EXHIBIT 10.22
-------------
GLOBAL SPORTS & ENTERTAINMENT, INC.
SECURITIES PURCHASE AGREEMENT
JUNE 29, 2002
TABLE OF CONTENTS
Page
----
1. AGREEMENT TO SELL AND PURCHASE 1
2. FEES AND WARRANT 1
3. CLOSING, DELIVERY AND PAYMENT 2
3.1 Closing 2
3.2 Delivery 2
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
4.1 Organization, Good Standing and Qualification 3
4.2 Subsidiaries 3
4.3 Capitalization; Voting Rights 3
4.4 Authorization; Binding Obligations 4
4.5 Liabilities 4
4.6 Agreements; Action 4
4.7 Obligations to Related Parties 5
4.8 Changes 5
4.9 Title to Properties and Assets; Liens, Etc. 7
4.10 Intellectual Property 7
4.11 Compliance with Other Instruments 7
4.12 Litigation 8
4.13 Tax Returns and Payments 8
4.14 Employees 8
4.15 Registration Rights and Voting Rights 9
4.16 Compliance with Laws; Permits 9
4.17 Valid Offering 9
4.18 Insurance 9
4.19 SEC Reports 9
4.20 Listing 10
4.21 No Integrated Offering 10
4.22 Stop Transfer 10
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 10
5.1 Requisite Power and Authority 10
5.2 Investment Representations 11
5.3 Purchaser Bears Economic Risk 11
5.4 Acquisition for Own Account 11
5.5 Purchaser Can Protect Its Interest 11
5.6 Accredited Investor 11
5.7 Legends 11
5.8 No Shorting 11
6. COVENANTS OF THE COMPANY 13
6.1 Stop-Orders 13
6.2 Listing 13
6.3 Market Regulations 13
6.4 Reporting Requirements 13
6.5 Use of Funds 13
6.6 Access to Facilities 14
6.7 Taxes 14
6.8 Insurance 14
6.9 Intellectual Property 14
6.10 Properties 14
6.11 Confidentiality 14
6.12 Reissuance of Securities. 15
6.13 Opinion 15
7. COVENANTS OF THE COMPANY AND PURCHASERS REGARDING
INDEMNIFICATION 15
7.1 Company Indemnification 15
7.2 Purchaser's Indemnification 15
7.2 Procedures 15
8. CONVERSION OF CONVERTIBLE NOTE 16
8.1 Mechanics of Conversion 16
8.3 Maximum Conversion 17
8.4 Injunction - Posting of Bond
8.5 Optional Redemption
9. REGISTRATION RIGHTS 18
9.1 Registration Rights Granted 18
9.2 Registration Procedures 18
9.3 Provision of Documents 19
9.4 Non-Registration Events 19
9.5 Expenses 20
9.6 Indemnification and Contribution 20
10. SECURITY INTEREST
11. MISCELLANEOUS 22
12.1 Governing Law 22
12.2 Survival 23
12.3 Successors and Assigns 23
12.4 Entire Agreement 23
12.5 Severability 23
12.6 Amendment and Waiver 23
12.7 Delays or Omissions 23
12.8 Notices 24
12.9 Attorneys' Fees 24
12.10 Titles and Subtitles 24
12.11 Counterparts 24
12.12 Broker's Fees 24
12.13 Construction 24
GLOBAL SPORTS & ENTERTAINMENT, INC.
SECURITIES PURCHASE AGREEMENT
THISnnydopro5Straight quotes rather than smart quotes are used throughout
the document. --mfg SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") is made and
entered into as of June ___, 2002, by and among Global Sports & Entertainment,
Inc., a Delaware corporation (the "COMPANY"), and Laurus Master Fund, Ltd., a
Cayman Islands company (the "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale of a 13% Convertible Note in
an aggregate principal amount of $750,000 (the "NOTE"), convertible into shares
of the Company's common stock, $0.0001 par value per share (the "COMMON STOCK")
at a fixed conversion rate of $.80 per share of Common Stock ("FIXED CONVERSION
RATE");
WHEREAS, the Company wishes to issue a warrant (the "WARRANT") to the
Purchaser to purchase shares of the Company's Common Stock in connection with
Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and Warrant on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to Purchaser
on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1. AGREEMENT TO SELL AND
PURCHASE
Pursuant to the terms and conditions set forth in this Agreement, on the
Closing Date (as defined in Section 3), the Company agrees to sell to the
Purchaser, and the Purchaser hereby agrees to purchase from the Company a Note
in the amount of $750,000 convertible in accordance with the terms thereof into
shares of the Company's Common Stock in accordance with the terms of the Note
and this Agreement. The Note purchased on the Closing Date shall be known as
the "OFFERING." A form of the Note is annexed hereto as Exhibit A. The Note
will have a Maturity Date (as defined in the Note) eighteen months from the date
of issuance. Collectively, the Note and Warrant (as defined in Section 2) and
Common Stock issuable in payment of the Note, upon conversion of the Note and
upon exercise of the Warrant are referred to as the "SECURITIES."
2. FEES AND WARRANT. On the Closing Date:2. FEES AND WARRANTS
(a) The Company will issue and deliver to the Purchaser a Warrant to
purchase 250,000 shares of Common Stock in connection with the Offering (the
"WARRANT") pursuant to Section 1 hereof. The Warrant must be delivered on the
Closing Date. A form of Warrant is annexed hereto as Exhibit B. All the
representations, covenants, warranties, undertakings, and indemnification, and
other rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted in respect of the Warrant and shares of
the Company's Common Stock issuable upon exercise of the Warrant (the
"WARRANT SHARES").
(b) The Company shall reimburse the Purchaser for its reasonable legal fees
for services rendered to the Purchaser in preparation of this Agreement and the
Related Agreements, and expenses in connection with the Purchaser's due
diligence review of the Company and relevant matters. Amounts required to be
paid hereunder will be paid at the Closing and shall not exceed $20,000.
(c) The Company will pay a cash fee in the amount of eight and one half
percent (8.5%) of the aggregate gross purchase price to be paid to the Company
from the sale of Note in the Offering (the "FUND MANAGEMENT FEE") to Laurus
Capital Management, L.L.C., a Delaware limited liability company. The Fund
Management Fee must be paid on the Closing Date. The aforementioned Fund
Management Fee and legal fees will be payable at the Closing out of funds held
pursuant to a Funds Escrow Agreement to be entered into by the Company,
Purchaser and an Escrow Agent (the "FUNDS ESCROW AGREEMENT").
3. CLOSING, DELIVERY AND PAYMENT3. CLOSING, DELIVERY AND PAYMENT.
3.1 CLOSING3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "CLOSING"), shall take
place on the date hereof, at such time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "CLOSING DATE").
3.2 DELIVERY3.2 Delivery. Pursuant to the Funds Escrow Agreement, at
the Closing, subject to the terms and conditions hereof, the Company will
deliver to the Escrow Agent, among other things, a Note in the form attached as
Exhibit A representing the principal amount of $750,000 and a Common Stock
Purchase Warrant in the form attached as Exhibit B in the Purchaser's name
representing 250,000 Warrant Shares and the Purchaser will deliver to the Escrow
Agent, among other things, $750,000, by certified funds or wire transfer
made payable to the order of the Escrow Agent.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY4. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser as of the date
of this Agreement as set forth below except as disclosed in the Company's
filings under the Securities Exchange Act of 1934 (collectively, the "EXCHANGE
ACT FILINGS"), copies of which have been provided to the Purchaser, or the
Schedules hereto.
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION4.1 Organization, Good
Standing and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and authority to own and operate its
properties and assets, to execute and deliver this Agreement, the Warrant to be
issued in connection with this Agreement, the Funds Escrow Agreement, the
Security Agreement and all other agreements referred to herein (collectively,
the "RELATED AGREEMENTS"), to issue and sell the Note and the shares of Common
Stock issuable upon conversion of the Note (the "NOTE SHARES") , to issue and
sell the Warrant and the Warrant Shares , and to carry out the provisions of
this Agreement and the Related Agreements and to carry on its business as
presently conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a material adverse effect on the Company
or its business.
4.2 SUBSIDIARIES4.2 Subsidiaries. Except as disclosed on Schedule 4.2,
the Company does not own or control any equity security or other interest of any
other corporation, limited partnership or other business entity.
4.3 CAPITALIZATION; VOTING RIGHTS4.3 Capitalization; Voting Rights2.
(a) The authorized capital stock of the Company, as of May 12, 2002,
consists of (i) 50,000,000 shares of Common Stock, par value $0.0001 per share,
19,579,728 shares of which are issued and outstanding and (ii) 5,000,000 shares
of Preferred Stock, par value $.0001 per share, 64,000 shares of which have been
designated Series C Preferred Stock, all of which are issued and
outstanding.
(b) Except as disclosed on Schedule 4.3, other than (i) the shares reserved
for issuance under the Company's stock option plans; and (ii) shares which may
be granted pursuant to this Agreement and the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or stockholder agreements, or
arrangements or agreements of any kind for the purchase or acquisition from the
Company of any of its securities. Neither the offer, issuance or sale of any of
the Note or Warrant, or the issuance of any of the Note Shares or Warrant
Shares, nor the consummation of any transaction contemplated hereby will result
in a change in the price or number of any securities of the Company outstanding,
under anti-dilution or other similar provisions contained in or affecting any
such securities.
(c) All issued and outstanding shares of the Company's Common Stock (i) have
been duly authorized and validly issued and are fully paid and nonassessable and
(ii) were issued in compliance with all applicable state and federal laws
concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the shares of
the Common Stock are as stated in the Certificate of Incorporation, as amended
(the "CHARTER"). The Note Shares and Warrant Shares have been duly and validly
reserved for issuance. When issued in compliance with the provisions of this
Agreement and the Company's Charter, the Securities will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances;
provided, however, that the Securities may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
(e) No stock plan, stock purchase, stock option or other agreement or
understanding between the Company and any holder of any equity securities of the
Company or rights to purchase equity securities of the Company provides for
acceleration or other changes in the vesting provisions or other terms of such
agreement or understanding as the result of any merger, consolidated sale of
stock or assets, change in control or any other transaction(s) by the Company,
including the transactions contemplated hereunder.
4.4 AUTHORIZATION; BINDING OBLIGATIONS4.4 Authorization; Binding
Obligations. All corporate action on the part of the Company, its officers and
directors necessary for the authorization of this Agreement and the Related
Agreements to which the Company, the performance of all obligations of the
Company hereunder at the Closing and, the authorization, sale, issuance and
delivery of the Note and Warrant has been taken or will be taken prior to the
Closing. The Agreement and the Related Agreements, when executed and delivered
and to the extent it is a party thereto, will be valid and binding obligations
of the Company enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting enforcement of creditors' rights, and (b)
general principles of equity that restrict the availability of equitable or
legal remedies. The sale of the Note and the subsequent conversion of the Note
into Note Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with. The
issuance of the Warrant and the subsequent exercise of the Warrant for Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with. The Note and
the Warrant, when executed and delivered in accordance with the terms of this
Agreement, will be valid and binding obligations of the Company, enforceable in
accordance with their respective terms.
4.5 LIABILITIES4.5 Liabilities. The Company has no material liabilities
and, to the best of its knowledge, knows of no material contingent
liabilities, except current liabilities incurred in the ordinary course of
business and liabilities disclosed in any Exchange Act Filings.
4.6 AGREEMENTS; ACTION4.6 Agreements; Action. Except as set forth on
Schedule 4.6:
(a) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or to its knowledge by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $50,000 (other than obligations of, or payments to, the Company arising from
purchase or sale agreements entered into in the ordinary course of business), or
(ii) the transfer or license of any patent, copyright, trade secret or
other proprietary right to or from the Company (other than licenses arising from
the purchase of "off the shelf" or other standard products), or (iii) provisions
restricting the development, manufacture or distribution of the Company's
products or services, or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(b) The Company has not (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its
capital stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $50,000 or, in the case of indebtedness
and/or liabilities individually less than $50,000, in excess of $100,000 in the
aggregate, (iii) made any loans or advances to any person not in excess,
individually or in the aggregate, of $100,000, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(c) For the purposes of subsections (a) and (b) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
4.7 OBLIGATIONS TO RELATED PARTIES4.7 Obligations to Related Parties.
There are no obligations of the Company to officers, directors, stockholders or
employees of the Company other than (a) for payment of salary for services
rendered, (b) reimbursement for reasonable expenses incurred on behalf of the
Company, (c) for other standard employee benefits made generally available to
all employees (including stock option agreements outstanding under any stock
option plan approved by the Board of Directors of the Company) and (d)
obligations listed in the Company's financial statements or disclosed in any of
its Exchange Act Filings. Except as described above or set forth on Schedule
4.7, none of the officers, directors or, to the best of the Company's knowledge,
key employees or stockholders of the Company or any members of their
immediate families, are indebted to the Company, individually or in the
aggregate, in excess of $50,000 or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than 1% of such company) which may compete with the
Company. Except as described above, no officer, director or stockholder, or any
member of their immediate families, is, directly or indirectly, interested in
any material contract with the Company and no agreements, understandings or
proposed transactions are contemplated between the Company and any such person.
Except as set forth on Schedule 4.7, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
4.8 CHANGES4.8 Changes. To the best of the Company's knowledge, since
March 31, 2002, except as disclosed in any Schedule to this Agreement or to any
of the Related Agreements, there has not been:
(a) Any change in the assets, liabilities, financial condition, or
operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or is
reasonably expected to have a material adverse effect on such assets,
liabilities, financial condition, or operations of the Company;
(b) Any resignation or termination of any officer, key employee or group of
employees of the Company;
(c) Any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or financial
condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material debt owed
to it;
(f) Any direct or indirect material loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other distribution of the
assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or guaranteed by the
Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks, copyrights,
trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a party or
by which it is bound which may materially and adversely affect the business,
assets, liabilities, financial condition or operations of the Company;
(m) Any other event or condition of any character that, either individually
or cumulatively, has or may materially and adversely affect the business,
assets, liabilities, financial condition, or operations of the Company; or
(n) Any arrangement or commitment by the Company to do any of the acts
described in subsection (a) through (m) above.
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC.4.9 Title to Properties
and Assets; Liens, Etc. The Company has good and marketable title to its
properties and assets, and good title to its leasehold estates, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than
(a) those resulting from taxes which have not yet become delinquent, (b) minor
liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company, and
(c) those that have otherwise arisen in the ordinary course of business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company are in good operating condition and repair
and are reasonably fit and usable for the purposes for which they are being
used. To the best of the Company's knowledge, the Company is in compliance with
all material terms of each lease to which it is a party or is otherwise bound.
4.10 INTELLECTUAL XXXXXXXX0.10 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary for its
business as now conducted (the "INTELLECTUAL PROPERTY"), without any known
infringement of the rights of others. There are no outstanding options,
licenses or agreements of any kind relating to the foregoing proprietary rights,
nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase of "off the shelf" or standard
products.
(b) Except as set forth on Schedule 4.10(b), the Company has not received
any communications alleging that the Company has violated any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity, nor is the Company aware of
any basis therefor.
(c) The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company, except for inventions, trade
secrets or proprietary information that have been rightfully assigned to the
Company.
4.11 COMPLIANCE WITH OTHER INSTRUMENTS4.11 Compliance with Other
Instruments. To the Company's knowledge, the Company is not in violation or
default of any term of its Charter or Bylaws, or of any material provision of
any mortgage, indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order or writ.
To the Company's knowledge, the execution, delivery and performance of and
compliance with this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Note by the Company and the other
Securities by the Company each pursuant hereto, will not, with or without the
passage of time or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such term or provision, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
4.12 LITIGATION4.12 Litigation. Except as set forth on Schedule 4.12,
there is no action, suit, proceeding or investigation pending or, to the
Company's knowledge, currently threatened against the Company that prevents the
Company to enter into this Agreement or the Related Agreements, or to consummate
the transactions contemplated hereby or thereby, or which might result,
either individually or in the aggregate, in any material adverse change in the
assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for any of the foregoing. The Company
is not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no action, suit, proceeding or investigation by the Company currently pending
or which the Company intends to initiate.
4.13 TAX RETURNS AND PAYMENTS4.13 Tax Returns and Payments. The Company
has timely filed all tax returns (federal, state and local) required to be
filed by it of which the failure to file would have a material adverse effect.
All taxes shown to be due and payable on such returns, any assessments imposed,
and to the Company's knowledge all other taxes due and payable by the Company on
or before the Closing, have been paid or will be paid prior to the time they
become delinquent. The Company has not been advised (a) that any of its
returns, federal, state or other, have been or are being audited as of the date
hereof, or (b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes. The Company has no knowledge of any liability of
any tax to be imposed upon its properties or assets as of the date of this
Agreement that is not adequately provided for.
4.14 EMPLOYEES4.14 Employees. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to the
Company. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company's knowledge, no employee of the Company, nor
any consultant with whom the Company has contracted, is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company. The Company has
not received any notice alleging that any such violation has occurred. Except
for employees who have a current effective employment agreement with the
Company, no employee of the Company has been granted the right to continued
employment by the Company or to any material compensation following termination
of employment with the Company. The Company is not aware that any officer, key
employee or group of employees intends to terminate his, her or their employment
with the Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
4.15 REGISTRATION RIGHTS AND VOTING RIGHTS4.15 Registration Rights and
Voting Rights. Except as set forth on Schedule 4.15, the Company is presently
not under any obligation, and has not granted any rights, to register any of the
Company's presently outstanding securities or any of its securities that
may hereafter be issued. To the Company's knowledge, no stockholder of the
Company has entered into any agreement with respect to the voting of equity
securities of the Company.
4.16 COMPLIANCE WITH LAWS; PERMITS4.16 Compliance with Laws; Permits.
To its knowledge, the Company is not in violation in any material respect of any
applicable statute, rule, regulation, order or restriction of any domestic
or foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of any of the
Securities, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all material franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects or financial condition of the Company.
4.17 VALID OFFERING4.17 Valid Offering. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this Agreement, the
offer, sale and issuance of the Securities will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
4.18 INSURANCE4.18 Insurance. The Company has general commercial,
product liability, fire and casualty insurance policies with coverage customary
for companies similarly situated to the Company in the same or similar business.
4.19 SEC REPORTS4.19 SEC Reports. The Company has filed all proxy
statements, reports and other documents required to be filed by it under the
Exchange Act. The Company has furnished the Purchaser with copies of (i) its
Annual Report on Form 10-K for the fiscal year ended December 31, 2001 as
amended, (ii) its Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2002 and (iii) its Proxy Statement dated August 6, 2001 (collectively,
the "SEC REPORTS"). Each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective form and none of
the SEC Reports, nor the financial statements (and the notes thereto) included
in the SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.20 LISTING4.20 Listing. The Company's Common Stock is listed for
trading on the OTC Bulletin Board and satisfies all requirements for the
continuation of such listing. The Company has not received any notice that its
Common Stock will be delisted from the OTC Bulletin Board or that the Common
Stock does not meet all requirements for the continuation of such listing.
4.21 NO INTEGRATED OFFERING4.21 No Integrated Offering. To the
Company's knowledge, neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions. Nor will the Company or any
of its affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.
4.22 STOP TRANSFER4.22 Stop Transfer. The Securities are restricted
securities as of the date of this Agreement. The Company will not issue any
stop transfer order or other order impeding the sale and delivery of any of the
Securities at such time as the Securities are registered for public sale or an
exemption from registration is available, except as required by federal
securities laws.
4.23 DILUTION4.23 Dilution. The Company understands the nature of the
Securities being sold hereby and recognizes that they may have a potential
dilutive effect. The Company specifically acknowledges that its obligation to
issue the shares of Common Stock upon conversion of the Note and exercise of the
Warrant is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER5. REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS.
The Purchaser hereby represents and warrants to the Company as follows:
5.1 REQUISITE POWER AND AUTHORITY5.1 Requisite Power and Authority.
Purchaser has all necessary power and authority under all applicable provisions
of law to execute and deliver this Agreement and the Related Agreements and to
carry out their provisions. All corporate action on Purchaser's part required
for the lawful execution and delivery of this Agreement and the Related
Agreements have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of Purchaser, enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, and (b) as limited by general principles of
equity that restrict the availability of equitable and legal remedies.
5.2 INVESTMENT REPRESENTATIONS5.2 Investment Representations. Purchaser
understands that the Securities are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
Purchaser's representations contained in the Agreement, including, without
limitation, that the Purchaser is an "accredited investor" within the meaning of
Regulation D under the Securities Act. The Purchaser has received or has
had full access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the Note and the Warrant to
be purchased by it under this Agreement and the Note Shares and the Warrant
Shares acquired by it upon the conversion of the Note and the exercise of the
Warrant, respectively. The Purchaser further has had an opportunity to ask
questions and receive answers from the Company regarding the Company's business,
management and financial affairs and the terms and conditions of the Offering,
the Note, the Warrant and the Securities and to obtain additional information
(to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify any information
furnished to the Purchaser or to which the Purchaser had access.
5.3 PURCHASER BEARS ECONOMIC RISK. 5.3 Purchaser Bears Economic Risk
Purchaser has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so that
it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. Purchaser must bear
the economic risk of this investment until the Securities are sold pursuant to
(i) an effective registration statement under the Securities Act, or (ii) an
exemption from registration is available.
5.4 ACQUISITION FOR OWN ACCOUNT. 5.4 Acquisition for Own Account
Purchaser is acquiring the Note and Warrant and the Note Shares and the Warrant
Shares for Purchaser's own account for investment only, and not as a nominee or
agent and not with a view towards or for resale in connection with their
distribution.
5.5 PURCHASER CAN PROTECT ITS INTEREST. 5.5 Purchaser Can Protect Its
Interest Purchaser represents that by reason of its, or of its management's,
business and financial experience, Purchaser has the capacity to evaluate the
merits and risks of its investment in the Note, the Warrant and the Securities
and to protect its own interests in connection with the transactions
contemplated in this Agreement, and the Related Agreements. Further, Purchaser
is aware of no publication of any advertisement in connection with the
transactions contemplated in the Agreement or the Related Agreements.
5.6 ACCREDITED INVESTOR. 5.6 Accredited Investor Purchaser represents
that it is an accredited investor within the meaning of Regulation D under the
Securities Act.
5.7 LEGENDS5.7 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR, IF APPLICABLE,
STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO GLOBAL SPORTS & ENTERTAINMENT, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by DWAC system (as
hereinafter defined), shall bear a legend which shall be in substantially
the following form until such shares are covered by an effective registration
statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR IF APPLICABLE, STATE SECURITIES LAWS.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO GLOBAL
SPORTS & ENTERTAINMENT, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO GLOBAL SPORTS &
ENTERTAINMENT, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
5.8 NO SHORTING. The Purchaser will not and will not cause any person or
entity, directly or indirectly, to engage in "short sales" of the Company's
Common Stock.
6. COVENANTS OF THE COMPANY. 6. COVENANTS OF THE COMPANY The Company
covenants and agrees with the Purchaser as follows:
6.1 STOP-ORDERS6.1 Stop-Orders. The Company will advise the Purchaser,
promptly after it receives notice of issuance by the Securities and Exchange
Commission (the "SEC"), any state securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending any
offering of any securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
6.2 LISTING. 6.2 Listing The Company shall promptly secure the listing
of the shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the Pink Sheets, the NASD OTC Bulletin Board, NASDAQ
SmallCap Market, NASDAQ National Market, American Stock Exchange or New York
Stock Exchange (the "PRINCIPAL MARKET") upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain such
listing so long as any other shares of Common Stock shall be so listed. The
Company will maintain the listing of its Common Stock on a Principal Market, and
will comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company will
provide the Purchaser copies of all notices it receives notifying the Company of
the threatened and actual delisting of the Common Stock from any Principal
Market.
6.3 MARKET REGULATIONS. 6.3 Market Regulations The Company shall notify
the SEC, NASD and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to Purchaser and promptly provide copies thereof to Purchaser.
6.4 REPORTING REQUIREMENTS. 6.4 Reporting Requirements The Company
will timely file with the SEC all reports required to be filed pursuant to
the Exchange Act and refrain from terminating its status as an issuer required
by the Exchange Act to file reports thereunder even if the Exchange Act or the
rules or regulations thereunder would permit such termination.
6.5 USE OF FUNDS. 6.5 Use of Funds The Company agrees that it will use
the proceeds of the sale of the Note and Warrant for general corporate purposes
only.
6.6 ACCESS TO FACILITIES. 6.6 Access to Facilities The Company will
permit any representatives designated by the Purchaser (or any transferee of the
Purchaser), upon reasonable notice and during normal business hours, at
such person's expense and accompanied by a representative of the Company, to (a)
visit and inspect any of the properties of the Company, (b) examine the
corporate and financial records of the Company (unless such examination is not
permitted by federal, state or local law or by contract) and make copies thereof
or extracts therefrom and (c) discuss the affairs, finances and accounts of any
such corporations with the directors, officers and independent accountants of
the Company.
6.7 TAXES. 6.7 Taxes The Company will promptly pay and discharge, or
cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the income, profits,
property or business of the Company; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.
6.8 INSURANCE. 6.8 Insurance The Company will keep its assets which are
of an insurable character insured by financially sound and reputable
insurers against loss or damage by fire, explosion and other risks customarily
insured against by companies in similar business similarly situated as the
Company; and the Company will maintain, with financially sound and reputable
insurers, insurance against other hazards and risks and liability to persons and
property to the extent and in the manner customary for companies in similar
business similarly situated as the Company and to the extent available on
commercially reasonable terms.
6.9 INTELLECTUAL PROPERTY. 6.9 Intellectual Property The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use Intellectual Property owned or
possessed by it and reasonably deemed to be necessary to the conduct of its
business.
6.10 PROPERTIES. 6.10 Properties The Company will keep its properties
in good repair, working order and condition, reasonable wear and tear excepted,
and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably be
expected to have a material adverse effect.
6.11 CONFIDENTIALITY6.11 Confidentiality. The Company agrees that it
will not disclose, and will not include in any public announcement, the name of
the Purchaser, unless expressly agreed to by the Purchaser or unless and until
such disclosure is required by law or applicable regulation, and then only to
the extent of such requirement.
6.12 REQUIRED APPROVALS6.12 Required Approvals. For so long as at least
50% of the principal amount of the Note is outstanding, the Company,
without the prior written consent of the Purchaser, which shall not be
unreasonably withheld, shall not:
(a) directly or indirectly declare or pay any dividends or make any
distributions upon any of its capital stock or other equity securities (or any
securities directly or indirectly convertible into or exercisable or
exchangeable for equity securities);
(b) consent to or implement any termination, amendment, modification,
supplement or waiver of (a) the certificate or articles of incorporation,
bylaws, regulations or other constitutional documents of the Company or any
subsidiary or (b) any material contract to which it is a party not in the
ordinary course of business with Company obligations in excess of $250,000 per
year; provided, however, that any such document may be amended or modified if
-------- -------
and to the extent that such amendment or modification is not adverse to the
Purchaser and further, except as set forth in Section 10 hereof, that the
Purchaser's consent shall not be required with respect to any future equity or
debt financing of the Company; or
(c) materially alter or change the scope of the business of the
Company.
6.13 REISSUANCE OF SECURITIES.6.13 Reissuance of Securities. The
Company agrees to reissue certificates representing the Securities without the
legends set forth in Section 5.7 above at such time as (a) the holder thereof is
permitted to dispose of such Securities pursuant to Rule 144(k) under the
Securities Act, or (b) upon resale subject to an effective registration
statement after such Securities are registered under the Securities Act. The
Company agrees to cooperate with the Purchaser in connection with all resales
pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to
allow such resales provided the Company and its counsel receive reasonably
requested representations from the selling Purchaser and broker, if any.
6.14 OPINION6.14 Opinion. On the Closing Date, the Company will deliver
to the Purchaser an opinion acceptable to the Purchaser from the Company's legal
counsel in the form annexed hereto as Exhibit C. The Company will provide,
at the Company's expense, such other legal opinions in the future as are
reasonably necessary for the conversion of the Note and exercise of the Warrant.
7. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION. 7.
COVENANTS OF THE COMPANY AND PURCHASERS REGARDING INDEMNIFICATION
7.1 COMPANY INDEMNIFICATION. 7.1 Company Indemnification The Company
agrees to indemnify, hold harmless, reimburse and defend Purchaser, each of
Purchaser's officers, directors, agents, affiliates, control persons, and
principal shareholders, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by
or imposed upon the Purchaser which results, arises out of or is based upon (i)
any misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement, or (ii) any breach or default in performance by Company of any
covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
7.2 PURCHASER'S INDEMNIFICATION. 7.2 Purchaser's Indemnification
Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company
and each of the Company's officers, directors, agents, affiliates, control
persons and principal shareholders, at all times against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal fees)
of any nature, incurred by or imposed upon the Company which results,
arises out of or is based upon (i) any misrepresentation by Purchaser or breach
of any warranty by Purchaser in this Agreement or in any exhibits or schedules
attached hereto or any Related Agreement; or (ii) any breach or default in
performance by Purchaser of any covenant or undertaking to be performed by
Purchaser hereunder, or any other agreement entered into by the Company and
Purchaser relating hereto.
7.3 PROCEDURES7.3 Procedures. The procedures and limitations set forth
in Section 9.6 shall apply to the indemnifications set forth in Sections 7.1 and
7.2 above.
8. CONVERSION OF CONVERTIBLE NOTE8. CONVERSION OF CONVERTIBLE NOTES.
8.1 MECHANICS OF CONVERSION8.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the Purchaser's
intention to sell the Note Shares and the Note Shares are included in an
effective registration statement or are otherwise exempt from registration when
sold: (i) Upon the conversion of the Note or part thereof, the Company shall,
at its own cost and expense, take all necessary action (including the issuance
of an opinion of counsel) to assure that the Company's transfer agent shall
issue shares of the Company's Common Stock in the name of the Purchaser (or its
nominee) or such other persons as designated by the Purchaser in accordance with
Section 8.1(b) hereof and in such denominations to be specified
representing the number of Note Shares issuable upon such conversion; and (ii)
The Company warrants that no instructions other than these instructions have
been or will be given to the transfer agent of the Company's Common Stock and
that after the Effective Date (as hereinafter defined) the Note Shares issued
will be freely transferable subject to the prospectus delivery requirements of
the Securities Act and the provisions of this Agreement, and will not contain a
legend restricting the resale or transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its right to
convert the Note or part thereof by telecopying or otherwise delivering an
executed and completed notice of the number of shares to be converted to the
Company (the "NOTICE OF CONVERSION"). The Purchaser will not be required to
surrender the Note until the Purchaser receives a credit to the account of the
Purchaser's prime broker through the DWAC system (as defined below),
representing the Note Shares or until the Note has been fully satisfied. Each
date on which a Notice of Conversion is telecopied or delivered to the Company
in accordance with the provisions hereof shall be deemed a "CONVERSION DATE."
The Company will cause the transfer agent to transmit the shares of the
Company's Common Stock issuable upon conversion of the Note (and a certificate
representing the balance of the Note not so converted, if requested by
Purchaser) to the Purchaser by crediting the account of the Purchaser's prime
broker with the Depository Trust Company ("DTC") through its Deposit Withdrawal
Agent Commission ("DWAC") system within three business days after receipt by the
Company of the Notice of Conversion (the "DELIVERY DATE").
(c) The Company understands that a delay in the delivery of the Note
Shares in the form required pursuant to Section 8 hereof beyond the Delivery
Date could result in economic loss to the Purchaser. In the event that the
Company fails to direct its transfer agent to deliver the Note Shares to the
Purchaser via the DWAC system within the time frame set forth in Section 8.1(b)
above and the Note Shares are not delivered to the Purchaser by the Delivery
Date, as compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Note Shares in the form
required pursuant to Section 8 hereof upon conversion of the Note in the amount
equal to the Purchaser's actual damages from such delayed delivery. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand and accompanied by reasonable documentation of the amount of
such damages.
(d) Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
amount permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to a Purchaser and thus refunded to
the Company.
8.2 MANDATORY REDEMPTION8.2 Mandatory Redemption. If after receiving a
valid Notice of Conversion, the Company is unable to issue Note Shares within
five (5) business days of a Delivery Date, for any reason, then at the
Purchaser's election, the Company must pay to the Purchaser ten (10) days after
receipt of written request by the Purchaser ("MANDATORY REDEMPTION PAYMENT
DATE") a sum of money determined by multiplying the principal of the Note
required to be converted and not so converted by 130%, together with accrued but
unpaid interest thereon ("MANDATORY REDEMPTION PAYMENT"). Upon receipt of
the Mandatory Redemption Payment, the corresponding Note principal and interest
will be deemed paid and no longer outstanding. The event giving rise to a
Mandatory Redemption Payment under this Section 8.2 shall not constitute an
Event of Default (as that term is defined in Section 4 of the Note.)
8.3 MAXIMUM CONVERSION8.3 Maximum Conversion. The Purchaser shall not
be entitled to convert on a Conversion Date that amount of a Note in connection
with that number of shares of Common Stock which would be in excess of the sum
of (i) the number of shares of Common Stock beneficially owned by the Purchaser
on a Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the Note with respect to which the determination of this
proviso is being made on a Conversion Date, which would result in beneficial
ownership by the Purchaser of more than 4.9% of the outstanding shares of Common
Stock of the Company on such Conversion Date. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and Regulation 13d-3
thereunder. Subject to the foregoing, a Purchaser shall not be limited to
aggregate conversions of only 4.9%. Upon an Event of Default under the Note,
the conversion limitation in this Section 8.2 shall automatically become null
and void. In the event of an Optional Redemption or a Mandatory Redemption
Payment, the Purchaser will be permitted to raise the limit set forth in this
Section 8.2.
8.4 INJUNCTION - POSTING OF BOND8.4 Injunction - Posting of Bond. In
the event a Purchaser shall elect to convert a Note or part thereof, the Company
may not refuse conversion for any reason, unless an injunction from a
court, on notice, restraining and or enjoining conversion of all or part of said
Note shall have been sought and obtained and the Company posts a surety bond for
the benefit of the Purchaser in the amount of 130% of the amount of the Note,
which is subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Purchaser to the extent it obtains judgment.
8.5 OPTIONAL REDEMPTION. The Company will have the option of redeeming any
outstanding principal of the Note ("OPTIONAL REDEMPTION") by paying to the
Purchaser a sum of money equal to the greater of (i) the Mandatory Redemption
Payment or (ii) a fraction, of which the numerator is the amount of the Note
being redeemed and of which the denominator is the Conversion Price, as set
forth in Section 3.1(b) of the Note, together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Purchaser
arising under this Agreement, Note or any other document delivered herewith
("REDEMPTION AMOUNT") outstanding on the day notice of redemption ("NOTICE OF
REDEMPTION) is delivered to a Purchaser ("REDEMPTION DATE"). A Notice of
Redemption may not be given in connection with any portion of Note for which a
Notice of Conversion has been given by the Purchaser at any time before receipt
of a Notice of Redemption or given pursuant to the following sentence. A Notice
of Redemption must be accompanied by a certificate signed by the chief executive
officer or chief financial officer of the Company stating that the Company has
on deposit and segregated ready funds equal to the Redemption Amount. The
Redemption Amount must be paid in good funds to the Purchaser no later than the
seventh (7th) business day after the Redemption Date ("OPTIONAL REDEMPTION
PAYMENT DATE"). In the event the Company fails to pay the Redemption Amount by
the Optional Redemption Payment Date, then the Redemption Notice will be null
and void. A Notice of Redemption may be given by the Company, provided (i) no
Event of Default as described in the Note shall have occurred or be continuing;
and (ii) the Note Shares issuable upon conversion of the full outstanding Note
principal are included for unrestricted resale in a registration statement
effective as of the Redemption Date or are otherwise exempt from registration.
9. REGISTRATION RIGHTS. 9. REGISTRATION RIGHTS
9.1 REGISTRATION RIGHTS GRANTED. 9.1 Registration Rights Granted The
Company hereby grants the following registration rights to the Purchaser.
(a) The Company shall use its reasonable commercial efforts to file a
Form SB-2 registration statement (or such other form that it is eligible to use)
in order to register the Registrable Securities (as that term is defined below)
for resale and distribution under the Securities Act with the SEC within 60 days
of the Closing Date (the "FILING DATE"), and use its reasonable commercial
efforts to cause such registration statement to be declared effective within 105
days of the Filing Date (the "EFFECTIVE DATE"). The Company will register not
less than a number of shares of Common Stock in the aforedescribed registration
statement that is equal to the Warrant Shares and 200% (or such lower amount as
permitted or required by the SEC) of the Note Shares issuable at the Conversion
and Purchase Prices set forth in the Note and Warrant, respectively, that would
be in effect on the Closing Date or the date of filing of such registration
statement (employing the price which would result in the greater number of
Shares), assuming the conversion of 100% of the principal amount of the Note
which is then outstanding, and at least one share of Common Stock for each
common share issuable upon exercise of the Warrant ("REGISTRABLE SECURITIES").
Such registration statement will be promptly amended or additional registration
statements will be promptly filed by the Company as necessary to register
additional Company Shares to allow the public resale of all Common Stock
included in and issuable by virtue of the Registrable Securities.
9.2 REGISTRATION PROCEDURES. 9.2 Registration ProceduresIf and
whenever the Company is required by the provisions hereof to effect the
registration of the Registrable Securities under the Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the SEC a registration statement with respect to
such securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as herein provided), and promptly provide to the Purchaser
copies of all filings and SEC letters of comment;
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective until the earlier
of: (i) six months after the latest exercise period of the Warrant; (ii) four
years after the Closing Date, or (iii) the date on which the Purchaser has
disposed of all of the Registrable Securities covered by such registration
statement in accordance with the Purchaser's intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Purchaser such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) as the Purchaser reasonably may request to facilitate the public
sale or disposition of the securities covered by such registration statement;
(d) use its commercially reasonable efforts to register or qualify the
Purchaser's Registrable Securities covered by such registration statement under
the securities or "blue sky" laws of such jurisdictions as the Purchaser shall
be issued Registrable Securities in, provided, however, that the Company shall
not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration statement
with any securities exchange on which the Common Stock of the Company is then
listed;
(f) immediately notify the Purchaser at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; and
(g) make available for inspection by the Purchaser and any attorney,
accountant or other agent retained by the Purchaser, all publicly available,
non-confidential financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the attorney, accountant or agent of the Purchaser.
9.3 PROVISION OF DOCUMENTS. 9.3 Provision of Documents
(a) In connection with each registration hereunder, the Purchaser will
furnish to the Company in writing such information and representation letters
with respect to itself and the proposed distribution by it as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
9.4 NON-REGISTRATION EVENTS. 9.4 Non-Registration Events (a) If (i) the
Registration Statement described in Section 9.1(a) is not filed on or
before the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within five business days of receipt by the Company of a
communication from the SEC that the registration statement described in Section
9.1(a) will not be reviewed, or (iii) any registration statement described in
Section 9.1(a) is filed and declared effective but shall thereafter cease to be
effective (without being succeeded immediately by an additional registration
statement filed and declared effective) for a period of time which shall exceed
30 days in the aggregate per year but not more than 20 consecutive calendar days
(defined as a period of 365 days commencing on the date the Registration
Statement is declared effective) (each such event referred to in this Section
9.4 is referred to herein as a "NON-REGISTRATION EVENT"), then, for so long as
such Non-Registration Event shall continue, the Company shall pay in cash as
Liquidated Damages to each holder of any Registrable Securities an amount equal
to two percent (2%) per month during the pendency of such Non-Registration Event
of the principal of the Note issued in connection with the Offering, whether or
not converted, then owned of record by such holder or issuable as of or
subsequent to the occurrence of such Non-Registration Event. Payments to be
made pursuant to this Section shall be due and payable immediately upon demand
in immediately available funds. It shall be deemed a Non-Registration Event to
the extent that all the Common Stock included in the Registrable Securities and
underlying the Securities is not included in an effective registration statement
as of and after the Effective Date at the conversion prices in effect from and
after the Effective Date.
(b) In addition to the foregoing, if there is a Non-Registration Event, then
the Purchaser shall have the right to demand that the Company redeem the
Note for consideration equal to the greater of (i) the Mandatory Redemption
Payment or (ii) a fraction, of which the numerator is the amount of the Note
being redeemed and of which the denominator is the Conversion Price, as set
forth in Section 3.1(b) of the Note.
9.5 EXPENSES. 9.5 Expenses All expenses incurred by the Company in
complying with Section 9, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, fees of, and disbursements incurred by, one
counsel for the Purchaser, and costs of insurance are called "REGISTRATION
EXPENSES". All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of any
special counsel to the Purchaser beyond those included in Registration Expenses,
are called "SELLING EXPENSES."
The Company will pay all Registration Expenses. All Selling Expenses in
connection with each registration statement under Section 9 shall be borne by
the Purchaser.
9.6 INDEMNIFICATION. 9.6 Indemnification and Contribution
(a) In the event of a registration of any Registrable Securities under the
Securities Act pursuant to Section 9, the Company will indemnify and hold
harmless the Purchaser, and its officers, directors and each other person, if
any, who controls the Purchaser within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Purchaser, or such persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities were registered under the
Securities Act pursuant to Section 9, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Purchaser, and each such person
for any reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by the
Purchaser or any such person in writing specifically for use in any such
document.
(b) In the event of a registration of the Registrable Securities under the
Securities Act pursuant to Section 9, the Purchaser will indemnify and hold
harmless the Company, and its officers, directors and each other person, if any,
who controls the Company within the meaning of the Securities Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the Securities Act
pursuant to Section 9, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such person for any reasonable legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action, provided, however, that the
Purchaser will be liable in any such case if and only to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing to the Company by the Purchaser
specifically for use in any such document.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 9.6(c) if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof; if the
indemnified party retains its own counsel, then the indemnified party shall pay
all fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties shall have the right to
select one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the event of
joint liability under the Securities Act in any case in which either (i) the
Purchaser, or any controlling person of the Purchaser, makes a claim for
indemnification pursuant to this Section 9.6 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 9.6 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the
Purchaser or controlling person of the Purchaser in circumstances for which
indemnification is provided under this Section 9.6; then, and in each such case,
the Company and the Purchaser will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that the Purchaser is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (A) the Purchaser will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
10. OFFERING RESTRICTIONSERROR! REFERENCE SOURCE NOT FOUND.. Right of
First Refusal. ERROR! REFERENCE SOURCE NOT FOUND. Offering
RestrictionsExcept as previously disclosed in the SEC Reports or in the Exchange
Act Filings, or stock or stock options granted to employees or directors of
the Company; or equity or debt issued in connection with an acquisition of a
business or assets by the Company; or the issuance by the Company of stock in
connection with the establishment of a joint venture partnership or licensing
arrangement (these exceptions hereinafter referred to as the "EXCEPTED
ISSUANCES"), the Company will not issue any securities with a variable/floating
conversion feature which are or could be (by conversion or registration)
free-trading securities (i.e. common stock subject to a registration statement)
prior to the full repayment or conversion of the Note; provided, however, that
nothing in the foregoing shall prohibit the issuance of securities exempt from
registration and freely tradeable pursuant to Rule 144 of the Securities Act.
In addition, if the Company issues any shares of Common Stock or securities
convertible into shares of Common Stock at a discount to the market price of the
Common Stock, or with a conversion price that is at a discount to the market
price, the Company will not grant demand registration rights, and will only
grant piggy back registration rights upon the issuance of the Common Stock or
upon the conversion of such securities into shares of Common Stock, as the case
may be.
11. SECURITY INTEREST. As a condition of Closing, the Company will grant to
the Purchaser a security interest in its assets pursuant to a Security
Agreement. The Company will also execute all such documents reasonably
necessary to memorialize and further protect the security interest described
above.
12. MISCELLANEOUS12. MISCELLANEOUS.
12.1 GOVERNING LAW12.1 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the state of New York. Both parties and the individuals executing
this Agreement and other agreements on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. In the event that any
provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement.
12.2 SURVIVAL12.2 Survival. The representations, warranties, covenants
and agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby to the extent
provided therein. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
12.3 SUCCESSORS AND ASSIGNS12.3 Successors and Assigns. Except as
otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the Securities from time to
time.
12.4 ENTIRE AGREEMENT12.4 Entire Agreement. This Agreement, the
exhibits and schedules hereto, the Related Agreements and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.
12.5 SEVERABILITY12.5 Severability. In case any provision of the
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
12.6 AMENDMENT AND WAIVER12.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the written consent
of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser under
this Agreement may be waived only with the written consent of the Purchaser.
12.7 DELAYS OR OMISSIONS12.7 Delays or Omissions. It is agreed that no
delay or omission to exercise any right, power or remedy accruing to any party,
upon any breach, default or noncompliance by another party under this Agreement
or the Related Agreements, shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either under this
Agreement, the Note or the Related Agreements, by law or otherwise afforded to
any party, shall be cumulative and not alternative.
12.8 NOTICES12.8 Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof, with a copy to
Xxxxxx X. Xxxxx, Esq. Xxxxxx, Xxxxxxxxxx & Xxxxx, 00000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxx Xxxxxxx, XX 00000, facsimile number (000) 000-0000, and to the
Purchaser at the address set forth on the signature page hereto for such
Purchaser, with a copy in the case of the Purchaser to Xxxxxx X. Xxxxxx, Esq.,
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000, facsimile number (212)
541-4434, or at such other address as the Company or the Purchaser may designate
by ten days advance written notice to the other parties hereto.
12.9 ATTORNEYS' FEES12.9 Attorneys' Fees. In the event that any suit or
action is instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including, without limitation,
such reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
12.10 TITLES AND SUBTITLES12.10 Titles and Subtitles. The titles of the
sections and subsections of the Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.
12.11 FACSIMILE SIGNATURES; COUNTERPARTS12.11 Counterparts. This
Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12.12 BROKER'S FEES12.12 Broker's Fees. Each party hereto represents
and warrants that, except as each party may have notified the other in writing
on or prior to the date hereof, no agent, broker, investment banker, person or
firm acting on behalf of or under the authority of such party hereto is or will
be entitled to any broker's or finder's fee or any other commission directly or
indirectly in connection with the transactions contemplated herein. Each party
hereto further agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the representation in this
Section 11.12 being untrue.
12.13 CONSTRUCTION12.13 Construction. Each party acknowledges that its
legal counsel participated in the preparation of this Agreement and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Agreement to favor any party against the other.
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
GLOBAL SPORTS & ENTERTAINMENT, INC. 13. LAURUS MASTER FUND, LTD.
By: 14.
Name: By:
Title: 00.Xxxx:
Address: 15.1 Address: c/o Ironshore Corporate Services Ltd.
0000 Xxxxx Xxxxx Xxxx. 15.2 P.O. Box 1234 G.T., Xxxxxxxxxx Xxxxx, Xxxxx
Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxx 00000 Grand Cayman, Cayman Islands
14.
LIST OF EXHIBITS
Form of Offering Convertible Note Exhibit A
Form of Warrant Exhibit B
Form of Opinion Exhibit C
19. A-1
EXHIBIT A
FORM OF CONVERTIBLE NOTE
20. B-1
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF OPINION
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement and Related
Agreements. All corporate action on the part of the Company and its officers,
directors and stockholders necessary for (i) the authorization of the Agreement
and Related Agreements to which each is a party, and the performance of all
obligations of the Company thereunder at the Closing, and (ii) the
authorization, sale, issuance and delivery of the Securities pursuant to the
Agreement and the Related Agreements has been taken. The Note Shares and the
Warrant Shares, when issued pursuant to and in accordance with the terms of the
Agreement and upon delivery, shall be validly issued and outstanding, fully paid
and non assessable.
3. The execution, delivery and performance of the Agreement, the
Note or the Related Agreements by the Company and the consummation of the
transactions contemplated by any thereof, will not, with or without the giving
of notice or the passage of time or both:
(a) Violate the provisions of the Charter or bylaws of the
Company; or
(b) To the best of such counsel's knowledge, violate any
judgment, decree, order or award of any court binding upon the Company.
4. The Agreement and Related Agreements to which the Company is a
party constitute and the Note and Warrant, upon their issuance will constitute,
valid and legally binding obligations of the Company, and are enforceable
against the Company in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights,
and (b) general principles of equity that restrict the availability of equitable
or legal remedies.
5. The sale of the Note and the subsequent conversion of the Note
into Note Shares are not subject to any preemptive rights or, to such counsel's
knowledge, rights of first refusal that have not been properly waived or
complied with. The sale of the Warrant and the subsequent exercise of the
Warrant for Warrant Shares are not subject to any preemptive rights or, to such
counsel's knowledge, rights of first refusal that have not been properly waived
or complied with.
6. Assuming the accuracy of the representations and warranties of
the Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities will be exempt from the registration requirements of the Securities
Act. To the best of such counsel's knowledge, neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions.
7. Except as disclosed in the Agreement, there is no action, suit,
proceeding or investigation pending or, to the best of such counsel's knowledge,
currently threatened against the Company that prevents the right of the Company
to enter into this Agreement or any of the Related Agreements, or to consummate
the transactions contemplated thereby. To the best of such counsel's knowledge,
the Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality; nor is there any action, suit, proceeding or investigation by
the Company currently pending or which the Company intends to initiate.
