EXHIBIT 10.1
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT, dated as of December 15, 2005, is entered
into by and between AMEDIA NETWORKS, INC., a Delaware corporation with
headquarters located at 000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000
(the "Company"), and each individual or entity named on an executed counterpart
of the signature page hereto (each such signatory is referred to as a "Buyer")
(each agreement with a Buyer being deemed a separate and independent agreement
between the Company and such Buyer, except that each Buyer acknowledges and
consents to the rights granted to each other Buyer [each, an "Other Buyer"]
under such agreement and the Transaction Agreements, as defined below, referred
to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded, INTER ALIA,
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, each Buyer wishes to lend funds in the amount of the Purchase
Price (as defined below) to the Company, subject to and upon the terms and
conditions of this Agreement and acceptance of this Agreement by the Company,
the repayment of which will be represented by a Secured Promissory Note of the
Company (the "Note"), on the terms and conditions referred to herein; and
WHEREAS, in connection with the loan to be made by the Buyer, the
Company has agreed to issue the Note and the Warrant (as defined below) to the
Buyer;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE.
(i) Subject to the terms and conditions of this Agreement and the
other Transaction Agreements (as defined below), the Buyer hereby agrees to loan
to the Company the principal amount specified on the Buyer's signature page of
this Agreement (the "Purchase Price"), out of the aggregate amount being loaned
by all Buyers of US $1,000,000 (the "Aggregate Purchase Price"). The Buyers and
the Other Buyers have agreed that the Company may enter into one or more
Permitted New Transactions (as defined below), in which event the term
"Aggregate Purchase Price" shall be deemed to refer to the sum of (x) the
aggregate amount loaned by all Buyers under this Agreement and (y) the aggregate
amount loaned by all parties identified as Buyers under such Permitted New
Transactions; provided, however, that in no event will the Aggregate Purchase
Price be more than $1,500,000 (the "Maximum Aggregate Purchase Price")
(ii) The obligation to repay the loan of the relevant Purchase Price
from the Buyer shall be evidenced by the Company's issuance of one or more Notes
to the Buyer in the principal amount of one hundred eight percent (108%) of the
Purchase Price paid by the Buyer on or in connection with the Closing Date. Each
Note shall be payable on the date (the "Stated Maturity Date") which is one
hundred twenty days after the Closing Date or the date on which the New
Transaction Threshold (as defined below) occurs. Each Note, which shall be shall
be in the form of ANNEX I annexed hereto. Repayment of the Note shall be secured
under the terms of a Security Interest Agreement between the Company, as debtor,
and the Buyer, as secured party (the "Security Interest Agreement"),
substantially in the form annexed hereto as ANNEX V.
(iii) In consideration of the loan to be made by the Buyer, the
Company will issue to such Buyer the Warrant to purchase the number of shares of
the Company's Common Stock as provided in Section 4 hereof.
(iv) The loan to be made by the Buyer and the issuance of the Note
and the Warrant to the Buyer and the other transactions contemplated hereby are
sometimes referred to herein and in the other Transaction Agreements as the
purchase and sale of the Securities (as defined below), and are referred to
collectively as the "Transactions."
B. CERTAIN DEFINITIONS. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred to
in the relevant provision, another Person who or which controls or is controlled
by or is under common control with such specified Person.
"Buyer Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Buyer
pursuant to Rule 405 under the 1933 Act or Section 20 of the 0000 Xxx.
"Buyer's Allocable Share" means the fraction, of which the
numerator is the Buyer's Purchase Price and the denominator is the Aggregate
Purchase Price.
"Certificates" means the ink-signed Note and the Warrant, each
duly executed by the Company and issued on the Closing Date in the name of the
Buyer.
"Closing Date" means the date of the closing of the
Transactions, as provided herein. "Company Control Person" means each director,
executive officer, promoter, and such other Persons as may be deemed in control
of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934
Act (as defined below).
"Disclosure Letter" means a letter and any modifications
thereof, the latest of which is dated at least one Trading Day prior to the
Closing Date, from the Company to the Buyer; provided, however, that the
Disclosure Letter shall be arranged in sections corresponding to the identified
Sections of this Agreement, but the disclosure in any such section of the
Disclosure Letter shall qualify other provisions in this Agreement to the extent
that it would be readily apparent to an informed reader from a reading of such
section of the Disclosure Letter that it is also relevant to other provisions of
this Agreement.
"Escrow Agent" means Xxxxxxx & Xxxxxx LLP, the escrow agent
identified in the Joint Escrow Instructions attached hereto as ANNEX II (the
"Joint Escrow Instructions").
"Escrow Funds" means the Purchase Price delivered to the Escrow
Agent as contemplated by Sections 1(c) and (d) hereof.
"Escrow Property" means the Escrow Funds and the Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.
"Holder" means the Person holding the relevant Securities at the
relevant time.
"Last Audited Date" means December 31, 2004.
"Material Adverse Effect" means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(x) adversely affect the legality, validity or enforceability of the Purchased
Securities or any of the Transaction Agreements, (y) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company and its subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
material obligations under any of the Transaction Agreements or the transactions
contemplated thereby.
"New Common Stock" means shares of Common Stock and/or
securities convertible into, and/or other rights exercisable for, Common Stock,
which are offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or
lender (howsoever denominated) in a New Transaction.
"New Transaction" means
(i) the offer or sale of New Common Stock by or on behalf of the Company
to a New Investor and/or
(ii) the grant of a security interest in or pledge of (x) any or all of
the Company's assets by the Company and/or (y) shares of the Company's
Common Stock or securities convertible into or exercisable for the
Company's Common Stock by any other party
in a transaction offered or consummated after the date hereof; provided,
however, that it is specifically understood that the term "New Transaction" (1)
includes, but is not limited to, a sale of Common Stock or of a security
convertible into Common Stock or an equity or credit line transaction, but (2)
does not include (a) the issuance of Common Stock upon the exercise or
conversion of options, warrants or convertible securities outstanding on the
date hereof, or in respect of any other financing agreements as in effect on the
date hereof and identified in the Disclosure Letter (provided the same is not
amended after the date of the Disclosure Letter) or the Company SEC Documents
(provided the same is not amended after the date hereof), (b) the issuance of
Common Stock pursuant to an Employee Stock Option Plan (an "ESOP") of the
Company, such ESOP having been properly approved by the shareholders of the
Company, (c) the issuance of Common Stock pursuant to a non-employee director or
consultants' stock option plan of the Company, (d) the issuance of Common Stock
upon the exercise of any options or warrants referred to in the preceding
clauses of this paragraph (provided the same is not amended after the date
hereof), (e) the issuance of shares to a Strategic Partner, (f) the issuance of
any securities or the grant of a security interest pursuant to a Permitted New
Transaction.
"Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin
Board or such other market on which the Common Stock is principally traded at
the relevant time, but shall not included the "pink sheets."
"Purchased Securities" means the Note and the Warrant.
"Registrable Securities" means the Warrant Shares, unless such
shares can then be sold by the Holder without volume or other restrictions or
limit.
"Registration Rights Provisions" means the piggy-back
registration rights contemplated by the terms of this Agreement, including, but
not necessarily limited to, Section 4(h) hereof, and of the other Transaction
Agreements.
"Registration Statement" means an effective registration
statement covering the Registrable Securities.
"Securities" means the Note, the Warrant and the Shares.
"Shares" means the shares of Common Stock representing any of
the Warrant Shares.
"State of Incorporation" means Delaware.
"Strategic Partner" means a third party, whether or not
currently affiliated with the Company, hereof, which party (i) is engaged in a
business which is the business in which the Company is engaged or a similar or
related business, and (ii) either (a) subsequently purchases equity securities
of the Company (or securities convertible into equity securities of the
Company), or (b) enters into an agreement for one or more of the following: the
licensing by the Company of all or any portion of its technology to such third
party, the licensing by such third party of all or any portion of its technology
to the Company, or any other coordination of all or a portion of their
respective business activities or operations by the Company and such third
party.
"Trading Day" means any day during which the Principal Trading
Market shall be open for business.
"Transfer Agent" means, at any time, the transfer agent for the
Company's Common Stock.
"Transaction Agreements" means this Bridge Loan Agreement, the
Note, the Security Interest Agreement, the Joint Escrow Instructions, and the
Warrant, and includes all ancillary documents referred to in those agreements.
"Warrant" means the warrant issued to the Buyer as contemplated
by Section 4 of this Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrant.
C. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars to the Escrow Agent no later than
the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Buyer to the Escrow Agent of the Purchase Price, the
Company shall deliver the
Certificates, each duly executed on behalf of the Company and issued in the name
of the Buyer, to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
D. METHOD OF PAYMENT. Payment into escrow of the Purchase Price
shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Buyer by Xxxxxxx &
Prager LLP]
Re: Amedia 12/05 Bridge Transaction
For: [Name of Buyer]
2. LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
A. Without limiting Buyer's right to sell the Securities pursuant
to an effective registration statement or otherwise in compliance with the 1933
Act, the Buyer is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
B. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
C. All subsequent offers and sales of the Securities by the Buyer
shall be made pursuant to registration of the relevant Securities under the 1933
Act or pursuant to an exemption from registration.
D. The Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of the 1933 Act and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
E. The Buyer and its advisors, if any, have been furnished with or
have been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer, including those set forth on
in any annex attached hereto. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management and
have received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has also had the opportunity
to obtain and to review the Company's filings on XXXXX listed on ANNEX VI hereto
(the documents listed on such Annex VI, to the extent available on XXXXX or
otherwise provided to the Buyer as indicated on said Annex VI, collectively, the
"Company's SEC Documents").
F. The Buyer understands that its investment in the Securities
involves a high degree of risk.
G. The Buyer hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or any of its officers, directors and employees or any of its
attorneys or agents, except as specifically set forth herein.
H. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
I. This Agreement and the other Transaction Agreements to which the
Buyer is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Buyer and are valid
and binding agreements of the Buyer enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer as of the date hereof and as of the Closing Date that,
except as otherwise provided in the Disclosure Letter or in the Company's SEC
Documents:
A. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Note, the Warrant or the Shares. No party has a currently exercisable right of
first refusal which would be applicable to any or all of the transactions
contemplated by the Transaction Agreements.
B. STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.
C. AUTHORIZED SHARES.
(i) The authorized capital stock of the Company consists of (x)
75,000,000 shares of Common Stock, $.001 par value per share, of which
approximately 21,359,814 are outstanding as of the date hereof, and (y)
5,000,000 shares of Preferred Stock, $.001 par value, of which (1) 52,500 shares
of the Series A 7% Convertible Preferred Stock, par value $.001 per share and
having a Stated Value of $100 per share, are authorized and approximately 21,403
shares are outstanding as of the date hereof; and (2) 85,000 shares of the
Series B 8% Convertible Preferred Stock, par value $.001 per share and having a
Stated Value of $100 per share, are authorized and approximately 76,650 shares
are outstanding as of the date hereof.
(ii) Other than the convertible preferred shares referred to in the
immediately preceding subparagraph (i), there are no outstanding securities
which are convertible into shares of Common Stock, whether such conversion is
currently exercisable or exercisable only upon some future date or the
occurrence of some event in the future. If any such securities are listed on the
Disclosure Letter, the number or amount of each such outstanding convertible
security and the conversion terms are set forth in said Disclosure Letter.
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as would be
necessary to effect the issuance of the Shares on the Closing Date, were the
Warrant fully exercised on that date.
(iv) As of the Closing Date, the Shares shall have been duly
authorized by all necessary corporate action on the part of the Company, and,
when issued upon exercise of the
Warrant, in accordance with its terms, will have been duly and validly issued,
fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.
D. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated thereby, have
been duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Note, the
Warrant and each of the other Transaction Agreements, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
E. NON-CONTRAVENTION. The execution and delivery of this Agreement
and each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Note, the Warrant and the other Transaction
Agreements do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the certificate of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have or result in a Material Adverse Effect.
F. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
G. FILINGS. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since November 1, 2004, the Company has timely filed all
requisite forms, reports and exhibits thereto required to be filed by the
Company with the SEC.
H. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there
has been no material adverse change and no Material Adverse Effect, except as
disclosed in the Company's SEC Documents. Since the Last Audited Date, except as
provided in the Company's
SEC Documents, the Company has not (i) incurred or become subject to any
material liabilities (absolute or contingent) except liabilities incurred in the
ordinary course of business consistent with past practices; (ii) discharged or
satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business consistent with past practices; (iii) declared or
made any payment or distribution of cash or other property to shareholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts owed to the Company
by any third party or claims of the Company against any third party, except in
the ordinary course of business consistent with past practices; (v) waived any
rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of existing business; (vi) made any
increases in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
I. FULL DISCLOSURE. To the best of the Company's knowledge, there
is no fact known to the Company (other than general economic conditions known to
the public generally or as disclosed in the Company's SEC Documents) that has
not been disclosed in writing to the Buyer that would reasonably be expected to
have or result in a Material Adverse Effect.
J. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company, threatened against or affecting the Company
before or by any governmental authority or nongovernmental department,
commission, board, bureau, agency or instrumentality or any other person,
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, any of the
Transaction Agreements. The Company is not aware of any valid basis for any such
claim that (either individually or in the aggregate with all other such events
and circumstances) could reasonably be expected to have a Material Adverse
Effect. There are no outstanding or unsatisfied judgments, orders, decrees,
writs, injunctions or stipulations to which the Company is a party or by which
it or any of its properties is bound, that involve the transaction contemplated
herein or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.
K. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section
3(e) hereof, (i) neither the Company nor any of its subsidiaries is in default
in the performance or observance of any material obligation, agreement, covenant
or condition contained in any material indenture, mortgage, deed of trust or
other material agreement to which it is a party or by which its property is
bound, and (ii) no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company or its subsidiary is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent
term) (as so defined in such agreement), has occurred and is continuing, which
would have a Material Adverse Effect.
L. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR EVENTS. To
the Company's knowledge, none of the following has occurred during the past five
(5) years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general
partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other Person
regulated by the Commodity Futures Trading Commission ("CFTC")
or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting for
more than 60 days the right of such Company Control Person to engage in
any activity described in paragraph (3) of this item, or to be
associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently reversed,
suspended, or vacated.
M. NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the
Company's knowledge, the Company has no liabilities or obligations other than
those disclosed in the Transaction Agreements or the Company's SEC Documents or
those incurred in the ordinary course of the Company's business since the Last
Audited Date, or which individually or in the aggregate, do not or would not
have a Material Adverse Effect. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
N. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since June 1, 2005, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
O. DILUTION. The number of shares issuable upon exercise of the
Warrant may have a dilutive effect on the ownership interests of the other
shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Warrant Shares upon exercise of the Warrant is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company, and the Company will honor such obligations, including honoring every
Notice of Exercise (as contemplated by the Warrant), unless the Company is
subject to an injunction (which injunction was not sought by the Company)
prohibiting the Company from doing so.
P. FEES TO BROKERS, FINDERS AND OTHERS. The Company has taken no
action which would give rise to any claim by any Person for brokerage
commission, finder's fees or similar payments by Buyer relating to this
Agreement or the transactions contemplated hereby. Notwithstanding the
foregoing, the Company acknowledges that it has agreed to pay the Due
Diligence Fees to the Due Diligence Reviewers (as those terms are defined in
ANNEX VII hereto) for providing due diligence services to all the Buyers in
connection with the transactions contemplated hereby. Buyer shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of the Buyer, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
Q. CONFIRMATION. The Company confirms that all statements of the
Company contained herein shall survive acceptance of this Agreement by the Buyer
for a period of eighteen (18) months from the Closing Date. The Company agrees
that, if any events occur or circumstances exist prior to the Closing Date or
the release of the Purchase Price to the Company which would make any of the
Company's representations, warranties, agreements or other information set forth
herein materially untrue or materially inaccurate as of such date, the Company
shall immediately notify the Buyer (directly or through its counsel, if any) and
the Escrow Agent in writing prior to such date of such fact, specifying which
representation, warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Provisions or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Provisions) under the 1933 Act
or to comply with the terms and conditions of any exemption thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that,
until such time as the relevant Shares have been registered under the 1933 Act,
as contemplated by the Registration Rights Provisions and sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective registration statement, the certificates and other instruments
representing any of the Securities shall bear a restrictive legend in
substantially
the following form (and a stop-transfer order may be placed against transfer of
any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
C. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
D. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Securities and for at least twenty (20) Trading Days thereafter, the Company
shall file all reports required to be filed with the SEC pursuant to Section 13
or 15(d) of the 1934 Act, shall take all reasonable action under its control to
ensure that adequate current public information with respect to the Company, as
required in accordance with Rule 144(c)(2) of the 1933 Act, is publicly
available, and shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination. The Company will take all reasonable
action under its control to maintain the continued listing and quotation and
trading of its Common Stock (including, without limitation, all Registrable
Securities) on the Principal Trading Market or a listing on the NASDAQ/Small Cap
or National Markets and, to the extent applicable to it, will comply in all
material respects with the Company's reporting, filing and other obligations
under the by-laws or rules of the Principal Trading Market and/or the National
Association of Securities Dealers, Inc., as the case may be, applicable to it at
least through the date which is sixty (60) days after the Warrant has been
exercised in full or has expired.
E. USE OF PROCEEDS. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal and escrow fees and
the Due Diligence Fee in connection with the sale of the Securities) (i) first,
as provided in ANNEX VII attached hereto, and (ii) then, for general corporate
purposes.
F. WARRANT. The Company agrees to issue to each Buyer on the
Closing Date a transferable warrant (the "Warrant") for the purchase of the
Buyer's Allocable Share of 500,000 shares of Common Stock. The exercise price of
the Warrant will be equal to $1.50, subject to adjustment as provided in the
Warrant and herein. The Warrant shall be exercisable initially on the
Commencement Date specified in the Warrant and shall expire on the last day of
the calendar month in which the fifth anniversary of the Closing Date occurs.
Except as
specified above, each Warrant shall generally be in the form annexed hereto as
ANNEX IV, and shall have the benefit of the Registration Rights Provisions.
G. CERTAIN AGREEMENTS.
(i) The term "Permitted New Transaction" has the meaning ascribed to
in ANNEX VIII attached hereto. Subject to the provisions of subparagraph (ii) of
this Section 4(g), the Buyer has given its limited consent to the Company
entering into a Permitted New Transaction as provided is said Annex VIII.
(ii) Any other provision of this Agreement or any of the other
Transaction Agreements to the contrary notwithstanding, the Company shall not
engage in any offers, sales or other transactions of its securities which would
adversely affect the exemption from registration available for the transactions
contemplated by the Transaction Agreements.
H. PIGGY-BACK RIGHTS; RULE 144.
(i) The Holder shall have piggy-back registration rights with
respect to the Registrable Securities subject to the conditions set forth below.
If the Company participates (whether voluntarily or by reason of an obligation
to a third party) in the registration of any shares of the Company's stock
(other than a registration on Form S-8 or on Form S-4), the Company shall give
written notice thereof to the Holder and the Holder shall have the right,
exercisable within ten (10) Trading Days after receipt of such notice, to demand
inclusion of all or a portion of the Holder's Registrable Securities in such
registration statement. If the Holder exercises such election, the Registrable
Securities so designated shall be included in the registration statement
(without any holdbacks) at no cost or expense to the Holder (other than any
commissions, if any, relating to the sale of Holder's shares). The Holder's
rights under this Section 4(h)(i) shall expire at such time as such Holder can
sell all of such Holder's remaining Registrable Securities under Rule 144 (as
defined below) without volume or other restrictions or limit.
(ii) With a view to making available to the Holder the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit Holder to sell securities of the Company
to the public without registration (collectively, "Rule 144"), the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to the Holder so long as such party owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the
reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) if not
available on the SEC's XXXXX system, a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Holder to sell such securities pursuant to Rule 144 without
registration; and
(d) at the request of any Holder then holding Registrable
Securities, give the Transfer Agent instructions (supported by an opinion of
Company counsel, if required or requested by the Transfer Agent) to the effect
that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the provisions
of Rule 144) for the Shares which the Holder proposes to sell (the
"Securities Being Sold") is not less than (1) year and (B) as to such
other matters as may be appropriate in accordance with Rule 144 under
the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for which purposes
it is agreed that Xxxxxxx & Prager LLP shall be deemed acceptable if not
given by Company counsel) that, based on the Rule 144 Certificate,
Securities Being Sold may be sold pursuant to the provisions of Rule
144, even in the absence of an effective registration statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the relevant
Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Buyer). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.
(iii) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the registration statement, the Company
notifies the Holder in writing of the existence of a Potential Material Event
(as defined below), the Holder shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until the Holder receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; PROVIDED, HOWEVER,
that the Company may not so suspend such right other than during a Permitted
Suspension Period. The term "Potential Material Event" means any of the
following: (i) the possession by the Company of material information not ripe
for disclosure in a registration
statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
registration statement would be detrimental to the business and affairs of the
Company; or (ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the registration statement would be materially
misleading absent the inclusion of such information.
I. AVAILABLE SHARES. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, a number of shares (the
"Minimum Available Shares") at least equal to one hundred percent (100%) of the
number of shares which would be issuable upon exercise of the outstanding
Warrants held by all Holders (in each case, whether such Warrant were originally
issued to the Holder, the Buyer or to any other party). For the purposes of such
calculations, the Company should assume that the Warrant were then exercisable
without regard to any restrictions which might limit any Holder's right to
exercise the Warrant held by any Holder.
J. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties agrees
that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects, unless in the reasonable opinion of
counsel to the party proposing such statement, such statement is legally
required to be included. In furtherance of the foregoing, the Company will
provide to the Buyer drafts of the applicable text of the first filing of a
Current Report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least two
(2) Trading Days before such filing will be made) will not include in such
filing any statement or statements or other material to which the other party
reasonably objects, unless in the reasonable opinion of counsel to the party
proposing such statement, such statement is legally required to be included.
Notwithstanding the foregoing, each of the parties hereby consents to the
inclusion of the text of the Transaction Agreements in filings made with the SEC
as well as any descriptive text accompanying or part of such filing which is
accurate and reasonably determined by the Company's counsel to be legally
required. Notwithstanding, but subject to, the foregoing provisions of this
Section 4(i), the Company will, after the Closing Date, promptly issue a press
release and file a Current Report on Form 8-K or, if appropriate, a quarterly or
annual report on the appropriate form, referring to the transactions
contemplated by the Transaction Agreements.
5. TRANSFER AGENT INSTRUCTIONS.
A. The Company warrants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 4(a) hereof, it
will give its transfer agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon exercise of the Warrant in such
amounts as specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement prior
to registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Holder in
connection with each exercise of the Warrant. Except as so provided, the 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 other Transaction
Agreements. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities. If the Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of a resale by
the Buyer of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the 1933 Act, the Company shall
(except as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer of the Securities and, in the case of the Warrant Shares, promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without legend in such name and in such denominations as specified
by the Buyer.
B. Subject to the provisions of this Agreement, the Company will
permit the Buyer to exercise the Warrant in the manner contemplated by the
Warrant.
C. (i) The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date (as defined in the Warrant)
could result in economic loss to the Buyer. As compensation to the Buyer for
such loss, the Company agrees to pay late payments to the Buyer for late
issuance of Shares upon exercise in accordance with the following schedule
(where "No. Business Days Late" refers to the number of Trading Days which is
beyond two (2) Trading Days after the Delivery Date):(1)
-------------------------
(1) Example: Notice of Exercise is delivered on Monday, May 1, 2006. The
Delivery Date would be Thursday, May 4 (the third Trading Day after such
delivery). If the certificate is delivered by Monday, May 8 (2 Trading Days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on May 9, that is 1 "Business Day Late" in the table
below; if delivered on August 16, that is 6 "Business Days Late" in the table.
Late Payment For Each $10,000
of Exercise Price of Warrant
No. Business Days Late Being Exercised
---------------------- ---------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Buyer's exclusive remedy (other than the
following provisions of this Section 5(c)) for such delay. Furthermore, in
addition to any other remedies which may be available to the Buyer, in the event
that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the tenth Trading Day after the Delivery
Date, the Buyer will be entitled to revoke the relevant Notice of Exercise by
delivering a notice to such effect to the Company, whereupon the Company and the
Buyer shall each be restored to their respective positions immediately prior to
delivery of such Notice of Exercise; provided, however, that an amount equal to
any payments contemplated by this Section 5(c) which have accrued through the
date of such revocation notice shall remain due and owing to the Exercising
Holder notwithstanding such revocation.
(ii) If, by the close of business on the fifth Trading Day after the
Delivery Date, the Company fails for any reason to deliver the Shares to be
issued upon exercise of the Warrant and after such fifth Trading Day, the Holder
of the Note being exercised (an "Exercising Holder") purchases, in an
arm's-length open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Exercising Holder (the "Sold Shares"), which delivery such
Exercising Holder anticipated to make using the Shares to be issued upon such
exercise (a "Buy-In"), the Exercising Holder shall have the right, in addition
to and not in lieu of all other amounts contemplated in other provisions of the
Transaction Agreements, including, but not limited to, the provisions of the
immediately preceding Section 5(c)(i)), the Buy-In Adjustment Amount (as defined
below). The "Buy-In Adjustment Amount" is the amount equal to the number of Sold
Shares multiplied by the excess, if any, of (x) the Exercising Holder's total
purchase price per share (including brokerage commissions, if any) for the
Covering Shares over (y) the net
proceeds per share (after brokerage commissions, if any) received by the
Exercising Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Exercising Holder in immediately available funds
immediately upon demand by the Exercising Holder. By way of illustration and not
in limitation of the foregoing, if the Exercising Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Exercising Holder will be $1,000.
D. The provisions of this paragraph apply on or after the effective
date of the registration statement covering the resale of the Shares. After such
effective date, the Company will issue Shares without legend and without
transfer restrictions on the books of the Transfer Agent, and, at the request of
the Holder, will use it best efforts to have previously issued certificates
representing the Shares re-issued without legend and without transfer
restrictions on the books of the Transfer Agent. In lieu of delivering physical
certificates representing the Common Stock issuable upon exercise of a Warrant
or at the request of the Holder with respect to any Shares previously issued,
provided the Transfer Agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, upon request of the Holder
and its compliance with the provisions contained in this paragraph, so long as
the certificates therefor do not bear a legend and the Holder thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause the Transfer Agent to electronically
transmit to the Holder the Common Stock issuable upon exercise of the Warrant or
in replacement of any Shares previously issued by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system. In connection therewith, it will be the Holder's obligation to obtain
formal requirements, such as medallion guaranty, if necessary.
E. The Company shall assume any fees or charges of the Transfer
Agent or Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement.
F. The Holder of the Warrant shall be entitled to exercise its
exercise privilege with respect to the Warrant notwithstanding the commencement
of any case under 11 U.S.C. ss.101 ET SEQ. (the "Bankruptcy Code"). In the event
the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to
the fullest extent permitted, any rights to relief it may have under 11 U.S.C.
ss.362 in respect of such holder's exercise privilege. The Company hereby
waives, to the fullest extent permitted, any rights to relief it may have under
11 U.S.C. ss.362 in respect of the exercise of the Warrant. The Company agrees,
without cost or expense to such Holder, to take or to consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss.362.
G. The Company will authorize the Transfer Agent to give
information relating to the Company directly to the Holder or the Holder's
representatives upon the request of the Holder or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Holder in connection with a Notice of
Exercise, or (ii) the aggregate number of outstanding shares of Common Stock of
all shareholders (as a group, and not individually) as of a current or other
specified date. At the request of the Holder, the Company will provide the
Holder with a copy of the authorization so given to the Transfer Agent.
6. CLOSING DATE.
A. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
B. The closing of the Transactions shall occur on the Closing Date
at the offices of the Escrow Agent and shall take place no later than 3:00 P.M.,
New York time, on such day or such other time as is mutually agreed upon by the
Company and the Buyer.
C. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Note and
the Warrant to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon:
A. The execution and delivery of this Agreement by the Buyer;
B. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price in accordance with this
Agreement;
C. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
D. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Note
and the Warrant on the Closing Date is conditioned upon:
A. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;
B. Delivery by the Company to the Escrow Agent of the Certificates
in accordance with this Agreement;
C. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
D. On the Closing Date, the Buyer shall have received an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
ANNEX III attached hereto;
E. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
F. From and after the date hereof to and including the Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii) no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market.
9. INDEMNIFICATION AND REIMBURSEMENT.
A. (i) The Company agrees to indemnify and hold harmless the Buyer
and its officers, directors, employees, and agents, and each Buyer Control
Person from and against any losses, claims, damages, liabilities or expenses
incurred (collectively, "Damages"), joint or several, and any action in respect
thereof to which the Buyer, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Buyer Control Person becomes
subject to, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Company contained in this Agreement, as such Damages
are incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer, other than by
reason of its gross negligence, illegal or willful misconduct (in each case, as
determined by a non-appealable judgment to such effect), (x) becomes involved in
any capacity in any action, proceeding or investigation brought by any
shareholder of the Company, in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or if the Buyer is impleaded in any such action,
proceeding or investigation by any Person, or (y) becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisdiction, against or
involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by this Agreement or the other Transaction
Agreements, or (z) is impleaded in any such action, proceeding or investigation
by any Person, then in any such case, the Company shall indemnify, defend and
hold harmless the Buyer from and against and in respect of all losses, claims,
liabilities, damages or expenses resulting from, imposed upon or incurred by the
Buyer, directly or indirectly, and reimburse such Buyer for its reasonable legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Buyer, any such Affiliate and any such
Person. The Company also agrees that neither the Buyer nor any such Affiliate,
partner, director, agent, employee or Buyer Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except as may be expressly and
specifically provided in or contemplated by this Agreement.
B. All claims for indemnification by any Indemnified Party (as
defined below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any Person
claiming indemnification under any provision of this Section (an "Indemnified
Party") might seek indemnity under paragraph (a) of this Section is asserted
against or sought to be collected from such Indemnified Party by a Person other
than a party hereto or an Affiliate thereof (a "Third Party Claim"), the
Indemnified Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such Third
Party Claim and for the Indemnified Party's claim for indemnification that is
being asserted under any provision of this Section against any Person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have
the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party shall
not be indemnified in full pursuant to paragraph (a) of this Section).
The Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense of
the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this
subparagraph (x), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be
necessary or appropriate protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party will,
at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in contesting any Third
Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this subparagraph (x), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under paragraph (a) of this
Section with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to paragraph (b) of this Section, or if
the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within the
Dispute Period, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings
shall be prosecuted by the Indemnified Party in a reasonable manner and
in good faith or will be settled at the discretion of the Indemnified
Party (with the consent of the Indemnifying Party, which consent will
not be unreasonably withheld). The Indemnified Party will have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this subparagraph (y), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of its liability
hereunder to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying Party
in the manner provided in subparagraph(z) below, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this subparagraph (y) or of the Indemnifying
Party's participation therein at the Indemnified Party's request, and
the Indemnified Party shall reimburse the Indemnifying Party in full for
all reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate
in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this subparagraph (y), and the
Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under paragraph
(a) of this Section or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party with respect to
such Third Party Claim, the amount of Damages specified in the Claim
Notice shall be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate
a resolution of such dispute; provided, however, that if the dispute is
not resolved within thirty (30) days after the Claim Notice, the
Indemnifying Party shall be entitled to institute such legal action as
it deems appropriate.
(ii) In the event any Indemnified Party should have a claim under
paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that it the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
C. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
A. (i) This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum
extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS, to the
bringing of any such proceeding in such jurisdictions or to any claim that such
venue of the suit, action or proceeding is improper. To the extent determined by
such court, the Company shall reimburse the Buyer for any reasonable legal fees
and disbursements incurred by the Buyer in enforcement of or protection of any
of its rights under any of the Transaction Agreements. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(ii) The Company and the Buyer acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement or the other Transaction Agreements 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 and
the other Transaction Agreements and to enforce specifically the terms and
provisions hereof and thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
B. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
C. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto.
D. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
E. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
F. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original.
G. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
H. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
I. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
J. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
K. All dollar amounts referred to or contemplated by this
Agreement or any other Transaction Agreement shall be deemed to refer to US
Dollars, unless otherwise explicitly stated to the contrary.
12. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile transmission,
(b) the fifth Trading Day after deposit, postage prepaid, in
the United States Postal Service by registered or certified mail, or
(c) the third Trading Day after mailing by domestic or
international express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Aboudi & Xxxxxxxxxx
Attn: Xxxxx Xxxxxx, Esq.
Rechov Gavish 3, POB 2432
Kfar Xxxx Xxxxxxxxxx Xxxx 00000 Xxxxxx
Telephone No.: (000-000-0) 000-0000
Telecopier No.: (000-000-0) 000-0000
LENDER: At the address set forth on the signature page of this
Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and
the Buyer's representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Certificates and the
payment of the Purchase Price, and shall inure to the benefit of the Buyer and
the Company and their respective successors and assigns.
[Balance of page intentionally left blank]
IN WITNESS WHEREOF, with respect to the Purchase Price specified below,
this Agreement has been duly executed by the Buyer and the Company as of the
date set first above written.
PURCHASE PRICE: $_______________
BUYER:
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________________________________ ________________________________________
Address Printed Name of Buyer
________________________________
By: ____________________________________
Telecopier No. _________________ (Signature of Authorized Person)
________________________________ ________________________________________
Jurisdiction of Incorporation Printed Name and Title
or Organization
COMPANY
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AMEDIA NETWORKS, INC.
By: ____________________________
(Signature of Authorized Person)
________________________________
Printed Name and Title
