SECURITIES PURCHASE AGREEMENT
Exhibit
10.2
THIS
SECURITIES PURCHASE AGREEMENT
(the “Agreement”),
dated as of December __, 2005, by and among Cape Coastal Trading Corporation,
a
Delaware corporation (the “Company”),
uBid, Inc., a Delaware corporation
with headquarters located at 0000 Xxxx Xxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
XX
00000 (“uBid”)
and the investors listed on the Schedule of Investors attached hereto
as
Exhibit A-1
or A-2,
as such Exhibits may be amended from time-to-time (individually,
an “Investor”
and collectively, the “Investors”).
WHEREAS:
A. The
Company and uBid are parties to a Merger Agreement and Plan of Reorganization
(the “Merger
Agreement”)
pursuant to which, in exchange for certain consideration payable to the security
holders of uBid prior to the Merger (the “uBid
Stockholders”),
a
wholly-owned subsidiary of the Company will be merged with and into uBid, with
uBid as the surviving entity (the “Merger”),
which,
as a result of the Merger, uBid will be a wholly-owned subsidiary of the
Company. The targeted closing date for the Merger is December 22,
2005, subject to extension by the Company in its discretion up to and including
December 30, 2005 (the “First
Closing Date”).
B. The
Company and each Investor is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of
the Securities Act of 1933, as amended (the “Securities
Act”),
and Rule 506
of Regulation D
(“Regulation
D”)
as promulgated by the United States Securities and Exchange Commission (the
“SEC”)
under the Securities Act.
C. Each
Investor, severally and not jointly, wishes to purchase, and the Company wishes
to sell, upon the terms and conditions stated in this Agreement, (i) that
aggregate number of shares of the Common Stock, par value $0.001 per share,
of
the Company (the “Common
Stock”),
set forth opposite such Investor’s name in column two (2) on the Schedule of
Investors in Exhibit A-1
(“Initial
Common Shares”)
and (ii) initial warrants, in substantially the form attached hereto as
Exhibit
F
(the “Initial
Warrants”)
to acquire up to that number of additional shares of Common Stock set forth
opposite such Investor’s name in column three (3) on the Schedule of Investors
(as exercised, collectively, the “Initial
Warrant Shares”).
D. Subject
to the terms and conditions set forth in this Agreement, the Investors shall
have the right to purchase in Second Closing (as defined in Section 2.1(b)
below) (i) that aggregate number of shares of the Common Stock, par value $0.001
per share, of the Company, set forth opposite such Investor’s name in column two
(2) on the Schedule of Investors in Exhibit A-2
(“Additional
Common Shares”
and collectively with the Initial Common Shares, the “Common
Shares”)
and (ii) warrants, in substantially the form attached hereto as Exhibit
F
(the “Additional
Warrants”
and collectively with the Initial Warrants, the "Warrants")
to acquire up to that number of additional shares of Common Stock set forth
opposite such Investor’s name in column three (3) on the Schedule of Investors
(as exercised, collectively, the “Additional
Warrant Shares”
and collectively with the Initial Warrant Shares, the "Warrant
Shares").
E. The
aggregate number of shares of Common Stock that shall be sold in the First
Closing shall be at least 10,000,000
shares of Common Stock, with the aggregate number of Common Shares to be sold
to
Investors in both the First Closing and the Second Closing not to exceed
13,000,000
shares of Common Stock.
F. The
Common Shares, the Warrants and the Warrant Shares
issued pursuant to this Agreement are
collectively are referred to herein as the “Securities”.
G. At
the time of the First Closing, 8,800,000 of shares of Common Stock will be
issued to the uBid Stockholders in connection with the Merger, with 600,667
additional shares to be issued, in accordance with the Merger Agreement (as
defined below). If more than $45,500,000 of Securities are sold pursuant to
this
Agreement, in accordance with the Merger Agreement, cash proceeds from the
sale
of such Securities, net of expenses related thereto, will be used to purchase
certain shares of Common Stock issued pursuant to the Merger Agreement, up
to
$12,000,000 in total, if 13,000,000 shares of Common Stock are sold pursuant
to
this Agreement.
H. The
Company and McGuireWoods LLP (the “Escrow
Agent”)
have entered into an Escrow Agreement (the “Escrow
Agreement”)
to provide for the safekeeping of funds received and documents executed in
connection with the Offering. Such
funds
shall be held in escrow until the Closing and delivered by the Escrow Agent
on
behalf of the Investors to the Company upon the satisfaction of the Company’s
closing conditions.
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 Company and the Investors agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, the following
terms have the meanings indicated:
“Advice”
has the meaning set forth in Section 6.5.
“Additional
Common Shares”
has the meaning set forth in recitals to this Agreement.
“Additional
Purchase Price”
has the meaning set forth in Section
2.1.
“Additional
Warrant Shares”
has the meaning set forth in recitals to this Agreement.
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
Person, as such terms are used in and construed under Rule 144
under the Securities Act.
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“Business
Day”
means any day other than Saturday, Sunday or other day on which commercial
banks
in The City of New York are authorized or required by law to remain
closed.
“Closing”
has the meaning set forth in Section 2.1(c).
“Closing
Date”
has
the meaning set forth in Section 2.3.
“Closing
Price”
means, for any date, the closing price per share of the Common Stock for such
date (or the nearest preceding date) on the primary Eligible Market or exchange
on which the Common Stock is then listed or quoted.
“Company
Counsel”
means McGuireWoods
LLP,
counsel to the Company.
“Common
Shares”
has the meaning set forth in recitals to this Agreement.
“Common
Stock”
means the common stock of the Company, par value $0.001 per share.
“Current
Trading Market”
is the NASD OTC Bulletin Board.
“Designated
Investor” means
Smithfield Fiduciary, LLC.
“Designated
Investor Counsel”
means Xxxxxxx Xxxx & Xxxxx, LLP.
“Disclosure
Materials”
has the meaning set forth in Section 3.1(g).
“Effective
Date”
means the date that the Registration Statement is first declared effective
by
the SEC.
“Effectiveness
Period”
has the meaning set forth in Section 6.1.
“Eligible
Market”
means any of the New York Stock Exchange, the American Stock Exchange, The
NASDAQ National Market, The NASDAQ Capital Market.
“Event”
has the meaning set forth in Section 6.1.
“Event
Payments”
has the meaning set forth in Section 6.1.
“Exchange
Act”
means the Securities Exchange Act of 1934, as amended.
“Excluded
Events”
has the meaning set forth in Section 6.1.
“Excluded
Investors”
means XX Xxxxx & Co., LLC and its Affiliates.
“Filing
Date”
means 45 days after the First Closing Date.
“First
Closing”
has the meaning set forth in Section 2.1(a).
“First
Closing Date”
has the meaning set
forth in recitals to this Agreement.
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“Indemnified
Party”
has the meaning set forth in Section 6.4.
“Indemnifying
Party”
has the meaning set forth in Section 6.4.
“Intellectual
Property Rights” has
the meaning set forth in Section 3.1(s).
“Initial
Common Shares”
has the meaning set forth in recitals to this Agreement.
“Initial
Purchase Price”
has the meaning set forth in Section
2.1.
“Initial
Warrant Shares”
has
the meaning set forth in recitals to this Agreement.
“Lien”
means any lien, charge, claim, security interest, encumbrance, right of first
refusal or other restriction.
“Losses”
means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, costs of preparation and reasonable
attorneys’ fees.
“Material
Adverse Effect” has
the meaning set forth in Section 3.1(b).
“Material
Permits” has
the meaning set forth in Section 3.1(u).
“Person”
means any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, or joint
stock company.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened in writing.
“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus including post effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Purchase
Price”
has the meaning set forth in Section
2.1.
“Registrable
Securities”
means the (i) Common Shares and the Warrant Shares issued or issuable pursuant
to the Transaction Documents, (ii) the Merger Shares and Contingent Shares
issued pursuant to the Merger Agreement (as such terms are defined in the Merger
Agreement), and (iii) the shares of Common Stock issuable pursuant to warrants
assumed pursuant to the Merger Agreement and the warrants to be issued to the
Placement Agents, together with any securities issued or issuable upon any
stock
split, dividend or other distribution, recapitalization, exchange or similar
event with respect to the foregoing.
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“Registration
Statement”
means each registration statement required to be filed under Article VI,
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or
deemed to be incorporated by reference in such registration
statement.
“Required
Effectiveness Date”
means 120
days
after the First Closing Date, provided that if the Registration Statement will
not be reviewed by the SEC, the Required Effectiveness Date shall be 90 days
after the First Closing Date.
“Rule 144,”
“Rule 415”
and “Rule 424”
means Rule 144,
Rule 415
and Rule 424,
respectively, promulgated by the SEC pursuant to the Securities Act, as such
Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such
Rule.
“SEC”
means the Securities and Exchange Commission.
“Second
Closing”
has the meaning set forth in Section 2.1(b).
“Second
Closing Date”
has the meaning set forth in Section 2.3.
“Second
Closing Notice”
has the meaning set forth in Section 2.3.
“SEC
Reports”
has the meaning set forth in Section 3.1(g).
“Securities”
has the meaning set forth in the Preamble.
“Shares”
means shares of the Company’s Common Stock.
“Subsidiary”
means any Person in which the Company, directly or indirectly, owns capital
stock or holds an equity or similar interest.
“Trading
Day”
means (a) any day on which the Common Stock is listed or quoted and traded
on its primary Trading Market, (b) if the Common Stock is not then listed
or quoted and traded on any Eligible Market, then a day on which trading occurs
on the NASDAQ National Market (or any successor thereto), or (c) if trading
ceases to occur on the NASDAQ National Market (or any successor thereto), any
Business Day.
“Trading
Market”
means the Current Trading Market, the NASDAQ National Market or any other
Eligible Market.
“Transaction
Documents”
means this Agreement, the schedules and exhibits attached hereto, the Warrants
and the Transfer Agent Instructions.
“Transfer
Agent”
means Pacific
Stock Transfer and Trust,
or any successor transfer agent for the Company.
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“Transfer
Agent Instructions”
means, with respect to the Company, the Irrevocable Transfer Agent Instructions,
in the form of Exhibit E,
executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.
“Warrants”
has the meaning set forth in recitals to this Agreement.
“Warrant
Shares”
has the meaning set forth in recitals to this Agreement.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closings.
(a) First
Closing.
Subject
to the terms and conditions set forth in this Agreement, the Company shall
issue
and sell to each Investor, and each Investor shall, severally and not jointly,
purchase from the Company on the First Closing Date, such number of Common
Shares and Warrants set forth opposite such Investor’s name on Exhibit A-1
for the
First Closing hereto under the headings “Common Shares” and “Warrants” (the
“First
Closing”).
(b) Second
Closing.
Subject
to the terms and conditions set forth in this Agreement, the Company shall
issue
and sell to each Investor electing to participate in such Second Closing
pursuant to Section 2.2 below, and each such Investor so participating in the
Second Closing shall, severally and not jointly, purchase from the Company
on
such Second Closing Date (as defined below), up to such number of Common Shares
and Warrants set forth opposite such Investor’s name on Exhibit A-2
for the
Second Closing hereto under the headings “Common Shares” and “Warrants” (the
“Second
Closing”)
from
those Common Shares and Warrants that the Company elects to offer in the Second
Closing. Notwithstanding the foregoing, the aggregate
number of Common Shares to be sold to Investors in both the First Closing and
the Second Closing shall not exceed 13,000,000
Common Shares.
(c) Closing.
The First
Closing and the Second Closings are each referred to in this Agreement as a
“Closing.”
The
date
and time of each Closing shall occur on the applicable Closing Date at the
offices of McGuireWoods LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX
00000.
(d) Purchase
Price.
The
purchase price for each Investor of the Initial Common Shares and the related
Initial Warrants to be purchased by each such Investor at the First Closing
shall be the amount set forth opposite such Investor's name on Exhibit A-1
for the
First Closing (the "Initial
Purchase Price").
Each
Investor shall pay such purchase price for the Additional Common Shares and
the
related Additional Warrants as set forth opposite such Investor's name on
Exhibit
A-2
for the
Second Closing at the Second Closing (the "Additional
Purchase Price",
and
together with the Initial Purchase Price, the "Purchase
Price").
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2.2 First
Closing Date.
Subject
to
the terms and conditions set forth in this Agreement, the date and time of
the
First Closing shall be the First Closing Date (or such later date as is mutually
agreed to by the Company and each Investor).
2.3 Second
Closing Date.
Subject
to the terms and conditions set forth in this Agreement, the date and time
of
the Second Closings (each, a "Second
Closing Date,"
and
together with the First Closing Date, each a "Closing
Date"
and
collectively, the "Closing
Dates")
shall
be 10:00 a.m., New York City Time, on the date specified in Section 2.3(c)
by
the Company in the manner set forth below with respect to Additional Common
Shares and Additional Warrants that the Company elects to offer in the Second
Closing.
(a) Each
Investor participating in the First Closing shall have the right participate
in
the Second Closing on a pro rata basis (pro rata among such Investors based
on
the relative number of Common Shares purchased by each in the First Closing).
To
exercise such participation right, such Investor participating in the First
Closing that wishes to participate in the Second Closing shall provide written
notice thereof to the Company on or before the thirtieth (30th)
day
after the First Closing Date, which notice shall specify the number of Common
Shares (up to such Investor’s pro rata portion).
(b) If
one or
more Investors participating in the First Closing do not exercise their rights
to participate in the Second Closing by giving written notice thereof by the
thirtieth (30th)
day
after the First Closing Date (or waive in writing their right to so
participate), the Company, in its discretion, may accept subscriptions for
Common Shares and Warrants, on the same terms and conditions, from one or more
additional persons who may become additional Investors by executing this
Agreement or a counterpart signature page hereto.
(c) The
Second
Closing Date shall be the fortieth (40th)
day
after the First Closing Date, or if such date is not be a Business Day, the
last
Business Day prior thereto, provided, however, that if Investors have subscribed
for the purchase of all Common Shares offered in the Second Closing, or if
the
Company elects not seek additional Investors to purchase any amounts not
subscribed to by the Investors participating in the First Closing, the Company
may, by written notice to all Investors participating in the Second Closing
set
forth an earlier date for the Second Closing Date, provided that such Investors
are given at least two (2) Business Days written notice of such date.
2.4 Closing
Deliveries.
(a) At
each Closing, the Company shall deliver or cause to be delivered to each
Investor the following:
(i) one
or more stock certificates, free and clear of all restrictive and other legends
(except as expressly provided in Section 4.1(b)
hereof), evidencing such number of Company Shares equal to the number of Shares
set forth opposite such Investor’s name on Exhibit A-1
or A-2, as applicable, hereto under the heading “Common Shares”,
registered in the name of such Investor;
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(ii) a
Warrant, issued in the name of such Investor, pursuant to which such Investor
shall have the right to acquire such number of Warrant Shares set forth opposite
such Investor’s name on Exhibit A-1
or A-2,
as applicable, hereto under the heading “Warrant Shares”;
(iii) a
legal opinion of Company Counsel dated as of the date of the First Closing,
in
the form of Exhibit C
hereto executed by such counsel and delivered to the Investors; and
(iv) duly
executed Transfer Agent Instructions in the form of Exhibit
E
hereto acknowledged by the Company’s transfer agent.
(b) On
the
First Closing Date, each Investor shall deliver or cause to be delivered to
the
Company the Initial Purchase Price set forth opposite such Investor’s name on
Exhibit A-1
hereto
under the heading “Purchase Price” (i) by paying United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing to such Investor by the Company for such purpose; (ii) by tendering
to
the Company a promissory note issued by uBid in exchange for Securities or
(iii)
any combination of (i) and (ii) above. On the Second Closing Date, each Investor
shall pay the Additional Purchase Price set forth opposite such Investor’s name
on Exhibit
A-2
to the
Company for the Additional Common Shares to be issued and sold to such Investor
at the Additional Closing (i) by paying United States dollars and in immediately
available funds, by wire transfer to an account designated in writing to such
Investor by the Company for such purpose; (ii) by tendering to the Company
a
promissory note issued by uBid exchange for Securities or (iii) any combination
of (i) and (ii) above.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
The Company hereby represents and warrants to the Investors as of the date
hereof and as of each Closing Date as follows (which representations and
warranties shall be deemed to apply to each subsidiary of the Company,
including, without limitation, uBid, after giving effect to the
Merger):
(a) Subsidiaries.
The Company has no direct or indirect Subsidiaries other than those listed
in
Schedule 3.1(a)
hereto. Except as disclosed in Schedule 3.1(a)
hereto, the Company owns, directly or indirectly, all of the capital stock
or
comparable equity interests of each Subsidiary free and clear of any Lien and
all the issued and outstanding shares of capital stock or comparable equity
interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization
and Qualification.
Each of the Company and the Subsidiaries is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite legal
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of
the
Company and the Subsidiaries 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,
(i) materially and adversely affect the legality, validity or
enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole on
a
consolidated basis, or (iii) materially and adversely impair the Company’s
ability to perform fully on a timely basis its obligations under any of the
Transaction Documents (any of (i), (ii) or (iii), a “Material
Adverse Effect”).
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(c) Authorization;
Enforcement.
The
Company has the requisite corporate authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents to which
it
is a party and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of each of the Transaction Documents to which it
is a
party by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part
of the Company and no further consent or action is required by the Company,
its
Board of Directors or its stockholders. Each of the Transaction Documents to
which it is a party has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditors rights
generally, and (ii) the effect of rules of law governing the availability
of specific performance and other equitable remedies. Assuming the accuracy
of
the Investors representations contained in Section 3.2 hereof, the offer and
issuance by the Company of the Securities is exempt from registration under
the
Securities Act.
(d) No
Conflicts.
The execution, delivery and performance of the Transaction Documents to which
it
is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not, and will not,
(i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a
default (or an event that 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, except to the extent that such conflict,
default, termination, amendment, acceleration or cancellation right could not
reasonably be expected to have a Material Adverse Effect, 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 and the rules and regulations of any self-regulatory organization
to
which the Company or its securities are subject, including all applicable
Trading Markets), or by which any property or asset of the Company or a
Subsidiary is bound or affected, except to the extent that such violation could
not reasonably be expected to have a Material Adverse Effect.
(e) Authorization
of Securities.
The Securities (including
the Warrant Shares)
are duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens and shall not be subject to
preemptive or similar rights of stockholders (other than those imposed by the
Investors). The Company has reserved from its duly authorized capital stock
the
maximum number of shares of Common Stock issuable upon exercise of the
Warrants.
-9-
(f) Capitalization.
The aggregate number of shares and type of all authorized, issued and
outstanding classes of capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) as of the date of
this
Agreement and assuming the sale of 10,000,000 of Securities pursuant to this
Agreement is set forth in Schedule 3.1(f)
hereto. All outstanding shares of capital stock are duly authorized, validly
issued, fully paid and non-assessable and have been issued in compliance with
all applicable securities laws. Except as disclosed in Schedule 3.1(f)
hereto, and other than pursuant to Securities issued pursuant to this Agreement,
the Company has not issued any other options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or entered into any agreement giving any Person any right
to
subscribe for or acquire, any shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. Except as set forth
on
Schedule
3.1(f)
hereto, and except for customary adjustments as a result of stock dividends,
stock splits, combinations of shares, reorganizations, recapitalizations,
reclassifications or other similar events, there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in
any
agreement providing rights to security holders) and the issuance and sale of
the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Investors) and will not result
in
a right of any holder of securities to adjust the exercise, conversion, exchange
or reset price under such securities. To the knowledge of the Company, except
as
specifically disclosed in the SEC Reports or in Schedule
3.1(f)
hereto, no Person or group of Related Persons beneficially owns (as determined
pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire,
by
agreement with or by obligation binding upon the Company, beneficial ownership
of in excess of 5% of the outstanding Common Stock, ignoring for such purposes
any limitation on the number of shares of Common Stock that may be owned at
any
single time.
(g) SEC
Reports; Financial Statements.
The Company has filed all reports required to be filed by it under the Exchange
Act, including pursuant to Section 13(a)
or 15(d)
thereof, for the two years preceding the date hereof (the foregoing materials
(together with any materials filed by the Company under the Exchange Act,
whether or not required) being collectively referred to herein as the
“SEC
Reports”)
on a timely basis or has received a valid extension of such time of filing
and
has filed any such SEC Reports prior to the expiration of any such extension
(the SEC Reports together with this Agreement and the Schedules to this
Agreement and the Supplemental Private Placement Memorandum dated December
15,
2005, as updated pursuant to the Addendum thereto dated December 21, 2005,
are
collectively referred to as the “Disclosure
Materials”).
The Company has made available to the Investors or their respective
representatives true, correct and complete copies of the SEC Reports not
available on the XXXXX system. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Reports, 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 the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of filing.
The financial statements Company included in the SEC reports and the financial
statements of uBid included in the Disclosure Materials, as applicable, have
been prepared in accordance with United States 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, year-end audit
adjustments. Except as set forth on Schedule
3.1(g),
all material agreements to which the Company or any Subsidiary is a party or
to
which the property or assets of the Company or any Subsidiary are subject are
included as part of or specifically identified in the SEC Reports.
-10-
(h) Absence
of Changes.
Since the date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in the SEC Reports, the Disclosure
Materials, or in Schedule
3.1(h)
hereto or incident to the transactions contemplated hereby or in connection
with
the Merger, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that could result in a Material
Adverse Effect, (ii) neither the Company nor its Subsidiaries have incurred
any material liabilities other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
indebtedness disclosed therein and (B) 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 SEC, (iii) neither the Company nor
its Subsidiaries have altered their method of accounting or the identity of
its
auditors, except as disclosed in its SEC Reports, (iv) neither the Company
nor its Subsidiaries have declared or made any dividend or distribution of
cash
or other property to their stockholders, in their capacities as such, or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
their capital stock (except for repurchases by the Company or its Subsidiaries
of shares of capital stock held by employees, officers, directors, or
consultants pursuant to an option of the Company or its Subsidiaries to
repurchase such shares upon the termination of employment or services), and
(v) except as reflected therein, neither the Company nor its Subsidiaries
have issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock-based plans. Neither the Company nor its
Subsidiaries have taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company or its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact that would reasonably lead a creditor to
do
so. Neither the Company nor its Subsidiaries are Insolvent (as defined below)
as
of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the applicable Closing, will not be Insolvent. For purposes
of this Section 3.1(h), “Insolvent” means (i) the present fair saleable value of
the Company’s assets is less than the amount required to pay the Company’s total
Indebtedness (as defined in Section 3.1(aa)), (ii) the Company is unable to
pay
its debts and liabilities, subordinated, contingent or otherwise, as such debts
and liabilities become absolute and matured, (iii) the Company intends to incur
or believes that it will incur debts that would be beyond its ability to pay
as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
-11-
(i) Absence
of Litigation.
Except as set forth on Schedule
3.1(i)
hereto, there is no action, suit, claim, arbitration or proceeding, or, to
the
Company’s knowledge, inquiry or investigation, before or by any court, public
board, government agency, self-regulatory organization or body pending or,
to
the knowledge of the Company, threatened against or affecting the Company or
any
of its Subsidiaries that could, individually or in the aggregate, have a
Material Adverse Effect.
(j) Compliance.
Neither the Company nor any Subsidiary, except in each case as could not,
individually or in the aggregate, reasonably be expected to have or result
in a
Material Adverse Effect, (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under),
nor
has the Company or any Subsidiary received written 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 (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of
any statute, rule or regulation of any governmental authority.
(k) Title
to Assets.
The Company and the Subsidiaries have good and marketable title in fee simple
to
all real property owned by them that is material to the business of the Company
and the Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens that
do
not, individually or in the aggregate, have or result in a Material Adverse
Effect. Any real property and facilities held under lease by the Company and
the
Subsidiaries are held by them under valid, subsisting and enforceable leases
of
which the Company and the Subsidiaries are in material compliance.
(l) No
General Solicitation; Placement Agent’s Fees.
Neither the Company, any of its Affiliates, nor any Person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the
payment of any placement agent’s, financial advisory or brokers’ fees (other
than for persons engaged by any Investor or its investment advisor) relating
to
or arising out of the issuance of the Securities pursuant to this Agreement.
The
Company shall pay, and hold each Investor harmless against, any liability,
loss
or expense (including, without limitation, reasonable attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim for fees
arising out of the issuance of the Securities pursuant to this Agreement. The
Company acknowledges that uBid has engaged XX Xxxxx & Co., LLC as the lead
placement agent and Think Equity Partners LLC as a co-agent (the “Placement
Agents”)
in connection with the sale of the Securities by the Company. Other than the
Placement Agents, neither the Company nor uBid has engaged any placement agent
or other agent in connection with the sale of the Securities.
(m) Private
Placement.
Neither the Company nor, any Person acting on the Company’s behalf has sold or
offered to sell or solicited any offer to buy the Securities by means of any
form of general solicitation or advertising. Neither the Company nor any of
its
Affiliates nor, any Person acting on the Company’s behalf has, directly or
indirectly, at any time within the past six months, made any offer or sale
of
any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption
from registration under Regulation D under the Securities Act in connection
with the offer and sale by the Company of the Securities as contemplated hereby,
or (ii) cause the offering of the Securities pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes
of
any applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market.
The
Company is not required to be registered as, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended. The Company is not required to be registered as, a United States
real property holding corporation within the meaning of the Foreign Investment
in Real Property Tax Act of 1980.
-12-
(n) Listing
and Maintenance Requirements.
The Company has not, in the twelve months preceding the date hereof, received
notice (written or oral) from any Trading Market on which the Common Stock
is or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market. The Company
is in compliance with all such listing and maintenance
requirements.
(o) Registration
Rights.
Except as described in Schedule
3.1(o),
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 SEC or any other governmental authority that have
not been satisfied or waived.
(p) Application
of Takeover Protections.
Except as described in Schedule
3.1(p),
there is no control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of its
state of incorporation (“Takeover Protections”) that is or could become
applicable to any of the Investors as a result of the Investors and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, as a result of the Company’s issuance
of the Securities and the Investors’ ownership of the Securities.
The
Company and its board of directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the jurisdiction of its incorporation which is or could become
applicable to any Investor as a result of the transactions contemplated by
this
Agreement, including, without limitation, the Company’s issuance of the
Securities and any Investor’s ownership of the Securities.
(q) Disclosure.
The
Company confirms that neither it nor any officers, directors or Affiliates,
has
provided any of the Investors (other than Excluded Investors) or their agents
or
counsel with any information that constitutes or might constitute material,
nonpublic information (other than the existence and terms of the issuance of
Securities, as contemplated by this Agreement). The
Company understands and confirms that each of the Investors will rely on the
foregoing representations in effecting transactions in securities of the Company
(other than Excluded Investors). All disclosure provided by the Company to
the
Investors regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on the behalf
of the Company are true and correct in all material respects 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 the light of the
circumstances under which they were made, not misleading. To the Company’s
knowledge, no event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by the Company
but which has not been so publicly announced or disclosed. The Company
acknowledges and agrees that no Investor (other than Excluded Investors) makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in the Transaction
Documents.
-13-
(r) Acknowledgment
Regarding Investors’ Purchase of Securities.
Based upon the assumption that the transactions contemplated by this Agreement
are consummated in all material respects in conformity with the Transaction
Documents, the Company acknowledges and agrees that each of the Investors (other
than Excluded Investors) is acting solely in the capacity of an arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that no
Investor (other than Excluded Investors) is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by
any
Investor (other than Excluded Investors) or any of their respective
representatives or agents in connection with the Transaction Documents and
the
transactions contemplated hereby and thereby is merely incidental to the
Investors’ purchase of the Securities. The Company further represents to each
Investor that the Company’s decision to enter into this Agreement has been based
solely on the independent evaluation of the transactions contemplated hereby
by
the Company and its representatives.
(s) Patents
and Trademarks.
The Company and its Subsidiaries own, or possess adequate rights or licenses
to
use, all trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights (“Intellectual
Property Rights”)
necessary to conduct their respective businesses
as presently conducted. Except as set forth on Schedule
3.1(s),
there is no current claim, action or proceeding, or to the knowledge of the
Company, being threatened or brought, against the Company or its Subsidiaries
regarding its Intellectual Property Rights. The Company is unaware of any facts
or circumstances, which might give rise to any of the foregoing infringements
or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
Except as
set forth in Schedule
3.1(s),
since
April 2003, none of the uBid’s Intellectual Property Rights have expired,
terminated or have been abandoned, or are expected to expire or terminate
without renewal, or be abandoned, within three years from the date of this
Agreement, except for such expirations or terminations without renewal, or
abandonments, in either case which would not, individually or in the aggregate
have a Material Adverse Effect.
(t) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses and location in which the Company and the
Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
knowledge that it will not be able to renew its existing insurance coverage
as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a significant
increase in cost.
-14-
(u) Regulatory
Permits.
The Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the
SEC Reports, except where the failure to possess such permits does not,
individually or in the aggregate, have or result in a Material Adverse Effect
(“Material
Permits”),
and neither the Company nor any Subsidiary has received any written notice
of
proceedings relating to the revocation or modification of any Material
Permit.
(v) Transactions
With Affiliates and Employees.
Except as set forth in Schedule
3.1(v),
none of the officers, directors or employees of the Company is a party to any
transaction that would be required to be reported on Form 10-KSB with the
Company or any of its Subsidiaries (other than for ordinary course services
as
employees, officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director or employee or, to the Company’s
knowledge, any corporation, partnership, trust or other entity in which any
such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.
(w) Internal
Accounting Controls.
The Company maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to
any differences.
(x) Xxxxxxxx-Xxxxx
Act.
The Company is in compliance with applicable requirements of the Xxxxxxxx-Xxxxx
Act of 2002 and applicable rules and regulations promulgated by the SEC
thereunder, except where such noncompliance would not have, individually or
in
the aggregate, a Material Adverse Effect.
(y) Foreign
Corrupt Practices.
Neither
the Company nor any of its Subsidiaries nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official
or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
-15-
(z) OFAC.
Neither
the Company nor any of its Subsidiaries (i) is a Person whose property or
interest in property is blocked or subject to blocking pursuant to Section
1 of
Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions
prohibited by Section 2 of such executive order, or is otherwise associated
with
any such Person in any manner violative of Section 2 of such executive order,
or
(iii) is a Person on the list of Specially Designated Nationals and Blocked
Persons or subject to the limitations or prohibitions under any other U.S.
Department of Treasury’s Office of Foreign Assets Control regulation or
executive order.
(aa) Patriot
Act.
To the
extent applicable, both the Company and its Subsidiaries are in compliance,
in
all material respects, with the (i) Trading with the Enemy Act, as amended,
and
each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
and
Obstruct Terrorism (USA Patriot Act of 2001).
(bb) Indebtedness.
Except
as disclosed in Schedule
3.1 (bb),
neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the aggregate,
in a Material Adverse Effect, or (iii) is a party to any contract, agreement
or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect. Schedule
3.1(bb)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising
under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under
any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby,
is
classified as a capital lease, (G) all indebtedness referred to in clauses
(A)
through (F) above secured by (or for which the holder of such Indebtedness
has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
-16-
(cc) Employee
Relations.
Neither
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are good. No executive officer
of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
Securities Act) has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer of the Company or any of its Subsidiaries, to the knowledge
of
the Company or any such Subsidiary, is now, or expects to be, in violation
of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract, agreement or any restrictive covenant, and the continued employment
of
each such executive officer does not subject the Company or any such Subsidiary
to any liability with respect to any of the foregoing matters.
The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or
in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
There are no material complaints or charges against the Company or its
Subsidiaries pending or, to the knowledge of the Company and its Subsidiaries,
threatened to be filed with any Governmental Authority or arbitrator based
on,
arising out of, in connection with, or otherwise relating to the employment
or
termination of employment by the Company or its Subsidiaries of any individual.
(dd) Environmental
Laws.
The Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval where, in each
of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ee) Subsidiary
Rights.
Except as set forth in Schedule
3.1(ee),
the Company or one of its Subsidiaries has the unrestricted right to vote,
and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
-17-
(ff) Tax
Status.
The Company and each of its Subsidiaries (i) has made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all taxes
and
other governmental assessments and charges that are material in amount, shown
or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of
any jurisdiction, and the officers of the Company know of no basis for any
such
claim.
(gg) Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company or
to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) except for the actions taken by the Placement Agents in
connection with the transactions contemplated hereby, paid or agreed to pay
to
any person any compensation for soliciting another to purchase any other
securities of the Company, none of which shall be in violation of any applicable
securities laws.
3.2 Representations
and Warranties of the Investors.
Each Investor hereby, as to itself only and for no other Investor, represents
and warrants to the Company as follows:
(a) Organization;
Authority.
Such Investor 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 hereunder and thereunder. The purchase by such Investor
of
the Securities hereunder has been duly authorized by all necessary action on
the
part of such Investor. This Agreement has been duly executed and delivered
by
such Investor and constitutes the valid and binding obligation of such Investor,
enforceable against it in accordance with its terms, except as may be limited
by
(i) applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditors rights
generally, and (ii) the effect of rules of law governing the availability
of specific performance and other equitable remedies.
(b) No
Public Sale or Distribution; Investment Intent.
Such Investor is (i) acquiring the Common Shares and the Warrants and
(ii) upon exercise of the Warrants will acquire the Warrant Shares issuable
upon exercise thereof, in the ordinary course of business for its own account
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws, and such Investor does not
have a present arrangement to effect any distribution of the Securities to
or
through any person or entity; provided,
however,
that by making the representations herein, such Investor does not agree to
hold
any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant
to
a registration statement or an exemption under the Securities Act.
-18-
(c) Investor
Status.
At the time such Investor 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 Investor.
Such Investor, 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.
Such Investor 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.
(e) Access
to Information.
Such Investor 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
(other than material non-public information) about the Company and the
Subsidiaries and their respective 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 that 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. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its representatives
or counsel shall modify, amend or affect such Investor’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.
(f) No
Governmental Review.
Such Investor understands that no United States federal or state agency or
any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.
(g) No
Conflicts.
The execution, delivery and performance by such Investor of this Agreement
and
the consummation by such Investor of the transactions contemplated hereby will
not (i) result in a violation of the organizational documents of such
Investor or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which such Investor is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws) applicable to such
Investor, except in the case of clauses (ii) and (iii) above, for such that
are
not material and do not otherwise affect the ability of such Investor to
consummate the transactions contemplated hereby.
(h) Illegal
Transactions.
Such
Investor has not directly or indirectly, nor has any Person acting on behalf
of
or pursuant to any understanding with such Investor, engaged in any transactions
in the securities of the Company (including, without limitations, any Short
Sales involving the Company’s securities) since the time that the name of the
Company was disclosed to Investors by the Company, a Placement Agent(s) or
any
other Person regarding an investment in the Company, excluding any bridge notes
or bridge warrants issued to such Investor, if applicable. Such Investor
covenants that neither it nor any Person acting on its behalf or pursuant to
any
understanding with it will engage in any transactions in the securities of
the
Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed, excluding conversion
of
any such bridge notes, if applicable.
As used
in this Agreement, “Short
Sales”
include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect
stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker-dealers or foreign regulated
brokers.
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(i) No
Legal, Tax or Investment Advice.
Such
Investor understands that nothing in this Agreement or any other materials
presented by or on behalf of the Company to the Investor in connection with
the
purchase of the Securities constitutes legal, tax or investment advice. Such
Investor has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Securities. Such Investor understands that the Placement Agents
have acted solely as the agent of the Company in this placement of the
Securities, and that the Placement Agents make no representation or warranty
with regard to the merits of this transaction or as to the accuracy of any
information such Investor may have received in connection therewith. Such
Investor acknowledges that he has not relied on any information or advice
furnished by or on behalf of the Placement Agents.
(j) Registration
Questionnaire.
Each
Investor has completed or caused to be completed the Questionnaires and
Certificates attached hereto as Exhibit
B
(B-1 to
B-3) and on the signature page for use in preparation of the Registration
Statement and the answers to the Questionnaires and Certificates and on such
signature page are true and correct in all material respects as of the date
of
this Agreement and will be true and correct in all material respects as of
the
effective date of the Registration Statement; provided that such Investor shall
be entitled to update such information by providing written notice thereof
to
the Company prior to the effective date of the Registration
Statement.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Investors covenant that the Securities will only be disposed of pursuant to
an
effective registration statement under, and in compliance with the requirements
of, the Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company,
or
pursuant to Rule 144(k) except as otherwise set forth herein, the Company
requires the transferor 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 under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, except to the
extent that the transfer agent requests such legal opinion, any transfer of
Securities by an Investor to an Affiliate of such Investor, 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 provided that such Affiliate
does not request any removal of any existing legends on any certificate
evidencing the Securities.
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(b) The
Investors agree to the imprinting, so long as is required by this Section 4.1(b),
of the following legend on any certificate evidencing Securities:
THESE
SECURITIES HAVE NOT 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 COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS.
Certificates
evidencing Securities shall not be required to contain such legend or any other
legend (i) if the Securities are registered for resale under the Securities
Act
or any sale of such Securities pursuant to Rule 144, (ii) if such
Securities are eligible for sale under Rule 144(k), or (iii) if such legend
is
not required under applicable requirements of the Securities Act (including
controlling judicial interpretations and pronouncements issued by the Staff
of
the SEC). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Transfer Agent on the
Effective Date. Following the Effective Date or at such earlier time as a legend
is no longer required for certain Securities, the Company will no later than
three (3) Trading Days following the delivery by an Investor to the Transfer
Agent of a legended certificate representing such Securities or an exercise
notice pursuant to a Warrant, deliver or cause to be delivered to such Investor
a certificate representing such Securities that is free from all restrictive
and
other legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer
set
forth in this Section.
If
within three (3) Trading Days after the Transfer Agent’s receipt of a legended
certificate representing such Securities or an exercise notice pursuant to
a
Warrant, the Company’s Transfer Agent shall fail to issue and deliver to such
Investor a certificate representing such Securities that is free from all
restrictive and other legends, and if on or after such Trading Day the Investor
purchases (in an open market transaction or otherwise) shares of Common Stock
to
deliver in satisfaction of a sale by the Investor of shares of Common Stock
that
the Investor anticipated receiving from the Company without any restrictive
legend (a “Buy-In”), then the Company shall, within three (3) Trading Days after
the Investor’s request and in the Investor’s discretion, either (i) pay cash to
the Investor in an amount equal to the Investor’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate shall terminate, or (ii) promptly honor its obligation
to deliver to the Investor a certificate or certificates representing such
shares of Common Stock and pay cash to the Investor in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the closing bid price on the date of delivery
of such legended certificate.
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(c) The
Company will not object to and shall permit (except as prohibited by law) an
Investor to pledge or grant a security interest in some or all of the Securities
in connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities, and if required under the terms of such
agreement, loan or arrangement, the Company will not object to and shall permit
(except as prohibited by law) such Investor to transfer pledged or secured
Securities to the pledgees or secured parties. Except as required by law, such
a
pledge or transfer would not be subject to approval of the Company, no legal
opinion of the pledgee, secured party or pledgor shall be required in connection
therewith, and no notice shall be required of such pledge. Each Investor
acknowledges that the Company shall not be responsible for any pledges relating
to, or the grant of any security interest in, any of the Securities or for
any
agreement, understanding or arrangement between any Investor and its pledgee
or
secured party. At the appropriate Investor’s expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the
Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder. Provided that the Company is in compliance with the
terms of this Section 4.1(c), the Company’s indemnification obligations pursuant
to Section 6.4 shall not extend to any Proceeding or Losses arising out of
or
related to this Section 4.1(c).
4.2 Furnishing
of Information.
As long as any Investor owns Securities, the Company covenants 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 the Exchange Act. Upon the reasonable request of any Investor,
the
Company shall deliver to such Investor a written certification of a duly
authorized officer as to whether it has complied with the preceding sentence.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request to satisfy the provisions of this
Section 4.2.
4.3 Integration.
The Company shall not, and shall use its commercially reasonably efforts to
ensure that no Affiliate thereof 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 Investors or that would
be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 Reservation
of Securities.
The Company shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as
may
be required to fulfill its obligations in full under the Transaction Documents.
In the event that at any time the then authorized shares of Common Stock are
insufficient for the Company to satisfy its obligations in full under the
Transaction Documents, the Company shall promptly take such actions as may
be
required to increase the number of authorized shares.
-22-
4.5 Securities
Laws Disclosure; Publicity.
The
Company shall, on or before 8:30 a.m., New York time, on the first Trading
Day
following execution of this Agreement, issue a press release acceptable to
the
Designated Investor disclosing all material terms of the transactions
contemplated hereby. In accordance with timing and form required by the
Exchange Act, on or prior to the 4th
Business
Day after the First Closing Date, the Company shall file a Current Report on
Form 8-K with the SEC (the “8-K
Filing”)
describing the material terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K Filing this Agreement and the form of Warrants. From
and
after the filing of the 8-K Filing with the SEC, no Investor shall be in
possession of any material, nonpublic information received from the Company,
any
of its Subsidiaries or any of its respective officers, directors, employees
or
agents, that is not disclosed in the 8-K Filing.
Thereafter, the Company shall timely file any filings and notices required
by
the SEC or applicable law with respect to the transactions contemplated hereby
and provide copies thereof to the Investors promptly after filing. Except
with respect to the 8-K Filing and the press release referenced above (a copy
of
which will be provided to the Designated Investor for their review as early
as
practicable prior to its filing), the Company shall, at least two (2) Trading
Days prior to the filing or dissemination of any disclosure required by this
paragraph, provide a copy thereof to the Designated Investor for their review;
provided, however, to the extent such disclosures specifically identifies a
specific Investor, the Company shall provide such Investor an opportunity to
review the disclosure. The Company shall consult with the Designated
Investor in issuing any press releases or otherwise making public statements
or
filings and other communications with the SEC or any regulatory agency or
Trading Market with respect to the transactions contemplated hereby, and the
Company shall not issue any such press release or otherwise make any such public
statement, filing or other communication without the prior consent of the
Designated Investor, except if such disclosure is required by law, in which
case
the disclosing party shall promptly provide the other party with prior notice
of
such public statement, filing or other communication. Each Investor shall
consult with the Company in issuing any press releases or otherwise making
public statements or filings and other communications with the SEC or any
regulatory agency or Trading Market with respect to the transactions
contemplated hereby, and no Investor shall issue any such press release or
otherwise make any such public statement, filing or other communication without
the prior consent of the Company, except if such disclosure is required by
law,
in which 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 Company shall not publicly disclose the
name
of any Investor, or include the name of any Investor in any press release
without the prior written consent of such Investor. The Company shall not,
and shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any Investor with
any
material nonpublic information regarding the Company or any of its Subsidiaries
from and after the issuance of the above referenced press release without the
express written consent of such Investor.
4.6 Use
of Proceeds.
The Company may only use the net proceeds from the sale of the Securities as
set
forth on Schedule
4.6.
Pending these uses, the Company intends to invest the net proceeds from this
offering in short-term, interest-bearing, investment-grade securities, or as
otherwise pursuant to the Company’s customary investment policies.
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ARTICLE
V
CONDITIONS
5.1 Conditions
Precedent to the Obligations of the Investors.
The obligation of each Investor to acquire Securities at each Closing is subject
to the satisfaction or waiver by such Investor, at or before such Closing,
of
each of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. Such Investor shall have
received a certificate, executed by the Chief Executive Officer of the Company
and uBid, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Investor in the form
attached hereto as Exhibit
G.
(b) Performance.
The Company and each other Investor shall have performed, satisfied and complied
in all material respects with all covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by
it
at or prior to the Closing.
(c) The
Company shall have delivered to the Designated Investor a certificate evidencing
the formation and good standing of the Company and each of its Subsidiaries
in
each such entity’s jurisdiction of formation issued by the Secretary of State
(or comparable office) of such jurisdiction, as of a date within 10 days of
the
Closing Date.
(d) The
Company shall have delivered to the Designated Investor a certificate evidencing
the Company’s qualification as a foreign corporation and good standing issued by
the Secretary of State (or comparable office) of each jurisdiction in which
the
Company, as applicable, conducts business, as of a date within 10 days of the
Closing Date.
(e) The
Company shall have delivered to the Designated Investor a certified copy of
the
Certificate of Incorporation of the Company as certified by the Secretary of
State of its state of incorporation within ten (10) days of the Closing
Date.
(f) Both
the
Company and uBid shall have delivered to such Investor a certificate, executed
by the Secretary of the Company dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3.1(c) as adopted by the Company’s Board of
Directors in a form reasonably acceptable to such Investor, (ii) the Certificate
of Incorporation, as in effect at the Closing and (iii) the Bylaws, as in
effect at the Closing, in the form attached hereto as Exhibit
H.
(g) The
Common
Shares (i) shall be designated for quotation or listed on the Current Trading
Market and (ii) shall not have been suspended, as of the Closing Date, by the
SEC or the Current Trading Market from trading on the Current Trading Market
nor
shall suspension by the SEC or the Current Trading Market have been threatened,
as of the Closing Date, either (A) in writing by the SEC or the Current Trading
Market or (B) by failing to satisfy any requirements for trading on the Current
Trading Market.
-24-
(h) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(i) each
Investor shall have purchased and paid for the Common Shares and Warrants being
purchased by it on the Closing Date, and the aggregate purchase price paid
by
all of the Investors for the Common Shares and Warrants being purchased by
them
on the First Closing shall be at least $45,000,000.
(j) Contemporaneously
with the First Closing, the Merger shall have been consummated;
(k) The
stockholders of the Company set forth on Schedule
6.6
shall
have agreed to be subject to the lock-up provisions set forth in the Form of
Lock-Up Agreement attached hereto as Exhibit
I;
and
(l) The
Company shall have delivered to such Investor such other documents relating
to
the transactions contemplated by this Agreement as such Investor or its counsel
may reasonably request.
5.2 Conditions
Precedent to the Obligations of the Company.
The obligation of the Company to sell the Securities at each Closing is subject
to the satisfaction or waiver by the Company, at or before such Closing, of
each
of the following conditions:
(a) Representations
and Warranties.
The representations and warranties of the Investors contained herein shall
be
true and correct in all material respects as of the date when made and as of
the
Closing Date as though made on and as of such date; and
(b) Performance.
The Investors shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Investors at or prior to the Closing.
ARTICLE
VI
REGISTRATION
RIGHTS
6.1 Shelf
Registration.
(a) As
promptly as possible, and in any event on or prior to the Filing Date, the
Company shall prepare and file with the SEC a “Shelf” Registration Statement
covering the resale of all Registrable Securities for an offering to be made
on
a continuous basis pursuant to Rule 415. The Registration Statement shall be
on
Form S-1 and shall contain (except if otherwise directed by the Investors or
the
SEC) the “Plan of Distribution” attached hereto as Exhibit
D.
The
Company shall undertake to register the Registrable Securities on Form S-3
as
soon as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time
as a
Registration Statement on Form S-3 covering the Registrable Securities has
been
declared effective by the SEC or the Company is no longer obligated to maintain
a registration statement for the Registrable Securities pursuant to the terms
hereof.
-25-
(b) The
Company shall use its reasonable best efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after
the
filing thereof, but in any event prior to the Required Effectiveness Date,
and
shall use its reasonable best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of the date
that all Registrable Securities covered by such Registration Statement have
been
sold or can be sold publicly under Rule 144(k) (the “Effectiveness
Period”).
(c) The
Company shall notify the Investors in writing on the Business Day it receives
notification from the SEC that the Registration Statement has been declared
effective, or the following Business Day if the notification is received after
2:00 p.m., New York City time; provided that the Company shall notify all
Investors on the same Business Day.
(d) Should
an Event (as defined below) occur, then upon the occurrence of such Event,
and
on every monthly anniversary thereof until the applicable Event is cured, as
partial relief for the damages suffered therefrom by the Investors (which remedy
shall not be exclusive of any other remedies available under this Agreement,
at
law or in equity), the Company shall pay to each Investor an amount in cash,
as
liquidated damages and not as a penalty, equal to 1.0% of (i) the number of
Securities held by such Investor as of the date of such Event, multiplied by
(ii) the purchase price paid by such Investor for such Securities then held.
The
payments to which an Investor shall be entitled pursuant to this Section 6.1(d)
are referred to herein as “Event
Payments”.
Any Event Payments payable pursuant to the terms hereof shall apply on a
pro-rata basis for any portion of a month prior to the cure of an Event. In
the
event the Company fails to make Event Payments in a timely manner, such Event
Payments shall bear interest at the rate of 1.0% per month (prorated for partial
months) until paid in full. All pro rated calculations made pursuant to this
paragraph shall be based upon the actual number of days in such pro rated month.
For
such purposes, each of the following shall constitute an “Event”:
(i) the
Registration Statement is not filed on or prior to the Filing Date or
is not declared effective on or prior to the Required Effectiveness
Date;
provided, however if the Company files a Registration Statement without
affording the Designated Investor the opportunity to review and comment the
same
prior to filing as required herein, the Company shall not be deemed to have
satisfied this requirement;
(ii) except
(A) as provided for in Section
6.1(e),
(B) if the Company is involved in a “Rule 13e-3 transaction” as defined in
Rule 13e-3 under the Exchange Act, or (C) a merger or consolidation of the
Company or a sale of more than one-half of the assets of the Company in one
or a
series of related transactions, unless following such transaction or series
of
transactions, the holders of the Company’s securities prior to the first such
transaction continue to hold at least 50% of the voting rights and equity
interests of the surviving entity or acquirer (clauses (B) and (C),
collectively, the “Excluded
Events”),
after the Effective Date, an Investor is not permitted to sell Registrable
Securities under the Registration Statement (or a subsequent Registration
Statement filed in replacement thereof) for any reason (other than the fault
of
such Investor) for five or more Trading Days (whether or not
consecutive);
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(iii) except
as a result of the Excluded Events, the Common Stock is not listed or quoted,
or
is suspended from trading, on an Eligible Market for a period of three Trading
Days (which need not be consecutive Trading Days) during the Effectiveness
Period;
(iv) the
Company fails for any reason to deliver a certificate evidencing any Securities
to an Investor within three Trading Days after delivery of such certificate
is
required pursuant to any Transaction Document or the exercise rights of the
Investors pursuant to the Warrants are otherwise suspended for any reason;
or
(v) the
Company fails to have available a sufficient number of authorized but unissued
and otherwise unreserved shares of Common Stock available to issue Warrant
Shares upon any exercise of the Warrants or, except as a result of the Excluded
Events, during the Effectiveness Period, any Shares or Warrant Shares are not
listed on an Eligible Market.
(e) Notwithstanding
anything in this Agreement to the contrary, after sixty (60) consecutive Trading
Days of continuous effectiveness of the initial Registration Statement filed
and
declared effective pursuant to this Agreement, the Company may, by written
notice to the Investors, suspend sales under a Registration Statement after
the
Effective Date thereof and/or require that the Investors immediately cease
the
sale of shares of Common Stock pursuant thereto and/or defer the filing of
any
subsequent Registration Statement if the Company is engaged in a material
merger, acquisition or sale and the Board of Directors determines in good faith,
by appropriate resolutions, that, as a result of such activity, (A) it
would be materially detrimental to the Company (other than as relating solely
to
the price of the Common Stock) to maintain a
Registration Statement at such time and (B) it is in the best interests of
the Company to defer proceeding with such registration at such time.
Notwithstanding the foregoing, the Company shall not, and shall cause each
of
its Subsidiaries and its and each of their respective officers, directors,
employees and agents not to, provide any Investor with any material nonpublic
information regarding the Company or any of its Subsidiaries about the foregoing
merger, sale or acquisition without the express written consent of such
Investor. Upon
receipt of such notice, each Investor shall immediately discontinue any sales
of
Registrable Securities pursuant to such registration until such Investor has
received copies of a supplemented or amended Prospectus or until such Investor
is advised in writing by the Company that the then-current Prospectus may be
used and has received copies of any additional or supplemental filings that
are
incorporated or deemed incorporated by reference in such Prospectus. In no
event, however, shall this right be exercised to suspend sales beyond the period
during which (in the good faith determination of the Company’s Board of
Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section
6(e)
may be exercised for a period of no more than twenty (20) days at a time and
not
more than three times in any twelve-month period, without such suspension being
considered as part of an Event Payment determination. Immediately after the
end
of any suspension period under this Section
6(e),
the Company shall take all necessary actions (including filing any required
supplemental prospectus) to restore the effectiveness of the applicable
Registration Statement and the ability of the Investors to publicly resell
their
Registrable Securities pursuant to such effective Registration
Statement.
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(f) The
Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement
relating to an offering for its own account or the account of others under
the
Securities Act of any of its equity securities, other than a Registration
Statement or Form S-8.
6.2 Registration
Procedures.
In connection with the Company’s registration obligations hereunder, the Company
shall:
(a) (i) Subject
to Section
6.1(e),
prepare and file with the SEC such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective, as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the SEC such additional Registration Statements
in order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to
be
filed pursuant to Rule 424; (iii) respond as promptly as reasonably
possible, and in any event within twelve (12) Trading Days (except to the extent
that the Company reasonably requires additional time to respond to accounting
comments), to any comments received from the SEC with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Lead Investor Counsel true and complete copies of all
correspondence from and to the SEC relating to the Registration Statement;
and
(iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period
in
accordance with the intended methods of disposition by the Investors thereof
set
forth in the Registration Statement as so amended or in such Prospectus as
so
supplemented.
(b) Notify
each Investor as promptly as reasonably possible of any of the following events:
(i) the SEC notifies the Company whether there will be a “review” of any
Registration Statement; (ii) the SEC comments in writing on any
Registration Statement; (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the SEC or any other
Federal or state governmental authority requests any amendment or supplement
to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the SEC issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities
for
sale in any jurisdiction, or the initiation or threat of any Proceeding for
such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in
any
Registration Statement or Prospectus or any document incorporated or deemed
to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that 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.
-28-
(c) Use
its reasonable best efforts to avoid the issuance of or, if issued, obtain
the
withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in
any jurisdiction, as soon as possible.
(d) If
requested by an Investor, provide such Investor, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the
SEC.
(e) Promptly
deliver to each Investor, without charge, as many copies of the Prospectus
or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Investors in connection with the offering and sale of
the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto to the extent permitted by federal and state securities
laws
and regulations.
(f) (i) In
the time and manner required by each Trading Market, prepare and file with
such
Trading Market an additional shares listing application covering all of the
Registrable Securities; (ii) take all steps necessary to cause such
Registrable Securities to be approved for listing on each Trading Market as
soon
as possible thereafter; (iii) provide to Investor Counsel evidence of such
listing; and (iv) except as a result of the Excluded Events, during the
Effectiveness Period, maintain the listing of such Registrable Securities on
each such Trading Market or another Eligible Market.
(g) Prior
to any public offering of Registrable Securities, use its reasonable best
efforts to register or qualify or cooperate with the selling Investors in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Investor requests in writing, to keep each such registration
or
qualification (or exemption therefrom) effective for so long as required, but
not to exceed the duration of the Effectiveness Period, and to do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided,
however,
that the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject.
(h) Cooperate
with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to
the
extent permitted by this Agreement and under law, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Investors may reasonably
request.
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(i) Upon
the occurrence of any event described in Section
6.2(b)(vii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to
the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(j) Cooperate
with any reasonable due diligence investigation undertaken by the Investors
in
connection with the sale of Registrable Securities, including, without
limitation, by making available documents and information; provided that the
Company will not deliver or make available to any Investor material, nonpublic
information unless such Investor specifically requests in advance to receive
material, nonpublic information in writing.
(k) Comply
with all rules and regulations of the SEC applicable to the registration of
the
Securities.
(l) If
after
the execution of this Agreement, any Investor is deemed, or may be deemed,
to be
an underwriter, at the reasonable request of any Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company’s independent
certified public accountants in form and substance as is customarily given
by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the Investors, and (ii) an opinion, dated as
of
such date, of counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is, at the time requested,
customarily given by counsel to an issuer in an underwritten public offering,
addressed to the Investors.
(m) If
after
the execution of this Agreement, any Investor is deemed, or may be deemed,
to be
an underwriter, the Company shall make available for inspection by (i) any
Investor, (ii) legal counsel for such Investor and (iii) one firm of accountants
or other agents retained by the Investors (collectively, the “Inspectors”),
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”),
as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree
to
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors
are
so notified, unless (a) the disclosure of such Records is necessary to avoid
or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the Securities Act, (b) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or government
body of competent jurisdiction, or (c) the information in such Records has
been
made generally available to the public other than by disclosure in violation
of
this or any other agreement of which the Inspector has knowledge. Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought
in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in
any
other confidentiality agreement between the Company and any Investor) shall
be
deemed to limit the Investors’ ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and
regulations.
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6.3 Registration
Expenses.
The
Company shall pay all fees and expenses incident to the performance of or
compliance with Article VI of this Agreement by the Company, including
without limitation (a) all registration and filing fees and expenses,
including without limitation those related to filings with the SEC, any Trading
Market and in connection with applicable state securities or Blue Sky laws,
(b) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities), (c) messenger, telephone and
delivery expenses, (d) fees and disbursements of counsel for the Company,
(e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the
Trading Market. The Company shall also reimburse each Designated Investor for
the fees and disbursements of the Designated Investor Counsel in connection
with
registration, filing or qualification of the Registration Statement which amount
shall be limited to $10,000; provided,
however,
that
such amount shall be limited to $5,000 if the SEC does not review the
Registration Statement.
6.4 Indemnification
(a) Indemnification
by the Company.
The Company shall, notwithstanding any termination of this Agreement, indemnify
and hold harmless each Investor, the officers, directors, partners, members,
agents and employees of each of them, each Person who controls any such Investor
(within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, partners, members, agents
and
employees of each such controlling Person, to the fullest extent permitted
by
applicable law, from and against any and all Losses, as incurred, arising out
of
or relating to (i) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of the Company contained in
the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (iii) any cause of action, suit or claim brought
or made against such Indemnified Party (as defined in Section 6.4(c) below)
by a
third party (including for these purposes a derivative action brought on behalf
of the Company), arising out of or resulting from (x) execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (y) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (z) the
status of Indemnified Party as holder of the Securities or (iv) any untrue
or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of Company prospectus or in any amendment
or supplement thereto or in any Company preliminary prospectus, or arising
out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case
of
any Prospectus or form of prospectus or supplement thereto, in the light of
the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (A) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information
regarding such Investor furnished in writing to the Company by such Investor
for
use therein, or to the extent that such information relates to such Investor
or
such Investor’s proposed method of distribution of Registrable Securities, or
(B) in the case of an occurrence of an event of the type specified in
Section
6.2(b)(v)-(vii),
the use by such Investor of an outdated or defective Prospectus after the
Company has timely notified such Investor in writing that the Prospectus is
outdated or defective and prior to the receipt by such Investor of the Advice
contemplated in Section 6.5.
The Company shall notify the Investors promptly of the institution, threat
or
assertion of any Proceeding of which the Company is aware in connection with
the
transactions contemplated by this Agreement.
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(b) Indemnification
by Investors.
Each Investor shall, severally and not jointly, indemnify and hold harmless
the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15
of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of any omission of a material fact required
to be
stated therein or necessary to make the statements therein (in the case of
any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading to the extent, but
only
to the extent, that such untrue statement or omission is contained in any
information so furnished by such Investor to the Company in writing specifically
for inclusion in such Registration Statement or such Prospectus or to the extent
that (i) such untrue statements or omissions are based solely upon
information regarding such Investor furnished to the Company by such Investor
expressly for use therein, or to the extent that such information relates to
such Investor or such Investor’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Investor
expressly for use in the Registration Statement, such Prospectus or such form
of
Prospectus or in any amendment or supplement thereto or (ii) in the case of
an occurrence of an event of the type specified in Section
6.2(b)(v)-(vii),
the use by such Investor of an outdated or defective Prospectus after the
Company has notified such Investor in writing that the Prospectus is outdated
or
defective and prior to the receipt by such Investor of the Advice contemplated
in Section 6.5.
In no event shall the liability of any selling Investor hereunder be greater
in
amount than the dollar amount of the net proceeds received by such Investor
upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct
of Indemnification Proceedings.
If any Proceeding shall be brought or asserted against any Person entitled
to
indemnity hereunder (an “Indemnified
Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity
is
sought (the “Indemnifying
Party”)
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that
it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
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An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees
and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense
of
the Indemnifying Party). It being understood, however, that the Indemnifying
Party shall not, in connection with any one such Proceeding be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
all Indemnified Parties, which firm shall be appointed by a majority of the
Indemnified Parties; provided, however, that in the case a single firm of
attorneys would be inappropriate due to actual or potential differing interests
of conflicts between such Indemnified Parties and any other party represented
by
such counsel in such Proceeding or otherwise, then the Indemnifying Party shall
be liable for the fees and expenses of one additional firm of attorneys with
respect to such Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of
such Proceeding.
All
fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing
to
defend such Proceeding in a manner not inconsistent with this Section) shall
be
paid to the Indemnified Party, as incurred, within ten (10) Trading Days of
written notice thereof to the Indemnifying Party (regardless of whether it
is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses
to
the extent it is finally judicially determined that such Indemnified Party
is
not entitled to indemnification hereunder).
(d) Contribution.
If a claim for indemnification under Sections
6.4(a)
or (b)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to
information supplied by, such Indemnifying Party or Indemnified Party, and
the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section
6.4(c),
any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been
indemnified for such fees or expenses if the indemnification provided for in
this Section was
available to such party in accordance with its terms.
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The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section
6.4(d)
were determined by pro rata allocation or by any other method of allocation
that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section
6.4(d),
no Investor shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Investor
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Investor has otherwise been required to
pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person who
was
not guilty of such fraudulent misrepresentation.
The
indemnity and contribution agreements contained in this Section
6.4 are in addition to any liability that the Indemnifying Parties may have
to
the Indemnified Parties.
6.5 Dispositions.
Each Investor agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement. Each Investor
further agrees that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Sections
6.2(b)(v),
(vi)
or (vii),
such Investor will discontinue disposition of such Registrable Securities under
the Registration Statement until such Investor’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated
by
Section
6.2(i),
or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in
either case, has received copies of any additional or supplemental filings
that
are incorporated or deemed to be incorporated by reference in such Prospectus
or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
6.6 No
Piggyback on Registrations.
Other than as set forth on Schedule
6.6,
neither the Company nor any of its security holders (other than the Investors
in
such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders.
6.7 Piggy-Back
Registrations.
If at any time during the Effectiveness Period there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the SEC a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form
S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection
with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Investor written notice of such determination and if, within
ten days after receipt of such notice, any such Investor shall so request in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such Investor requests to be
registered.
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ARTICLE
VII
MISCELLANEOUS
7.1 Termination.
This Agreement may be terminated by uBid, the Company or any Investor, by
written notice to the other parties, if the First Closing has not been
consummated by the third (3rd) Business Day following the date of this
Agreement; provided that no such termination will affect the right of any party
to xxx for any breach by the other party (or parties).
7.2 Entire
Agreement.
The Transaction Documents, together with the Exhibits and Schedules thereto,
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. At or after the Closing,
and
without further consideration, the Company will execute and deliver to the
Investors such further documents as may be reasonably requested in order to
give
practical effect to the intention of the parties under the Transaction
Documents.
7.3 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 (a) the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified
in
this Section prior
to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section on a day that
is
not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the Trading Day following the date of deposit with a nationally
recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses and facsimile
numbers for such notices and communications are those set forth on the signature
pages hereof, or such other address or facsimile number as may be designated
in
writing hereafter, in the same manner, by any such Person.
7.4 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 Company and each of
the
Investors 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 subsequent default 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. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates to the rights of the Investors under Article VI
may be given by the holders holding at least two-thirds (2/3) of the Registrable
Securities issued to the Investors to which such waiver or consent
relates.
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7.5 Construction.
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. 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.
7.6 Successors
and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties
and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. Any Investor may assign its rights under this
Agreement to any Person to whom such Investor assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to the
“Investors.” Notwithstanding anything to the contrary herein, Securities may be
assigned to any Person in connection with a bona fide margin account or other
loan or financing arrangement secured by such Securities.
7.7 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, except that each
Indemnified Party is an intended third party beneficiary of Section 6.4
and (in each case) may enforce the provisions of such Sections directly against
the parties with obligations thereunder,
and the
holders of Registrable Securities may enforce the provisions of this Agreement
applicable thereto.
7.8 Governing
Law; Venue; Waiver of Jury Trial. THE
CORPORATE LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING
THE
RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT
TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT
BY
THE COMPANY OR ANY INVESTOR HEREUNDER, 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
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY
THE
COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR 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) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
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7.9 Survival.
The representations and warranties, agreements and covenants contained herein
shall survive the Closing.
7.10 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) with the same
force and effect as if such facsimile signature page were an original
thereof.
7.11 Severability.
If any provision of this Agreement is held to 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 affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
7.12 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Investor
exercises a right, election, demand or option owed to such Investor by the
Company under a Transaction Document and the Company does not timely perform
its
related obligations within the periods therein provided, then, prior to the
performance by the Company of the Company’s related obligation, such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or
in
part without prejudice to its future actions and rights.
7.13 Replacement
of Securities.
If any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt
of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company for any losses in connection therewith. The applicants
for
a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement
Securities.
7.14 Remedies.
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Investors and the Company
will be entitled to seek specific performance under the Transaction Documents.
The parties agree that monetary damages may not be adequate compensation for
any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation (other than in connection with any action for temporary
restraining order) the defense that a remedy at law would be adequate.
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7.15 Payment
Set Aside.
To the extent that the Company makes a payment or payments to any Investor
hereunder or any Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation
or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.16 Adjustments
in Share Numbers and Prices.
In the event of any stock split, subdivision, dividend or distribution payable
in shares of Common Stock (or other securities or rights convertible into,
or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof, each reference in any Transaction Document to a number of
shares or a price per share shall be amended to appropriately account for such
event.
7.17 Independent
Nature of Investors’ Obligations and Rights.
The obligations of each Investor under any Transaction Document are separate
and
not joint with the obligations of any other Investor, and no Investor shall
be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to this Agreement has been made by such Investor
independently of any other Investor and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of the Subsidiary which may have
been
made or given by any other Investor or by any agent or employee of any other
Investor, and no Investor or any of its agents or employees shall have any
liability to any other Investor (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Investor
pursuant thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no other Investor will be acting as agent of such Investor
in
connection with monitoring its investment hereunder. Each Investor shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor
to
be joined as an additional party in any proceeding for such
purpose.
[SIGNATURE
PAGES TO FOLLOW]
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IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
| CAPE COASTAL TRADING CORPORATION | ||
| |
|
|
| By: | ||
| Name: |
Xxxxxxxx Xxxxxx |
|
| Title: | President | |
| uBID, INC. | ||
| |
|
|
| By: | ||
| Name: |
Xxxxxx X. Xxxxxxxxx, Xx. |
|
| Title: | President & Chief Executive Officer | |
| Address for Notice: | ||
| 0000 Xxxx Xxxx Xxxx | ||
| Xxxxx 000 | ||
| Xxxxxxx, XX 00000 | ||
| Facsimile No.: 000-000-0000 | ||
| Telephone No.: 000-000-0000 | ||
| Attn: Xxxxxxxxx | ||
| With a copy to: McGuireWoods LLP | ||
| Facsimile: (000) 000-0000 | ||
|
Telephone: (000)
000-0000
|
||
| Attn: Xxxxx X. Xxxxx | ||
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Investor
Signature Page
By
its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of December __, 2005 (the “Purchase
Agreement”) by and among Cape
Coastal Trading Corporation,
uBid, Inc. and
the Investors (as defined therein), as to the number of shares of Common Stock
and Warrants set forth below, and authorizes this signature page to be attached
to the Purchase Agreement or counterparts thereof.
| Name of Investor: | |||
|
|
|||
| By: | |||
|
|
|||
| Name: | |||
| Title: | |||
| Address: | |||
|
|
|||
|
|
|||
| Telephone No.: | |||
| Facsimile No.: | |||
|
|
|||
| Number of Shares: | |||
|
|
|||
| Number of Warrants: | |||
|
|
|||
| Aggregate Purchase Price: $ | |||
|
|
|||
| Agreed to and accepted this | |||
| ___ day of December, 2005 | |||
| CAPE COASTAL TRADING CORPORATION | |||
| By: | |||
|
|
|||
| Name: | |||
| Title: |
-40-
