NOTE AND WARRANT PURCHASE
AGREEMENT
Dated as of February 13, 2006
by and among
FINANCIALCONTENT, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
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ARTICLE I Purchase and Sale of Notes and Warrants.......................................................1
Section 1.1 Purchase and Sale of Notes and Warrants.............................................1
Section 1.2 Purchase Price and Closing..........................................................1
Section 1.3 Conversion Shares / Warrant Shares..................................................2
ARTICLE II Representations and Warranties................................................................2
Section 2.1 Representations and Warranties of the Company.......................................2
Section 2.2 Representations and Warranties of the Purchasers...................................13
ARTICLE III Covenants....................................................................................15
Section 3.1 Securities Compliance..............................................................15
Section 3.2 Registration and Listing...........................................................15
Section 3.3 Inspection Rights..................................................................16
Section 3.4 Compliance with Laws...............................................................16
Section 3.5 Keeping of Records and Books of Account............................................16
Section 3.6 Reporting Requirements.............................................................16
Section 3.7 Other Agreements...................................................................17
Section 3.8 Use of Proceeds....................................................................17
Section 3.9 Reporting Status...................................................................17
Section 3.10 Disclosure of Transaction..........................................................17
Section 3.11 Disclosure of Material Information.................................................18
Section 3.12 Pledge of Securities...............................................................18
Section 3.13 Amendments.........................................................................18
Section 3.14 Distributions......................................................................18
Section 3.15 Reservation of Shares..............................................................18
Section 3.16 Transfer Agent Instructions........................................................18
Section 3.17 Disposition of Assets..............................................................19
Section 3.18 Form SB-2 Eligibility..............................................................19
Section 3.19 Subsequent Financings..............................................................19
ARTICLE IV Conditions...................................................................................20
Section 4.1 Conditions Precedent to the Obligation of the Company to Close and to Sell the
Securities.........................................................................20
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the
Securities.........................................................................21
ARTICLE V Certificate Legend...........................................................................23
Section 5.1 Legend.............................................................................24
ARTICLE VI Indemnification..............................................................................24
Section 6.1 General Indemnity..................................................................24
Section 6.2 Indemnification Procedure..........................................................25
ARTICLE VII Miscellaneous................................................................................26
Section 7.1 Fees and Expenses..................................................................26
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue...............................26
Section 7.3 Entire Agreement; Amendment........................................................26
Section 7.4 Notices............................................................................27
Section 7.5 Waivers............................................................................28
Section 7.6 Headings...........................................................................28
Section 7.7 Successors and Assigns.............................................................28
Section 7.8 No Third Party Beneficiaries.......................................................28
Section 7.9 Governing Law......................................................................28
Section 7.10 Survival...........................................................................28
Section 7.11 Counterparts.......................................................................28
Section 7.12 Publicity..........................................................................28
Section 7.13 Severability.......................................................................29
Section 7.14 Further Assurances.................................................................29
NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT dated as of February 13, 2006
(this "Agreement") by and among FinancialContent, Inc., a Delaware corporation
(the "Company"), and each of the purchasers of the senior secured convertible
promissory notes of the Company whose names are set forth on Exhibit A attached
hereto (each a "Purchaser" and collectively, the "Purchasers").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND WARRANTS
Section 1.1 Purchase and Sale of Notes and Warrants.
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(a) Upon the following terms and conditions, the Company shall issue and sell to
the Purchasers, and the Purchasers shall purchase from the Company, senior
secured convertible promissory notes in the aggregate principal amount of One
Million Dollars ($1,000,000) bearing interest at the rate of nine percent (9%)
per annum, convertible into shares of the Company's common stock, $0.001 par
value per share (the "Common Stock"), in substantially the form attached hereto
as Exhibit B (the "Notes"). The Company and the Purchasers are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded by Section 4(2) of the U.S. Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), including Regulation D ("Regulation D"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
(b) Upon the following terms and conditions, the Purchasers shall be issued (i)
Series A Warrants, in substantially the form attached hereto as Exhibit C (the
"Series A Warrants"), to purchase the number of shares of Common Stock set forth
opposite such Purchaser's name on Exhibit A attached hereto at an exercise price
per share equal to $1.00 and (ii) Series B Warrants, in substantially the form
attached hereto as Exhibit D (the "Series B Warrants" and, together with the
Series A Warrants, the "Warrants"), to purchase the number of shares of Common
Stock set forth opposite such Purchaser's name on Exhibit A attached hereto at
an exercise price per share equal to $1.25. Each Purchaser shall be entitled to
receive Series A Warrants and Series B Warrants to purchase a number of shares
of Common Stock equal to twenty-five percent (25%) of the number of shares of
Common Stock issuable upon conversion of such Purchaser's Note. The Warrants
shall expire five (5) years following the issuance thereof.
Section 1.2 Purchase Price and Closing. Subject to the terms and
conditions hereof, the Company agrees to issue and sell to the Purchasers and,
in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers,
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severally but not jointly, agree to purchase the Notes and Warrants for an
aggregate purchase price of One Million Dollars ($1,000,000) (the "Purchase
Price"). The Notes and Warrants shall be sold and funded in three separate
closings (each, a "Closing"). The initial Closing under this Agreement (the
"Initial Closing") shall take place on or about February 13, 2006 (the "Initial
Closing Date") and shall be funded in the amount of Three Hundred Fifty Thousand
Dollars ($350,000). The second Closing under this Agreement (the "Second
Closing") shall take place no later than five (5) business days after the date
that the Company files the registration statement (the "Registration Statement")
with the Securities and Exchange Commission (the "Commission") providing for the
resale of the Conversion Shares (as defined below) and the Warrant Shares (as
defined below) (the "Second Closing Date") and shall be funded in the amount of
Three Hundred Fifty Thousand Dollars ($350,000). The final Closing under this
Agreement (the "Final Closing") shall take place no later than five (5) business
days after the Commission declares the Registration Statement effective (the
"Final Closing Date") and shall be funded in the amount of Three Hundred
Thousand Dollars ($300,000). The Initial Closing Date, the Second Closing Date
and the Final Closing Date are sometimes referred to in this Agreement as the
"Closing Date". Each Closing of the purchase and sale of the Notes and Warrants
to be acquired by the Purchasers from the Company under this Agreement shall
take place at the offices of Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m., New York time; provided,
that all of the conditions set forth in Article IV hereof and applicable to each
Closing shall have been fulfilled or waived in accordance herewith. Subject to
the terms and conditions of this Agreement, at each Closing, the Company shall
deliver or cause to be delivered to each Purchaser (x) its Note for the
principal amount set forth opposite the name of such Purchaser on Exhibit A
hereto, (y) a Series A Warrant and Series B Warrant to purchase such number of
shares of Common Stock as is set forth opposite the name of such Purchaser on
Exhibit A attached hereto and (z) any other deliveries as required by Article
IV. At each Closing, each Purchaser shall deliver its Purchase Price by wire
transfer to an account designated by the Company.
Section 1.3 Conversion Shares / Warrant Shares. The Company has authorized
and has reserved and covenants to continue to reserve, free of preemptive rights
and other similar contractual rights of stockholders, a number of its authorized
but unissued shares of Common Stock equal to one hundred fifty percent (150%) of
the aggregate number of shares of Common Stock to effect the conversion of the
Notes and any interest accrued and outstanding thereon and exercise of the
Warrants as of the Closing Date. Any shares of Common Stock issuable upon
conversion of the Notes and any interest accrued and outstanding on the Notes
are herein referred to as the "Conversion Shares". Any shares of Common Stock
issuable upon exercise of the Warrants (and such shares when issued) are herein
referred to as the "Warrant Shares". The Notes, the Warrants, the Conversion
Shares and the Warrant Shares are sometimes collectively referred to herein as
the "Securities".
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers, as of the date hereof and each
Closing Date (except as set forth on the Schedule of Exceptions attached hereto
with each numbered Schedule corresponding to the section number herein), as
follows:
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(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company does not have any Subsidiaries (as defined in Section 2.1(g)) or own
securities of any kind in any other entity except as set forth on Schedule
2.1(g) hereto. Except as set forth on Schedule 2.1(g) hereto, the Company and
each such Subsidiary (as defined in Section 2.1(g)) is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, operations, properties,
prospects, or financial condition of the Company and its Subsidiaries and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform any of its
obligations under this Agreement in any material respect.
(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Notes, the Warrants,
the Registration Rights Agreement by and among the Company and the Purchasers,
dated as of the date hereof, substantially in the form of Exhibit E attached
hereto (the "Registration Rights Agreement"), the Security Agreement by and
among the Company and the Purchasers, dated as of the date hereof, substantially
in the form of Exhibit F attached hereto (the "Security Agreement"), and the
Irrevocable Transfer Agent Instructions (as defined in Section 3.16 hereof)
(collectively, the "Transaction Documents") and to issue and sell the Securities
in accordance with the terms hereof. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action, and, except as set forth on Schedule 2.1(b), no
further consent or authorization of the Company, its Board of Directors or
stockholders is required. When executed and delivered by the Company, each of
the Transaction Documents shall constitute a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.
(c) Capitalization. The authorized capital stock and the issued and outstanding
shares of capital stock of the Company as of the date hereof is set forth on
Schedule 2.1(c) hereto. All of the outstanding shares of the Common Stock and
any other outstanding security of the Company have been duly and validly
authorized. Except as set forth in this Agreement, the Commission Documents (as
defined in Section 2.1(f)) or as set forth on Schedule 2.1(c) hereto, no shares
of Common Stock or any other security of the Company are entitled to preemptive
rights or registration rights and there are no outstanding options, warrants,
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scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth in this Agreement and as
set forth on Schedule 2.1(c) hereto, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as provided on Schedule
2.1(c) hereto, the Company is not a party to or bound by any agreement or
understanding granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. Except as set forth on Schedule
2.1(c), the Company is not a party to, and it has no knowledge of, any agreement
or understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance of Securities. The Notes and the Warrants to be issued at each
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Notes shall be
validly issued and outstanding, free and clear of all liens, encumbrances and
rights of refusal of any kind. When the Conversion Shares and Warrant Shares are
issued and paid for in accordance with the terms of this Agreement and as set
forth in the Notes and Warrants, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the performance by the Company of its obligations
under the Notes and the consummation by the Company of the transactions
contemplated hereby and thereby, and the issuance of the Securities as
contemplated hereby, do not and will not (i) violate or conflict with any
provision of the Company's Certificate of Incorporation (the "Certificate") or
Bylaws (the "Bylaws"), each as amended to date, or any Subsidiary's comparable
charter documents, (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, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect (other than
violations pursuant to clauses (i) or (iii) (with respect to federal and state
securities laws)). Neither the Company nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under the Transaction Documents or issue and sell the
Securities in accordance with the terms hereof (other than any filings, consents
and approvals which may be required to be made by the Company under applicable
state and federal securities laws, rules or regulations or any registration
provisions provided in the Registration Rights Agreement).
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(f) Commission Documents, Financial Statements. The Common Stock of the Company
is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and except as set forth on Schedule
2.1(f) hereto, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
including filings incorporated by reference therein being referred to herein as
the "Commission Documents"). Except as set forth on Schedule 2.1(f) hereto, at
the times of their respective filings, the Form 10-QSB for the fiscal quarters
ended September 30, 2005, March 31, 2005 and December 31, 2004 (collectively,
the "Form 10-QSB") and the Form 10-KSB for the fiscal year ended June 30, 2005
(the "Form 10-KSB") complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and the Form 10-QSB and Form 10-KSB did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, except as set forth on Schedule 2.1(f)
hereto, the financial statements of the Company included in the Commission
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of the Company and its Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. Except as set forth on
Schedule 2.1(g) hereto, there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.
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(h) No Material Adverse Change. Since June 30, 2005, the Company has not
experienced or suffered any Material Adverse Effect, except as disclosed on
Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i) hereto,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of the Company's or its Subsidiaries respective
businesses or which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Since June 30, 2005, except as
disclosed on Schedule 2.1(j) hereto, no event or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, 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.
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments. For the purposes of
this Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money
or amounts owed in excess of $100,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of others, whether
or not the same are or should be reflected in the Company's balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of $25,000
due under leases required to be capitalized in accordance with GAAP. Neither the
Company nor any Subsidiary is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has good and valid
title to all of its real and personal property reflected in the Commission
Documents, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated on Schedule 2.1(l)
hereto or such that, individually or in the aggregate, do not cause a Material
Adverse Effect. Any leases of the Company and each of its Subsidiaries are valid
and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents or on Schedule 2.1(m) hereto, there is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, any Subsidiary or any of their
respective properties or assets, which individually or in the aggregate, would
reasonably be expected, if adversely determined, to have a Material Adverse
Effect. There are no outstanding orders, judgments, injunctions, awards or
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decrees of any court, arbitrator or governmental or regulatory body against the
Company or any Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the Subsidiaries has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth in the Commission Documents or on Schedule 2.1(n) hereto or such that,
individually or in the aggregate, the noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. The Company and each
of its Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the Company and each
of the Subsidiaries has accurately prepared and filed all federal, state and
other tax returns required by law to be filed by it, has paid or made provisions
for the payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial statements of
the Company and the Subsidiaries for all current taxes and other charges to
which the Company or any Subsidiary is subject and which are not currently due
and payable. Except as disclosed on Schedule 2.1(o) hereto or in the Commission
Documents, none of the federal income tax returns of the Company or any
Subsidiary have been audited by the Internal Revenue Service. The Company has no
knowledge of any additional assessments, adjustments or contingent tax liability
(whether federal or state) of any nature whatsoever, whether pending or
threatened against the Company or any Subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the Company has
not employed any broker or finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders' structuring fees, financial
advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. Except for the transactions contemplated by this Agreement, the
Company confirms that neither it nor any other person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that constitutes or might constitute material, nonpublic information. To the
best of the Company's knowledge, neither this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchasers
by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(r) Operation of Business. Except as set forth on Schedule 2.1(r) hereto, the
Company and each of the Subsidiaries owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
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improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.
(s) Environmental Compliance. To the best knowledge of the Company, except as
set forth on Schedule 2.1(s) hereto or in the Commission Documents, the Company
and each of its Subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. "Environmental Laws"
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. To the best of
the Company's knowledge, the Company has all necessary governmental approvals
required under all Environmental Laws as necessary for the Company's business or
the business of any of its subsidiaries. To the best of the Company's knowledge,
the Company and each of its subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its Subsidiaries that violate or may violate any Environmental Law after the
Initial Closing Date or that may give rise to any environmental liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation (i) under any Environmental Law, or (ii) based
on or related to the manufacture, processing, distribution, use, treatment,
storage (including without limitation underground storage tanks), disposal,
transport or handling, or the emission, discharge, release or threatened release
of any hazardous substance.
(t) Books and Records; Internal Accounting Controls. The records and documents
of the Company and its Subsidiaries accurately reflect in all material respects
the information relating to the business of the Company and the Subsidiaries,
the location and collection of their assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the Company or any
Subsidiary. The Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient, in the judgment of the Company's board
of directors, 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 actions are taken with respect to any
differences.
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(u) Material Agreements. Except for the Transaction Documents (with respect to
clause (i) only), as disclosed in the Commission Documents or as set forth on
Schedule 2.1(u) hereto, or as would not be reasonably likely to have a Material
Adverse Effect, (i) the Company and each of its Subsidiaries have performed all
obligations required to be performed by them to date under any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement,
filed or required to be filed with the Commission (the "Material Agreements"),
(ii) neither the Company nor any of its Subsidiaries has received any notice of
default under any Material Agreement and, (iii) to the best of the Company's
knowledge, neither the Company nor any of its Subsidiaries is in default under
any Material Agreement now in effect.
(v) Transactions with Affiliates. Except as set forth on Schedule 2.1(v) hereto
and in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any of its
Subsidiaries, or any person owning at least 5% of the outstanding capital stock
of the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder which, in each case, is required to be
disclosed in the Commission Documents or in the Company's most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
(w) Securities Act of 1933. Based in material part upon the representations
herein of the Purchasers, the Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws, and neither the
Company nor 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 under the Securities Act) in connection with the
offer or sale of any of the Securities.
(x) Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth on Schedule 2.1(x) hereto. Except as set forth on Schedule 2.1(x)
hereto, neither the Company nor any Subsidiary has any employment contract,
agreement regarding proprietary information, non-competition agreement,
non-solicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such Subsidiary
required to be disclosed in the Commission Documents that is not so disclosed.
No officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, would be reasonably likely
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to have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.
(y) Absence of Certain Developments. Except as set forth in the Commission
Documents or provided on Schedule 2.1(y) hereto, since June 30, 2005, neither
the Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or any right, options
or warrants with respect thereto;
(ii) borrowed any amount in excess of $100,000 or incurred or become subject to
any other liabilities in excess of $100,000 (absolute or contingent) except
current liabilities incurred in the ordinary course of business which are
comparable in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of the business of
the Company and its Subsidiaries;
(iii) discharged or satisfied any lien or encumbrance in excess of $100,000 or
paid any obligation or liability (absolute or contingent) in excess of $100,000,
other than current liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock, in each
case in excess of $50,000 individually or $100,000 in the aggregate;
(v) sold, assigned or transferred any other tangible assets, or canceled any
debts or claims, in each case in excess of $100,000, except in the ordinary
course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or intellectual property
rights in excess of $100,000, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any material losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss of any
material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary course
of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in excess
of $100,000;
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(x) entered into any material transaction, whether or not in the ordinary course
of business;
(xi) made charitable contributions or pledges in excess of $10,000;
(xii) suffered any material damage, destruction or casualty loss, whether or not
covered by insurance; (xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment; or
(xiv) entered into an agreement, written or otherwise, to take any of the
foregoing actions.
(z) Public Utility Holding Company Act and Investment Company Act Status. The
Company is not a "holding company" or a "public utility company" as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended. The
Company is not, and as a result of and immediately upon the Closing will not be,
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(aa) ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its Subsidiaries
which is or would be materially adverse to the Company and its Subsidiaries. The
execution and delivery of this Agreement and the issuance and sale of the
Securities will not involve any transaction which is subject to the prohibitions
of Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or in connection with which a tax could be imposed pursuant to
Section 4975 of the Internal Revenue Code of 1986, as amended, provided that, if
any of the Purchasers, or any person or entity that owns a beneficial interest
in any of the Purchasers, is an "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) with respect to which the Company is a "party
in interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(aa), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any Subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(bb) Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that the
decision of each Purchaser to purchase Securities pursuant to this Agreement has
been made by such Purchaser independently of any other Purchaser 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
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its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that for reasons of
administrative convenience only, the Transaction Documents have been prepared by
counsel for one of the Purchasers and such counsel does not represent all of the
Purchasers but only such Purchaser and the other Purchasers have retained their
own individual counsel with respect to the transactions contemplated hereby. The
Company acknowledges that it has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Purchasers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated hereby or thereby.
(cc) No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
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 Regulation D and Rule 506 thereof 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. The Company does not have any registration statement pending
before the Commission or currently under the Commission's review and except as
set forth on Schedule 2.1(cc) hereto, and since July 1, 2005, the Company has
not offered or sold any of its equity securities or debt securities convertible
into shares of Common Stock.
(dd) Xxxxxxxx-Xxxxx Act. The Company is in compliance with the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx Act"), and the
rules and regulations promulgated thereunder, that are effective, and intends to
comply with other applicable provisions of the Xxxxxxxx-Xxxxx Act, and the rules
and regulations promulgated thereunder, upon the effectiveness of such
provisions.
(ee) Dilutive Effect. The Company understands and acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes in accordance
with this Agreement and the Notes and its obligations to issue the Warrant
Shares upon the exercise of the Warrants in accordance with this Agreement and
the Warrants, is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interest of other
stockholders of the Company.
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(ff) DTC Status. The Company's transfer agent is a participant in and the Common
Stock is eligible for transfer pursuant to the Depository Trust Company
Automated Securities Transfer Program. The name, address, telephone number, fax
number, contact person and email address of the Company's transfer agent is set
forth on Schedule 2.1(ff) hereto.
(gg) Solvency. Based on the financial condition of the Company as of the Closing
Date (after giving effect to the transactions contemplated herein and in the
other Transaction Documents), (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of
the Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
Section 2.2.......Representations and Warranties of the Purchasers. Each of the
Purchasers hereby represents and warrants to the Company with respect solely to
itself and not with respect to any other Purchaser as follows as of the date
hereof and as of each Closing Date:
(a) Organization and Standing of the Purchasers. If the Purchaser is an entity,
such Purchaser is a corporation, limited liability company or partnership duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.
(b) Authorization and Power. Each Purchaser has the requisite power and
authority to enter into and perform the Transaction Documents and to purchase
the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by each Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. When executed and delivered by the
Purchasers, the other Transaction Documents shall constitute valid and binding
obligations of each Purchaser enforceable against such Purchaser in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the Transaction
Documents by the Purchaser and the consummation by the Purchaser of the
transactions contemplated thereby and hereby do not and will not (i) violate any
provision of the Purchaser's charter or organizational documents, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
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both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Purchaser is a party or by which the Purchaser's respective
properties or assets are bound, or (iii) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Purchaser or by which any property or asset of the Purchaser are bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, except, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, materially and
adversely affect the Purchaser's ability to perform its obligations under the
Transaction Documents.
(d) Acquisition for Investment. Each Purchaser is purchasing the Securities
solely for its own account and not with a view to or for sale in connection with
distribution. Each Purchaser does not have a present intention to sell any of
the Securities, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of any of the Securities to or through any
person or entity; provided, however, that by making the representations herein,
such Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with Federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it (i) has such knowledge and
experience in financial and business matters such that Purchaser is capable of
evaluating the merits and risks of Purchaser's investment in the Company, (ii)
is able to bear the financial risks associated with an investment in the
Securities and (iii) has been given full access to such records of the Company
and the Subsidiaries and to the officers of the Company and the Subsidiaries as
it has deemed necessary or appropriate to conduct its due diligence
investigation.
(e) Rule 144. Each Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or
an exemption from registration is available. Each Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Each Purchaser understands that the Securities are being offered
and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Each Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
-14-
(g) No General Solicitation. Each Purchaser acknowledges that the Securities
were not offered to such Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications. Each
Purchaser, in making the decision to purchase the Securities, has relied upon
independent investigation made by it and has not relied on any information or
representations made by third parties.
(h) Accredited Investor. Each Purchaser is an "accredited investor" (as defined
in Rule 501 of Regulation D), and such Purchaser has such experience in business
and financial matters that it is capable of evaluating the merits and risks of
an investment in the Securities. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is
not a broker-dealer. Each Purchaser acknowledges that an investment in the
Securities is speculative and involves a high degree of risk.
(i) Certain Fees. The Purchasers have not employed any broker or finder or
incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(j) Independent Investment. No Purchaser has agreed to act with any other
Purchaser for the purpose of acquiring, holding, voting or disposing of the
Securities purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Purchaser is acting independently with respect to its investment
in the Securities.
ARTICLE III
COVENANTS
The Company covenants with each Purchaser as follows, which covenants
are for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1.......Securities Compliance. The Company shall notify the Commission
in accordance with its rules and regulations, of the transactions contemplated
by any of the Transaction Documents 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 the
Purchasers, or their respective subsequent holders.
Section 3.2.......Registration and Listing. So long as a Purchaser beneficially
owns any of the Securities, the Company shall cause its Common Stock to continue
to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in
all respects with its reporting and filing obligations under the Exchange Act,
to comply with all requirements related to any registration statement filed
pursuant to this Agreement, and to not take any action or file any document
(whether or not permitted by the Securities Act or the rules promulgated
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act or Securities Act,
except as permitted herein. The Company will take all action necessary to
continue the listing or trading of its Common Stock on the OTC Bulletin Board or
other exchange or market on which the Common Stock is trading. Subject to the
terms of the Transaction Documents, the Company further covenants that it will
take such further action as the Purchasers may reasonably request, all to the
extent required from time to time to enable the Purchasers to sell the
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 promulgated under the Securities Act.
Upon the request of the Purchasers, the Company shall deliver to the Purchasers
a written certification of a duly authorized officer as to whether it has
complied with such requirements.
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Section 3.3.......Inspection Rights. Provided same would not be in violation of
Regulation FD, the Company shall permit, during normal business hours and upon
reasonable request and reasonable notice, each Purchaser or any employees,
agents or representatives thereof, so long as such Purchaser shall be obligated
hereunder to purchase the Notes or shall beneficially own any Conversion Shares
or Warrant Shares, for purposes reasonably related to such Purchaser's interests
as a stockholder, to examine the publicly available, non-confidential records
and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
publicly available, non-confidential affairs, finances and accounts of the
Company and any Subsidiary with any of its officers, consultants, directors, and
key employees.
Section 3.4.......Compliance with Laws. The Company shall comply, and cause each
Subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which would be reasonably likely to have a Material Adverse
Effect.
Section 3.5.......Keeping of Records and Books of Account. The Company shall
keep and cause each Subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.6.......Reporting Requirements. If the Company ceases to file its
periodic reports with the Commission, or if the Commission ceases making these
periodic reports available via the Internet without charge, then the Company
shall furnish the following to each Purchaser so long as such Purchaser shall be
obligated hereunder to purchase the Securities or shall beneficially own
Securities:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon as
practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission;
(b) Annual Reports filed with the Commission on Form 10-KSB as soon as practical
after the document is filed with the Commission, and in any event within five
(5) days after the document is filed with the Commission; and
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(c) Copies of all notices, information and proxy statements in connection with
any meetings, that are, in each case, provided to holders of shares of Common
Stock, contemporaneously with the delivery of such notices or information to
such holders of Common Stock.
Section 3.7.......Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any Subsidiary under any
Transaction Document.
Section 3.8.......Use of Proceeds. The net proceeds from the sale of the
Securities shall be used by the Company for working capital and general
corporate purposes and not to redeem any Common Stock or securities convertible,
exercisable or exchangeable into Common Stock or to settle any outstanding
litigation.
Section 3.9.......Reporting Status. So long as a Purchaser beneficially owns any
of the Securities, the Company shall timely file all reports required to be
filed with the Commission pursuant to the Exchange Act, and the Company shall
not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
Section 3.10......Disclosure of Transaction. The Company shall issue a press
release describing the material terms of the transactions contemplated hereby
(the "Press Release") on the day of the Initial Closing but in no event later
than one hour after the Initial Closing; provided, however, that if the Initial
Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following the Initial Closing Date. The Company shall also file with
the Commission a Current Report on Form 8-K (the "Form 8-K") describing the
material terms of the transactions contemplated hereby (and attaching as
exhibits thereto this Agreement, the form of Note, the Registration Rights
Agreement, the Security Agreement, the form of each series of Warrant and the
Press Release) as soon as practicable following the Initial Closing Date but in
no event more than two (2) Trading Days following the Initial Closing Date,
which Press Release and Form 8-K shall be subject to prior review and comment by
the Purchasers. "Trading Day" means any day during which the principal exchange
on which the Common Stock is traded shall be open for trading.
Section 3.11......Disclosure of Material Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf has provided or
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
Section 3.12......Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by a Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
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of the Securities shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document; provided that a Purchaser and its pledgee
shall be required to comply with the provisions of Article V hereof in order to
effect a sale, transfer or assignment of Securities to such pledgee. At the
Purchasers' expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Purchaser.
Section 3.13......Amendments. The Company shall not amend or waive any provision
of the Certificate or Bylaws of the Company in any way that would adversely
affect exercise rights, voting rights, conversion rights, prepayment rights or
redemption rights of the holder of the Notes.
Section 3.14......Distributions. So long as any Notes or Warrants remain
outstanding, the Company agrees that it shall not (i) declare or pay any
dividends or make any distributions to any holder(s) of Common Stock or (ii)
purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section 3.15......Reservation of Shares. So long as any of the Notes or Warrants
remain outstanding, the Company shall take all action necessary to at all times
have authorized and reserved for the purpose of issuance, one hundred fifty
percent (150%) of the aggregate number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and the Warrant Shares.
Section 3.16......Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each Purchaser or its
respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon
conversion of the Notes or exercise of the Warrants in the form of Exhibit G
attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.17 will be given by the Company to its transfer agent and that
the Conversion Shares and Warrant Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 3.16
shall affect in any way each Purchaser's obligations and agreements set forth in
Section 5.1 to comply with all applicable prospectus delivery requirements, if
any, upon resale of the Conversion Shares and the Warrant Shares. If a Purchaser
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Conversion
Shares or Warrant Shares may be made without registration under the Securities
Act or the Purchaser provides the Company with reasonable assurances that the
Conversion Shares or Warrant Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold, the Company shall permit the transfer, and, in the
case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive legend.
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The Company acknowledges that a breach by it of its obligations under this
Section 3.16 will cause irreparable harm to the Purchasers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 3.16 will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 3.16, that
the Purchasers shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
Section 3.17......Disposition of Assets. So long as the Notes remain
outstanding, neither the Company nor any subsidiary shall sell, transfer or
otherwise dispose of any of its properties, assets and rights including, without
limitation, its software and intellectual property, to any person except for
sales of obsolete assets and sales to customers in the ordinary course of
business or with the prior written consent of the holders of a majority of the
principal amount of the Notes then outstanding.
Section 3.18......Form SB-2 Eligibility. The Company currently meets, and will
take all necessary action to continue to meet, the "registrant eligibility" and
transaction requirements set forth in the general instructions to Form SB-2
applicable to "resale" registrations on Form SB-2 during the Effectiveness
Period (as defined in the Registration Rights Agreement) and the Company shall
file all reports required to be filed by the Company with the Commission in a
timely manner so as to maintain such eligibility for the use of Form SB-2.
Section 3.19......Subsequent Financings.
(a) So long as the Notes remain outstanding, during the period commencing on the
Final Closing Date and ending on the date that is twenty-four (24) months
following the Final Closing Date, the Company covenants and agrees to promptly
notify (in no event later than five (5) days after making or receiving an
applicable offer) in writing (a "Rights Notice") each Purchaser of the terms and
conditions of any proposed any proposed offer or sale to, or exchange with (or
other type of distribution to) any third party (a "Subsequent Financing"), of
Common Stock or any securities convertible, exercisable or exchangeable into
Common Stock, including convertible debt securities (collectively, the
"Financing Securities"). The Rights Notice shall describe, in reasonable detail,
the proposed Subsequent Financing, the names and investment amounts of all
investors participating in the Subsequent Financing, the proposed closing date
of the Subsequent Financing, which shall be within thirty (30) calendar days
from the date of the Rights Notice, and all of the terms and conditions thereof
and proposed definitive documentation to be entered into in connection
therewith. The Rights Notice shall provide each Purchaser an option (the "Rights
Option") during the fifteen (15) Trading Days following delivery of the Rights
Notice (the "Option Period") to inform the Company whether such Purchaser will
purchase up to its pro rata portion of the amount of the securities being
offered in such Subsequent Financing on the same, absolute terms and conditions
as contemplated by such Subsequent Financing. Each Purchaser shall have an
additional five (5) Trading Days to fund the purchase of the securities being
offered in such Subsequent Financing. If any Purchaser elects not to participate
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in such Subsequent Financing, the other Purchasers may participate on a pro-rata
basis so long as such participation in the aggregate does not exceed the total
amount of the Subsequent Financing. For purposes of this Section, all references
to "pro rata" means, for any Purchaser electing to participate in such
Subsequent Financing, the percentage obtained by dividing (x) the principal
amount of the Notes purchased by such Purchaser at each Closing by (y) the total
principal amount of all of the Notes purchased by all of the participating
Purchasers at each Closing. Delivery of any Rights Notice constitutes a
representation and warranty by the Company that there are no other material
terms and conditions, arrangements, agreements or otherwise except for those
disclosed in the Rights Notice, to provide additional compensation to any party
participating in any proposed Subsequent Financing, including, but not limited
to, additional compensation based on changes in the Purchase Price or any type
of reset or adjustment of a purchase or conversion price or to issue additional
securities at any time after the closing date of a Subsequent Financing. If the
Company does not receive notice of exercise of the Rights Option from the
Purchasers within the Option Period, the Company shall have the right to close
the Subsequent Financing on the scheduled closing date with a third party;
provided that all of the material terms and conditions of the closing are the
same as those provided to the Purchasers in the Rights Notice. If the closing of
the proposed Subsequent Financing does not occur on that date, any closing of
the contemplated Subsequent Financing or any other Subsequent Financing shall be
subject to all of the provisions of this Section 3.19(a), including, without
limitation, the delivery of a new Rights Notice. The provisions of this Section
3.19(a) shall not apply to issuances of securities in a Permitted Financing (as
defined below).
(b) For purposes of this Agreement, a Permitted Financing (as defined
hereinafter) shall not be considered a Subsequent Financing. A "Permitted
Financing" shall mean (i) securities issued (other than for cash) in connection
with a merger, acquisition, or consolidation, (ii) securities issued pursuant to
a bona fide firm underwritten public offering of the Company's securities, (iii)
securities issued pursuant to the conversion or exercise of convertible or
exercisable securities issued or outstanding on or prior to the date hereof or
issued pursuant to this Agreement and the Notes, (iv) the Warrant Shares, (v)
securities issued in connection with bona fide strategic license agreements,
partnering arrangements or other consulting services so long as such issuances
are not for the purpose of raising capital, (vi) Common Stock issued or the
issuance or grants of options or warrants to purchase Common Stock to any
employer, officer, director or advisor of the Company for a period of two (2)
years following the date of this Agreement so long as the exercise price of such
options or warrants is greater than $0.75, (vii) any warrants issued to the
placement agent and its designees for the transactions contemplated by this
Agreement, (viii) the payment of any accrued interest in shares of Common Stock
pursuant to the Notes; and (ix) securities issued to CNET Networks, Inc.
ARTICLE IV
CONDITIONS
Section 4.1.......Conditions Precedent to the Obligation of the Company to Close
and to Sell the Securities. The obligation hereunder of the Company to close and
issue and sell the Securities to the Purchasers at each Closing is subject to
the satisfaction or waiver, at or before each Closing of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
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(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of each Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to each Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Securities shall have
been delivered to the Company on each Closing Date.
(e) Delivery of Transaction Documents. The Transaction Documents shall have been
duly executed and delivered by the Purchasers to the Company.
Section 4.2.......Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Securities. The obligation hereunder of the Purchasers
to purchase the Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before each Closing,
of each of the conditions set forth below. These conditions are for the
Purchasers' sole benefit and may be waived by the Purchasers at any time in
their sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement and the other
Transaction Documents shall be true and correct in all material respects as of
each Closing Date, except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material respects as of
such date.
(b) Performance by the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to each Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission or the OTC Bulletin Board (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Initial Closing), and, at any time prior to each
Closing Date, trading in securities generally as reported by Bloomberg Financial
Markets ("Bloomberg") shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by Bloomberg, or on the New York Stock Exchange, nor shall a banking moratorium
have been declared either by the United States or New York State authorities.
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(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Opinion of Counsel. The Purchasers shall have received an opinion of counsel
to the Company, dated the date of each Closing, substantially in the form of
Exhibit H hereto, with such exceptions and limitations as shall be reasonably
acceptable to counsel to the Purchasers.
(g) Notes and Warrants. At or prior to each Closing, the Company shall have
delivered to the Purchasers the Notes (in such denominations as each Purchaser
may request) and the Warrants (in such denominations as each Purchaser may
request).
(h) Secretary's Certificate. The Company shall have delivered to the Purchasers
a secretary's certificate, dated as of each Closing Date, as to (i) the
resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(i) Officer's Certificate. On each Closing Date, the Company shall have
delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of each Closing Date, confirming the accuracy of
the Company's representations, warranties and covenants as of the Closing Date
and confirming the compliance by the Company with the conditions precedent set
forth in paragraphs (b)-(e) and (l) of this Section 4.2 as of each Closing Date
(provided that, with respect to the matters in paragraphs (d) and (e) of this
Section 4.2, such confirmation shall be based on the knowledge of the executive
officer after due inquiry).
(j) Registration Rights Agreement. As of the Initial Closing Date, the Company
shall have executed and delivered the Registration Rights Agreement to each
Purchaser.
(k) Security Agreement. As of the Initial Closing Date, the Company shall have
executed and delivered the Security Agreement to each Purchaser.
(l) UCC Financing Statements. As of the Initial Closing Date, the Company shall
have filed all UCC financing statements in form and substance satisfactory to
the Purchasers at the appropriate offices to create a valid and perfected
security interest in the Collateral (as defined in the Security Agreement).
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(m) Material Adverse Effect. No Material Adverse Effect shall have occurred at
or before each Closing Date.
(n) Transfer Agent Instructions. As of the Initial Closing Date, the Irrevocable
Transfer Agent Instructions, in the form of Exhibit G attached hereto, shall
have been delivered to the Company's transfer agent.
(o) Asia Pacific Ventures. All UCC financing statements listing Asia Pacific
Ventures as a secured party and the Company as debtor shall have been terminated
on or before the Initial Closing Date.
(p) Registration Statement Filed. With respect to the Second Closing, the
Registration Statement shall have been filed with the Commission.
(q) Effective Registration Statement. With respect to the Final Closing, the
Registration Statement shall have been declared effective by the Commission.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1.......Legend. Each certificate representing the Securities shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required by applicable state securities or "blue sky"
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
FINANCIALCONTENT, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to issue or reissue certificates representing any of
the Conversion Shares and the Warrant Shares, without the legend set forth above
if at such time, prior to making any transfer of any such Conversion Shares or
Warrant Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request. Such proposed transfer and removal will not be effected
until: (a) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that the registration of the
Conversion Shares or Warrant Shares under the Securities Act is not required in
connection with such proposed transfer, (ii) a registration statement under the
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Securities Act covering such proposed disposition has been filed by the Company
with the Commission and has become effective under the Securities Act, (iii) the
Company has received other evidence reasonably satisfactory to the Company that
such registration and qualification under the Securities Act and state
securities laws are not required, or (iv) the holder provides the Company with
reasonable assurances that such security can be sold pursuant to Rule 144 under
the Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, (ii) compliance with
applicable state securities or "blue sky" laws has been effected, or (iii) the
holder provides the Company with reasonable assurances that a valid exemption
exists with respect thereto. The Company will respond to any such notice from a
holder within three (3) business days. In the case of any proposed transfer
under this Section 5.1, the Company will use reasonable efforts to comply with
any such applicable state securities or "blue sky" laws, but shall in no event
be required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or "blue sky" laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement. Whenever a certificate representing the Conversion Shares or
Warrant Shares is required to be issued to a Purchaser without a legend, in lieu
of delivering physical certificates representing the Conversion Shares or
Warrant Shares, provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, the
Company shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Conversion Shares or Warrant Shares to a Purchaser
by crediting the account of such Purchaser's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system (to the extent not
inconsistent with any provisions of this Agreement).
ARTICLE VI........
INDEMNIFICATION
Section 6.1.......General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors, officers, affiliates,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by such Purchaser
herein. The maximum aggregate liability of each Purchaser pursuant to its
indemnification obligations under this Article VI shall not exceed the portion
of the Purchase Price paid by such Purchaser hereunder.
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Section 6.2.......Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matter giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnifying party a conflict of interest between it
and the indemnified party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the
reasonable fees and expenses of one separate counsel for the indemnified
parties), to assume the defense thereof with counsel reasonably satisfactory to
the indemnified party. In the event that the indemnifying party advises an
indemnified party that it will not contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VI to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
obligations to defend the indemnified party required by this Article VI shall be
made by periodic payments of the amount thereof during the course of
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, so long as the indemnified party shall refund
such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law. No indemnifying party will be liable to the indemnified party under this
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Agreement to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to the indemnified party's breach of any of the
representations, warranties or covenants made by such party in this Agreement or
in the other Transaction Documents.
ARTICLE VII.......
MISCELLANEOUS
Section 7.1.......Fees and Expenses. Each party shall pay the fees and expenses
of its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided, however, that
the Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) incurred by the Purchasers in
connection with (i) the preparation, negotiation, execution and delivery of the
Transaction Documents and the transactions contemplated thereunder, which
payment shall be made at the Initial Closing and shall not exceed $25,000 (plus
disbursements and out-of-pocket expenses), of which $5,000 has been paid prior
to the Initial Closing Date, and (ii) any amendments, modifications or waivers
of this Agreement or any of the other Transaction Documents. In addition, the
Company shall pay all reasonable fees and expenses incurred by the Purchasers in
connection with the enforcement of this Agreement or any of the other
Transaction Documents, including, without limitation, all reasonable attorneys'
fees and expenses.
Section 7.2.......Specific Performance; Consent to Jurisdiction; Venue.
----------------------------------------------------
(a) The Company and the Purchasers acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Documents were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement or the other Transaction Documents and to
enforce specifically the terms and provisions hereof or thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.
(b) The parties agree that venue for any dispute arising under this Agreement
will lie exclusively in the state or federal courts located in New York County,
New York, and the parties irrevocably waive any right to raise forum non
conveniens or any other argument that New York is not the proper venue. The
parties irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Company and each Purchaser consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof 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 in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Securities, this
Agreement or the other Transaction Documents, shall be entitled to reimbursement
for reasonable legal fees from the non-prevailing party. The parties hereby
waive all rights to a trial by jury.
Section 7.3.......Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
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parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers holding at least a majority
of the principal amount of the Notes then held by the Purchasers. Any amendment
or waiver effected in accordance with this Section 7.3 shall be binding upon
each Purchaser (and their permitted assigns) and the Company.
Section 7.4.......Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: FinancialContent, Inc.
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Tel. No.: (000) 000-0000 Fax No.: (650)
745-2677
with copies (which copies
shall not constitute notice)
to: Xxxx Xxxxxxx, Esq.
Tel. No.:
Fax No.:
If to any Purchaser: At the address of such
Purchaser set forth on Exhibit A to this
Agreement, with copies to Purchaser's
counsel as set forth on Exhibit A or as
specified in writing by such Purchaser with
copies to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
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Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto.
Section 7.5.......Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter. No consideration shall be offered or paid to any
Purchaser to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration is also offered
to all of the parties to the Transaction Documents. This provision constitutes a
separate right granted to each Purchaser by the Company and shall not in any way
be construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
Section 7.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. After the
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement. Subject to
Section 5.1 hereof, the Purchasers may assign the Securities and its rights
under this Agreement and the other Transaction Documents and any other rights
hereto and thereto without the consent of the Company.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.
Section 7.10 Survival. The representations and warranties of the Company and the
Purchasers shall survive the execution and delivery hereof and the Closing until
the second anniversary of the Closing Date, except the agreements and covenants
set forth in Articles I, III, V, VI and VII of this Agreement shall survive the
execution and delivery hereof and the Closing hereunder.
Section 7.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
Section 7.12 Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the names of the Purchasers without the
consent of the Purchasers, which consent shall not be unreasonably withheld or
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delayed, or unless and until such disclosure is required by law, rule or
applicable regulation, including without limitation any disclosure pursuant to
the Registration Statement, and then only to the extent of such requirement.
Section 7.13 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 7.14 Further Assurances. From and after the date of this Agreement, upon
the request of the Purchasers or the Company, the Company and each Purchaser
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the other Transaction
Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Note and
Warrant Purchase Agreement to be duly executed by their respective authorized
officers as of the date first above written.
FINANCIALCONTENT, INC.
By: /S/ Wing Yu
---------------
Name: Wing Yu
Title: Chief Executive Officer
PURCHASER:
By: /S/ Xxxxx Xxxxxx
--------------------
Name: Xxxxx Xxxxxx
Title: Manager, Jade Special Strategy
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SCHEDULE 2.1
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ATTACHMENT TO NOTE AND WARRANT PURCHASE
AGREEMENT
Schedule 2.1
c. 900,000,000 authorized shares of common stock 200,000,000 authorized
shares of preferred stock
Shares of our series A, B & C preferred stock have registration rights
2004 Employee Stock Option Plan has 2,700,000 authorized Warrant to
purchase 1,400,000 shares of our common stock at $1.30 Warrant to
purchase 380,000 share of our common stock at $0.75
f. Forms required to be filed under section 16 of the Securities Exchange
Act of 1934 have not been timely file and or are delinquent
The company is responding to comments by the SEC to its form 10KSB for
the period ending June 30, 2005 under which the SEC alleges the filing does not
fully comply with Regulation S-B and FASB. Based upon the SEC comments the
company will be restating its financials for the year ended June 30, 2004 and
2005, and possibly the quarterly reports issued during such periods, to reflect
the ...beneficial conversion feature of its Series A, B, and C convertible
preferred stock issuances not previously reflected is such filings.
Form D's under regulation D have not been filed
g. FinancialContent Services, Inc.
Licensed Delaware Corporation
Licensed California foreign corporation
XxxxxxXX.xxx, Inc.
Licensed Delaware Corporation
iTrack, Inc.
inactive
MB Technologies, Inc.
inactive
KingFine, Inc.
inactive
XxxxXxxxxxxx.xxx, Inc.
Inactive
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i. The Company indebted to Asia Pacific Ventures, an affiliated entity, in
the amount $237,642 inclusive of interest as of 12/31/05.
Company owes dividend payments to CNET Networks, Inc. in the approximate
amount of $63,391.00.
k. The Company indebted to Asia Pacific Ventures, an affiliated entity, in
the amount $237,642 inclusive of interest as of 12/31/05.
l. Two UCC-1 Financing Statement filed June 12, 2002, and June 11, 2002.
Secured party is Asia Pacific Ventures
m. On November 7, 2005, we received a letter from an attorney representing
a former consultant to the Company demanding payment of 300,667 shares
of our common stock based upon alleged services provided under the
terms of a contract entered into between the parties. The Company
disputes that any number of shares are due to this consultant. The
contract was terminated and no services ever provided. We have not
recorded a reserve on this matter because we believe the claim to be
without merit and accordingly believe any outcome will not result in an
adverse judgment against the Company.
On May 21, 2002, we issued a warrant to purchase 450,000 registrable
shares of our common stock to a firm pursuant to a Services Agreement
of the same date, which services we allege were never delivered nor
forthcoming. Accordingly, we cancelled this warrant in 2002. The shares
underlying the warrant have demand registration rights. In 2004, this
firm attempted to exercise the warrant, which we have no intention of
honoring. The firm has threatened litigation to compel us to honor the
warrant. We do not record this warrant as outstanding, and we have not
recorded a reserve in regards to this matter because we believe the
outcome will not result in an adverse judgment against the Company.
Since receiving an initial letter from an attorney representing
Willow-Cove in November of 2003 threatening to enforce the warrant by
way of litigation, we have received no renewed threats of litigation by
Willow-Cove or its attorneys, though Willow-Cove did attempt to
exercise the warrant in full which we did not honor.
o. The Company has unpaid payroll tax payable to the Canadian government
from discontinued operations in the amount of approximately $117,509,
plus accrued interest from 12/31/02.
x. Xxxxx, Inc. has objected to our use of the xxxx "swiftir". We are
currently negotiating a compromise of our use of said xxxx.
y. i. The Company's director's approved the issuance of warrants to its
advisors
ff. American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxxxx Xxxxx
-00-
Xxx Xxxx, XX 00000
Xxxxx Xxxxx
Tel: (000) 000-0000
Fax; (000) 000-0000
-34-
EXHIBIT A
LIST OF PURCHASERS
Names and Addresses Investment Amount and Number of
of Purchasers Warrants Purchased
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EXHIBIT B
FORM OF NOTE
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THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
FINANCIALCONTENT, INC.
Senior Secured Convertible Promissory Note
due February 13, 2008
No. CN-06-__ $___________
Dated: February 13, 2006
For value received, FinancialContent, Inc., a Delaware corporation (the
"Maker"), hereby promises to pay to the order of _______________________
(together with its successors, representatives, and permitted assigns, the
"Holder"), in accordance with the terms hereinafter provided, the principal
amount of ________________________ ($______________), together with interest
thereon. Concurrently with the issuance of this Note, the Maker is issuing
separate convertible promissory notes (the "Other Notes") to separate purchasers
(the "Other Holders") pursuant to the Purchase Agreement (as defined in Section
1.1 hereof).
All payments under or pursuant to this Note shall be made in United States
Dollars in immediately available funds to the Holder at the address of the
Holder first set forth above or at such other place as the Holder may designate
from time to time in writing to the Maker or by wire transfer of funds to the
Holder's account, instructions for which are attached hereto as Exhibit A. The
outstanding principal balance of this Note shall be due and payable on February
13, 2008 (the "Maturity Date") or at such earlier time as provided herein.
ARTICLE I
Section 1.1 Purchase Agreement. This Note has been executed and delivered
pursuant to the Note and Warrant Purchase Agreement dated as of February 13,
2006 (the "Purchase Agreement") by and among the Maker and the purchasers listed
therein. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Purchase Agreement.
Section 1.2 Interest.
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(a) Beginning on the issuance date of this Note (the "Issuance Date"), the
outstanding principal balance of this Note shall bear interest, in arrears, at a
rate per annum equal to nine percent (9%), payable monthly commencing on March
1, 2006 and on the first business day of each following month at the option of
the Maker in (A) cash or (B) registered shares of the Maker's common stock,
$0.001 par value per share (the "Common Stock"); provided that commencing with
the first month following the month that the Registration Statement is declared
effective, interest shall be paid on the last business day of each month. The
Maker shall provide irrevocable written notice to the Holder of the form of
interest payment at least ten (10) days prior to an interest payment date. If no
such notice is provided at least ten (10) days prior to an interest payment
date, the Maker must make the interest payment in cash. In addition, the Maker
must make interest payments in cash if it is unable to make interest payments in
registered shares of Common Stock. Notwithstanding the foregoing, the interest
payment for the three (3) months following the Issuance Date shall be payable in
cash on the Issuance Date. The number of shares of Common Stock to be issued as
payment of accrued and unpaid interest shall be determined by dividing (a) the
total amount of accrued and unpaid interest to be converted into Common Stock by
(b) the lesser of (i) the Conversion Price (as defined in Section 3.2 hereof)
and (ii) the average of the Closing Bid Price (as defined in Section 1.2(b)
below) for the ten (10) Trading Days immediately preceding the interest payment
date. Interest shall be computed on the basis of a 360-day year of twelve (12)
30-day months and shall accrue commencing on the Issuance Date. Furthermore,
upon the occurrence of an Event of Default (as defined in Section 2.1 hereof),
then to the extent permitted by law, the Maker will pay interest to the Holder,
payable on demand, on the outstanding principal balance of the Note from the
date of the Event of Default until such Event of Default is cured at the rate of
the lesser of fifteen percent (15%) and the maximum applicable legal rate per
annum.
(b) The term "Closing Bid Price" shall mean, on any particular date (i) the last
closing bid price per share of the Common Stock on such date on the OTC Bulletin
Board or another registered national stock exchange on which the Common Stock is
then listed, or if there is no such price on such date, then the last closing
bid price on such exchange or quotation system on the date nearest preceding
such date, or (ii) if the Common Stock is not listed then on the OTC Bulletin
Board or any registered national stock exchange, the last trading price for a
share of Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (iii) if the Common Stock is not then
reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated
(or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (iv) if the Common Stock
is not then publicly traded the fair market value of a share of Common Stock as
determined by the Holder and reasonably acceptable to the Maker.
Section 1.3 Security Agreement. The obligations of the Maker hereunder are
secured by a continuing security interest in all of the assets of the Maker
pursuant to the terms of a security agreement dated as of February 13, 2006 by
and among the Maker, on the one hand, and the Holder and the Other Holders, on
the other hand.
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Section 1.4 Payment on Non-Business Days. Whenever any payment to be made shall
be due on a Saturday, Sunday or a public holiday under the laws of the State of
New York, such payment may be due on the next succeeding business day and such
next succeeding day shall be included in the calculation of the amount of
accrued interest payable on such date.
Section 1.5 Transfer. This Note may be transferred or sold, subject to the
provisions of Section 4.8 of this Note, or pledged, hypothecated or otherwise
granted as security by the Holder.
Section 1.6 Replacement. Upon receipt of a duly executed, notarized and
unsecured written statement from the Holder with respect to the loss, theft or
destruction of this Note (or any replacement hereof) and a standard indemnity,
or, in the case of a mutilation of this Note, upon surrender and cancellation of
such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu
of such lost, stolen, destroyed or mutilated Note.
ARTICLE II
EVENTS OF DEFAULT; REMEDIES
Section 2.1 Events of Default. The occurrence of any of the following events
shall be an "Event of Default" under this Note:
(a) the Maker shall fail to make any principal or interest payments on the date
such payments are due and such default is not fully cured within three (3)
business days after the occurrence thereof; or
(b) the failure of the Registration Statement to be declared effective by the
Securities and Exchange Commission on or prior to the date which is two hundred
ten (210) days after the Issuance Date; or
(c) the suspension from listing, without subsequent listing on any one of, or
the failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the American Stock Exchange, the Nasdaq National Market, the Nasdaq
SmallCap Market or The New York Stock Exchange, Inc. for a period of seven (7)
consecutive Trading Days; or
(d) the Maker's notice to the Holder, including by way of public announcement,
at any time, of its inability to comply (including for any of the reasons
described in Section 3.8(a) hereof) or its intention not to comply with proper
requests for conversion of this Note into shares of Common Stock; or
(e) the Maker shall fail to (i) timely deliver the shares of Common Stock upon
conversion of the Note or any interest accrued and unpaid, (ii) file the
Registration Statement in accordance with the terms of the Registration Rights
Agreement or (iii) make the payment of any fees and/or liquidated damages under
this Note, the Purchase Agreement or the Registration Rights Agreement, which
failure in the case of items (i) and (iii) of this Section 2.1(e) is not
remedied within four (4) business days after the incurrence thereof and, solely
with respect to item (iii) above, after the Holder delivers written notice to
the Maker of the incurrence thereof; or
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(f) while the Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness of
the Registration Statement lapses for any reason (including, without limitation,
the issuance of a stop order) or is unavailable to the Holder for sale of the
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of ten (10) consecutive Trading Days,
provided that the Maker has not exercised its rights pursuant to Section 3(n) of
the Registration Rights Agreement; or
(g) default shall be made in the performance or observance of (i) any material
covenant, condition or agreement contained in this Note (other than as set forth
in clause (f) of this Section 2.1) and such default is not fully cured within
five (5) business days after the Holder delivers written notice to the Maker of
the occurrence thereof or (ii) any material covenant, condition or agreement
contained in the Purchase Agreement, the Other Notes, the Registration Rights
Agreement or any other Transaction Document which is not covered by any other
provisions of this Section 2.1 and such default is not fully cured within five
(5) business days after the Holder delivers written notice to the Maker of the
occurrence thereof; or
(h) any material representation or warranty made by the Maker herein or in the
Purchase Agreement, the Registration Rights Agreement, the Other Notes or any
other Transaction Document shall prove to have been false or incorrect or
breached in a material respect on the date as of which made and the Holder
delivers written notice to the Maker of the occurrence thereof; or
(i) the Maker shall (A) default in any payment of any amount or amounts of
principal of or interest on any Indebtedness (other than the Indebtedness
hereunder) the aggregate principal amount of which Indebtedness is in excess of
$100,000 or (B) default in the observance or performance of any other agreement
or condition relating to any Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders or beneficiary or
beneficiaries of such Indebtedness to cause with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity; or
(j) the Maker shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property or assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the United States Bankruptcy Code (as now or hereafter in effect) or under
the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors'
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
-40-
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or
(k) a proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets in connection with the liquidation or dissolution of the Maker or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of thirty
(30) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker or
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing shall be taken with respect to the Maker and shall continue
undismissed, or unstayed and in effect for a period of thirty (30) days; or
(l) the failure of the Maker to instruct its transfer agent to remove any
legends from shares of Common Stock eligible to be sold under Rule 144 of the
Securities Act and issue such unlegended certificates to the Holder within five
(5) business days of the Holder's request so long as the Holder has provided
reasonable assurances to the Maker that such shares of Common Stock can be sold
pursuant to Rule 144; or
(m) the failure of the Maker to pay any amounts due to the Holder herein or any
other Transaction Document within five (5) business days of the date such
payments are due and such default is not fully cured within two (2) business
days after the Holder delivers written notice to the Maker of the occurrence
thereof; or
(n) the occurrence of an Event of Default under the Other Notes.
Section 2.2 Remedies Upon An Event of Default. If an Event of Default shall have
occurred and shall be continuing, the Holder of this Note may at any time at its
option, (a) declare the entire unpaid principal balance of this Note, together
with all interest accrued hereon, due and payable, and thereupon, the same shall
be accelerated and so due and payable, without presentment, demand, protest, or
notice, all of which are hereby expressly unconditionally and irrevocably waived
by the Maker; provided, however, that upon the occurrence of an Event of Default
described in (i) Sections 2.1 (j) or (k), the outstanding principal balance and
accrued interest hereunder shall be automatically due and payable and (ii)
Sections 2.1 (b)-(i), demand the prepayment of this Note pursuant to Section 3.7
hereof, (b) demand that the principal amount of this Note then outstanding and
all accrued and unpaid interest thereon shall be converted into shares of Common
Stock at a Conversion Price per share calculated pursuant to Section 3.1 hereof
assuming that the date that the Event of Default occurs is the Conversion Date
(as defined in Section 3.1 hereof), or (c) exercise or otherwise enforce any one
or more of the Holder's rights, powers, privileges, remedies and interests under
this Note, the Purchase Agreement, the Registration Rights Agreement or
applicable law. No course of delay on the part of the Holder shall operate as a
-41-
waiver thereof or otherwise prejudice the right of the Holder. No remedy
conferred hereby shall be exclusive of any other remedy referred to herein or
now or hereafter available at law, in equity, by statute or otherwise.
ARTICLE III
CONVERSION; ANTIDILUTION; PREPAYMENT
Section 3.1 Conversion Option.
(a) At any time on or after the Issuance Date, this Note shall be convertible
(in whole or in part), at the option of the Holder (the "Conversion Option"),
into such number of fully paid and non-assessable shares of Common Stock (the
"Conversion Rate") as is determined by dividing (x) that portion of the
outstanding principal balance plus any accrued but unpaid interest under this
Note as of such date that the Holder elects to convert by (y) the Conversion
Price (as defined in Section 3.2(a) hereof) then in effect on the date on which
the Holder faxes a notice of conversion (the "Conversion Notice"), duly
executed, to the Maker (facsimile number (000) 000-0000, Attn.: Chief Executive
Officer) (the "Voluntary Conversion Date"), provided, however, that the
Conversion Price shall be subject to adjustment as described in Sections 3.2(b)
and 3.6 below. The Holder shall deliver this Note to the Maker at the address
designated in the Purchase Agreement at such time that this Note is fully
converted. With respect to partial conversions of this Note, the Maker shall
keep written records of the amount of this Note converted as of each Conversion
Date. Section 3.2 Conversion Price.
(a) The term "Conversion Price" shall mean $0.75, subject to adjustment under
Section 3.6 hereof.
(b) Subject to the terms and provisions of Section 3.7(k) hereof, for a period
of thirty (30) days following the effective date of the Registration Statement
(the "Initial Repricing Period"), in the event that the average Closing Bid
Price for any ten (10) Trading Day period during the Initial Repricing Period is
less than the Conversion Price then in effect during the Initial Repricing
Period (the "Initial Adjusted Conversion Price"), the Holder shall have the
right to adjust the Conversion Price to a price equal to seventy-five percent
(75%) of the Initial Adjusted Conversion Price. In addition, once in every
subsequent four (4) month period following the Initial Repricing Period through
the Maturity Date (a "Subsequent Repricing Period"), in the event that the
average Closing Bid Price for any ten (10) Trading Day period during a
Subsequent Repricing Period is less than the Conversion Price then in effect
during a Subsequent Repricing Period (the "Subsequent Adjusted Conversion
Price"), the Holder shall have the right to adjust the Conversion Price to a
price equal to seventy-five percent (75%) of the Subsequent Adjusted Conversion
Price. The Holder shall provide written notice to the Maker of its intent to
adjust the Conversion Price pursuant to this Section 3.2(b).
(c) Notwithstanding any of the foregoing to the contrary, if during any period
(a "Black-out Period"), a Holder is unable to trade any Common Stock issued or
-42-
issuable upon conversion of this Note immediately due to the postponement of
filing or delay or suspension of effectiveness of the Registration Statement or
because the Maker has otherwise informed such Holder that an existing prospectus
cannot be used at that time in the sale or transfer of such Common Stock
(provided that such postponement, delay, suspension or fact that the prospectus
cannot be used is not due to factors solely within the control of the Holder of
this Note or due to the Maker exercising its rights under Section 3(n) of the
Registration Rights Agreement), such Holder shall have the option but not the
obligation on any Conversion Date within ten (10) Trading Days following the
expiration of the Black-out Period of using the Conversion Price applicable on
such Conversion Date or any Conversion Price selected by such Holder that would
have been applicable had such Conversion Date been at any earlier time during
the Black-out Period or within the ten (10) Trading Days thereafter. In no event
shall the Black-out Period have any effect on the Maturity Date of this Note.
Section 3.3 Mechanics of Conversion.
(a) Not later than three (3) Trading Days after any Conversion Date, the Maker
or its designated transfer agent, as applicable, shall issue and deliver to the
Depository Trust Company ("DTC") account on the Holder's behalf via the Deposit
Withdrawal Agent Commission System ("DWAC") as specified in the Conversion
Notice, registered in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder shall be entitled. In the
alternative, not later than three (3) Trading Days after any Conversion Date,
the Maker shall deliver to the applicable Holder by express courier a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 5.1 of the Purchase
Agreement) representing the number of shares of Common Stock being acquired upon
the conversion of this Note (the "Delivery Date"). Notwithstanding the foregoing
to the contrary, the Maker or its transfer agent shall only be obligated to
issue and deliver the shares to the DTC on the Holder's behalf via DWAC (or
certificates free of restrictive legends) if such conversion is in connection
with a sale and the Holder has complied with the applicable prospectus delivery
requirements (as evidenced by documentation furnished to and reasonably
satisfactory to the Maker). If in the case of any Conversion Notice such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the Delivery Date, the Holder shall be entitled by written
notice to the Maker at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the Maker
shall immediately return this Note tendered for conversion, whereupon the Maker
and the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the date notice of
rescission is given to the Maker.
(b) The Maker understands that a delay in the delivery of the shares of Common
Stock upon conversion of this Note beyond the Delivery Date could result in
economic loss to the Holder. If the Maker fails to deliver to the Holder such
shares via DWAC or a certificate or certificates pursuant to this Section
hereunder by the Delivery Date, the Maker shall pay to such Holder, in cash, an
amount per Trading Day for each Trading Day until such shares are delivered via
DWAC or certificates are delivered, together with interest on such amount at a
rate of 10% per annum, accruing until such amount and any accrued interest
thereon is paid in full, equal to the greater of (A) (i) 1% of the aggregate
principal amount of the Notes requested to be converted for the first five (5)
Trading Days after the Delivery Date and (ii) 2% of the aggregate principal
-43-
amount of the Notes requested to be converted for each Trading Day thereafter
and (B) $2,000 per day (which amount shall be paid as liquidated damages and not
as a penalty). Nothing herein shall limit a Holder's right to pursue actual
damages for the Maker's failure to deliver certificates representing shares of
Common Stock upon conversion within the period specified herein and such Holder
shall have the right to pursue all remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief). Notwithstanding anything to the contrary contained herein,
the Holder shall be entitled to withdraw a Conversion Notice, and upon such
withdrawal the Maker shall only be obligated to pay the liquidated damages
accrued in accordance with this Section 3.3(b) through the date the Conversion
Notice is withdrawn.
(c) In addition to any other rights available to the Holder, if the Maker fails
to cause its transfer agent to transmit to the Holder a certificate or
certificates representing the shares of Common Stock issuable upon conversion of
this Note on or before the Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
shares of Common Stock issuable upon conversion of this Note which the Holder
anticipated receiving upon such exercise (a "Buy-In"), then the Maker shall (1)
pay in cash to the Holder the amount by which (x) the Holder's total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased exceeds (y) the amount obtained by multiplying (A) the number of
shares of Common Stock issuable upon conversion of this Note that the Maker was
required to deliver to the Holder in connection with the conversion at issue
times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Note and equivalent number of shares of Common Stock for
which such conversion was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Maker timely complied
with its conversion and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of shares of Common Stock with
an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (1) of the immediately preceding sentence the Maker shall be
required to pay the Holder $1,000. The Holder shall provide the Maker written
notice indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Maker. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Maker's failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required pursuant to the
terms hereof.
Section 3.4 Ownership Cap and Certain Conversion Restrictions.
(a) Notwithstanding anything to the contrary set forth in Section 3 of this
Note, at no time may the Holder convert all or a portion of this Note if the
number of shares of Common Stock to be issued pursuant to such conversion would
exceed, when aggregated with all other shares of Common Stock owned by the
Holder at such time, the number of shares of Common Stock which would result in
the Holder beneficially owning (as determined in accordance with Section 13(d)
-44-
of the Exchange Act and the rules thereunder) more than 4.9% of all of the
Common Stock outstanding at such time; provided, however, that upon the Holder
providing the Maker with sixty-one (61) days notice (pursuant to Section 4.1
hereof) (the "Waiver Notice") that the Holder would like to waive this Section
3.4(a) with regard to any or all shares of Common Stock issuable upon conversion
of this Note, this Section 3.4(a) will be of no force or effect with regard to
all or a portion of the Note referenced in the Waiver Notice.
(b) Notwithstanding anything to the contrary set forth in Section 3 of this
Note, at no time may the Holder convert all or a portion of this Note if the
number of shares of Common Stock to be issued pursuant to such conversion, when
aggregated with all other shares of Common Stock owned by the Holder at such
time, would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.9% of the then issued and outstanding shares of Common Stock
outstanding at such time; provided, however, that upon the Holder providing the
Maker with a Waiver Notice that the Holder would like to waive Section 3.4(b) of
this Note with regard to any or all shares of Common Stock issuable upon
conversion of this Note, this Section 3.4(b) shall be of no force or effect with
regard to all or a portion of the Note referenced in the Waiver Notice.
Section 3.5 Intentionally Omitted.
Section 3.6 Adjustment of Conversion Price.
(a) The Conversion Price shall be subject to adjustment from time to time as
follows:
(i) Adjustments for Stock Splits and Combinations. If the
Maker shall at any time or from time to time after the Issuance Date, effect a
stock split of the outstanding Common Stock, the applicable Conversion Price in
effect immediately prior to the stock split shall be proportionately decreased.
If the Maker shall at any time or from time to time after the Issuance Date,
combine the outstanding shares of Common Stock, the applicable Conversion Price
in effect immediately prior to the combination shall be proportionately
increased. Any adjustments under this Section 3.6(a)(i) shall be effective at
the close of business on the date the stock split or combination occurs.
(ii) Adjustments for Certain Dividends and Distributions. If
the Maker shall at any time or from time to time after the Issuance Date, make
or issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the applicable Conversion Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, the applicable Conversion
Price then in effect by a fraction:
(1) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date; and
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(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution.
(iii) Adjustment for Other Dividends and Distributions. If
the Maker shall at any time or from time to time after the Issuance Date, make
or issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in other than
shares of Common Stock, then, and in each event, an appropriate revision to the
applicable Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holders of this
Note shall receive upon conversions thereof, in addition to the number of shares
of Common Stock receivable thereon, the number of securities of the Maker which
they would have received had this Note been converted into Common Stock on the
date of such event and had thereafter, during the period from the date of such
event to and including the Conversion Date, retained such securities (together
with any distributions payable thereon during such period), giving application
to all adjustments called for during such period under this Section 3.6(a)(iii)
with respect to the rights of the holders of this Note and the Other Notes;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.
(iv) Adjustments for Reclassification, Exchange or
Substitution. If the Common Stock issuable upon conversion of this Note at any
time or from time to time after the Issuance Date shall be changed to the same
or different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
3.6(a)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale
of assets provided for in Section 3.6(a)(v)), then, and in each event, an
appropriate revision to the Conversion Price shall be made and provisions shall
be made (by adjustments of the Conversion Price or otherwise) so that the Holder
shall have the right thereafter to convert this Note into the kind and amount of
shares of stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock
into which such Note might have been converted immediately prior to such
reclassification, exchange, substitution or other change, all subject to further
adjustment as provided herein.
(v) Adjustments for Reorganization, Merger, Consolidation or
Sales of Assets. If at any time or from time to time after the Issuance Date
there shall be a capital reorganization of the Maker (other than by way of a
stock split or combination of shares or stock dividends or distributions
provided for in Section 3.6(a)(i), (ii) and (iii), or a reclassification,
exchange or substitution of shares provided for in Section 3.6(a)(iv)), or a
merger or consolidation of the Maker with or into another corporation where the
holders of outstanding voting securities prior to such merger or consolidation
do not own over fifty percent (50%) of the outstanding voting securities of the
merged or consolidated entity, immediately after such merger or consolidation,
or the sale of all or substantially all of the Maker's properties or assets to
any other person (an "Organic Change"), then as a part of such Organic Change,
(A) if the surviving entity in any such Organic Change is a public company that
is registered pursuant to the Securities Exchange Act of 1934, as amended, and
its common stock is listed or quoted on a national exchange or the OTC Bulletin
Board, an appropriate revision to the Conversion Price shall be made and
provision shall be made (by adjustments of the Conversion Price or otherwise) so
that the Holder shall have the right thereafter to convert such Note into the
kind and amount of shares of stock and other securities or property of the Maker
or any successor corporation resulting from Organic Change, and (B) if the
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surviving entity in any such Organic Change is not a public company that is
registered pursuant to the Securities Exchange Act of 1934, as amended, or its
common stock is not listed or quoted on a national exchange or the OTC Bulletin
Board, the Holder shall have the right to demand prepayment pursuant to Section
3.7(b) hereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3.6(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.6(a)(v) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note and the Other Notes) shall be applied
after that event in as nearly an equivalent manner as may be practicable.
(vi) Adjustments for Issuance of Additional Shares of Common
Stock.
(1) In the event the Maker, shall, at any time, from time to
time, issue or sell any shares of additional shares of common stock (otherwise
than as provided in the foregoing subsections (i) through (v) of this Section
3.6(a) or pursuant to Common Stock Equivalents (hereafter defined) granted or
issued prior to the Issuance Date) ("Additional Shares of Common Stock"), at a
price per share less than the Conversion Price then in effect or without
consideration, then the Conversion Price upon each such issuance shall be
adjusted to that price (rounded to the nearest cent) determined by multiplying
each of the Conversion Price then in effect by a fraction:
(A) the numerator of which shall be equal to the
sum of (x) the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of Common Stock plus (y) the number of
shares of Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the Conversion Price then in
effect, and
(B) the denominator of which shall be equal to the
number of shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
(2) The provisions of paragraph (1) of Section 3.6(a)(vi)
shall not apply to any issuance of Additional Shares of Common Stock for which
an adjustment is provided under Section 3.6(a)(vii). No adjustment of the number
of shares of Common Stock for which this Note shall be convertible shall be made
under paragraph (1) of Section 3.6(a)(vi) upon the issuance of any Additional
Shares of Common Stock which are issued pursuant to the exercise of any Common
Stock Equivalents, if any such adjustment shall previously have been made upon
the issuance of such Common Stock Equivalents pursuant to Section 3.6(a)(vii).
(vii) Issuance of Common Stock Equivalents. If the Maker, at
any time after the Issuance Date, shall issue any securities convertible into or
exchangeable for, directly or indirectly, Common Stock ("Convertible
Securities"), other than the Notes, or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities, shall be issued or
sold (collectively, the "Common Stock Equivalents") and the aggregate of the
price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent, plus the consideration
received by the Maker for issuance of such Common Stock Equivalent divided by
the number of shares of Common Stock issuable pursuant to such Common Stock
Equivalent (the "Aggregate Per Common Share Price") shall be less than the
applicable Conversion Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall make the Aggregate Per Share Common Price be less than the
applicable Conversion Price in effect at the time of such amendment or
adjustment, then the applicable Conversion Price upon each such issuance or
amendment shall be adjusted as provided in the first sentence of subsection (vi)
of this Section 3.6(a) on the basis that (1) the maximum number of Additional
Shares of Common Stock issuable pursuant to all such Common Stock Equivalents
shall be deemed to have been issued (whether or not such Common Stock
Equivalents are actually then exercisable, convertible or exchangeable in whole
or in part) as of the earlier of (A) the date on which the Maker shall enter
into a firm contract for the issuance of such Common Stock Equivalent, or (B)
the date of actual issuance of such Common Stock Equivalent. No adjustment of
the applicable Conversion Price shall be made under this subsection (vii) upon
the issuance of any Convertible Security which is issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any adjustment shall previously have been made to the exercise price of such
warrants then in effect upon the issuance of such warrants or other rights
pursuant to this subsection (vii). No adjustment shall be made to the Conversion
Price upon the issuance of Common Stock pursuant to the exercise, conversion or
exchange of any Convertible Security or Common Stock Equivalent where an
adjustment to the Conversion Price was made as a result of the issuance or
purchase of any Convertible Security or Common Stock Equivalent.
(viii) Consideration for Stock. In case any shares of Common
Stock or any Common Stock Equivalents shall be issued or sold:
(1) in connection with any merger or consolidation
in which the Maker is the surviving corporation (other than any consolidation or
merger in which the previously outstanding shares of Common Stock of the Maker
shall be changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefor shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board of Directors
of the Maker, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the case
may be; or
(2) in the event of any consolidation or merger of
the Maker in which the Maker is not the surviving corporation or in which the
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previously outstanding shares of Common Stock of the Maker shall be changed into
or exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or substantially all of the assets of the Maker for
stock or other securities of any corporation, the Maker shall be deemed to have
issued a number of shares of its Common Stock for stock or securities or other
property of the other corporation computed on the basis of the actual exchange
ratio on which the transaction was predicated, and for a consideration equal to
the fair market value on the date of such transaction of all such stock or
securities or other property of the other corporation. If any such calculation
results in adjustment of the applicable Conversion Price, or the number of
shares of Common Stock issuable upon conversion of the Notes, the determination
of the applicable Conversion Price or the number of shares of Common Stock
issuable upon conversion of the Notes immediately prior to such merger,
consolidation or sale, shall be made after giving effect to such adjustment of
the number of shares of Common Stock issuable upon conversion of the Notes. In
the event Common Stock is issued with other shares or securities or other assets
of the Maker for consideration which covers both, the consideration computed as
provided in this Section 3.6(viii) shall be allocated among such securities and
assets as determined in good faith by the Board of Directors of the Maker.
(b) Record Date. In case the Maker shall take record of the
holders of its Common Stock for the purpose of entitling them to subscribe for
or purchase Common Stock or Convertible Securities, then the date of the issue
or sale of the shares of Common Stock shall be deemed to be such record date.
(c) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Maker shall not be required to make any adjustment to the
Conversion Price in connection with (i) securities issued (other than for cash)
in connection with a merger, acquisition, or consolidation, (ii) securities
issued pursuant to a bona fide firm underwritten public offering of the Maker's
securities, (iii) securities issued pursuant to the conversion or exercise of
convertible or excercisable securities issued or outstanding on or prior to the
date hereof or issued pursuant to the Purchase Agreement, (iv) the shares of
Common Stock issuable upon the exercise of Warrants, (v) securities issued in
connection with bona fide strategic license agreements, partnering arrangements
or other consulting services so long as such issuances are not for the purpose
of raising capital, (vi) Common Stock issued or the issuance or grants of
options or warrants to purchase Common Stock to any employer, officer, director
or advisor of the Company for a period of two (2) years following the Issuance
Date so long as the exercise price of such options or warrants is greater than
$0.75, (vii) any warrants issued to the placement agent and its designees for
the transactions contemplated by the Purchase Agreement, and (viii) the payment
of any accrued interest in shares of Common Stock pursuant to this Note or the
Other Notes, and (ix) securities issued to CNET Networks, Inc.
(d) No Impairment. The Maker shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Maker, but will at all
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times in good faith, assist in the carrying out of all the provisions of this
Section 3.6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Holder against
impairment. In the event a Holder shall elect to convert any Notes as provided
herein, the Maker cannot refuse conversion based on any claim that such Holder
or any one associated or affiliated with such Holder has been engaged in any
violation of law, violation of an agreement to which such Holder is a party or
for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and or adjoining conversion of all or of said Notes shall have
issued and the Maker posts a surety bond for the benefit of such Holder in an
amount equal to one hundred thirty percent (130%) of the amount of the Notes the
Holder has elected to convert, 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 Holder (as liquidated damages) in the event it obtains
judgment.
(e) Certificates as to Adjustments. Upon occurrence of each
adjustment or readjustment of the Conversion Price or number of shares of Common
Stock issuable upon conversion of this Note pursuant to this Section 3.6, the
Maker at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and readjustment, showing in detail the facts upon which
such adjustment or readjustment is based. The Maker shall, upon written request
of the Holder, at any time, furnish or cause to be furnished to the Holder a
like certificate setting forth such adjustments and readjustments, the
applicable Conversion Price in effect at the time, and the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon the conversion of this Note. Notwithstanding the
foregoing, the Maker shall not be obligated to deliver a certificate unless such
certificate would reflect an increase or decrease of at least one percent (1%)
of such adjusted amount.
(f) Issue Taxes. The Maker shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion of
this Note pursuant thereto; provided, however, that the Maker shall not be
obligated to pay any transfer taxes resulting from any transfer requested by the
Holder in connection with any such conversion.
(g) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of this Note. In lieu of any fractional shares
to which the Holder would otherwise be entitled, the Maker shall pay cash equal
to the product of such fraction multiplied by the average of the Closing Bid
Prices of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.
(h) Reservation of Common Stock. The Maker shall at all times
when this Note shall be outstanding, reserve and keep available out of its
authorized but unissued Common Stock, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of this Note and
all interest accrued thereon; provided that the number of shares of Common Stock
so reserved shall at no time be less than one hundred fifty percent (150%) of
the number of shares of Common Stock for which this Note and all interest
accrued thereon is at any time convertible. The Maker shall, from time to time
in accordance with Delaware law, increase the authorized number of shares of
Common Stock if at any time the unissued number of authorized shares shall not
be sufficient to satisfy the Maker's obligations under this Section 3.6(h).
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(i) Regulatory Compliance. If any shares of Common Stock to be
reserved for the purpose of conversion of this Note or any interest accrued
thereon require registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may be validly issued or
delivered upon conversion, the Maker shall, at its sole cost and expense, in
good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.
Section 3.7 Prepayment.
(a) Prepayment Upon an Event of Default. Notwithstanding
anything to the contrary contained herein, upon the occurrence of an Event of
Default described in Sections 2.1(b)-(k) hereof, the Holder shall have the
right, at such Holder's option, to require the Maker to prepay in cash all or a
portion of this Note at a price equal to one hundred ten percent (110%) of the
aggregate principal amount of this Note plus all accrued and unpaid interest
applicable at the time of such request. Nothing in this Section 3.7(a) shall
limit the Holder's rights under Section 2.2 hereof.
(b) Prepayment Option Upon Major Transaction. In addition to
all other rights of the Holder contained herein, simultaneous with the
occurrence of a Major Transaction (as defined below), the Holder shall have the
right, at the Holder's option, to require the Maker to prepay in cash all or a
portion of the Holder's Notes at a price equal to one hundred percent (100%) of
the aggregate principal amount of this Note plus all accrued and unpaid interest
(the "Major Transaction Prepayment Price"); provided that the Company shall have
the sole option to pay the Major Transaction Prepayment Price in cash or shares
of Common Stock. If the Holder elects to receive payment of the Major
Transaction Prepayment Price in shares of Common Stock, the price per share
shall be based upon the Conversion Price then in effect on the day preceding the
date of delivery of the Notice of Prepayment at Option of Holder Upon Major
Transaction (as hereafter defined) and the Holder shall have demand registration
rights with respect to such shares.
(c) Prepayment Option Upon Triggering Event. In addition to
all other rights of the Holder contained herein, after a Triggering Event (as
defined below), the Holder shall have the right, at the Holder's option, to
require the Maker to prepay all or a portion of this Note in cash at a price
equal to one hundred twenty percent (120%) of the aggregate principal amount of
this Note plus all accrued and unpaid interest (the "Triggering Event Prepayment
Price," and, collectively with the Major Transaction Prepayment Price, the
"Prepayment Price").
(d) Intentionally Omitted.
(e) "Major Transaction." A "Major Transaction" shall be deemed
to have occurred at such time as any of the following events:
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(i) the consolidation, merger or other business
combination of the Maker with or into another Person (as defined in Section 4.13
hereof) (other than (A) pursuant to a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the Maker or (B) a
consolidation, merger or other business combination in which holders of the
Maker's voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities).
(ii) the sale or transfer of more than fifty
percent (50%) of the Maker's assets (based on the fair market value as
determined in good faith by the Maker's Board of Directors) other than inventory
in the ordinary course of business in one or a related series of transactions;
or
(iii) closing of a purchase, tender or exchange
offer made to the holders of more than fifty percent (50%) of the outstanding
shares of Common Stock in which more than fifty percent (50%) of the outstanding
shares of Common Stock were tendered and accepted.
(f) "Triggering Event." A "Triggering Event" shall be deemed
to have occurred at such time as any of the following events:
(i) so long as any Notes are outstanding, the
effectiveness of the Registration Statement, after it becomes effective, (i)
lapses for any reason (including, without limitation, the issuance of a stop
order) or (ii) is unavailable to the Holder for sale of the shares of Common
Stock, and such lapse or unavailability continues for a period of twenty (20)
consecutive Trading Days, and the shares of Common Stock into which the Holder's
Notes can be converted cannot be sold in the public securities market pursuant
to Rule 144(k) under the Securities Act, provided that the cause of such lapse
or unavailability is not due to factors primarily within the control of the
Holder of the Notes; and provided further that a Triggering Event shall not have
occurred if and to the extent the Maker exercised its rights set forth in
Section 3(n) of the Registration Rights Agreement;
(ii) the suspension from listing, without
subsequent listing on any one of, or the failure of the Common Stock to be
listed on at least one of the OTC Bulletin Board, the American Stock Exchange,
the Nasdaq National Market, the Nasdaq SmallCap Market or The New York Stock
Exchange, Inc., for a period of five (5) consecutive Trading Days;
(iii) the Maker's notice to any holder of the
Notes, including by way of public announcement, at any time, of its inability to
comply (including for any of the reasons described in Section 3.8) or its
intention not to comply with proper requests for conversion of any Notes into
shares of Common Stock; or
(iv) the Maker's failure to comply with a
Conversion Notice tendered in accordance with the provisions of this Note within
ten (10) business days after the receipt by the Maker of the Conversion Notice;
or
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(v) the Maker deregisters its shares of Common
Stock and as a result such shares of Common Stock are no longer publicly traded;
or
(vi) the Maker consummates a "going private"
transaction and as a result the Common Stock is no longer registered under
Sections 12(b) or 12(g) of the Exchange Act; or
(vii) the Maker consummates an underwritten public
offering; or
(viii) the Maker breaches any representation,
warranty, covenant or other term or condition of the Purchase Agreement, this
Note or any other agreement, document, certificate or other instrument delivered
in connection with the transactions contemplated thereby or hereby, except to
the extent that such breach would not have a Material Adverse Effect (as defined
in the Purchase Agreement) and except, in the case of a breach of a covenant
which is curable, only if such breach continues for a period of a least ten (10)
business days.
(g) Intentionally Omitted.
(h) Mechanics of Prepayment at Option of Holder Upon Major
Transaction. No sooner than fifteen (15) days nor later than ten (10) days prior
to the consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Maker shall deliver written notice
thereof via facsimile and overnight courier ("Notice of Major Transaction") to
the Holder of this Note. At any time after receipt of a Notice of Major
Transaction (or, in the event a Notice of Major Transaction is not delivered at
least ten (10) days prior to a Major Transaction, at any time within ten (10)
days prior to a Major Transaction), any holder of the Notes then outstanding may
require the Maker to prepay, effective immediately prior to the consummation of
such Major Transaction, all of the holder's Notes then outstanding by delivering
written notice thereof via facsimile and overnight courier ("Notice of
Prepayment at Option of Holder Upon Major Transaction") to the Maker, which
Notice of Prepayment at Option of Holder Upon Major Transaction shall indicate
(i) the principal amount of the Notes that such holder is electing to have
prepaid and (ii) the applicable Major Transaction Prepayment Price, as
calculated pursuant to Section 3.7(b) above.
(i) Mechanics of Prepayment at Option of Holder Upon
Triggering Event. Within two (2) business days after the occurrence of a
Triggering Event, the Maker shall deliver written notice thereof via facsimile
and overnight courier ("Notice of Triggering Event") to each holder of the
Notes. At any time after the earlier of a holder's receipt of a Notice of
Triggering Event and such holder becoming aware of a Triggering Event, any
holder of this Note and the Other Notes then outstanding may require the Maker
to prepay all of the Notes on a pro rata basis by delivering written notice
thereof via facsimile and overnight courier ("Notice of Prepayment at Option of
Holder Upon Triggering Event") to the Maker, which Notice of Prepayment at
Option of Holder Upon Triggering Event shall indicate (i) the amount of the Note
that such holder is electing to have prepaid and (ii) the applicable Triggering
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Event Prepayment Price, as calculated pursuant to Section 3.7(c) above. A holder
shall only be permitted to require the Maker to prepay the Note pursuant to
Section 3.7 hereof for the greater of a period of ten (10) days after receipt by
such holder of a Notice of Triggering Event or for so long as such Triggering
Event is continuing.
(j) Payment of Prepayment Price. Upon the Maker's receipt of
a Notice(s) of Prepayment at Option of Holder Upon Triggering Event or a
Notice(s) of Prepayment at Option of Holder Upon Major Transaction from any
holder of the Notes, the Maker shall immediately notify each holder of the Notes
by facsimile of the Maker's receipt of such Notice(s) of Prepayment at Option of
Holder Upon Triggering Event or Notice(s) of Prepayment at Option of Holder Upon
Major Transaction and each holder which has sent such a notice shall promptly
submit to the Maker such holder's certificates representing the Notes which such
holder has elected to have prepaid. The Maker shall deliver the applicable
Triggering Event Prepayment Price to such holder within five (5) business days
after the Maker's receipt of a Notice of Prepayment at Option of Holder Upon
Triggering Event and, in the case of a prepayment pursuant to Section 3.7(h),
the Maker shall deliver the applicable Major Transaction Prepayment Price
immediately prior to the consummation of the Major Transaction; provided that a
holder's original Note shall have been so delivered to the Maker; provided
further that if the Maker is unable to prepay all of the Notes to be prepaid,
the Maker shall prepay an amount from each holder of the Notes being prepaid
equal to such holder's pro-rata amount (based on the number of Notes held by
such holder relative to the number of Notes outstanding) of all Notes being
prepaid. If the Maker shall fail to prepay all of the Notes submitted for
prepayment (other than pursuant to a dispute as to the arithmetic calculation of
the Prepayment Price), in addition to any remedy such holder of the Notes may
have under this Note and the Purchase Agreement, the applicable Prepayment Price
payable in respect of such Notes not prepaid shall bear interest at the rate of
two percent (2%) per month (prorated for partial months) until paid in full.
Until the Maker pays such unpaid applicable Prepayment Price in full to a holder
of the Notes submitted for prepayment, such holder shall have the option (the
"Void Optional Prepayment Option") to, in lieu of prepayment, require the Maker
to promptly return to such holder(s) all of the Notes that were submitted for
prepayment by such holder(s) under this Section 3.7 and for which the applicable
Prepayment Price has not been paid, by sending written notice thereof to the
Maker via facsimile (the "Void Optional Prepayment Notice"). Upon the Maker's
receipt of such Void Optional Prepayment Notice(s) and prior to payment of the
full applicable Prepayment Price to such holder, (i) the Notice(s) of Prepayment
at Option of Holder Upon Triggering Event or the Notice(s) of Prepayment at
Option of Holder Upon Major Transaction, as the case may be, shall be null and
void with respect to those Notes submitted for prepayment and for which the
applicable Prepayment Price has not been paid, (ii) the Maker shall immediately
return any Notes submitted to the Maker by each holder for prepayment under this
Section 3.7(j) and for which the applicable Prepayment Price has not been paid
and (iii) the Conversion Price of such returned Notes shall be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the Void
Optional Prepayment Notice(s) is delivered to the Maker and (B) the lowest
Closing Bid Price during the period beginning on the date on which the Notice(s)
of Prepayment of Option of Holder Upon Major Transaction or the Notice(s) of
Prepayment at Option of Holder Upon Triggering Event, as the case may be, is
delivered to the Maker and ending on the date on which the Void Optional
Prepayment Notice(s) is delivered to the Maker; provided that no adjustment
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shall be made if such adjustment would result in an increase of the Conversion
Price then in effect. A holder's delivery of a Void Optional Prepayment Notice
and exercise of its rights following such notice shall not effect the Maker's
obligations to make any payments which have accrued prior to the date of such
notice. Payments provided for in this Section 3.7 shall have priority to
payments to other stockholders in connection with a Major Transaction.
(k) Maker Prepayment Option. Upon the Maker receiving written
notice from the Holder of an adjustment to the Conversion Price pursuant to
Section 3.2(b) of this Note (the "Section 3.2(b) Notice"), the Maker shall have
five (5) Trading Days following receipt of the Section 3.2(b) Notice to provide
written notice to the Holder of its intention to prepay in cash all of the
outstanding principal amount of this Note together with all accrued and unpaid
interest thereon (the "Maker's Prepayment Notice") at a price equal to one
hundred twenty percent (120%) of the aggregate principal amount of this Note
plus any accrued but unpaid interest (the "Maker's Prepayment Price"). The Maker
shall have thirty (30) days to deliver the Maker's Prepayment Price to the
Holder during which time the Holder shall not convert this Note into shares of
Common Stock; provided, however, that if during the period between delivery of
the Maker's Prepayment Notice and the Maker's Prepayment Date (as defined
below), the Holder shall become entitled to deliver a Notice of Prepayment at
Option of Holder Upon Major Transaction or Notice of Prepayment at Option of
Holder upon Triggering Event, then the such rights of the Holder shall take
precedence over the previously delivered Maker Prepayment Notice. The Maker's
Prepayment Notice shall state the date of prepayment which date shall be within
thirty (30) days after the Maker has delivered the Maker's Prepayment Notice
(the "Maker's Prepayment Date"), the Maker's Prepayment Price and the principal
amount of Notes plus any accrued but unpaid interest to be prepaid by the Maker.
The Maker shall deliver the Maker's Prepayment Price on or prior to the Maker's
Prepayment Date. If the Maker fails to pay the Maker's Prepayment Price by the
Maker's Prepayment Date, the prepayment will be declared null and void, the
Maker shall lose its right to serve a Maker's Prepayment Notice pursuant to this
Section 3.7(k) in the future and the interest rate under this Note shall be
adjusted to the lesser of fifteen percent (15%) and the maximum applicable legal
rate per annum.
Section 3.8 Inability to Fully Convert.
(a) Holder's Option if Maker Cannot Fully Convert. If, upon
the Maker's receipt of a Conversion Notice, the Maker cannot issue shares of
Common Stock registered for resale under the Registration Statement for any
reason, including, without limitation, because the Maker (w) does not have a
sufficient number of shares of Common Stock authorized and available, (x) is
otherwise prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Maker or any of its securities from
issuing all of the Common Stock which is to be issued to the Holder pursuant to
a Conversion Notice or (y) fails to have a sufficient number of shares of Common
Stock registered for resale under the Registration Statement, then the Maker
shall issue as many shares of Common Stock as it is able to issue in accordance
with the Holder's Conversion Notice and, with respect to the unconverted portion
of this Note, the Holder, solely at Holder's option, can elect to:
(i) require the Maker to prepay that portion of this Note for which the Maker is
unable to issue Common Stock in accordance with the Holder's Conversion Notice
(the "Mandatory Prepayment") at a price per share equal to the Triggering Event
Prepayment Price as of such Conversion Date (the "Mandatory Prepayment Price");
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(ii) if the Maker's inability to fully convert is pursuant to Section 3.8(a)(x)
above, require the Maker to issue restricted shares of Common Stock in
accordance with such holder's Conversion Notice;
(iii) void its Conversion Notice and retain or have returned, as the case may
be, this Note that was to be converted pursuant to the Conversion Notice
(provided that the Holder's voiding its Conversion Notice shall not effect the
Maker's obligations to make any payments which have accrued prior to the date of
such notice);
(iv) exercise its Buy-In rights pursuant to and in accordance with the terms and
provisions of Section 3.3(c) of this Note.
In the event a Holder shall elect to convert any portion of its Notes as
provided herein, the Maker cannot refuse conversion based on any claim that such
Holder or any one associated or affiliated with such Holder has been engaged in
any violation of law, violation of an agreement to which such Holder is a party
or for any reason whatsoever, unless, an injunction from a court, on notice,
restraining and or adjoining conversion of all or of said Notes shall have been
issued and the Maker posts a surety bond for the benefit of such Holder in an
amount equal to 130% of the principal amount of the Notes the Holder has elected
to convert, 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 Holder in the event it obtains judgment.
(b) Mechanics of Fulfilling Holder's Election. The Maker shall
immediately send via facsimile to the Holder, upon receipt of a facsimile copy
of a Conversion Notice from the Holder which cannot be fully satisfied as
described in Section 3.8(a) above, a notice of the Maker's inability to fully
satisfy the Conversion Notice (the "Inability to Fully Convert Notice"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is
unable to fully satisfy such holder's Conversion Notice, (ii) the amount of this
Note which cannot be converted and (iii) the applicable Mandatory Prepayment
Price. The Holder shall notify the Maker of its election pursuant to Section
3.8(a) above by delivering written notice via facsimile to the Maker ("Notice in
Response to Inability to Convert").
(c) Payment of Prepayment Price. If the Holder shall elect to
have its Notes prepaid pursuant to Section 3.8(a)(i) above, the Maker shall pay
the Mandatory Prepayment Price to the Holder within thirty (30) days of the
Maker's receipt of the Holder's Notice in Response to Inability to Convert,
provided that prior to the Maker's receipt of the Holder's Notice in Response to
Inability to Convert the Maker has not delivered a notice to the Holder stating,
to the satisfaction of the Holder, that the event or condition resulting in the
Mandatory Prepayment has been cured and all Conversion Shares issuable to the
Holder can and will be delivered to the Holder in accordance with the terms of
this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment
Price to the Holder on the date that is one (1) business day following the
Maker's receipt of the Holder's Notice in Response to Inability to Convert
(other than pursuant to a dispute as to the determination of the arithmetic
calculation of the Prepayment Price), in addition to any remedy the Holder may
have under this Note and the Purchase Agreement, such unpaid amount shall bear
interest at the rate of two percent (2%) per month (prorated for partial months)
until paid in full. Until the full Mandatory Prepayment Price is paid in full to
the Holder, the Holder may (i) void the Mandatory Prepayment with respect to
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that portion of the Note for which the full Mandatory Prepayment Price has not
been paid, (ii) receive back such Note, and (iii) require that the Conversion
Price of such returned Note be adjusted to the lesser of (A) the Conversion
Price as in effect on the date on which the Holder voided the Mandatory
Prepayment and (B) the lowest Closing Bid Price during the period beginning on
the Conversion Date and ending on the date the Holder voided the Mandatory
Prepayment.
(d) Pro-rata Conversion and Prepayment. In the event the Maker
receives a Conversion Notice from more than one holder of the Notes on the same
day and the Maker can convert and prepay some, but not all, of the Notes
pursuant to this Section 3.8, the Maker shall convert and prepay from each
holder of the Notes electing to have its Notes converted and prepaid at such
time an amount equal to such holder's pro-rata amount (based on the principal
amount of the Notes held by such holder relative to the principal amount of the
Notes outstanding) of all the Notes being converted and prepaid at such time.
Section 3.9 No Rights as Shareholder. Nothing contained in
this Note shall be construed as conferring upon the Holder, prior to the
conversion of this Note, the right to vote or to receive dividends or to consent
or to receive notice as a shareholder in respect of any meeting of shareholders
for the election of directors of the Maker or of any other matter, or any other
rights as a shareholder of the Maker.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery, telecopy or facsimile at the address or number
designated in the Purchase Agreement (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The Maker will give written notice to the
Holder at least ten (10) days prior to the date on which the Maker takes a
record (x) with respect to any dividend or distribution upon the Common Stock,
(y) with respect to any pro rata subscription offer to holders of Common Stock
or (z) for determining rights to vote with respect to any Organic Change,
dissolution, liquidation or winding-up and in no event shall such notice be
provided to such holder prior to such information being made known to the
public. The Maker will also give written notice to the Holder at least ten (10)
days prior to the date on which any Organic Change, dissolution, liquidation or
winding-up will take place and in no event shall such notice be provided to the
Holder prior to such information being made known to the public. The Maker shall
promptly notify the Holder of this Note of any notices sent or received, or any
actions taken with respect to the Other Notes.
Section 4.2 Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
-56-
application of the substantive law of another jurisdiction. This Note shall not
be interpreted or construed with any presumption against the party causing this
Note to be drafted.
Section 4.3 Headings. Article and section headings in this Note are included
herein for purposes of convenience of reference only and shall not constitute a
part of this Note for any other purpose.
Section 4.4 Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Maker to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the holder thereof and shall
not, except as expressly provided herein, be subject to any other obligation of
the Maker (or the performance thereof). The Maker acknowledges that a breach by
it of its obligations hereunder will cause irreparable and material harm to the
Holder and that the remedy at law for any such breach may be inadequate.
Therefore the Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
Section 4.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses
of enforcement of this Note, including, without limitation, reasonable
attorneys' fees and expenses.
Section 4.6 Binding Effect. The obligations of the Maker and the Holder set
forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.
Section 4.7 Amendments. This Note may not be modified or amended in any manner
except in writing executed by the Maker and the Holder.
Section 4.8 Compliance with Securities Laws. The Holder of this Note
acknowledges that this Note is being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder shall not offer, sell or otherwise dispose of this Note. This Note
and any Note issued in substitution or replacement therefor shall be stamped or
imprinted with a legend in substantially the following form:
"THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
-57-
THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE MAKER THAT THIS NOTE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY BE SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
SECURITIES LAWS."
Section 4.9 Consent to Jurisdiction. Each of the Maker and the Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State
of New York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Maker and the Holder
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under the Purchase Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing in this Section
4.9 shall affect or limit any right to serve process in any other manner
permitted by law. Each of the Maker and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Note shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.
Section 4.10 Parties in Interest. This Note shall be binding upon, inure to the
benefit of and be enforceable by the Maker, the Holder and their respective
successors and permitted assigns.
Section 4.11 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
Section 4.12 Maker Waivers. Except as otherwise specifically provided herein,
the Maker and all others that may become liable for all or any part of the
obligations evidenced by this Note, hereby waive presentment, demand, notice of
nonpayment, protest and all other demands' and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Maker liable for the payment of this Note, AND DO
HEREBY WAIVE TRIAL BY JURY.
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(a) No delay or omission on the part of the Holder in exercising its rights
under this Note, or course of conduct relating hereto, shall operate as a waiver
of such rights or any other right of the Holder, nor shall any waiver by the
Holder of any such right or rights on any one occasion be deemed a waiver of the
same right or rights on any future occasion.
(b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS
A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
Section 4.13 Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Trading Day" means (a) a day on which the Common Stock is
traded on the OTC Bulletin Board, or (b) if the Common Stock is not traded on
the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall
mean any day except Saturday, Sunday and any day which shall be a legal holiday
or a day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.
FINANCIALCONTENT, INC.
By: /S/ Wing Yu
-----------
Name: Wing Yu
Title: Chief Executive Officer
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EXHIBIT A
WIRE INSTRUCTIONS
Payee: _______________________________________________________
Bank: _______________________________________________________
Address: _____________________________________________________
_____________________________________________________
Bank No.: ____________________________________________________
Account No.: ________________________________________________
Account Name: ________________________________________________
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>
FORM OF
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of
FinancialContent, Inc. (the "Maker") according to the conditions hereof, as of
the date written below.
Date of Conversion _______________________________________________________
Applicable Conversion Price ______________________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion:
___________________________
Signature_________________________________________________________________
[Name]
Address:__________________________________________________________________
_________________________________________________________________
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EXHIBIT C
FORM OF SERIES A WARRANT
-62-
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
SERIES A WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
FINANCIALCONTENT, INC.
Expires February 13, 2011
No.: W-A-06- __ Number of Shares: ___________
Date of Issuance: February 13, 2006
FOR VALUE RECEIVED, the undersigned, FinancialContent, Inc., a Delaware
corporation (together with its successors and assigns, the "Issuer"), hereby
certifies that _______________________________ or its registered assigns is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 8 hereof.
1. Term. The term of this Warrant shall commence on February 13, 2006
and shall expire at 6:00 p.m., eastern time, on February 13, 2011 (such period
being the "Term").
2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part during the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
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shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of this
Warrant.
(c) Cashless Exercise. Notwithstanding any provisions herein to the
contrary and commencing one (1) year following the Original Issue Date if (i)
the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is not then in effect by the date such registration statement is
required to be effective pursuant to the Registration Rights Agreement (as
defined in the Purchase Agreement) or not effective at any time during the
Effectiveness Period (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y - (A)(Y)
--------
B
Where X = the number of shares of Common Stock to be issued to
the Holder.
Y = the number of shares of Common Stock purchasable
upon exercise of all of the Warrant or, if only a
portion of the Warrant is being exercised, the
portion of the Warrant being exercised.
A = the Warrant Price.
B = the Per Share Market Value of one share
of Common Stock.
(d) Issuance of Stock Certificates. In the event of any exercise of
this Warrant in accordance with and subject to the terms and conditions hereof,
(i) certificates for the shares of Warrant Stock so purchased shall be delivered
to the Holder hereof within a reasonable time, not exceeding three (3) Trading
Days after such exercise (the "Delivery Date") or, at the request of the Holder
(provided that a registration statement under the Securities Act providing for
the resale of the Warrant Stock is then in effect), issued and delivered to the
Depository Trust Company ("DTC") account on the Holder's behalf via the Deposit
Withdrawal Agent Commission System ("DWAC") within a reasonable time, not
exceeding three (3) Trading Days after such exercise (provided, however that the
Issuer or its transfer agent shall only be obligated to issue and deliver the
shares to the DTC on the Holder's behalf via DWAC or certificates free of
restrictive legends if such exercise is in connection with a sale (as evidenced
by documentation furnished to and reasonably satisfactory to the Issuer) and the
registration statement providing for the resale of the Warrant Stock is
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effective, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant Stock so purchased as of the date of such
exercise and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(e) Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Exercise. In addition to any other rights available to the Holder, if the
Issuer fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock
which the Holder anticipated receiving upon such exercise (a "Buy-In"), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000. The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Issuer. Nothing herein shall limit a
Holder's right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer's failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
(f) Transferability of Warrant. Subject to Section 2(h) hereof, this
Warrant may be transferred by a Holder without the consent of the Issuer. If
transferred pursuant to this paragraph, this Warrant may be transferred on the
books of the Issuer by the Holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant at the principal office of the Issuer,
properly endorsed (by the Holder executing an assignment in the form attached
hereto) and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. This Warrant is exchangeable at the principal
office of the Issuer for Warrants to purchase the same aggregate number of
shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange. All Warrants issued on transfers or exchanges shall
be dated the Original Issue Date and shall be identical with this Warrant except
as to the number of shares of Warrant Stock issuable pursuant thereto.
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(g) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
(h) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The Issuer agrees to reissue this Warrant or
certificates representing any of the Warrant Stock, without the legend
set forth above if at such time, prior to making any transfer of any
such securities, the Holder shall give written notice to the Issuer
describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has
received an opinion of counsel reasonably satisfactory to the Issuer,
to the effect that the registration of such securities under the
Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Issuer with
the Securities and Exchange Commission and has become effective under
the Securities Act, (iii) the Issuer has received other evidence
reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are
not required, or (iv) the Holder provides the Issuer with reasonable
assurances that such security can be sold pursuant to Rule 144 under
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the Securities Act; and (b) either (i) the Issuer has received an
opinion of counsel reasonably satisfactory to the Issuer, to the effect
that registration or qualification under the securities or "blue sky"
laws of any state is not required in connection with such proposed
disposition, or (ii) compliance with applicable state securities or
"blue sky" laws has been effected or a valid exemption exists with
respect thereto. The Issuer will respond to any such notice from a
holder within three (3) business days. In the case of any proposed
transfer under this Section 2(h), the Issuer will use reasonable
efforts to comply with any such applicable state securities or "blue
sky" laws, but shall in no event be required, (x) to qualify to do
business in any state where it is not then qualified, (y) to take any
action that would subject it to tax or to the general service of
process in any state where it is not then subject, or (z) to comply
with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Issuer. The
restrictions on transfer contained in this Section 2(h) shall be in
addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Warrant. Whenever a
certificate representing the Warrant Stock is required to be issued to
a the Holder without a legend, in lieu of delivering physical
certificates representing the Warrant Stock, provided the Issuer's
transfer agent is participating in the DTC Fast Automated Securities
Transfer program, the Issuer shall use its reasonable best efforts to
cause its transfer agent to electronically transmit the Warrant Stock
to the Holder by crediting the account of the Holder's Prime Broker
with DTC through its DWAC system (to the extent not inconsistent with
any provisions of this Warrant or the Purchase Agreement).
(i) Accredited Investor Status. In no event may the Holder exercise
this Warrant in whole or in part unless the Holder is an "accredited investor"
as defined in Regulation D under the Securities Act.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, when issued in accordance with the
terms of this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by or through
the Issuer. The Issuer further covenants and agrees that during the period
within which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of issuance upon exercise of this
Warrant a number of shares of Common Stock equal to at least one hundred twenty
percent (120%) of the aggregate number of shares of Common Stock to provide for
the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock has
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been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so listed.
The Issuer will also so list on each securities exchange or market, and will
maintain such listing of, any other securities which the Holder of this Warrant
shall be entitled to receive upon the exercise of this Warrant if at the time
any securities of the same class shall be listed on such securities exchange or
market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the Holders of
the Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Adjustment of Warrant Price. The price at which such shares of
Warrant Stock may be purchased upon exercise of this Warrant shall be subject to
adjustment from time to time as set forth in this Section 4. The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.
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(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event"): (a) consolidate or
merge with or into any other Person and the Issuer shall not be the
continuing or surviving corporation of such consolidation or merger, or
(b) permit any other Person to consolidate with or merge into the
Issuer and the Issuer shall be the continuing or surviving Person but,
in connection with such consolidation or merger, any Capital Stock of
the Issuer shall be changed into or exchanged for Securities of any
other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or
(d) effect a capital reorganization or reclassification of its Capital
Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in
the manner provided in this Warrant, the Holder of this Warrant shall
be entitled upon the exercise hereof at any time after the consummation
of such Triggering Event, to the extent this Warrant is not exercised
prior to such Triggering Event, to receive at the Warrant Price in
effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such
exercise of this Warrant prior to such Triggering Event, the
Securities, cash and property to which such Holder would have been
entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior
thereto (including the right of a shareholder to elect the type of
consideration it will receive upon a Triggering Event), subject to
adjustments (subsequent to such corporate action) as nearly equivalent
as possible to the adjustments provided for elsewhere in this Section
4. Notwithstanding the foregoing to the contrary, this Section 4(a)(i)
shall only apply if the surviving entity pursuant to any such
Triggering Event is a public company that is registered pursuant to the
Securities Exchange Act of 1934, as amended, and its common stock is
listed or quoted on a national exchange or the OTC Bulletin Board. In
the event that the surviving entity pursuant to any such Triggering
Event is not a public company that is registered pursuant to the
Securities Exchange Act of 1934, as amended, or its common stock is not
listed or quoted on a national exchange or the OTC Bulletin Board, then
the Holder shall have the right to demand that the Issuer pay to the
Holder an amount equal to the value of this Warrant according to the
Black-Scholes formula.
(ii) Notwithstanding anything contained in this Warrant to the
contrary and so long as the surviving entity pursuant to any Triggering
Event is a public company that is registered pursuant to the Securities
Exchange Act of 1934, as amended, and its common stock is listed or
quoted on a national exchange or the OTC Bulletin Board, a Triggering
Event shall not be deemed to have occurred if, prior to the
consummation thereof, each Person (other than the Issuer) which may be
required to deliver any Securities, cash or property upon the exercise
of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holder of this
Warrant, (A) the obligations of the Issuer under this Warrant (and if
the Issuer shall survive the consummation of such Triggering Event,
such assumption shall be in addition to, and shall not release the
Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver to such Holder such
Securities, cash or property as, in accordance with the foregoing
provisions of this subsection (a), such Holder shall be entitled to
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receive, and such Person shall have similarly delivered to such Holder
an opinion of counsel for such Person, which counsel shall be
reasonably satisfactory to such Holder, or in the alternative, a
written acknowledgement executed by the President or Chief Financial
Officer of the Issuer, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this subsection (a)) shall
be applicable to the Securities, cash or property which such Person may
be required to deliver upon any exercise of this Warrant or the
exercise of any rights pursuant hereto.
(b) Stock Dividends, Subdivisions and Combinations. If at any
time the Issuer shall:
(i) make or issue or set a record date for the
holders of the Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of, shares of
Common Stock,
(ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
(c) Certain Other Distributions. If at any time the Issuer shall make
or issue or set a record date for the holders of the Common Stock for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash (other than a cash dividend payable out of
earnings or earned surplus legally available for the payment of
dividends under the laws of the jurisdiction of incorporation of the
Issuer),
(ii) any evidences of its indebtedness, any shares of
stock of any class or any other securities or property of any nature
whatsoever (other than cash, Common Stock Equivalents or Additional
Shares of Common Stock), or
(iii) any warrants or other rights to subscribe for
or purchase any evidences of its indebtedness, any shares of stock of
any class or any other securities or property of any nature whatsoever
(other than cash, Common Stock Equivalents or Additional Shares of
Common Stock),
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then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to (but not affiliated with) the Holder) of any and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the holders
of its Common Stock of such shares of such other class of stock within the
meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
(d) Issuance of Additional Shares of Common Stock.
(i) In the event the Issuer shall at any time following the
Original Issue Date issue any Additional Shares of Common Stock (otherwise than
as provided in the foregoing subsections (a) through (c) of this Section 4), at
a price per share less than the Warrant Price then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price determined by multiplying the Warrant Price then in effect by a
fraction:
(A) the numerator of which shall be equal to the sum
of (x) the number of shares of Outstanding Common Stock
immediately prior to the issuance of such Additional Shares of
Common Stock plus (y) the number of shares of Common Stock
(rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares
of Common Stock so issued would purchase at a price per share
equal to the Warrant Price then in effect, and
(B) the denominator of which shall be equal to the
number of shares of Outstanding Common Stock immediately after
the issuance of such Additional Shares of Common Stock.
(ii) No adjustment of the number of shares of Common Stock for
which this Warrant shall be exercisable shall be made under paragraph (i) of
Section 4(d) upon the issuance of any Additional Shares of Common Stock which
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are issued pursuant to the exercise of any Common Stock Equivalents, if any such
adjustment shall previously have been made upon the issuance of such Common
Stock Equivalents (or upon the issuance of any warrant or other rights therefor)
pursuant to Section 4(e).
(e) Issuance of Common Stock Equivalents. If at any time the Issuer shall issue
or sell any Common Stock Equivalents, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the aggregate price per
share for which Common Stock is issuable upon such conversion or exchange plus
the consideration received by the Issuer for issuance of such Common Stock
Equivalent divided by the number of shares of Common Stock issuable pursuant to
such Common Stock Equivalent (the "Aggregate Per Common Share Price") shall be
less than the Warrant Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall make the Aggregate Per Common Share Price be less than the
Warrant Price in effect at the time of such amendment or adjustment, then the
Warrant Price upon each such issuance or amendment shall be adjusted as provided
in Section 4(d). No further adjustment of the Warrant Price then in effect shall
be made under this Section 4(e) upon the issuance of any Common Stock
Equivalents which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to this Section 4(e). No further adjustments of the Warrant Price then
in effect shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Common Stock Equivalents.
(f) Superseding Adjustment. If, at any time after any adjustment of the number
of shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall have been made pursuant to Section 4(e) as the result
of any issuance of Common Stock Equivalents, and (i) such Common Stock
Equivalents, or the right of conversion or exchange in such Common Stock
Equivalents, shall expire, and all or a portion of such or the right of
conversion or exchange with respect to all or a portion of such Common Stock
Equivalents, as the case may be, shall not have been exercised, or (ii) the
consideration per share for which shares of Common Stock are issuable pursuant
to such Common Stock Equivalents shall be increased, then such previous
adjustment shall be rescinded and annulled and the Additional Shares of Common
Stock which were deemed to have been issued by virtue of the computation made in
connection with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation. Upon the occurrence of
an event set forth in this Section 4(f), there shall be a recomputation made of
the effect of such Common Stock Equivalents on the basis of: (i) treating the
number of Additional Shares of Common Stock theretofore actually issued or
issuable pursuant to the previous exercise of Common Stock Equivalents or any
such right of conversion or exchange, as having been issued on the date or dates
of any such exercise and for the consideration actually received and receivable
therefor, and (ii) treating any such Common Stock Equivalents which then remain
outstanding as having been granted or issued immediately after the time of such
increase of the consideration per share for which Additional Shares of Common
Stock are issuable under such Common Stock Equivalents; whereupon a new
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adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Warrant Price then in effect shall be made, which new
adjustment shall supersede the previous adjustment so rescinded and annulled.
(h) Other Provisions applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
(i) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents (or any
warrants or other rights therefor) shall be issued for cash consideration, the
consideration received by the Issuer therefor shall be the amount of the cash
received by the Issuer therefor, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are offered by the Issuer for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Common
Stock Equivalents are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation (other
than any consolidation or merger in which the previously outstanding shares of
Common Stock of the Issuer shall be changed to or exchanged for the stock or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, of such portion of the assets and business of the
nonsurviving corporation as the Board may determine to be attributable to such
shares of Common Stock or Common Stock Equivalents, as the case may be. The
consideration for any Additional Shares of Common Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall be the
consideration received by the Issuer for issuing such warrants or other rights
plus the additional consideration payable to the Issuer upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Common Stock Equivalents shall be
the consideration received by the Issuer for issuing warrants or other rights to
subscribe for or purchase such Common Stock Equivalents, plus the consideration
paid or payable to the Issuer in respect of the subscription for or purchase of
such Common Stock Equivalents, plus the additional consideration, if any,
payable to the Issuer upon the exercise of the right of conversion or exchange
in such Common Stock Equivalents. In the event of any consolidation or merger of
the Issuer in which the Issuer is not the surviving corporation or in which the
previously outstanding shares of Common Stock of the Issuer shall be changed
into or exchanged for the stock or other securities of another corporation, or
in the event of any sale of all or substantially all of the assets of the Issuer
for stock or other securities of any corporation, the Issuer shall be deemed to
have issued a number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated, and for a consideration
equal to the fair market value on the date of such transaction of all such stock
or securities or other property of the other corporation. In the event any
consideration received by the Issuer for any securities consists of property
other than cash, the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the Board. In the
event Common Stock is issued with other shares or securities or other assets of
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the Issuer for consideration which covers both, the consideration computed as
provided in this Section 4(h)(i) shall be allocated among such securities and
assets as determined in good faith by the Board.
(ii) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common Stock for which this Warrant is exercisable that would
otherwise be required may be postponed (except in the case of a subdivision or
combination of shares of the Common Stock, as provided for in Section 4(b)) up
to, but not beyond the date of exercise if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than one
percent (1%) of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose of
any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(iii) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken into account
to the nearest one one-hundredth (1/100th) of a share.
(iv) When Adjustment Not Required. If the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(i) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
(j) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for the Holder by the Issuer to be issued
to the Holder upon and to the extent that the event actually takes place, upon
payment of the current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.
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5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall prepare and execute a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made any
determination hereunder), and the Warrant Price and Warrant Share Number after
giving effect to such adjustment, and shall cause copies of such certificate to
be delivered to the Holder of this Warrant promptly after each adjustment. Any
dispute between the Issuer and the Holder of this Warrant with respect to the
matters set forth in such certificate may at the option of the Holder of this
Warrant be submitted to a national or regional accounting firm reasonably
acceptable to the Issuer and the Holder, provided that the Issuer shall have ten
(10) days after receipt of notice from such Holder of its selection of such firm
to object thereto, in which case such Holder shall select another such firm and
the Issuer shall have no such right of objection. The firm selected by the
Holder of this Warrant as provided in the preceding sentence shall be instructed
to deliver a written opinion as to such matters to the Issuer and such Holder
within thirty (30) days after submission to it of such dispute. Such opinion
shall be final and binding on the parties hereto. The costs and expenses of the
initial accounting firm shall be paid equally by the Issuer and the Holder and,
in the case of an objection by the Issuer, the costs and expenses of the
subsequent accounting firm shall be paid in full by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with any exercise hereof, but in lieu of such fractional
shares, the Issuer shall round the number of shares to be issued upon exercise
up to the nearest whole number of shares.
7. Ownership Cap and Certain Exercise Restrictions. (a) Notwithstanding
anything to the contrary set forth in this Warrant, at no time may a Holder of
this Warrant exercise this Warrant if the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all other
shares of Common Stock owned by such Holder at such time, the number of shares
of Common Stock which would result in such Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 4.9% of the then issued and outstanding shares of
Common Stock; provided, however, that upon a holder of this Warrant providing
the Issuer with sixty-one (61) days notice (pursuant to Section 12 hereof) (the
"Waiver Notice") that such Holder would like to waive this Section 7(a) with
regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this Section 7(a) will be of no force or effect with regard to all or a
portion of the Warrant referenced in the Waiver Notice; provided, further, that
this provision shall be of no further force or effect during the sixty-one (61)
days immediately preceding the expiration of the term of this Warrant.
(b) The Holder may not exercise the Warrant hereunder to the
extent such exercise would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 9.9% of the then issued and outstanding shares of
Common Stock, including shares issuable upon exercise of the Warrant held by the
Holder after application of this Section; provided, however, that upon a holder
of this Warrant providing the Issuer with a Waiver Notice that such holder would
like to waive this Section 7(b) with regard to any or all shares of Common Stock
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issuable upon exercise of this Warrant, this Section 7(b) shall be of no force
or effect with regard to those shares of Warrant Stock referenced in the Waiver
Notice; provided, further, that this provision shall be of no further force or
effect during the sixty-one (61) days immediately preceding the expiration of
the term of this Warrant.
8. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued (other than for cash) in
connection with a merger, acquisition, or consolidation, (ii)
securities issued pursuant to a bona fide firm underwritten public
offering of the Issuer's securities, (iii) securities issued pursuant
to the conversion or exercise of convertible or exercisable securities
issued or outstanding on or prior to the date hereof or issued pursuant
to the Purchase Agreement, (iv) the Warrant Stock, (v) securities
issued in connection with bona fide strategic license agreements,
partnering arrangements or other consulting services so long as such
issuances are not for the purpose of raising capital, (vi) Common Stock
issued or the issuance or grants of options or warrants to purchase
Common Stock to any employer, officer, director or advisor of the
Issuer for a period of two (2) years following the Original Issue Date
so long as the exercise price of such options or warrants is greater
than $0.75, (vii) any warrants issued to the placement agent and its
designees for the transactions contemplated by the Purchase Agreement,
and (viii) the payment of any accrued interest in shares of Common
Stock pursuant to the Notes, and (ix) securities issued to CNET
Networks, Inc.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Common Stock" means the Common Stock, $0.001 par value per
share, of the Issuer and any other Capital Stock into which such stock
may hereafter be changed.
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"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means FinancialContent, Inc., a Delaware corporation,
and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Notes" means the senior secured convertible promissory notes
issued by the Issuer to the Purchasers pursuant to the Purchase
Agreement.
"Original Issue Date" means February 13, 2006.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Outstanding Common Stock" means, at any given time, the
aggregate amount of outstanding shares of Common Stock, assuming full
exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable
or exchangeable for, and any right to subscribe for, shares of Common
Stock that are outstanding at such time.
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"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
last closing bid price per share of the Common Stock on such date on
the OTC Bulletin Board or another registered national stock exchange on
which the Common Stock is then listed, or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered
national stock exchange, the last closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the five (5) Trading Days preceding such
date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined
by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to
select an additional Independent Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by
each such Independent Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar
transactions during such period. The determination of fair market value
by an Independent Appraiser shall be based upon the fair market value
of the Issuer determined on a going concern basis as between a willing
buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties.
In determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the
Common Stock imposed by agreement or by federal or state securities
laws, or to the existence or absence of, or any limitations on, voting
rights.
"Purchase Agreement" means the Note and Warrant Purchase
Agreement dated as of February 13, 2006, among the Issuer and the
Purchasers.
"Purchasers" means the purchasers of the Notes and the
Warrants issued by the Issuer pursuant to the Purchase Agreement.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security. "Security"
means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
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"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means (a) a day on which the Common Stock is
traded on the OTC Bulletin Board, or (b) if the Common Stock is not
traded on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that
in the event that the Common Stock is not listed or quoted as set forth
in (a) or (b) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Voting Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated)
having ordinary voting power for the election of a majority of the
members of the Board of Directors (or other governing body) of such
corporation, other than Capital Stock having such power only by reason
of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange for
any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e)
hereof or of any of such other Warrants.
"Warrant Price" initially means $1.00, as such price may be
adjusted from time to time as shall result from the adjustments
specified in this Warrant, including Section 4 hereto.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
9. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the
holders of Common Stock; or
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(B) the Issuer shall authorize the granting to all
holders of its Common Stock of rights to
subscribe for or purchase any shares of
Capital Stock of any class or other rights; or
(C) there shall be any reclassification of the
Capital Stock of the Issuer; or
(D) there shall be any capital reorganization by
the Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or
other disposition of all or substantially all
of the Issuer's property, assets or business
(except a merger or other reorganization in
which the Issuer shall be the surviving
corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged
and except a consolidation, merger, sale,
transfer or other disposition involving a
wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Issuer or any partial liquidation of the
Issuer or distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Common Stock.
10. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the Holder of this Warrant.
No consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of this Warrant unless the same
consideration is also offered to all holders of the Warrants.
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11. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted. The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New York.
The Issuer and the Holder consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 11 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Warrant or the Purchase Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury.
12. Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Issuer: FinancialContent, Inc.
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice)
to: Xxxx Xxxxxxx, Esq.
Tel. No.: Fax No.:
If to any Holder: At the address of such Holder
set forth on Exhibit A to this Agreement,
with copies to Holder's counsel as set forth
on Exhibit A or as specified in writing by
such Holder with copies to:
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with copies (which copies
shall not constitute notice)
to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto.
13. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
14. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
15. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
16. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
17. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Issuer has executed this Series A Warrant as of
the day and year first above written.
FINANCIALCONTENT, INC.
By: /S/ Wing Yu
-------------
Name: Wing Yu
Title: Chief Executive Officer
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EXERCISE FORM
SERIES A WARRANT
FINANCIALCONTENT, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
FinancialContent, Inc. covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address ___________________________________
___________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise:
___________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
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FOR USE BY THE ISSUER ONLY:
This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
-85-
EXHIBIT D
FORM OF SERIES B WARRANT
-86-
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
SERIES B WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
FINANCIALCONTENT, INC.
Expires February 13, 2011
No.: W-B-06- __ Number of Shares: ___________
Date of Issuance: February 13, 2006
FOR VALUE RECEIVED, the undersigned, FinancialContent, Inc., a Delaware
corporation (together with its successors and assigns, the "Issuer"), hereby
certifies that _______________________________ or its registered assigns is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 8 hereof.
1. Term. The term of this Warrant shall commence on February 13, 2006
and shall expire at 6:00 p.m., eastern time, on February 13, 2011 (such period
being the "Term").
3. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part during the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
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shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of this
Warrant.
(c) Cashless Exercise. Notwithstanding any provisions herein to the
contrary and commencing one (1) year following the Original Issue Date if (i)
the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is not then in effect by the date such registration statement is
required to be effective pursuant to the Registration Rights Agreement (as
defined in the Purchase Agreement) or not effective at any time during the
Effectiveness Period (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y - (A)(Y)
-------
B
Where X = the number of shares of Common Stock to be issued to
the Holder.
Y = the number of shares of Common Stock purchasable
upon exercise of all of the Warrant or, if only a
portion of the Warrant is being exercised, the
portion of the Warrant being exercised.
A = the Warrant Price.
B = the Per Share Market Value of one share of
Common Stock.
(d) Issuance of Stock Certificates. In the event of any exercise of
this Warrant in accordance with and subject to the terms and conditions hereof,
(i) certificates for the shares of Warrant Stock so purchased shall be delivered
to the Holder hereof within a reasonable time, not exceeding three (3) Trading
Days after such exercise (the "Delivery Date") or, at the request of the Holder
(provided that a registration statement under the Securities Act providing for
the resale of the Warrant Stock is then in effect), issued and delivered to the
Depository Trust Company ("DTC") account on the Holder's behalf via the Deposit
Withdrawal Agent Commission System ("DWAC") within a reasonable time, not
exceeding three (3) Trading Days after such exercise (provided, however that the
Issuer or its transfer agent shall only be obligated to issue and deliver the
shares to the DTC on the Holder's behalf via DWAC or certificates free of
restrictive legends if such exercise is in connection with a sale (as evidenced
by documentation furnished to and reasonably satisfactory to the Issuer) and the
-88-
registration statement providing for the resale of the Warrant Stock is
effective, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant Stock so purchased as of the date of such
exercise and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(e) Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Exercise. In addition to any other rights available to the Holder, if the
Issuer fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock
which the Holder anticipated receiving upon such exercise (a "Buy-In"), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000. The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Issuer. Nothing herein shall limit a
Holder's right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer's failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
(f) Transferability of Warrant. Subject to Section 2(h) hereof, this
Warrant may be transferred by a Holder without the consent of the Issuer. If
transferred pursuant to this paragraph, this Warrant may be transferred on the
books of the Issuer by the Holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant at the principal office of the Issuer,
properly endorsed (by the Holder executing an assignment in the form attached
hereto) and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. This Warrant is exchangeable at the principal
office of the Issuer for Warrants to purchase the same aggregate number of
shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange. All Warrants issued on transfers or exchanges shall
be dated the Original Issue Date and shall be identical with this Warrant except
as to the number of shares of Warrant Stock issuable pursuant thereto.
-89-
(g) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
(h) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The Issuer agrees to reissue this Warrant or
certificates representing any of the Warrant Stock, without the legend
set forth above if at such time, prior to making any transfer of any
such securities, the Holder shall give written notice to the Issuer
describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has
received an opinion of counsel reasonably satisfactory to the Issuer,
to the effect that the registration of such securities under the
Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Issuer with
the Securities and Exchange Commission and has become effective under
the Securities Act, (iii) the Issuer has received other evidence
reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are
not required, or (iv) the Holder provides the Issuer with reasonable
assurances that such security can be sold pursuant to Rule 144 under
the Securities Act; and (b) either (i) the Issuer has received an
-90-
opinion of counsel reasonably satisfactory to the Issuer, to the effect
that registration or qualification under the securities or "blue sky"
laws of any state is not required in connection with such proposed
disposition, or (ii) compliance with applicable state securities or
"blue sky" laws has been effected or a valid exemption exists with
respect thereto. The Issuer will respond to any such notice from a
holder within three (3) business days. In the case of any proposed
transfer under this Section 2(h), the Issuer will use reasonable
efforts to comply with any such applicable state securities or "blue
sky" laws, but shall in no event be required, (x) to qualify to do
business in any state where it is not then qualified, (y) to take any
action that would subject it to tax or to the general service of
process in any state where it is not then subject, or (z) to comply
with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Issuer. The
restrictions on transfer contained in this Section 2(h) shall be in
addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Warrant. Whenever a
certificate representing the Warrant Stock is required to be issued to
a the Holder without a legend, in lieu of delivering physical
certificates representing the Warrant Stock, provided the Issuer's
transfer agent is participating in the DTC Fast Automated Securities
Transfer program, the Issuer shall use its reasonable best efforts to
cause its transfer agent to electronically transmit the Warrant Stock
to the Holder by crediting the account of the Holder's Prime Broker
with DTC through its DWAC system (to the extent not inconsistent with
any provisions of this Warrant or the Purchase Agreement).
(i) Accredited Investor Status. In no event may the Holder exercise
this Warrant in whole or in part unless the Holder is an "accredited investor"
as defined in Regulation D under the Securities Act.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, when issued in accordance with the
terms of this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by or through
the Issuer. The Issuer further covenants and agrees that during the period
within which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of issuance upon exercise of this
Warrant a number of shares of Common Stock equal to at least one hundred twenty
percent (120%) of the aggregate number of shares of Common Stock to provide for
the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock has
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been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so listed.
The Issuer will also so list on each securities exchange or market, and will
maintain such listing of, any other securities which the Holder of this Warrant
shall be entitled to receive upon the exercise of this Warrant if at the time
any securities of the same class shall be listed on such securities exchange or
market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the Holders of
the Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Adjustment of Warrant Price. The price at which such shares of
Warrant Stock may be purchased upon exercise of this Warrant shall be subject to
adjustment from time to time as set forth in this Section 4. The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.
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(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event"): (a) consolidate or
merge with or into any other Person and the Issuer shall not be the
continuing or surviving corporation of such consolidation or merger, or
(b) permit any other Person to consolidate with or merge into the
Issuer and the Issuer shall be the continuing or surviving Person but,
in connection with such consolidation or merger, any Capital Stock of
the Issuer shall be changed into or exchanged for Securities of any
other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or
(d) effect a capital reorganization or reclassification of its Capital
Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in
the manner provided in this Warrant, the Holder of this Warrant shall
be entitled upon the exercise hereof at any time after the consummation
of such Triggering Event, to the extent this Warrant is not exercised
prior to such Triggering Event, to receive at the Warrant Price in
effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such
exercise of this Warrant prior to such Triggering Event, the
Securities, cash and property to which such Holder would have been
entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior
thereto (including the right of a shareholder to elect the type of
consideration it will receive upon a Triggering Event), subject to
adjustments (subsequent to such corporate action) as nearly equivalent
as possible to the adjustments provided for elsewhere in this Section
4. Notwithstanding the foregoing to the contrary, this Section 4(a)(i)
shall only apply if the surviving entity pursuant to any such
Triggering Event is a public company that is registered pursuant to the
Securities Exchange Act of 1934, as amended, and its common stock is
listed or quoted on a national exchange or the OTC Bulletin Board. In
the event that the surviving entity pursuant to any such Triggering
Event is not a public company that is registered pursuant to the
Securities Exchange Act of 1934, as amended, or its common stock is not
listed or quoted on a national exchange or the OTC Bulletin Board, then
the Holder shall have the right to demand that the Issuer pay to the
Holder an amount equal to the value of this Warrant according to the
Black-Scholes formula.
(ii) Notwithstanding anything contained in this Warrant to the
contrary and so long as the surviving entity pursuant to any Triggering
Event is a public company that is registered pursuant to the Securities
Exchange Act of 1934, as amended, and its common stock is listed or
quoted on a national exchange or the OTC Bulletin Board, a Triggering
Event shall not be deemed to have occurred if, prior to the
consummation thereof, each Person (other than the Issuer) which may be
required to deliver any Securities, cash or property upon the exercise
of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holder of this
Warrant, (A) the obligations of the Issuer under this Warrant (and if
the Issuer shall survive the consummation of such Triggering Event,
such assumption shall be in addition to, and shall not release the
Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver to such Holder such
Securities, cash or property as, in accordance with the foregoing
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provisions of this subsection (a), such Holder shall be entitled to
receive, and such Person shall have similarly delivered to such Holder
an opinion of counsel for such Person, which counsel shall be
reasonably satisfactory to such Holder, or in the alternative, a
written acknowledgement executed by the President or Chief Financial
Officer of the Issuer, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this subsection (a)) shall
be applicable to the Securities, cash or property which such Person may
be required to deliver upon any exercise of this Warrant or the
exercise of any rights pursuant hereto.
(b) Stock Dividends, Subdivisions and Combinations. If at any
time the Issuer shall:
(i) make or issue or set a record date for the
holders of the Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of, shares of
Common Stock,
(ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
(c) Certain Other Distributions. If at any time the Issuer shall make
or issue or set a record date for the holders of the Common Stock for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash (other than a cash dividend payable out of
earnings or earned surplus legally available for the payment of
dividends under the laws of the jurisdiction of incorporation of the
Issuer),
(ii) any evidences of its indebtedness, any shares of
stock of any class or any other securities or property of any nature
whatsoever (other than cash, Common Stock Equivalents or Additional
Shares of Common Stock), or
(iii) any warrants or other rights to subscribe for
or purchase any evidences of its indebtedness, any shares of stock of
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any class or any other securities or property of any nature whatsoever
(other than cash, Common Stock Equivalents or Additional Shares of
Common Stock),
then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to (but not affiliated with) the Holder) of any and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the holders
of its Common Stock of such shares of such other class of stock within the
meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
(d) Issuance of Additional Shares of Common Stock.
(i) In the event the Issuer shall at any time following the
Original Issue Date issue any Additional Shares of Common Stock (otherwise than
as provided in the foregoing subsections (a) through (c) of this Section 4), at
a price per share less than the Warrant Price then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price determined by multiplying the Warrant Price then in effect by a
fraction:
(A) the numerator of which shall be equal to the sum
of (x) the number of shares of Outstanding Common Stock
immediately prior to the issuance of such Additional Shares of
Common Stock plus (y) the number of shares of Common Stock
(rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares
of Common Stock so issued would purchase at a price per share
equal to the Warrant Price then in effect, and
(B) the denominator of which shall be equal to the
number of shares of Outstanding Common Stock immediately after
the issuance of such Additional Shares of Common Stock.
(ii) No adjustment of the number of shares of Common Stock for
which this Warrant shall be exercisable shall be made under paragraph (i) of
Section 4(d) upon the issuance of any Additional Shares of Common Stock which
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are issued pursuant to the exercise of any Common Stock Equivalents, if any such
adjustment shall previously have been made upon the issuance of such Common
Stock Equivalents (or upon the issuance of any warrant or other rights therefor)
pursuant to Section 4(e).
(g) Issuance of Common Stock Equivalents. If at any time the Issuer shall issue
or sell any Common Stock Equivalents, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the aggregate price per
share for which Common Stock is issuable upon such conversion or exchange plus
the consideration received by the Issuer for issuance of such Common Stock
Equivalent divided by the number of shares of Common Stock issuable pursuant to
such Common Stock Equivalent (the "Aggregate Per Common Share Price") shall be
less than the Warrant Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall make the Aggregate Per Common Share Price be less than the
Warrant Price in effect at the time of such amendment or adjustment, then the
Warrant Price upon each such issuance or amendment shall be adjusted as provided
in Section 4(d). No further adjustment of the Warrant Price then in effect shall
be made under this Section 4(e) upon the issuance of any Common Stock
Equivalents which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to this Section 4(e). No further adjustments of the Warrant Price then
in effect shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Common Stock Equivalents.
(h) Superseding Adjustment. If, at any time after any adjustment of the number
of shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall have been made pursuant to Section 4(e) as the result
of any issuance of Common Stock Equivalents, and (i) such Common Stock
Equivalents, or the right of conversion or exchange in such Common Stock
Equivalents, shall expire, and all or a portion of such or the right of
conversion or exchange with respect to all or a portion of such Common Stock
Equivalents, as the case may be, shall not have been exercised, or (ii) the
consideration per share for which shares of Common Stock are issuable pursuant
to such Common Stock Equivalents shall be increased, then such previous
adjustment shall be rescinded and annulled and the Additional Shares of Common
Stock which were deemed to have been issued by virtue of the computation made in
connection with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation. Upon the occurrence of
an event set forth in this Section 4(f), there shall be a recomputation made of
the effect of such Common Stock Equivalents on the basis of: (i) treating the
number of Additional Shares of Common Stock theretofore actually issued or
issuable pursuant to the previous exercise of Common Stock Equivalents or any
such right of conversion or exchange, as having been issued on the date or dates
of any such exercise and for the consideration actually received and receivable
therefor, and (ii) treating any such Common Stock Equivalents which then remain
outstanding as having been granted or issued immediately after the time of such
increase of the consideration per share for which Additional Shares of Common
Stock are issuable under such Common Stock Equivalents; whereupon a new
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Warrant Price then in effect shall be made, which new
adjustment shall supersede the previous adjustment so rescinded and annulled.
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(h) Other Provisions applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
(i) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents (or any
warrants or other rights therefor) shall be issued for cash consideration, the
consideration received by the Issuer therefor shall be the amount of the cash
received by the Issuer therefor, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are offered by the Issuer for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Common
Stock Equivalents are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation (other
than any consolidation or merger in which the previously outstanding shares of
Common Stock of the Issuer shall be changed to or exchanged for the stock or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, of such portion of the assets and business of the
nonsurviving corporation as the Board may determine to be attributable to such
shares of Common Stock or Common Stock Equivalents, as the case may be. The
consideration for any Additional Shares of Common Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall be the
consideration received by the Issuer for issuing such warrants or other rights
plus the additional consideration payable to the Issuer upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Common Stock Equivalents shall be
the consideration received by the Issuer for issuing warrants or other rights to
subscribe for or purchase such Common Stock Equivalents, plus the consideration
paid or payable to the Issuer in respect of the subscription for or purchase of
such Common Stock Equivalents, plus the additional consideration, if any,
payable to the Issuer upon the exercise of the right of conversion or exchange
in such Common Stock Equivalents. In the event of any consolidation or merger of
the Issuer in which the Issuer is not the surviving corporation or in which the
previously outstanding shares of Common Stock of the Issuer shall be changed
into or exchanged for the stock or other securities of another corporation, or
in the event of any sale of all or substantially all of the assets of the Issuer
for stock or other securities of any corporation, the Issuer shall be deemed to
have issued a number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated, and for a consideration
equal to the fair market value on the date of such transaction of all such stock
or securities or other property of the other corporation. In the event any
consideration received by the Issuer for any securities consists of property
other than cash, the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the Board. In the
event Common Stock is issued with other shares or securities or other assets of
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the Issuer for consideration which covers both, the consideration computed as
provided in this Section 4(h)(i) shall be allocated among such securities and
assets as determined in good faith by the Board.
(ii) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common Stock for which this Warrant is exercisable that would
otherwise be required may be postponed (except in the case of a subdivision or
combination of shares of the Common Stock, as provided for in Section 4(b)) up
to, but not beyond the date of exercise if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than one
percent (1%) of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose of
any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(iii) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken into account
to the nearest one one-hundredth (1/100th) of a share.
(iv) When Adjustment Not Required. If the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(i) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
(j) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for the Holder by the Issuer to be issued
to the Holder upon and to the extent that the event actually takes place, upon
payment of the current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.
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5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall prepare and execute a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made any
determination hereunder), and the Warrant Price and Warrant Share Number after
giving effect to such adjustment, and shall cause copies of such certificate to
be delivered to the Holder of this Warrant promptly after each adjustment. Any
dispute between the Issuer and the Holder of this Warrant with respect to the
matters set forth in such certificate may at the option of the Holder of this
Warrant be submitted to a national or regional accounting firm reasonably
acceptable to the Issuer and the Holder, provided that the Issuer shall have ten
(10) days after receipt of notice from such Holder of its selection of such firm
to object thereto, in which case such Holder shall select another such firm and
the Issuer shall have no such right of objection. The firm selected by the
Holder of this Warrant as provided in the preceding sentence shall be instructed
to deliver a written opinion as to such matters to the Issuer and such Holder
within thirty (30) days after submission to it of such dispute. Such opinion
shall be final and binding on the parties hereto. The costs and expenses of the
initial accounting firm shall be paid equally by the Issuer and the Holder and,
in the case of an objection by the Issuer, the costs and expenses of the
subsequent accounting firm shall be paid in full by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with any exercise hereof, but in lieu of such fractional
shares, the Issuer shall round the number of shares to be issued upon exercise
up to the nearest whole number of shares.
7. Ownership Cap and Certain Exercise Restrictions. (a) Notwithstanding
anything to the contrary set forth in this Warrant, at no time may a Holder of
this Warrant exercise this Warrant if the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all other
shares of Common Stock owned by such Holder at such time, the number of shares
of Common Stock which would result in such Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 4.9% of the then issued and outstanding shares of
Common Stock; provided, however, that upon a holder of this Warrant providing
the Issuer with sixty-one (61) days notice (pursuant to Section 12 hereof) (the
"Waiver Notice") that such Holder would like to waive this Section 7(a) with
regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this Section 7(a) will be of no force or effect with regard to all or a
portion of the Warrant referenced in the Waiver Notice; provided, further, that
this provision shall be of no further force or effect during the sixty-one (61)
days immediately preceding the expiration of the term of this Warrant.
(b) The Holder may not exercise the Warrant hereunder to the
extent such exercise would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 9.9% of the then issued and outstanding shares of
Common Stock, including shares issuable upon exercise of the Warrant held by the
Holder after application of this Section; provided, however, that upon a holder
of this Warrant providing the Issuer with a Waiver Notice that such holder would
like to waive this Section 7(b) with regard to any or all shares of Common Stock
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issuable upon exercise of this Warrant, this Section 7(b) shall be of no force
or effect with regard to those shares of Warrant Stock referenced in the Waiver
Notice; provided, further, that this provision shall be of no further force or
effect during the sixty-one (61) days immediately preceding the expiration of
the term of this Warrant.
8. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued (other than for cash) in
connection with a merger, acquisition, or consolidation, (ii)
securities issued pursuant to a bona fide firm underwritten public
offering of the Issuer's securities, (iii) securities issued pursuant
to the conversion or exercise of convertible or exercisable securities
issued or outstanding on or prior to the date hereof or issued pursuant
to the Purchase Agreement, (iv) the Warrant Stock, (v) securities
issued in connection with bona fide strategic license agreements or
other partnering arrangements so long as such issuances are not for the
purpose of raising capital, (vi) Common Stock issued or the issuance or
grants of options or warrants to purchase Common Stock to any employer,
officer, director or advisor of the Issuer for a period of two (2)
years following the Original Issue Date so long as the exercise price
of such options or warrants is greater than $0.75, (vii) any warrants
issued to the placement agent and its designees for the transactions
contemplated by the Purchase Agreement, and (viii) the payment of any
accrued interest in shares of Common Stock pursuant to the Notes, and
(ix) securities issued to CNET Networks, Inc.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Common Stock" means the Common Stock, $0.001 par value per
share, of the Issuer and any other Capital Stock into which such stock
may hereafter be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
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"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means FinancialContent, Inc., a Delaware corporation,
and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Notes" means the senior secured convertible promissory notes
issued by the Issuer to the Purchasers pursuant to the Purchase
Agreement.
"Original Issue Date" means February 13, 2006.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Outstanding Common Stock" means, at any given time, the
aggregate amount of outstanding shares of Common Stock, assuming full
exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable
or exchangeable for, and any right to subscribe for, shares of Common
Stock that are outstanding at such time.
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"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
last closing bid price per share of the Common Stock on such date on
the OTC Bulletin Board or another registered national stock exchange on
which the Common Stock is then listed, or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered
national stock exchange, the last closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the five (5) Trading Days preceding such
date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined
by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to
select an additional Independent Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by
each such Independent Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar
transactions during such period. The determination of fair market value
by an Independent Appraiser shall be based upon the fair market value
of the Issuer determined on a going concern basis as between a willing
buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties.
In determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the
Common Stock imposed by agreement or by federal or state securities
laws, or to the existence or absence of, or any limitations on, voting
rights.
"Purchase Agreement" means the Note and Warrant Purchase
Agreement dated as of February 13, 2006, among the Issuer and the
Purchasers.
"Purchasers" means the purchasers of the Notes and the
Warrants issued by the Issuer pursuant to the Purchase Agreement.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security. "Security"
means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
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"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means (a) a day on which the Common Stock is
traded on the OTC Bulletin Board, or (b) if the Common Stock is not
traded on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that
in the event that the Common Stock is not listed or quoted as set forth
in (a) or (b) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Voting Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated)
having ordinary voting power for the election of a majority of the
members of the Board of Directors (or other governing body) of such
corporation, other than Capital Stock having such power only by reason
of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange for
any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e)
hereof or of any of such other Warrants.
"Warrant Price" initially means $1.25, as such price may be
adjusted from time to time as shall result from the adjustments
specified in this Warrant, including Section 4 hereto.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
9. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the
holders of Common Stock; or
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(B) the Issuer shall authorize the granting to all
holders of its Common Stock of rights to
subscribe for or purchase any shares of
Capital Stock of any class or other rights; or
(C) there shall be any reclassification of the
Capital Stock of the Issuer; or
(D) there shall be any capital reorganization by
the Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or
other disposition of all or substantially all
of the Issuer's property, assets or business
(except a merger or other reorganization in
which the Issuer shall be the surviving
corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged
and except a consolidation, merger, sale,
transfer or other disposition involving a
wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Issuer or any partial liquidation of the
Issuer or distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Common Stock.
10. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the Holder of this Warrant.
No consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of this Warrant unless the same
consideration is also offered to all holders of the Warrants.
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11. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted. The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New York.
The Issuer and the Holder consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 11 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Warrant or the Purchase Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury.
12. Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Issuer: FinancialContent, Inc.
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice)
to: Xxxx Xxxxxxx, Esq.
Tel. No.: Fax No.:
If to any Holder: At the address of such Holder
set forth on Exhibit A to this Agreement,
with copies to Holder's counsel as set forth
on Exhibit A or as specified in writing by
such Holder with copies to:
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with copies (which copies
shall not constitute notice)
to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto.
13. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
14. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
15. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
16. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
17. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Issuer has executed this Series B Warrant as of
the day and year first above written.
FINANCIALCONTENT, INC.
By: /S/ Wing Yu
----------------
Name: Wing Yu
Title: Chief Executive Officer
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EXERCISE FORM
SERIES B WARRANT
FINANCIALCONTENT, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
FinancialContent, Inc. covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: ____________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
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EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of February 13, 2006, by and among FinancialContent, Inc., a
Delaware corporation (the "Company"), and the purchasers listed on Schedule I
hereto (the "Purchasers").
This Agreement is being entered into pursuant to the Note and
Warrant Purchase Agreement dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" means the date of the initial closing of the
purchase and sale of the Notes and the Warrants pursuant to the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, $0.001 par
value per share.
"Effectiveness Date" means with respect to the Registration
Statement the earlier of the one hundred twentieth (120th) day following the
Closing Date or the date which is within three (3) Business Days of the date on
which the Commission informs the Company that (i) the Commission will not review
the Registration Statement or (ii) the Company may request the acceleration of
the effectiveness of the Registration Statement and the Company makes such
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request; provided that, if the Effectiveness Date falls on a Saturday, Sunday or
any other day which shall be a legal holiday or a day on which the Commission is
authorized or required by law or other government actions to close, the
Effectiveness Date shall be the following Business Day.
"Effectiveness Period" shall have the meaning set forth in
Section 2.
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"Event" shall have the meaning set forth in Section 7(d).
"Event Date" shall have the meaning set forth in Section 7(d).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the twenty-fifth (25th) Business Day
following the Closing Date; provided that, if the Filing Date falls on a
Saturday, Sunday or any other day which shall be a legal holiday or a day on
which the Commission is authorized or required by law or other government
actions to close, the Filing Date shall be the following Business Day.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"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.
"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 in such Prospectus.
"Registrable Securities" means (A) one hundred fifty percent
(150%) of the number of shares of Common Stock issuable upon conversion of the
Notes, including any interest accrued thereon, and (B) the shares of Common
Stock issuable upon exercise of the Warrants.
"Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
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statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"Warrants" means the warrants to purchase shares of Common
Stock issued to the Purchasers pursuant to the Purchase Agreement.
2. Resale Registration.
On or prior to the Filing Date the Company shall prepare and
file with the Commission a "resale" Registration Statement providing for 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 SB-2
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form SB-2, in which case such registration shall be on
another appropriate form in accordance with the Securities Act and the rules
promulgated thereunder). The Company shall (i) not permit any securities other
than the Registrable Securities and the securities to be listed on Schedule II
hereto to be included in the Registration Statement and (ii) use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event prior to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until such date as is the
earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period"). If at any time and for any reason, an additional Registration
Statement is required to be filed because at such time the actual number of
shares of Common Stock into which the Notes are convertible and the Warrants are
exercisable plus the number of shares of Common Stock exceeds the number of
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shares of Registrable Securities remaining under the Registration Statement, the
Company shall have fifteen (15) Business Days to file such additional
Registration Statement, and the Company shall use its best efforts to cause such
additional Registration Statement to be declared effective by the Commission as
soon as possible, but in no event later than sixty (60) days after filing.
3. Registration Procedures.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form SB-2 (or if the Company is not
then eligible to register for resale the Registrable Securities on Form SB-2
such registration shall be on another appropriate form in accordance with the
Securities Act and the rules promulgated thereunder) in accordance with the
method or methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders), and use its reasonable best efforts to cause
the Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and the Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject to
the review of such Holders and such Special Counsel, and (ii) cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries as shall be necessary, in the reasonable opinion of Special
Counsel, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities or the Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement 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 Commission such additional Registration Statements as necessary 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 (or any similar provisions then in force) promulgated
under the Securities Act; (iii) respond as promptly as possible, but in no event
later than ten (10) Business Days, to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and as
promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission 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
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
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(c) Notify the Holders of Registrable Securities to be sold
and the Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is filed, (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, 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.
(d) Use its reasonable best efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of, (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of
the Registrable Securities, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Company reasonably agrees should be included therein and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(f) Furnish to each Holder and the Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, 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
Commission.
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(g) Promptly deliver to each Holder and the Special Counsel,
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; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its reasonable best efforts to register or qualify or cooperate with the
selling Holders and the Special Counsel 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 Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things 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 required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free
of all restrictive legends (provided that the issuance of such unlegended
certificates is in compliance with applicable securities laws), and to enable
such Registrable Securities to be in such denominations and registered in such
names as any Holder may request in writing at least two (2) Business Days prior
to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as 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.
(k) Use its reasonable best efforts to cause all Registrable
Securities relating to the Registration Statement to be listed on the OTC
Bulletin Board or any other securities exchange, quotation system or market, if
any, on which similar securities issued by the Company are then listed or traded
as and when required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
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(m) The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v), 3(c)(vi) or 3(n), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), 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.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may (x) postpone or suspend filing
of a registration statement for a period not to exceed thirty (30) consecutive
days or (y) postpone or suspend effectiveness of a registration statement for a
period not to exceed twenty (20) consecutive days; provided that the Company may
not postpone or suspend effectiveness of a registration statement under this
Section 3(n) for more than forty-five (45) days in the aggregate during any
three hundred sixty (360) day period; provided, however, that no such
postponement or suspension shall be permitted for consecutive twenty (20) day
periods arising out of the same set of facts, circumstances or transactions.
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4. Registration Expenses.
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in this Section 4, shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the OTC
Bulletin Board and each other securities exchange or market on which Registrable
Securities are required hereunder to be listed, (B) with respect to filing fees
required to be paid to the National Association of Securities Dealers, Inc. and
the NASD Regulation, Inc. and (C) in compliance with state securities or Blue
Sky laws (including, without limitation, fees and disbursements of counsel for
the Holders in connection with Blue Sky qualifications of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the Holders of a majority
of Registrable Securities may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders, in
the case of the Special Counsel, up to a maximum amount of $7,500, (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
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Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any 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 (i) such untrue statements or omissions are based
solely upon information regarding such Holder or such other Indemnified Party
furnished in writing to the Company by such Holder expressly for use therein and
(ii) that the foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any untrue statement, allegedly untrue statement,
omission or alleged omission made in any preliminary prospectus but eliminated
or remedied in the final prospectus (filed pursuant to Rule 424 of the
Securities Act), such indemnity agreement shall not inure to the benefit of any
Holder, underwriter, broker or other Person acting on behalf of holders of the
Registrable Securities, from whom the Person asserting any loss, claim, damage,
liability or expense purchased the Registrable Securities which are the subject
thereof, if a copy of such final prospectus had been made available to such
Person and such Holder, underwriter, broker or other Person acting on behalf of
holders of the Registrable Securities and such final prospectus was not
delivered to such Person with or prior to the written confirmation of the sale
of such Registrable Securities to such Person. The Company shall notify the
Holders 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.
(b) Indemnification by Holders. Each Holder 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 and 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), as incurred, arising solely out of or based solely
upon any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or arising solely out of
or based solely upon 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 in writing by such Holder or other Indemnifying Party
to the Company specifically for inclusion in the Registration Statement or such
Prospectus. Notwithstanding anything to the contrary contained herein, each
Holder shall be liable under this Section 5(b) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
(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 promptly shall 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
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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.
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: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) 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 (3)
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 (which shall be reasonably
acceptable to the Indemnifying Party) 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). 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 or delayed. 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) Business 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 Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (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
benefits received by the Indemnifying Party on the one hand and the Indemnified
Party on the other from the offering of the Notes and Warrants. If, but only if,
the allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault, as applicable, 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,
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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 5(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. In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the net proceeds received by such Holder upon sale of
such Holder's Registrable Securities pursuant to the Registration Statement
giving rise to such contribution obligation.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(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.
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 are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties. Notwithstanding anything to the contrary contained
herein, the Holders shall be liable under this Section 5(d) for only that amount
as does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
6. Rule 144.
As long as any Holder owns any Registrable Securities, Notes or
Warrants, 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 Section 13(a) or 15(d) of
the Exchange Act and to promptly furnish the Holders with true and complete
copies of all such filings. As long as any Holder owns any Registrable
Securities, Notes or Warrants, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request all to the extent required from time
to time to enable such Person to sell the Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions relating to such sale pursuant to Rule 144.
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7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(c) of the Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company, under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders in such capacity pursuant hereto
or as disclosed on Schedule 2.1(c) of the Purchase Agreement or Schedule II
hereto) may include securities of the Company in the Registration Statement, and
the Company shall not after the date hereof enter into any agreement providing
such right to any of its securityholders, unless the right so granted is subject
in all respects to the prior rights in full of the Holders set forth herein, and
is not otherwise in conflict with the provisions of this Agreement.
(d) Failure to File Registration Statement and Other Events.
The Company and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or prior to the
Filing Date, or (B) the Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date, or (C) the Company fails to
file with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act within three (3) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (D) the Registration Statement is filed with and declared
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effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities at any time prior to the expiration of the Effectiveness
Period, without being succeeded immediately by a subsequent Registration
Statement filed with and declared effective by the Commission, or (E) the
Company has breached Section 3(n), or (F) trading in the Common Stock shall be
suspended or if the Common Stock is delisted from the OTC Bulletin Board (or
other principal exchange on which the Common Stock is traded) for any reason for
more than three (3) Business Days in the aggregate (any such failure or breach
being referred to as an "Event," and for purposes of clauses (A) and (B) the
date on which such Event occurs, or for purposes of clause (C) the date on which
such three (3) Business Day period is exceeded, or for purposes of clause (D)
after more than fifteen (15) Business Days, or for purposes of clause (F) the
date on which such three (3) Business Day period is exceeded, being referred to
as "Event Date"), the Company shall pay an amount as liquidated damages to each
Holder in cash equal to one and one-half percent (1.5%) for the first calendar
month (prorated for shorter periods) and one and one-quarter percent (1.25%) per
calendar month thereafter (prorated for shorter periods) of the Holder's initial
investment in the Notes, from the Event Date until the applicable Event is
cured; provided, however, in no event shall liquidated damages be payable to any
Holder pursuant to this Section 7(d) for a period in excess of two hundred forty
(240) days from the applicable Event Date. Notwithstanding anything to the
contrary in this paragraph (e), if (i) any of the Events described in clauses
(A), (B) or (C) shall have occurred, (ii) on or prior to the applicable Event
Date, the Company shall have exercised its rights under Section 3(n) hereof and
(iii) the postponement or suspension permitted pursuant to such Section 3(n)
shall remain effective as of such applicable Event Date, then the applicable
Event Date shall be deemed instead to occur on the second Business Day following
the termination of such postponement or suspension. For purposes of clarity, any
liquidated damages payable under this Section 7(d) are not payable per Event,
but rather are the maximum charges payable at any time when one or more Event
has occurred and is continuing.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of three-fourths (3/4) of the Registrable Securities
outstanding.
Section 7.15 (f) Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: FinancialContent, Inc.
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
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Attention: Chief Executive Officer
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which shall Xxxx Xxxxxxx, Esq.
not constitute notice) to:
Tel. No.:
Fax No.:
If to any Purchaser: At theaddress of such Purchaser set forth on
Exhibit A to this Agreement, with copies to
Purchaser's counsel as set forth on Exhibit A or
as specified in writing by such:
with copies (which shall Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
not constitute notice) to: 0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
Any party hereto may from time to time change its address for
notices by giving at least ten (10) days written notice of such changed address
to the other party hereto.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. Each
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder or any
other Holder or Affiliate of any other Holder of all or a portion of the
Registrable Securities if: (i) the Holder agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws, (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of
this Section, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. In addition, each Holder shall have the right to assign its rights
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hereunder to any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld. The rights to assignment shall
apply to the Holders (and to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to any of the conflicts of law principles which
would result in the application of the substantive law of another jurisdiction.
This Agreement shall not be interpreted or construed with any presumption
against the party causing this Agreement to be drafted. The Company and the
Holders agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New York,
and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue. The Company and the
Holders irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Company and the Holders consent to process
being served in any such suit, action or proceeding by mailing a copy thereof 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 in this Section 7(j) shall affect or limit any right
to serve process in any other manner permitted by law. The Company and the
Holders hereby agree that the prevailing party in any suit, action or proceeding
arising out of or relating to the this Agreement or the Purchase Agreement,
shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party. The parties hereby waive all rights to a trial by jury.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
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(n) Shares Held by the Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(o) Independent Nature of Purchasers. The Company acknowledges
that the obligations of each Purchaser under the Transaction Documents are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under the Transaction Documents. The Company acknowledges
that the decision of each Purchaser to purchase Securities pursuant to the
Purchase Agreement has been made by such Purchaser independently of any other
Purchaser 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 its Subsidiaries which may have made or given by
any other Purchaser or by any agent or employee of any other Purchaser, and no
Purchaser or any of its agents or employees shall have any liability to any
Purchaser (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained herein, or in any Transaction Document, and no action taken by
any Purchaser pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Purchaser in the Registration Statement and (ii) review by, and
consent to, such Registration Statement by a Purchaser) shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Purchaser 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 Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Purchasers and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own individual
counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers. The Company acknowledges
that such procedure with respect to the Transaction Documents in no way creates
a presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
FINANCIALCONTENT, INC.
By: /S/ Wing Yu
Name: Wing Yu
Title: Chief Executive Officer
PURCHASER:
By: /S/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Manager - Jade Special Strategy
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Section 7.16 Schedule I
Section 7.17 List of Purchasers
Section 7.18
Section 7.19
Section 7.20 Schedule II
Section 7.21 Securities Permitted to be Included on the Registration
Statement
1. Shares of Common Stock issuable upon the exercise of warrants issuable
to the placement agent and its designees in connection with the
transactions contemplated by the Purchase Agreement.
2. Shares of Common Stock issuable upon conversion of the Company's
outstanding Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock.
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EXHIBIT F
FORM OF SECURITY AGREEMENT
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SECURITY AGREEMENT
SECURITY AGREEMENT (as amended, restated, supplemented or otherwise
modified from time to time in accordance herewith and including all attachments,
exhibits and schedules hereto, the "Agreement"), dated as of February 13, 2006,
made by FinancialContent, Inc., a Delaware corporation (the "Grantor"), in favor
of the secured parties listed on Exhibit A to this Agreement and their permitted
successors and assigns (collectively, the "Secured Parties").
WHEREAS, Grantor has issued or will issue separate senior secured
convertible promissory notes to the Secured Parties (the "Notes") pursuant to a
Note and Warrant Purchase Agreement, dated as of February 13, 2006 (the
"Purchase Agreement"), by and among Grantor and the Secured Parties; and
WHEREAS, the Secured Parties and the Grantor agree that the Grantor
execute and deliver to the Secured Parties a security agreement providing for
the grant to the Secured Parties of a continuing security interest in all
personal property and assets of the Grantor, all in substantially the form
hereof to secure all Obligations (hereinafter defined).
NOW, THEREFORE, the parties agree as follows:
Definitions
Definition of Terms Used Herein. All capitalized terms used herein and
not defined herein have the respective meanings provided therefor in the
Purchase Agreement or the Notes, as applicable. All terms defined in the Uniform
Commercial Code (hereinafter defined) as in effect from time to time and used
herein and not otherwise defined herein (whether or not such terms are
capitalized) have the same definitions herein as specified therein.
Definition of Certain Terms Used Herein. As used herein, the following
terms have the following meanings:
"Collateral" means all accounts receivable of the Grantor and all
personal and fixed property of every kind and nature, including, without
limitation, all furniture, fixtures, equipment, raw materials, inventory, as
extracted collateral, or other goods, accounts, contract rights, rights to the
payment of money, insurance refund claims and all other insurance claims and
proceeds, tort claims, chattel paper, documents, instruments, securities and
other investment property, deposit accounts, rights to proceeds of letters of
credit and all general intangibles including, without limitation, all tax refund
claims, license fees, patents, patent licenses, patent applications, trademarks,
trademark licenses, trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to xxx and recover for past
infringement of patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any kind or nature pursuant to which the
Grantor possesses, uses or has authority to possess or use property (whether
tangible or intangible) of others or others possess, use or have authority to
possess or use property (whether tangible or intangible) of the Grantor, and all
recorded data of any kind or nature, regardless of the medium of recording
including, without limitation, all books and records, software, writings, plans,
specifications and schematics, whether now owned or hereinafter acquired by the
Grantor; and all proceeds and products of each of the foregoing.
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"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"Event of Default" has the meaning specified in the Notes.
"Indemnitees" has the meaning specified in Section 7.5(b).
"Lien" means: (i) any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (ii) to the extent not included
under clause (i), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (iii) any contingent or other agreement
to provide any of the foregoing.
"Notes" has the meaning assigned to such term in the first recital of
this Agreement.
"Obligations" means all indebtedness, liabilities, obligations,
covenants and duties of the Grantor to the Secured Parties of every kind, nature
and description, direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, now existing of hereafter arising under or in connection with the
Notes, this Agreement or the other Transaction Documents.
"Registered Organization" means an entity formed by filing a
registration document with a United States Governmental Authority, such as a
corporation, limited partnership or limited liability company.
"Security Interest" has the meaning specified in Section 2.1 of this
Agreement.
"Uniform Commercial Code" means the Uniform Commercial Code from time
to time in effect in the State of New York.
Security Interest
Security Interest. As security for the payment and performance, in full
of the Obligations, and any extensions, renewals, modifications or refinancings
of the Obligations, the Grantor hereby bargains, sells, conveys, assigns, sets
over, mortgages, pledges, hypothecates and transfers to the Secured Parties, and
hereby grants to the Secured Parties, their successors and assigns, a security
interest in, all of such Grantor's right, title and interest in, to and under
the Collateral and all hereinafter acquired Collateral (the "Security
Interest").
No Assumption of Liability. The Security Interest is granted as
security only and shall not subject the Secured Parties to, or in any way alter
or modify, any obligation or liability of the Grantor with respect to or arising
out of the Collateral.
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Representations and Warranties
The Grantor represents and warrants to the Secured Parties that:
Title and Authority. The Grantor has good and valid rights in and title
to the Collateral with respect to which it has purported to grant a security
interest hereunder and has full power and authority to grant to the Secured
Parties the Security Interest and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person other than any consent or approval which has
been obtained.
Filings; Actions to Achieve Perfection. Fully executed Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations containing a
description of the Collateral have been delivered to the Secured Parties for
filing in each United States governmental, municipal or other office specified
in Schedule A, which are all the filings, recordings and registrations that are
necessary to publish notice of and protect the validity of and to establish a
legal, valid and first priority perfected security interest in favor of the
Secured Parties in respect of all Collateral in which the Security Interest may
be perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or with
respect to the filing of amendments or new filings to reflect the change of the
Grantor's name, location, identity or corporate structure. The Grantor's name is
listed in the preamble of this Agreement identically to how it appears on its
certificate of incorporation or other organizational documents.
Validity and Priority of Security Interest. The Security Interest
constitutes (a) a legal and valid first priority security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
only to the filings described in Section 3.2 above and other previously
perfected security interests in the Collateral listed on Schedule 3.3 to this
Agreement ("Existing Liens"), a perfected first priority security interest in
all Collateral in which a security interest may be perfected by filing,
recording or registration in the United States pursuant to the Uniform
Commercial Code or other applicable law in the United States (or any political
subdivision thereof) and its territories and possessions or any other country,
state or nation (or any political subdivision thereof). The Security Interest is
and shall be subordinate to any other Existing Lien on any of the Collateral.
Absence of Other Liens. The Grantor's Collateral is owned by the
Grantor free and clear of any Lien other than Existing Liens. Without limiting
the foregoing and except as set forth on Schedule 3.4 to this Agreement, the
Grantor has not filed or consented to any filing of any financing statement or
similar filing in favor of any Person other than the Secured Parties, nor
permitted the granting or assignment of a security interest or permitted
perfection of any security interest in the Collateral in favor of any Person
other than the Secured Parties. The Grantor's having possession of all
instruments, certificates and cash constituting Collateral from time to time and
the filing of financing statements in the offices referred to in Schedule A
hereto results in the perfection of such security interest. Such Security
Interest is, or in the case of Collateral in which the Grantor obtain rights
after the date hereof, will be, a perfected, first priority security interest.
Such notices, filings and all other action necessary or desirable to perfect and
protect such security interest have been duly taken.
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Valid and Binding Obligation. This Agreement constitutes the legal,
valid and binding obligation of the Grantor, enforceable against the Grantor in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in this Agreement may be limited by applicable federal or state
securities laws.
Covenants
Change of Name; Location of Collateral; Place of Business, State of
Formation or Organization.
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The Grantor shall notify the Secured Parties in writing at
least eleven (11) days prior to any change (i) in its corporate name or
in any trade name used to identify it in the conduct of its business or
in the ownership of its properties, (ii) in the location of its chief
executive office, its principal place of business, any office in which
it maintains books or records relating to Collateral owned by it
(including the establishment of any such new office or facility), (iii)
in its identity or corporate structure such that a filed filing made
under the Uniform Commercial Code becomes misleading or (iv) in its
Federal Taxpayer Identification Number. Furthermore, the Grantor shall
not effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or
otherwise that are required in order for the Secured Parties to
continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral.
Without limiting Section 4.1(a), without the prior written
consent of the Secured Parties in each instance, the Grantor shall not
change its (i) principal residence, if it is an individual, (ii) place
of business, if it has only one place of business and is not a
Registered Organization, (iii) principal place of business, if it has
more than one place of business and is not a Registered Organization,
or (iv) state of incorporation, formation or organization, if it is a
Registered Organization.
Records. The Grantor shall maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which the Grantor is engaged, but in any event to include complete accounting
records indicating all payments and proceeds received with respect to any part
of the Collateral, and, at such time or times as the Secured Parties may
reasonably request, promptly to prepare and deliver to the Secured Parties a
duly certified schedule or schedules in form and detail satisfactory to the
Secured Parties showing the identity, amount and location of any and all
Collateral.
Periodic Certification; Notice of Changes. In the event there should at
any time be any change in the information represented and warranted herein or in
the documents and instruments executed and delivered in connection herewith, the
Grantor shall immediately notify the Secured Parties in writing of such change
(this notice requirement shall be in extension of and shall not limit or relieve
the Grantor of any other covenants hereunder).
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Protection of Security. The Grantor shall, at its own cost and expense,
take any and all actions necessary to defend title to the Collateral against all
persons and to defend the Security Interest of the Secured Parties in the
Collateral and the priority thereof against any Lien.
Inspection and Verification. The Secured Parties and such persons as
the Secured Parties may reasonably designate shall have the right to inspect the
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Collateral is located, to
discuss the Grantor's affairs with the officers of the Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of collateral in the
possession of any third Person, by contacting any account debtor or third Person
possessing such Collateral for the purpose of making such a verification.
Out-of-pocket expenses in connection with any inspections by representatives of
the Secured Parties shall be (a) the obligations of the Grantor with respect to
any inspection after the Secured Parties' demand payment of the Notes or (b) the
obligation of the Secured Parties in any other case.
Taxes; Encumbrances. At their option, the Secured Parties may
discharge, Liens other than Existing Liens at any time levied or placed on the
Collateral and may pay for the maintenance and preservation of the Collateral to
the extent the Grantor fails to do so and the Grantor shall reimburse the
Secured Parties on demand for any payment made or any expense incurred by the
Secured Parties pursuant to the foregoing authorization; provided, however, that
nothing in this Section shall be interpreted as excusing the Grantor from the
performance of, or imposing any obligation on the Secured Parties to cure or
perform, any covenants or other obligation of the Grantor with respect to any
Lien or maintenance or preservation of Collateral as set forth herein.
Use and Disposition of Collateral. The Grantor shall not make or permit
to be made an assignment, pledge or hypothecation of any Collateral or shall
grant any other Lien in respect of the Collateral without the prior written
consent of the Secured Parties. The Grantor shall not make or permit to be made
any transfer of any Collateral other than with respect to Existing Liens and
other liens approved by the Secured Parties and the Grantor shall remain at all
times in possession of the Collateral owned by it.
Insurance/Notice of Loss. Within a reasonable period of time following
the date of this Agreement, Grantor, at its own expense, shall maintain or cause
to be maintained insurance covering physical loss or damage to the Collateral as
described on Schedule 4.8 to this Agreement. In extension of the foregoing and
without limitation, such insurance shall be payable to the Secured Parties as
loss payee under a "standard" loss payee clause, and the Secured Parties shall
be listed as an "additional insured" on Grantor's general liability insurance.
Such insurance shall not be terminated, cancelled or not renewed for any reason,
including non-payment of insurance premiums, unless the insurer shall have
provided the Secured Parties at least 30 days prior written notice. Grantor
irrevocably makes, constitutes and appoints the Secured Parties (and all
officers, employees or agents designated by the Secured Parties) as its true and
lawful agent and attorney-in-fact for the purpose, at any time following the
Secured Parties' demand for payment of the Notes, of making, settling and
adjusting claims in respect of Collateral under policies of insurance, endorsing
the name of Grantor on any check, draft, instrument or other item of payment for
the proceeds of such policies of insurance and for making all determinations and
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decisions with respect thereto. In the event that Grantor at any time or times
shall fail to obtain or maintain any of the policies of insurance required
hereby or to pay any premium in whole or part relating thereto, the Secured
Parties may, without waiving or releasing any obligation or liability of Grantor
hereunder, in their sole discretion, obtain and maintain such policies of
insurance and pay such premium and take any other actions with respect thereto
as the Secured Parties deem advisable. All sums disbursed by the Secured Parties
in connection and in accordance with this Section, including reasonable
attorneys' fees, court costs, expenses and other charges relating thereto, shall
be payable upon demand, by Grantor to the Secured Parties and shall be
additional Obligations secured hereby. Grantor shall promptly notify the Secured
Parties if any material portion of the Collateral owned or held by Grantor is
damaged or destroyed. The proceeds of any casualty insurance in respect of any
casualty loss of any of the Collateral shall (i) so long as the Secured Parties
have not demanded payment of the Notes, be disbursed to Grantor for direct
application by Grantor solely to the repair or replacement of Grantor's property
so damaged or destroyed, and (ii) in all other circumstances, be held by the
Secured Parties as cash collateral for the Obligations. The Secured Parties may,
at their sole option, disburse from time to time all or any part of such
proceeds so held as cash collateral, upon such terms and conditions as the
Secured Parties may reasonably prescribe, for direct application by the Secured
Parties solely to the repair or replacement of Grantor's property so damaged or
destroyed, or Grantor may apply all or any part of such proceeds to the
Obligations.
Legend. Grantor shall legend, in form and manner satisfactory to the
Secured Parties, its accounts and its books, records and documents evidencing or
pertaining thereto with an appropriate reference to the fact that such accounts
have been assigned to the Secured Parties and that the Secured Parties have a
security interest therein.
Further Assurances; Power of Attorney
Further Assurances. Grantor shall, at its own expense, execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as the Secured Parties may from time to time
reasonably request to better assure, preserve, protect and perfect the Security
Interest and the rights and remedies created hereby, including the payment of
any fees and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of any
financing statements (including fixture filings) or other documents in
connection herewith or therewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be immediately pledged and
delivered to the Secured Parties, duly endorsed in a manner satisfactory to the
Secured Parties.
Power of Attorney.
Grantor hereby irrevocably (as a power coupled with an
interest) constitutes and appoints the Secured Parties and all officers,
employees or agents designated by the Secured Parties, its attorney-in-fact with
full power of substitution, for the benefit of the Secured Parties,
to take all appropriate action and to execute all
documents and instruments that may be necessary or desirable to
accomplish the purposes of this Agreement, and without limiting the
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generality of the foregoing, Grantor hereby grants the power to file
one or more financing statements (including fixture filings),
continuation statements, filings with the United States Patent and
Trademark Office or United States Copyright Office (or any successor
office or any similar office in any other country) or other documents
for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by Grantor, without the
signature of Grantor, and naming Grantor as debtor and the Secured
Parties as secured party; and
at any time following the Secured Parties' demand for
payment of the Notes (i) to receive, endorse, assign and/or deliver any
and all notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Collateral or any part thereof;
(ii) to demand, collect, receive payment of, give receipt for and give
discharges and releases of all or any of the Collateral; (iii) to sign
the name of Grantor on any invoice or xxxx of lading relating to any of
the Collateral; (iv) to send verifications of accounts to any account
debtor or any other Person liable for an account; (v) to commence and
prosecute any and all suits, actions or proceedings at law or in equity
in any court of competent jurisdiction to collect or otherwise realize
on all or any of the Collateral or to enforce any rights in respect of
any Collateral; (vi) to settle, compromise, compound, adjust or defend
any actions, suits or proceeding relating to all or any of the
Collateral; and (vii) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out
the purposes of this Agreement, as fully and completely as though the
Secured Parties were the absolute owner of the Collateral for all
purposes; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Secured Parties to make any
commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Secured Parties, or to present or file any
claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted
to be taken by the Secured Parties with respect to the Collateral or
any part thereof shall give rise to any defense, counterclaim or offset
in favor of Grantor or to any claim or action against the Secured
Parties.
The provisions of this Article shall in no event relieve
Grantor of any of its obligations hereunder with respect to the Collateral or
any part thereof or impose any obligation on the Secured Parties to proceed in
any particular manner with respect to the Collateral or any part thereof, or in
any way limit the exercise by the Secured Parties of any other or further right
which it may have on the date of this Agreement or hereafter, whether hereunder,
by law or otherwise.
Remedies
Remedies upon Default.
Upon the occurrence and during the continuance of an Event of
Default, Grantor agrees to deliver each item of its Collateral to the
Secured Parties on demand, and it is agreed that the Secured Parties
shall have the right to take any of or all the following actions at the
same or different times (but at all times subject to any Existing
Liens): with or without legal process and with or without prior notice
or demand for performance, to take possession of the Collateral and
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without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or
removing the Collateral, exercise Grantor's right to xxxx and receive
payment for completed work and, generally, to exercise any and all
rights afforded to a secured party under the Uniform Commercial Code or
other applicable law. Without limiting the generality of the foregoing,
Grantor agrees that the Secured Parties shall have the right, subject
to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale
or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Secured Parties shall deem
appropriate. The Secured Parties shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders
or purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation
of any such sale the Secured Parties shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of
Grantor, and Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which Grantor now has or may
at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
The Secured Parties shall give Grantor ten (10) days' written
notice (which Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code) of the Secured
Parties' intention to make any sale of Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale
and, in the case of a sale at a broker's board or on a securities
exchange, shall state the board or exchange at which such sale is to be
made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public
sale shall be held at such time or times within ordinary business hours
and at such place or places as the Secured Parties may fix and state in
the notice (if any) of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Secured Parties may (in their sole and
absolute discretion) determine. The Secured Parties shall not be
obligated to make any sale of any Collateral if it shall determine not
to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Secured Parties may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of
all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Secured Parties
until the sale price is paid by the purchaser or purchasers thereof,
but the Secured Parties shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent
permitted by law, private) sale made pursuant to this Section, the
Secured Parties may bid for or purchase, free (to the extent permitted
by law) from any right of redemption, stay, valuation or appraisal on
the part of Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part
thereof offered for sale and may make payment on account thereof by
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using any claim then due and payable to the Secured Parties from
Grantor as a credit against the purchase price, and the Secured Parties
may, upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to Grantor therefor.
For purposes hereof, a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof; the Secured
Parties shall be free to carry out such sale pursuant to such agreement
and Grantor shall not be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that
after the Secured Parties shall have entered into such an agreement all
Obligations have been paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Secured Parties may proceed
by a suit or suits at law or in equity to foreclose this Agreement and
to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant
to a proceeding by a court-appointed receiver.
Application of Proceeds. The Secured Parties shall apply the proceeds
of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by
the Secured Parties in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Obligations, including all court
costs and the fees and expenses of its agents and legal counsel, and any other
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder, under the Purchase Agreement, the Notes and the other
Transaction Documents;
SECOND, to the payment in full of the Obligations; and
THIRD, to Grantor, its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same, or as a court of competent
jurisdiction may otherwise direct.
Subject to the foregoing, the Secured Parties shall have absolute
discretion as to the time of application of such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the Secured
Parties (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of any such proceeds, moneys or balances by
the Secured Parties or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Secured Parties or such officer or
be answerable in any way for the misapplication thereof.
Grant of License to Use Intellectual Property. For the purpose of
enabling the Secured Parties to exercise rights and remedies under this Article
at such time as the Secured Parties shall be lawfully entitled to exercise such
rights and remedies, Grantor hereby grants to the Secured Parties an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Grantor) to use, license or sub-license any of the
Collateral consisting of intellectual property now owned or hereafter acquired
by Grantor, and wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
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compilation or printout thereof. The use of such license by the Secured Parties
may be exercised, at the option of the Secured Parties, only following the
Secured Parties' demand for payment of the Notes.
Miscellaneous
Notices. All communications and notices hereunder to the Grantor and to
the Secured Parties shall (except as otherwise expressly permitted herein) be in
writing and delivered to the Grantor or the Secured Parties, as the case may be,
as provided in the Purchase Agreement.
Security Interest Absolute. All rights of the Secured Parties
hereunder, the Security Interest and all obligations of Grantor hereunder shall
be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Purchase Agreement, the Notes, any Transaction Document or
any agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Purchase Agreement, the Notes, any Transaction Document or any other agreement
or instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Grantor in respect of the Obligations
or this Agreement.
Survival of Agreement. All covenants, agreements, representations and
warranties made by Grantor herein and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the Secured Parties and shall survive the
making of the loan and the execution and delivery to the Secured Parties of the
Notes, regardless of any investigation made by the Secured Parties or on their
behalf; and shall continue in full force and effect until this Agreement shall
terminate.
Binding Effect; Several Agreement; Successors and Assigns. This
Agreement shall become effective as to Grantor when a counterpart hereof
executed on behalf of Grantor shall have been delivered to the Secured Parties
and a counterpart hereof shall have been executed on behalf of the Secured
Parties, and thereafter shall be binding upon Grantor and the Secured Parties
and their respective successors and assigns, and shall inure to the benefit of
Grantor, the Secured Parties and their respective successors and assigns, except
that Grantor shall not have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly contemplated by this
Agreement, the Purchase Agreement, the Notes or the other Transaction Documents.
Secured Parties' Fees and Expense; Indemnification.
Grantor agrees to pay upon demand to the Secured Parties the
amount of any and all reasonable expenses, including all reasonable
fees, disbursements and other charges of its counsel and of any experts
or agents, which the Secured Parties may incur in connection with (i)
the administration of this Agreement (including the customary fees and
charges of the Secured Parties for any audits conducted by them or on
their behalf with respect to the accounts inventory), (ii) the custody
or preservation of, or the sale of, collection from or other
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realization upon any of the Collateral, (iii) the exercise, enforcement
or protection of any of the rights of the Secured Parties hereunder or
(iv) the failure of Grantor to perform or observe any of the provisions
hereof.
Grantor agrees to indemnify the Secured Parties and the agent,
contractors and employees of the Secured Parties (collectively, the
"Indemnitees") against, and hold each of them harmless from, any and
all losses, claims, damages, liabilities and related expenses,
including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way
connected with, or as a result of, the execution, delivery, or
performance of this Agreement or any agreement or instrument
contemplated hereby or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any
Indemnitee is a party thereto; provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby. The provisions of this Section
shall remain operative and in full force and effect regardless of the
termination of this Agreement, the Purchase Agreement, the Notes or the
other Transaction Documents, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this
Agreement, the Purchase Agreement, the Notes or the other Transaction
Documents, or any investigation made by or on behalf of the Secured
Parties. All amounts due under this Section shall be payable on written
demand therefor.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY OF THE CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN THE
APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION. THIS AGREEMENT SHALL
NOT BE INTERPRETED OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING
THIS AGREEMENT TO BE DRAFTED.
Waivers; Amendment.
No failure or delay of the Secured Parties in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Secured Parties hereunder and under the Purchase Agreement
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement, the Purchase
Agreement, the Notes or the other Transaction Documents or consent to any
departure by Grantor therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) below, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on Grantor in any case shall entitle Grantor to any other
or further notice or demand in similar or other circumstances.
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Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements, in writing
entered into by the Secured Parties and Grantor.
WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTES. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, THE PURCHASE AGREEMENT AND THE NOTES, AS APPLICABLE, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract. Each party shall be entitled
to rely on a facsimile signature of any other party hereunder as if it were an
original.
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Jurisdiction; Consent to Service of Process.
Grantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New
York State court or Federal court of the United States of America
sitting in New York City, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement,
the Purchase Agreement or the Notes, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Secured Parties may otherwise
have to bring any action or proceeding relating to this Agreement, the
Purchase Agreement, the Notes or the other Transaction Documents
against Grantor or its properties in the courts of any jurisdiction.
Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement, the
Purchase Agreement, the Notes or the other Transaction Documents in any
New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 7.1. Nothing
in this Agreement will affect the right of any party to this Agreement
to process in any other manner permitted by law.
Termination. This Agreement and the Security Interest shall terminate
when all the Obligations have been paid in full, at which time the Secured
Parties shall execute and deliver to Grantor, at Grantor's expense, all Uniform
Commercial Code termination statements and similar documents which Grantor shall
reasonably request to evidence such termination. Any execution and delivery of
termination statements or documents pursuant to this Section shall be without
recourse to or warranty by the Secured Parties.
Prejudgment Remedy Waiver. Grantor acknowledges that this Agreement,
the Purchase Agreement, the Notes and the other Transaction Documents evidence a
commercial transaction and that it could, under certain circumstances have the
right, to notice of and hearing on the right of the Secured Parties to obtain a
prejudgment remedy, such as attachment, garnishment and/or replevin, upon
commencing any litigation against Grantor. Notwithstanding, Grantor hereby
waives all rights to notice, judicial hearing or prior court order to which it
might otherwise have the right under any state or federal statute or
constitution in connection with the obtaining by the Secured Parties of any
prejudgment remedy by reason of this Agreement, the Purchase Agreement, the
Notes, the other Transaction Documents or by reason of the Obligations or any
renewals or extensions of the same. Grantor also waives any and all objection
which it might otherwise assert, now or in the future, to the exercise or use by
the Secured Parties of any right of setoff, repossession or self help as may
presently exist under statute or common law.
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[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have duly executed this Security
Agreement as of the day and year first written above.
FINANCIALCONTENT, INC.
By: /S/ Wing Yu
---------------------
Name: Wing Yu
Title: Chief Executive Officer
SECURED PARTY:
By: /S/ Xxxxx Xxxxxx
---------------------
Name: Xxxxx Xxxxxx
Title: Manager - Jade Special Strategy
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EXHIBIT A
Secured Parties
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SCHEDULE A
State of Incorporation; Chief Executive Office; Filing Locations
State of Incorporation:
Delaware
Chief Executive Office:
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Filing Locations:
Secretary of State of the State of Delaware
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SCHEDULE 3.3
Existing Liens
None
-147-
SCHEDULE 3.4
Absence of Other Liens
None
-148-
SCHEDULE 4.8
Insurance
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EXHIBIT G
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FINANCIALCONTENT, INC.
as of _______________, 2006
[Name and address of Transfer Agent]
Attn: _____________
Ladies and Gentlemen:
Reference is made to that certain Note and Warrant Purchase Agreement
(the "Purchase Agreement"), dated as of February 13, 2006, by and among
FinancialContent, Inc., a Delaware corporation (the "Company"), and the
purchasers named therein (collectively, the "Purchasers") pursuant to which the
Company is issuing to the Purchasers senior secured convertible promissory notes
(the "Notes") and warrants (the "Warrants") to purchase shares of the Company's
common stock, $0.001 par value per share (the "Common Stock"). This letter shall
serve as our irrevocable authorization and direction to you (provided that you
are the transfer agent of the Company at such time) to issue shares of Common
Stock upon conversion of the Notes (the "Conversion Shares") and exercise of the
Warrants (the "Warrant Shares") to or upon the order of a Purchaser from time to
time upon (i) surrender to you of a properly completed and duly executed
Conversion Notice or Exercise Notice, as the case may be, in the form attached
hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the
conversion of Notes, a copy of the Note (with the original delivered to the
Company) representing the Notes being converted or, in the case of Warrants
being exercised, a copy of the Warrants (with the original Warrants delivered to
the Company) being exercised (or, in each case, an indemnification undertaking
with respect to such Notes or the Warrants in the case of their loss, theft or
destruction), and (iii) delivery of a treasury order or other appropriate order
duly executed by a duly authorized officer of the Company. So long as you have
previously received (x) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), and no subsequent notice by the Company or its counsel of the
suspension or termination of its effectiveness and (y) a copy of such
registration statement, the Conversion Shares or the Warrant Shares, as the case
may be, were sold pursuant to the Registration Statement, then certificates
representing the Conversion Shares and the Warrant Shares, as the case may be,
shall not bear any legend restricting transfer of the Conversion Shares and the
Warrant Shares, as the case may be, thereby and should not be subject to any
stop-transfer restriction. Provided, however, that if you have not previously
received (i) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the SEC under the 1933
Act, and (ii) a copy of such registration statement, then the certificates for
the Conversion Shares and the Warrant Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS,
OR FINANCIALCONTENT, INC. SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED."
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and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III.
Please be advised that the Purchasers are relying upon this letter as
an inducement to enter into the Purchase Agreement and, accordingly, each
Purchaser is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ___________.
Very truly yours,
FINANCIALCONTENT, INC.
By:
---------------------------------
Name:
------------------------------
Title:
----------------------------
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By:
-----------------------------------------------------
Name:
-----------------------------------------------------
Title:
-----------------------------------------------------
Date:
------------------
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EXHIBIT I
FINANCIALCONTENT, INC.
CONVERSION NOTICE
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of
FINANCIALCONTENT, INC. (the "Maker") according to the conditions hereof, as of
the date written below.
Date of Conversion _____________________________________________________________
Applicable Conversion Price ____________________________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion:________________________________________
Signature_______________________________________________________________________
[Name]
Address:________________________________________________________________________
________________________________________________________________________
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EXHIBIT II
FORM OF EXERCISE NOTICE
EXERCISE FORM
FINANCIALCONTENT, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
FinancialContent, Inc. covered by the within Warrant.
Dated: _________________ Signature __________________________________
Address __________________________________
__________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise:
-------------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature __________________________________
Address __________________________________
__________________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature __________________________________
Address __________________________________
__________________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
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EXHIBIT III
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
Attn: _____________
Re: FinancialContent, Inc.
Ladies and Gentlemen:
We are counsel to FinancialContent, Inc., a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Note and Warrant Purchase Agreement (the "Purchase Agreement"), dated as of
February 13, 2006, by and among the Company and the purchasers named therein
(collectively, the "Purchasers") pursuant to which the Company issued to the
Purchasers senior secured convertible promissory notes (the "Notes") and
warrants (the "Warrants") to purchase shares of the Company's common stock,
$0.001 par value per share (the "Common Stock"). Pursuant to the Purchase
Agreement, the Company has also entered into a Registration Rights Agreement
with the Purchasers (the "Registration Rights Agreement"), dated as of February
13, 2006, pursuant to which the Company agreed, among other things, to register
the Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Notes and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on February 13, 2006, the Company filed a Registration
Statement on Form SB-2 (File No. 333-________) (the "Registration Statement")
with the Securities and Exchange Commission (the "SEC") relating to the resale
of the Registrable Securities which names each of the present Purchasers as a
selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:
----------------------------------
cc: [LIST NAMES OF PURCHASERS]
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EXHIBIT H
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Notes, the Warrants and the Common Stock issuable upon conversion of the
Notes and exercise of the Warrants. The execution, delivery and performance of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly and validly authorized by
all necessary corporate action and no further consent or authorization of the
Company, its Board of Directors or its stockholders is required. Each of the
Transaction Documents have been duly executed and delivered, and the Notes and
the Warrants have been duly executed, issued and delivered by the Company and
each of the Transaction Documents constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms. The Common Stock issuable upon conversion of the Notes and
exercise of the Warrants are not subject to any preemptive rights under the
Certificate of Incorporation or the Bylaws.
3. The Notes and the Warrants have been duly authorized and, when
delivered against payment in full as provided in the Purchase Agreement, will be
validly issued, fully paid and nonassessable. The shares of Common Stock
issuable upon conversion of the Notes and exercise of the Warrants have been
duly authorized and reserved for issuance, and when delivered upon conversion or
against payment in full as provided in the Notes and the Warrants, as
applicable, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Notes, the Warrants
and the Common Stock issuable upon conversion of the Notes and exercise of the
Warrants do not (a) violate any provision of the Certificate of Incorporation or
Bylaws, (b) 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
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party and
which is set forth on Schedule I, (c) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any commitment
which is set forth on Schedule I to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound, or (d) result in a violation of any Federal, state, local or foreign
statute, rule, regulation, order, judgment, injunction or decree (including
Federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected, except, in
all cases other than violations pursuant to clauses (a) and (d) above, for such
conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
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5. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Notes, the Warrants and the Common Stock issuable
upon conversion of the Notes and exercise of the Warrants other than filings as
may be required by applicable Federal and state securities laws and regulations
and any applicable stock exchange rules and regulations.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Purchase Agreement or the transactions contemplated thereby or
any action taken or to be taken pursuant thereto. There is no action, suit,
claim, investigation or proceeding pending, or to our knowledge, threatened,
against or involving the Company or any of its properties or assets and which,
if adversely determined, is reasonably likely to result in a Material Adverse
Effect. To our knowledge, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any officers or directors of the Company
in their capacities as such.
7. Assuming that all of the Purchasers' representations and warranties
in the Purchase Agreement are complete and accurate, the offer, issuance and
sale of the Notes and the Warrants and the offer, issuance and sale of the
Common Stock issuable upon conversion of the Notes and exercise of the Warrants
are exempt from the registration requirements of the Securities Act of 1933, as
amended.
8. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
9. The Security Agreement will create a valid security interest in
favor of the Purchasers in such assets of the Company that is subject to such
Security Agreement.
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