seller, Company nor any Person acting on its behalf
has taken or is contemplating taking any action which could subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act including soliciting any offer to buy or sell the Securities
by means of any form of general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including, without limitation, all
filings required pursuant to Sections 13(a) and 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Documents" and, together with the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
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. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required under the Exchange Act. The financial statements
of the Company included in the SEC Documents comply in all material respects
with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for 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, immaterial,
year-end audit adjustments. Since the date of this Agreement, except as
specifically disclosed in the SEC Documents, (a) there has been no event,
occurrence or development that has or that could result in a Material Adverse
Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (c) the Company has not
altered its method of accounting or the identity of its auditors and (d) the
Company has not declared or made any payment or distribution of cash or other
property to its stockholders or officers or directors (other than in compliance
with existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. No fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The preceding sentence does not include the
Purchaser's attorneys fees and costs, which shall be payable by the
Seller/Company. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) Exclusivity. The Seller shall not issue and sell
securities to any Person other than the Purchasers without the specific prior
written consent of the Purchasers.
(o) Seniority. No indebtedness of the Company is senior to the
Securities in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise except as previously disclosed to the
Purchasers.
(p) Listing and Maintenance Requirements. The Company has not,
in the two years preceding the date hereof, received notice (written or oral)
from the OTC Bulletin Board ("OTC") or any stock exchange, market or trading
facility on which the Common Stock is or has been listed (or on which it has
been quoted) to the effect that the Company is not in compliance with the
listing or maintenance requirements of such exchange, market or trading
facility. The Company is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with all such listing and maintenance requirements.
(q) Patents and Trademarks. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon the rights of any Person. To the best
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(r) Registration Rights; Rights of Participation. Except as
disclosed in Section 6(c) of the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied.
Except as set forth on Schedule 6(b) to the Registration Rights Agreement, no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.
(s) Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(t) Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in 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, except for Liens 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 and its Subsidiaries. Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and its Subsidiaries are
in compliance and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.
(v) Labor Relations. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(w) Disclosure. The Seller confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Seller understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business
and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Seller are true and correct and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(x) Solvency. Based on the financial condition of the Company
as of the Closing Date, (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and project capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Seller as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) Intent. Such Purchaser is acquiring the Securities as
principal for its own account and not with a view to act as a statutory
underwriter, without prejudice, however, to such Purchaser's right, to sell or
otherwise dispose of all or any part of such Securities. Nothing contained
herein shall be deemed a representation or warranty by such Purchaser to hold
the Securities for any period of time. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such Purchaser does
not have any agreement or understanding, directly or indirectly, with any Person
to distribute the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities which have been transferred
pursuant to this Agreement and which contain a restrictive legend may only be
disposed of pursuant to an effective registration statement under the Securities
Act, to the Company or pursuant to an available exemption from or in a
transaction not subject to the registration requirements of the Securities Act,
and in compliance with any applicable federal and state securities laws. In
connection with any transfer of Securities other than pursuant to an effective
registration statement or to the Company, except as otherwise set forth herein,
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of
such transferred securities under the Securities Act. Notwithstanding the
foregoing, the Company, without requiring a legal opinion as described in the
immediately preceding sentence, hereby consents to and agrees to register on the
books of the Company and with any transfer agent for the securities of the
Company any transfer of Securities by a Purchaser to an Affiliate of such
Purchaser or to one or more funds or managed accounts under common management
with such Purchaser, and any transfer among any such Affiliates or one or more
funds or managed accounts, provided that the transferee certifies to the Company
that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof). Any such transferee shall agree
in writing to be bound by the terms of this Agreement and shall have the rights
of a Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting on any non-free
trading stock that has been purchased, so long as is required by this Section
3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
BE REASONABLY ACCEPTABLE TO THE COMPANY.
The Shares shall not contain the legend set forth above nor
any other legend if the issuance of the Shares occurs at any time while, the
Shares received are free trading, a Shares Registration Statement is effective
under the Securities Act or the holder of any such security is relying on Rule
144 promulgated under the Securities Act ("Rule 144") in connection with the
resale of such Shares or in the event there is not an effective Shares
Registration Statement at such time and Rule 144 is not then available if, in
the opinion of counsel to the Company, such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall permit Purchasers Counsel to issue the legal opinion included in
the Transfer Agent Instructions to the Company's transfer agent on the day that
the Shares Registration Statement is declared effective by the Commission (the
"Effective Date"). The Company agrees that in the event any Shares are issued
with a legend in accordance with this Section 3.1(b), it will, within three (3)
Trading Days after request therefor by a Purchaser, provide such Purchaser with
a certificate or certificates representing such Shares, free from such legend at
such time as such legend would not have been required under this Section 3.1(b)
had such issuance occurred on the date of such request. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Seller acknowledges that the
issuance of the Shares, will result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Seller further acknowledges that its obligation to issue Shares in
accordance with this Agreement, is unconditional and absolute, subject to the
limitations set forth herein, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Seller agrees to help the Company to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act, to the extent the Seller's
assistance is needed. As long as the Purchasers own Securities, if the Company
is not required to file reports pursuant to such sections, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act such information as is required for
the Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. The Seller further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
causing its attorneys to render and deliver any legal opinion required in order
to permit a Purchaser to receive Shares free of all restrictive legends and to
subsequently sell Shares under Rule 144 upon receipt of a notice of an intention
to sell or other form of notice having a similar effect. Upon the request of any
such Person, the Company shall deliver to such Person a written certification of
a duly authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Seller shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares. If on any date the Seller would be,
precluded from issuing Shares as would then be issuable upon a conversion to
permit the Purchaser to receive the Return (the "Current Required Minimum"), in
either case, due to the unavailability of a sufficient number of authorized but
unissued or reserved shares of Common Stock, then the Seller shall cause the
Board of Directors of the Company to promptly prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's certificate or articles of incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least such
number of shares as reasonably requested by the Purchasers in order to provide
for such number of authorized and unissued shares of Common Stock to enable the
Seller to comply with this Agreement. In connection therewith, the Seller shall
make sure that the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best efforts
to promptly and duly obtain stockholder approval to carry out such resolutions
(and hold a special meeting of the stockholders no later than the earlier to
occur of the sixtieth (60th) day after delivery of the proxy materials relating
to such meeting and the ninetieth (90th) day after request by a holder of
Securities to issue the number of Shares in accordance with the terms hereof)
and (c) within five (5) Business Days of obtaining such stockholder
authorization, file an appropriate amendment to the Company's certificate or
articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Seller shall
make sure that the Company shall (i) in the time and manner required by any
national securities exchange, market, trading or quotation facility on which the
Common Stock is then traded, prepare and file with such national securities
exchange, market, trading or quotation facility on which the Common Stock is
then traded an additional shares listing application covering a number of shares
of Common Stock which is not less than the Shares, (ii) take all steps necessary
to cause such shares of Common Stock to be approved for listing on any such
national securities exchange, market or trading or quotation facility on which
the Common Stock is then listed as soon as possible thereafter, and (iii)
provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon. The Company shall take the
necessary actions to immediately list a number of Shares as equals no less than
the then Current Required Minimum.
(b) The Seller shall make sure that the Company shall maintain
a reserve of shares of Common Stock for issuance, respectively in accordance
with this Agreement, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
3.7 Conversion and Exercise Procedures. The Transaction Documents sets
forth the totality of the procedures with respect to this Agreement, including
the form of legal opinion, if necessary, that shall be rendered to the Company's
transfer agent and such other information and instructions as may be reasonably
necessary to enable the Purchasers to receive the Return.
3.8 Conversion and Exercise Obligations of the Company. The Seller
shall make sure that the Company shall honor and shall deliver Shares in
accordance with the respective terms, conditions and time periods set forth in
the Transaction Documents.
3.9 Subsequent Financing; Limitation on Registrations.(a) From the date
of this Agreement through the 360th day following the Closing Date and the 180th
day following the Effective Date, the Seller shall make sure that the Company
will not offer, sell, grant any option to purchase or any right to reprice
securities, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or equity or equity
equivalent securities (including the issuance of any debt or other instrument
that is at any time over the life thereof convertible into or exchangeable for
Common Stock), and the Company will cause its Subsidiaries not to offer, sell or
issue during such period any of such Subsidiary's securities which provide the
holder thereof the right to receive any Common Stock (collectively, "Common
Stock Equivalents") except as agreed to by the Purchaser.
(b) From the date of this Agreement through the 360th day
following the Effective Date, the Seller shall make sure that the Company will
not offer, sell, grant any option to purchase or any right to reprice
securities, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or Common Stock
Equivalents (collectively, a "Subsequent Placement"), unless (A) the Company
delivers to each Purchaser a written notice (the "Subsequent Placement Notice")
of its intention to effect such Subsequent Placement, which Subsequent Placement
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Placement, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Placement shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) no Purchaser
notifies the Company by 6:30 p.m. (New York City
time) on the tenth Trading Day after its receipt of the Subsequent Placement
Notice of its objection to the Subsequent Placement.
(c) Except for (x) the Shares, (y) securities of the Company
permitted pursuant to Section 6(c) of the Registration Rights Agreement to be
registered in the Registration Statement, and (z) Common Stock permitted to be
issued pursuant to Section 3.9(e), the Seller shall make sure that the Company
may not until the 90th day after the Effective Date file a registration
statement to register any of its securities.
(d) With respect to Section 3.9(a), (b) and (c), restrictive
periods shall be extended for the number of Trading Days during such period (A)
in which trading in the Common Stock is suspended by any securities exchange or
market or quotation system on which the Common Stock is then listed, or (B) that
the Registration Statement is not effective following the Effective Date, or (C)
that the prospectus included in the Registration Statement may not be used by
the holders thereof for the resale of Securities following the Effective Date.
(e) The restrictions contained in Section 3.9(a) and (b) shall
not apply to the granting of options or warrants to employees, officers and
directors of the Company, and the issuance of Common Stock upon exercise of such
options or warrants granted under any stock option plan heretofore or
hereinafter duly adopted by the Company. The restrictions contained in Sections
3.9(a) and (b) shall also not apply to shares of Common Stock issuable upon
exercise of any currently outstanding warrants and other outstanding convertible
securities of the Company, in each case as and to the extent disclosed in
Schedule 2.1(c) (but not as to any amendments or modifications of the terms of
such securities after the date of this Agreement, including "back-dated"
agreements).
3.10 Certain Securities Laws Disclosures; Publicity. The Seller shall
make sure that, if legally required, the Company shall: (i) on the Closing Date,
issue a press release acceptable to the Purchasers disclosing the transactions
contemplated hereby, (ii) file with the Commission a Report on Form 8-K
disclosing the transactions contemplated hereby within ten Business Days after
the Closing Date, and (iii) timely file with the Commission a Form D promulgated
under the Securities Act. The Seller shall make sure that the Company shall, no
less than two Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers for their
review. The Seller shall make sure that the Company shall consult with Purchaser
in issuing any other press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency or
stock market or trading facility with respect to the transactions contemplated
hereby and neither party shall issue any such press release or otherwise make
any such public statement, filings or other communications without the prior
written consent of the other, except that if such disclosure is required by law
or stock market regulations, in which such case the disclosing party shall
promptly provide the other party with prior notice of such public statement,
filing or other communication. Notwithstanding the foregoing, the Seller shall
not publicly disclose the names of the Purchasers, or include the names of the
Purchasers in any filing with the Commission, or any regulatory agency, trading
facility or stock market without the prior written consent of the Purchasers,
except to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law or stock market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure.
3.11 Non-Disclosure of Non-Public Information.(a) The Seller shall make
sure that the Company shall not disclose non-public information to the
Purchasers or their advisors or representatives unless prior to disclosure of
such information the Company identifies such information as being non-public
information and the Purchasers enter into a non-disclosure agreement in form
mutually acceptable to the Company and the Purchasers.
(b) The Seller 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. Notwithstanding
the foregoing or anything herein to the contrary, the Seller will immediately
notify the Purchasers of any event or the existence of any circumstance (without
any obligation to disclose the specific event or circumstance) of which it
becomes aware, (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.
3.12 Transfer of Intellectual Property Rights. Except in connection
with the sale of all or substantially all of the assets of the Company or
licensing arrangements in the ordinary course of the Company's business, the
Seller shall make sure that the Company shall not transfer, sell or otherwise
dispose of any Intellectual Property Rights, or allow any of the Intellectual
Property Rights to become subject to any liens, or fail to renew such
Intellectual Property Rights (if renewable and it would otherwise lapse if not
renewed), without the prior written consent of the Purchasers.
3.13 Use of Proceeds. The Seller shall not use the net proceeds from
the sale of the Securities hereunder for any unlawful purpose.
3.14 Reimbursement. If any Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Seller will reimburse such Purchaser for
its reasonable legal and other expenses (including, but not limited to, the cost
of any investigation, preparation or travel) incurred in connection therewith,
as such expenses are incurred. The reimbursement obligations of the Seller under
this paragraph shall be in addition to any liability which the Seller may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of the Purchasers 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 Purchasers 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 Purchasers and any such
affiliate and any such Person. The Seller also agrees that neither the
Purchasers nor any such affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Seller, Company or any
Person asserting claims on behalf of or in right of the Company solely as a
result of acquiring the Securities under this Agreement. The Seller shall also
be responsible for the payment of all attorneys fees, costs and escrow agent
fees incurred by the Purchaser with regards to this transaction and the Security
Deposit Stock may be used and sold to pay for the attorneys fees, costs and
escrow agent fees of this transaction via the attorneys of the Purchaser/escrow
agent selling that number of shares of the Security Deposit Stock as necessary
to pay for the attorneys fees as they are incurred and the attorney of the
Purchaser/escrow agent is specifically authorized to do so.
3.15 Shareholder Rights Plan. No claim will be made or enforced by the
Seller or any other Person that any Purchaser is an Acquiring Person" under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities or
shares of Common Stock under the Transaction Documents.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing, the Company shall
reimburse the Purchasers for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents and
may be later required to prepay any services to be provided under the
Transaction Documents, including but not limited to the preparation of a
registration statement, if necessary, by paying to Purchaser's counsel said sum
of money or securities reflected in or securities reflected in the closing
statement (Exhibit "E") for this transaction and anticipated work related
thereto. Purchaser's legal counsel shall also have the right to obtain the
payment of fees through the sale of the stock reflected in the Security Deposit
and thereafter, directing the transfer agent to issue replacement shares to be
held for security, if necessary. The amount contemplated by the immediately
preceding sentence shall be retained by the Purchaser's counsel and shall not be
delivered to the Company at the Closing. Other than the amount contemplated
herein, and except as otherwise set forth in the Registration Rights Agreement,
each party shall pay the fees and expenses of its advisers, counsel, 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. The Seller shall pay all filing fees, edgarizing fees, stamp and
other taxes and duties levied in connection with the issuance and registration
of the Securities, if a registration statement is necessary.
4.2 Entire Agreement; Amendments. The Transaction Documents,
together with the Exhibits and Schedules thereto and Transfer Agent
Instructions, contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Seller and each of
the Purchasers or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Seller may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Except as set
forth in Section 3.1(a), the Purchasers may not assign this Agreement or any of
the rights or obligations hereunder without the consent of the Seller. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
4.8 Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Florida, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in Palm Beach County, Florida for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery). Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
4.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being
understood that both parties need not sign the same counterpart. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
4.11 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the Purchasers will be entitled to specific performance of the obligations of
the Seller under the Transaction Documents. The parties hereto agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights.
In the event there are multiple Purchasers under this Agreement, then the
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CHAMPIONLYTE HOLDINGS, INC
By: s/s David Goldberg
Signature
Print Name: David Goldberg
Title: President
ADVANTAGE FUND I, LLC
By: s/s Robert Press
Signature
Print Name: Robert Press
Title: Vice President
Purchase Price: $25,000 installment payment
Address for Notice: Purchaser
c/o Anslow & Jaclin, LLP
With copies to: Anslow & Jaclin, LLP
4400 Route 9
Freehold, NJ 07728
- --------------------------------------------------------------------------------
$ 1,000,000
STOCK PURCHASE AGREEMENT
For
Stock In ChampionLyte Holdings, Inc.
Dated as of April, 2003
- --------------------------------------------------------------------------------