Exhibit 10.1.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of March
12, 2004 by and between LMIC, Inc., a Delaware corporation (the "Company"), and
[ _________________________ ] (the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended, the
Company desires to issue and sell to the Purchaser, and the Purchaser desires to
purchase from the Company, certain securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each of the Purchaser
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:
"Affiliate" means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144. With respect to
a Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as the Purchaser will be
deemed to be an Affiliate of the Purchaser.
"Bankruptcy Event" means any of the following events: (a) the Company or any
Subsidiary commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any Subsidiary is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary suffers any appointment
of any custodian or the like for it or any substantial part of its property that
is not discharged or stayed within 60 days; (e) the Company or any Subsidiary
makes a general assignment for the benefit of creditors; (f) the Company or any
Subsidiary fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; or (g) the Company or any Subsidiary
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts.
"Business Day" means any day other than Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required by law to
remain closed.
"Change of Control" means the occurrence of any of the following in one or a
series of related transactions: (i) an acquisition after the date hereof by an
1
individual or legal entity or "group" (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than one-third of the voting ______ rights or equity
interests in the Company; (ii) a replacement of more than one-third of the
members of the Company's board of directors that is not approved by those
individuals who are members of the board of directors on the date hereof (or
other directors previously approved by such individuals); (iii) a merger or
consolidation of the Company or any Subsidiary or a sale of more than one-third
of the assets of the Company in one or a series of related transactions, unless
following such transaction or series of transactions, the holders of the
Company's securities prior to the first such transaction continue to hold at
least 50.1% of the voting rights and equity interests in of the surviving entity
or acquirer of such assets; (iv) a recapitalization, reorganization or other
transaction involving the Company or any Subsidiary that constitutes or results
in a transfer of more than one-third of the voting rights or equity interests in
the Company; (v) consummation of a "Rule 13e-3 transaction" as defined in Rule
13e-3 under the Exchange Act with respect to the Company, or (vi) the execution
by the Company or its controlling stockholders of an agreement providing for any
of the foregoing events.
"Closing," means the closing of the purchase and sale of the Shares pursuant to
Section 2.1.
"Closing Date," means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001 per
share.
"Common Stock Equivalents" means, collectively, Options and Convertible Shares.
"Company Counsel" means Xxxxxxx Xxxx & Xxxxxxxxx, LLP.
"Convertible Shares" means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.
"Effective Date" means the date that the Registration Statement is first
declared effective by the Commission.
"Eligible Market" means any of the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market, the Nasdaq Small Cap Market or the OTC
Bulletin Board or any successor to any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Stock" means the issuance of Common Stock (A) upon exercise or
conversion of any Options or other securities described in Schedule 3.1(f)
(provided that such exercise or conversion occurs in accordance with the terms
thereof, without amendment or modification, and that the applicable exercise or
conversion price or ratio is described in such schedule), (B) in connection with
any grant of options to employees, officers, directors or consultants of the
2
Company pursuant to a stock option plan duly adopted by the Company's board of
directors or in respect of the issuance of Common Stock upon exercise of any
such options, (C) pursuant to a bona fide firm commitment underwritten public
offering with a nationally recognized underwriter (excluding any equity line) at
a per share offering price equal to at least the market price and in an
aggregate offering amount greater than $25,000,000, (D) pursuant to any bona
fide strategic transaction or investment, the primary purpose of which is not to
raise capital, (E) in connection with any bona fide loan transaction with a
commercial bank or other similar commercial lender; (F) in connection with the
Omicron Financing, or (G) in connection with a "Concurrent Offering" as defined
in Section 4.3.
"Filing Date" means no later than 45 days following the Closing Date.
"Lien" means any lien, charge, claim, security interest, encumbrance or right of
first refusal.
"Losses" means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, costs of preparation and
reasonable attorneys' fees.
"Manager" means Aladdin Investment Advisors, LLC, a Delaware limited liability
company.
"Member" means the Manager and any other holder of members' interests or other
equity interests of the Purchaser.
"Omicron Financing" means the proposed sale and issuance of up to $5,000,000 of
4% convertible debentures of the Company due August 3, 2006 and warrants to
purchase 810,373 shares of Common Stock of the Company to Omicron Master Trust
or its registered assigns.
"Options" means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Shares.
"Per Share Closing Price" means $1.50 per share, unless otherwise specified
herein.
"Person" means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or any court or
other federal, state, local or other governmental authority or other entity of
any kind.
"Post-Effective Amendment" means a post-effective amendment to the Registration
Statement.
"Post-Effective Amendment Filing Deadline" means the 10th Trading Day after the
Registration Statement ceases to be effective pursuant to applicable securities
laws due to the passage of time or the occurrence of an event requiring the
Company to file a Post-Effective Amendment.
"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.
3
"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 Shares covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Purchase Price" has the meaning defined in Section 2.1(b) hereof.
"Registrable Shares" means the Shares and any other shares of Common Stock
issued or issuable pursuant to the Transaction Documents that are owned of
record or beneficially by the Purchaser or any Member, together with any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing.
"Registration Statement" means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Required Effectiveness Date," means 150 days following the Closing Date.
"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the Commission pursuant to the Securities Act, as
such Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the aggregate number of shares of Common Stock, which are being
issued and sold to the Purchaser at the Closing.
"Subsidiary" means any subsidiary, as defined in Rule 1-02(x) of Regulation S-X
promulgated by the Commission, of the Company.
"Trading Day" means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market (or any successor thereto) or (b) if
trading does not occur on any Trading Market (or any successor thereto), any
Business Day.
"Trading Market," means the OTC Bulletin Board or any other Eligible Market on
which the Common Stock is then listed or quoted.
"Transaction Documents" means this Agreement, the Transfer Agent Instructions
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
4
"Transfer Agent" means Continental Stock Transfer & Trust Company, or any other
transfer agent selected by the Company.
"Transfer Agent Instructions" means the Irrevocable Transfer Agent Instructions,
in the form of Exhibit D, executed by the Company and delivered to and
acknowledged in writing by the Transfer Agent.
"Vertical Ventures Financing" means the sale in January and February 2004 of
approximately 3,201,667 shares of Company Common Stock at $1.50 per share to
investors originated by Vertical Ventures LLC.
ARTICLE II
PURCHASE AND SALE
2.1. Purchase and Sale of the Shares; Closing.
(a) Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to the Purchaser, and
the Purchaser shall purchase from the Company, an aggregate of [ ] Shares. Each
of the Shares shall be purchased at the Per Share Closing Price.
(b) At the Closing, the Purchaser shall, against delivery of one or more
stock certificates evidencing the applicable number of the Shares, pay to the
Company, an amount equal to the product of (i) the number of Shares to be
purchased, and (ii) the Per Share Closing Price (the "Purchase Price").
(c) The Closing shall take place at the offices of Xxxxxxx Xxxxxx
Xxxxxxxxx Xxxx & Xxxxxx, LLP, counsel to the Purchaser, 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, immediately following the execution hereof, or at such
other location or time as the parties may agree.
2.2. Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered
to the Purchaser the following:
(i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section 4.1(b)
hereof), evidencing the number of Shares being purchased under this Agreement,
registered in the name of the Purchaser;
(ii) a legal opinion of Company Counsel, in the form of Exhibit B,
executed by such counsel and delivered to the Purchaser; and
(iii) duly executed Transfer Agent Instructions acknowledged by the
Transfer Agent.
5
(b) At the Closing, the Purchaser shall deliver or cause to be delivered
to the Company the aggregate Purchase Price for the applicable number of Shares
to be purchased hereunder, in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing by the Company for
such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchaser as follows:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
stock or comparable equity interests of each Subsidiary free and clear of any
Lien, and all the issued and outstanding shares of capital stock or comparable
equity interests of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in material violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (i) materially
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) materially adversely
impair the Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents (any of (i), (ii) or (iii), a "Material
Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
6
the Company in accordance with its terms, subject to: (i) the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally; (ii) general equitable principles (whether considered in a proceeding
in equity or at law); and (iii) an implied covenant of good faith and fair
dealing.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except to the extent that such conflict, default or termination right
could not reasonably be expected to have a Material Adverse Effect, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations and the rules and regulations of any self-regulatory
organization to which the Company or its securities are subject), or by which
any property or asset of the Company or a Subsidiary is bound or affected.
(e) Issuance of the Shares. The Shares are duly authorized and,
when issued and paid for in accordance with the Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens and shall not be subject to preemptive rights or similar rights of
stockholders.
(f) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). hereto. All outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable and have been issued in
compliance with all applicable securities laws. Except as disclosed in Schedule
3.1(f), there are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. There are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issue and sale of the Shares will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchaser) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities. To the knowledge of the Company, except as
7
specifically disclosed in Schedule 3.1(f), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act),
or has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common
Stock, ignoring for such purposes any limitation on the number of shares of
Common Stock that may be owned at any single time.
(g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, since July 17, 2003
(or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as the
"SEC Reports" and, together with this Agreement and the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchaser
true, correct and complete copies of all SEC Reports filed within the ten (10)
days preceding the date hereof. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports (the "Financial Statement
Date"), except as specifically disclosed in the SEC Reports or on Schedule
3.1(h) annexed hereto , (i) there has been no event, occurrence or development
that, individually or in the aggregate, has had or that could result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred pursuant to arrangements in existence on the Financial Statement Date
or incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
8
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
(i) Absence of Litigation. Except as set forth in Schedule 3.1(i),
there is no Proceeding against or affecting the Company or any of its
Subsidiaries that could, individually or in the aggregate, have a Material
Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or result in a
Material Adverse Effect.
(k) Title to Assets. The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in material compliance.
(l) Certain Fees. Except for fees described in Schedule 3.1(l), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement, and the Company has not taken any action that
would cause any Purchaser to be liable for any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person acting
on the Company's behalf has sold or offered to sell or solicited any offer to
buy the Shares by means of any form of general solicitation or advertising.
Neither the Company nor any of its Affiliates nor any Person acting on the
Company's behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer to
buy any security under circumstances that would eliminate the availability of
the exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Shares as contemplated hereby. The
Company is not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company is not a
9
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.
(n) Form SB-2 Eligibility. The Company is eligible to register the
Shares to be issued to the Purchaser hereunder for resale by the Purchaser or
its Affiliates, using Form SB-2 promulgated under the Securities Act.
(o) Listing and Maintenance Requirements. Except as disclosed on
Schedule 3.1(o), the Company has not received notice (written or oral) from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(p) Registration Rights. Except as described in Schedule 3.1(p),
the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(q) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents that is or could become applicable to any of the Purchaser as
a result of the Purchaser and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including, without
limitation, as a result of the Company's issuance of the Shares and the
Purchaser' ownership of the Shares.
(r) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchaser or their agents or
counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchaser will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchaser regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2.
(s) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that each of the Purchaser is acting solely in
10
the capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that neither
the Purchaser nor the Manager is acting as a financial advisor or fiduciary of
the Company or in any similar capacity, with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to such Purchaser's
purchase of the Shares. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
(t) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
(u) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
(v) Regulatory Permits. The Company and the Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
(w) Transactions With Affiliates and Employees. Except as set
forth in SEC Reports, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is presently
a party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
11
(x) Solvency. Following consummation of the transactions
contemplated hereby, based on the financial condition of the Company as of the
Closing Date, (i) the Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature and (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, 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).
(y) Going Concern. Following consummation of the transactions
contemplated hereby, the Company and the Subsidiaries have no knowledge (after
taking into account the proceeds received by the Company from the sale of the
Shares) that the Company's independent public accountants, will issue an audit
letter containing a "going concern" opinion in connection with the Company's
quarterly report on Form 10-Q pursuant to Section 13 or 15(d) under the Exchange
Act for the period ended September 30, 2003 or otherwise.
(z) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. (i) if the Purchaser is not a natural
person: (A) the Purchaser is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder, and (B) the
purchase by the Purchaser of the Shares has been duly authorized by all
necessary action on the part of such Purchaser. This Agreement has been duly
executed and delivered by such Purchaser and constitutes the valid and binding
obligation of the Purchaser, enforceable against it in accordance with its
terms.
(b) Investment Intent. The Purchaser is acquiring the Shares as
principal for its own account for investment purposes only and not with a view
12
to or for distributing or reselling such Shares or any part thereof, without
prejudice, however, to the Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of such
Shares pursuant to an effective registration statement under the Securities Act
or under an exemption from such registration and in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by the Purchaser to hold Shares for any period of
time.
(c) Status. At the time the Purchaser was offered the Shares it or
its Affiliates were, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act, as evidenced by the Purchaser's
completion of the Statement of Accredited Investor attached hereto as Exhibit E.
(d) Investment Experience. The Purchaser, either alone or together
with its representatives and Affiliates, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment. The Affiliates of the
Purchaser are all able to bear the economic risk of an investment in the Shares
and are all able to afford a complete loss of such investment.
(e) General Solicitation. The Purchaser is not purchasing the
Shares as a result of any advertisement, article, notice or other communication
regarding the Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement. The Purchaser either (i)
conducted substantial negotiations with the Company relating to a proposed
investment in the Company prior to the filing of the Company's registration
statement on Form SB-2 in January of 2004 (the "Form SB-2"), or (ii) was
introduced to the Company by a person that had conducted substantial
negotiations with the Company relating to a proposed investment in the Company
prior to the filing of the Company's registration statement on Form SB-2 in
January of 2004.
(f) Company Information. The Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. The Purchaser has also had the opportunity
to ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(g) Certain Fees. The Company shall not be liable to pay any
brokerage or finder's fees or commissions to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement.
13
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Shares may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Shares other than pursuant to an effective registration statement or
to the Company or pursuant to Rule144(k), except as otherwise set forth herein,
the Company may require the transferor to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act. Notwithstanding
the foregoing, the Company hereby consents to and agrees to register on the
books of the Company and with its Transfer Agent, without any such legal
opinion, any transfer of Shares by a Purchaser to an Affiliate of the Purchaser,
provided that the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(b) The Purchaser and the Manager each agree to the imprinting, so
long as is required by this Section 4.1(b), of the following legend on any
certificate evidencing Shares, including Shares that may be distributed to any
Members of the Purchaser:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY SUCH SECURITIES.
(c) Certificates evidencing Shares shall not be required to
contain such legend or any other legend (i) while a Registration Statement
covering the resale of such Shares is effective under the Securities Act, or
(ii) following any valid sale of such Shares pursuant to Rule 144 so long as
Purchaser has completed and filed Form 144 with the Commission and provided
evidence satisfactory to the Company of compliance with Rule 144, or (iii) if
such Shares are eligible for sale under Rule 144(k) and Purchaser is not, and
has not been during the 90 days preceding such sale, an Affiliate of the
Company, or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements issued
14
by the Staff of the Commission). The Company shall cause its counsel to issue
the legal opinion included in the Transfer Agent Instructions to the Transfer
Agent on the Effective Date. Following the Effective Date or at such earlier
time as a legend is no longer required for certain Shares, the Company will use
reasonable efforts to, but in no event later than five Trading Days following
the delivery by a Purchaser to the Company or the Transfer Agent of a legended
certificate representing such Shares, deliver or cause to be delivered to such
Purchaser a certificate representing such Shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.
(d) The Company acknowledges and agrees that a Purchaser may from
time to time pledge or grant a security interest in some or all of the Shares in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Shares and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Shares to the pledgees or secured parties. Such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Shares may reasonably request in connection with a pledge or
transfer of the Shares, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.
4.2 Furnishing of Information. As long as the Purchaser or any Member of
the Purchaser owns Shares, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Not more often than once every 90 days, upon the request of
any Purchaser, the Company shall deliver to the Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Shares, if the Company is
not required to file reports pursuant to such laws, it will prepare and furnish
to the Purchaser and make publicly available in accordance with paragraph (c) of
Rule 144 such information as is required for the Purchaser to sell the Shares
under Rule 144. The Company further covenants that it will take such further
action as any holder of Shares may reasonably request to satisfy the provisions
of Rule 144 applicable to the issuer of securities relating to transactions for
the sale of securities pursuant to Rule 144.
4.3 Integration; Waiver of Rescission Right. The Company shall not, and
shall use its best efforts to ensure that no Affiliate of the Company shall,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Shares in a manner that would require
the registration under the Securities Act of the sale of the Shares to the
Purchaser. Purchaser acknowledges that the Company has conducted several
unregistered offerings of securities subsequent to the filing of the Form SB-2
and that the Securities and Exchange Commission or other governmental agencies
may take the position that (a) the offering and sale of the Shares hereunder
should be integrated with (i) such prior offerings, (ii) the concurrent offering
15
by the Company of Shares pursuant to a purchase agreement with terms and
conditions substantially similar to the terms and conditions of this Agreement
and of warrants (collectively, the "Concurrent Offering"), or (iii) the offering
of shares pursuant to the Form SB-2; and (b) as a result of such integration the
Purchaser may have the right to rescind the purchase and sale of the Shares
hereunder and receive a refund of the purchase price (the "Rescission Right").
The Purchaser hereby waives any Rescission Right and discharges the Company from
any obligation to make or consummate an offer to acquire the Shares in
connection with a Rescission Right and any breach of this Section 4.3 arising
out of the integration described in clause (a) of this paragraph.
4.4 Reservation and Listing of Shares. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares. Following the Effective Date, the Company shall in the time
and manner required by its Trading Market, prepare and file with such Trading
Market an additional shares listing application covering the number of shares of
Common Stock issuable under the Transaction Documents and shall take all steps
necessary to cause such shares of Common Stock to be approved for listing on its
Trading Market as soon as possible.
4.5 Subsequent Placements.
(a) Until the Effective Date (the "Blockout Period"), the Company
will not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or the Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement").
(b) The Blockout Period set forth in the preceding Section 4.5(a)
shall be extended for the number of Trading Days during such period in which (i)
trading in the Common Stock is suspended by any Trading Market, (ii) the
Registration Statement is not effective, or (iii) the prospectus included in the
Registration Statement may not be used by the Purchaser for the resale of
Registrable Shares thereunder.
(c) From the end of the Blockout Period until the 18th month
anniversary thereof, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4.5(c).
(i) The Company shall deliver to the Purchaser a
written notice (the "Offer") of any proposed or intended issuance or sale or
exchange of the securities being offered (the "Offered Shares") in a Subsequent
Placement, which Offer shall (w) identify and
16
describe the Offered Shares, (x) describe the price and other terms upon which
they are to be issued, sold or exchanged, and the number or amount of the
Offered Shares to be issued, sold or exchanged, (y) identify the Persons or
entities (if known) to which or with which the Offered Shares are to be offered,
issued, sold or exchanged and (z) offer to issue and sell to or exchange with
the Purchaser a pro rata portion of the Offered Shares equal to (A) the
aggregate Purchase Price paid by the Purchaser divided by (B) the sum of (i) the
aggregate principal amount of the debentures issued pursuant to the Omicron
Financing and converted in Common Stock prior to the date of the Subsequent
Financing, (ii) 64.171% of the aggregate Purchase Price paid by the Purchaser
pursuant to Section 2.1(a) of this Agreement for the Shares at the Per Share
Purchase Price, and (iii) the aggregate amount paid by the Purchasers for all of
the Shares issued in the Vertical Ventures Financing (the "Basic Amount").
(ii) To accept an Offer, in whole or in part, the
Purchaser must deliver a written notice to the Company prior to the end of the
ten (10) Trading Day period of the Offer, setting forth all or any portion of
the Purchaser's Basic Amount that the Purchaser elects to purchase (the "Notice
of Acceptance").
(iii) The Company shall have ten (10) Trading Days from
the expiration of the period set forth in Section 4.5(c)(ii) above (the
"Subsequent Placement Closing Period") to issue, sell or exchange all or any
part of such Offered Shares as to which a Notice of Acceptance has not been
given by the Purchaser (the "Refused Shares"), but only to the offerees
described in the Offer (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring Person or Persons or less favorable to
the Company than those set forth in the Offer. However, if the stock appreciates
by more than 15% during the Subsequent Placement Closing Period (or such shorter
period from the expiration of the period set forth in Section 4.5(c)(ii) above
through the date the Company sets to issue, sell or exchange all or any portion
of the Refused Shares), then the Purchaser will have 1 Trading Day to elect to
issue a Notice of Acceptance in accordance with Section 4.5(c)(ii) above
relating to the Refused Shares. The Company and the Purchaser agree that the
Subsequent Placement Closing Period shall be extended until the expiration of
the 1 Trading Day period in the immediately preceding sentence.
(iv) In the event the Company shall propose to sell
less than all the Refused Shares (any such sale to be in the manner and on the
terms specified in Section 4.5(c)(iii) above), then the Purchaser may, at its
sole option and in its sole discretion, reduce the number or amount of the
Offered Shares specified in its Notice of Acceptance to an amount that shall be
not less than the number or amount of the Offered Shares that the Purchaser
elected to purchase pursuant to Section 4.5(c)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Shares the Company actually proposes to issue, sell or exchange (including
Offered Shares to be issued or sold to Purchaser pursuant to Section 4.5(c)(ii)
above prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Shares. In the event that any Purchaser so elects
to reduce the number or amount of Offered Shares specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Shares unless and until such securities have
again been offered to the Purchaser in accordance with Section 4.5(c)(i) above.
17
(v) Upon the closing of the issuance, sale or exchange
of all or less than all of the Refused Shares, the Purchaser shall acquire from
the Company, and the Company shall issue to the Purchaser, the number or amount
of Offered Shares specified in the Notices of Acceptance, as reduced pursuant to
Section 4.5(c)(iv) above if the Purchaser have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Purchaser of any Offered
Shares is subject in all cases to the preparation, execution and delivery by the
Company and the Purchaser of a purchase agreement relating to such Offered
Shares reasonably satisfactory in form and substance to the Purchaser and its
respective counsel.
(vi) Any Offered Shares not acquired by the Purchaser
or other Persons in accordance with Section 4.5(c)(iii) above may not be issued,
sold or exchanged until they are again offered to the Purchaser under the
procedures specified in this Agreement.
(d) The restrictions contained in Sections 4.5(a) and (c) shall
not apply to Excluded Stock.
4.6 Securities Laws Disclosure; Publicity. The Company shall, on the
Closing Date, issue press release acceptable to the Purchaser disclosing all
material terms of the transactions contemplated hereby. On the Closing Date, the
Company shall file a Current Report on Form 8-K with the Commission (the "8-K
Filing") describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement, in the form required by the Exchange Act. Thereafter, the
Company shall timely file any filings and notices required by the Commission or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchaser promptly after filing. Except with respect to
the 8-K Filing and the press release referenced above (a copy of which will be
provided to the Purchaser for their review as early as practicable prior to its
filing), the Company shall, at least two Trading Days prior to the filing or
dissemination of any disclosure required by this paragraph, provide a copy
thereof to the Purchaser for their review. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or Trading Market with respect to the transactions
contemplated hereby, and neither party shall issue any such press release or
otherwise make any such public statement, filing or other communication without
the prior consent of the other, except if such disclosure is required by law, in
which case the disclosing party shall promptly provide the other party with
prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of the Purchaser or any Member of the Purchaser, or include the name of the
Purchaser or any Member of the Purchaser in any filing with the Commission or
any regulatory agency or Trading Market, without the prior written consent of
the Purchaser and (if applicable) such Member, except to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide the Purchaser with prior notice of such disclosure. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents not to, provide the
18
Purchaser or any Member of the Purchaser with any material nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing without the express written consent of such Purchaser. The
Purchaser hereby consents to disclosure of its name in the "Selling Stockholder"
section of the Registration Statement. Neither the Company nor the Purchaser
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case
of clause (i) the Purchaser shall be consulted by the Company in connection with
any such press release or other public disclosure prior to its release). Each
press release disseminated since July 17, 2003 did not at the time of release
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 are made, not
misleading.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7, the Company
shall use the net proceeds from the sale of the Shares hereunder for working
capital purposes and not for the satisfaction of any portion of the Company's
debt (other than payment of trade payables and accrued expenses in the ordinary
course of the Company's business and consistent with prior practices), to redeem
any Company equity or equity-equivalent securities or to settle any outstanding
litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a Purchaser
or any of its Affiliates (a "Related Person") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only Losses that
result directly from such Purchaser's or Related Person's misrepresentation,
gross negligence or willful misconduct. In addition, the Company shall indemnify
and hold harmless the Purchaser and Related Person from and against any and all
Losses, as incurred, arising out of or relating to any breach by the Company of
any of the representations, warranties or covenants made by the Company in this
Agreement or any other Transaction Document, or any allegation by a third party
hat, if true, would constitute such a breach. The conduct of any Proceedings for
which indemnification is available under this paragraph shall be governed by
Section 6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchaser and any such
Related Persons. The Company also agrees that neither the Purchaser nor any
Related Persons 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 transactions contemplated by the Transaction Documents, except to the
extent that any Losses incurred by the Company result from the
19
misrepresentation, gross negligence, willful misconduct or breach of any
Transaction Document of or by the applicable Purchaser or Related Person in
connection with such transactions. If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the Company
may have under any Transaction Document or applicable law, the Company shall pay
or reimburse the Purchaser on demand for all costs of collection and enforcement
(including reasonable attorneys fees and expenses). Without limiting the
generality of the foregoing, the Company specifically agrees to reimburse the
Purchaser on demand for all costs of enforcing the indemnification obligations
in this paragraph.
4.9 Fundamental Changes. In addition to any other rights provided by law
or set forth herein, from and after the date of this Agreement and until the
Effective Date, the Company shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the Purchaser:
(a) merge with any other business entity, which results in a
Change of Control;
(b) sell a substantial portion of assets not in the ordinary
course of business;
(c) increase the authorized number of shares of any class or
series of capital stock of the Company;
(d) amend the company's charter or by-laws;
(e) purchase, redeem (other than pursuant to equity incentive
agreements with non-officer employees giving the Company the right to repurchase
shares upon the termination of services) or set aside any sums for the purchase
or redemption of, or declare or pay any dividend (including a dividend payable
in stock of the Company) or make any other distribution with respect to, any
shares of capital stock or any other securities that are convertible into or
exercisable for such stock;
(f) increase the number of shares issuable pursuant to any stock
option or other equity incentive plan;
(g) change the nature of the Company's business to any business
which is fundamentally distinct and separate from the business currently
conducted by the Company; or
(h) cause or permit any subsidiary of the Company directly or
indirectly to take any actions described in clauses (a) through (g) above, other
than issuing securities to the Company.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchaser. The
obligation of the Purchaser to acquire Shares at the Closing is subject to the
satisfaction or waiver by the Purchaser, at or before the Closing, of each of
the following conditions:
20
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date; and
(b) Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing, including the conditions set forth in
Section 2.2(a).
5.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Shares at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchaser contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date; and
(b) Performance. The Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing.
(c) Receipt of Funds. The Company shall have received immediately
available funds payable to the Company from each Purchaser representing the
Purchaser's Purchase Price for the Shares.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering the resale of all Registrable Shares 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 Shares on Form SB-2, in which case such
registration shall be on another appropriate form in accordance herewith as the
Purchaser may consent) and shall contain (except if otherwise directed by the
Purchaser) the "Plan of Distribution" attached hereto as Exhibit C.
(b) The Company shall use its commercially reasonably efforts to
cause the Registration Statement to be declared effective by the Commission as
promptly as possible after the filing thereof, but in any event prior to the
Required Effectiveness Date, and shall use its best efforts to keep the
Registration Statement continuously effective under the
21
Securities Act until the Registrable Shares can be sold pursuant to Rule 144(k)
or such earlier date when all Registrable Shares covered by such Registration
Statement have been sold (the "Effectiveness Period").
(c) The Company shall notify the Purchaser in writing promptly
(and in any event within one Trading Day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) As promptly as possible, and in any event no later than the
Post-Effective Amendment Filing Deadline, the Company shall prepare and file
with the Commission a Post-Effective Amendment. The Company shall use its best
efforts to cause the Post-Effective Amendment to be declared effective by the
Commission as promptly as possible after the filing thereof, but in any event
prior to the 90th day after the Post-Effective Amendment Filing Deadline. The
Company shall notify each Purchaser in writing promptly (and in any event within
one Trading Day) after receiving notification from the Commission that the
Post-Effective Amendment has been declared effective.
(e) Upon the occurrence of any Event (as defined below) and on
every monthly anniversary thereof until the applicable Event is cured, as
partial relief for the damages suffered therefrom by the Purchaser (which remedy
shall not be exclusive of any other remedies available under this Agreement, at
law or in equity), the Company shall pay to the Purchaser an amount in cash, as
liquidated damages and not as a penalty, equal to 0.5% of the aggregate purchase
price paid by the Purchaser hereunder for the first month and 1.0% for each
month thereafter. The payments to which a Purchaser shall be entitled pursuant
to this Section 6.1(d) are referred to herein as "Event Payments". Any Event
Payments payable pursuant to the terms hereof shall apply on a pro-rata basis
for any portion of a month prior to the cure of an Event. In the event the
Company fails to make Event Payments in a timely manner, such Event Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.
For such purposes, each of the following shall constitute an "Event":
(i) the Registration Statement is not filed on or prior to
the Filing Date or is not declared effective on or prior to the Required
Effectiveness Date; provided, however, that for the purposes of the Event
Payment under this Section 6.1(e) only, the Company shall have an additional 15
days to cure the failure to declare the Registration Statement effective on or
prior to the Required Effectiveness Date before such Event Payment is due to the
Purchaser under this Section 6.1(e);
(ii) after the Effective Date, a Purchaser is not permitted
to sell Registrable Shares under the Registration Statement (or a subsequent
Registration Statement filed in replacement thereof) for any reason for five or
more Trading Days (whether or not consecutive);
(iii) a Post-Effective Amendment is not filed on or prior to
the Post-Effective Amendment Filing Deadline or is not declared effective on or
prior to the 15th Trading Day after the Post-Effective Amendment Filing
Deadline;
22
(iv) after the Effective Date, any Registrable Shares
covered by such Registration Statement are not listed on an Eligible Market;
(v) the Common Stock is not listed or quoted, or is
suspended from trading, on an Eligible Market for a period of five Trading Days
(which need not be consecutive Trading Days); or
(vi) the Company fails for any reason to deliver a
certificate evidencing any Shares to a Purchaser within ten (10) Trading Days
after delivery of such certificate is required pursuant to any Transaction
Document or the exercise rights of the Purchaser pursuant to the Transaction
Documents are otherwise suspended for any reason.
(f) Except as described in Schedule 3.1(p) hereto, the Company
shall not, prior to the Effective Date of the Registration Statement, prepare
and file with the Commission a Registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities.
6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) Furnish to the
Purchaser, the Manager and any counsel designated by the Purchaser ("Purchaser
Counsel") copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of the Purchaser and Purchaser 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
the Purchaser Counsel, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file a Registration Statement or
any such Prospectus or any amendments or supplements thereto to which Purchaser
holding a majority of the Registrable Shares shall reasonably object.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Shares for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Shares; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and (unless further delayed by
reason of responding to SEC financial comments or obtaining current financial
statements) in any event within twenty days, to any comments received from the
Commission with respect to the Registration Statement or any amendment thereto
and as promptly as reasonably possible provide the Purchaser true and complete
23
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 Shares covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Purchaser thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) Notify the Purchaser of Registrable Shares to be sold and each
Purchaser Counsel as promptly as reasonably possible, and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to the Purchaser a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Shares for sale
in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Shares for sale in any
jurisdiction, at the earliest practicable moment.
(e) Furnish to each Purchaser and the Purchaser Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference, and all exhibits to the extent requested by
such Person promptly after the filing of such documents with the Commission.
(f) Promptly deliver to the Purchaser and the Purchaser 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. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchaser in
connection with the valid offering and sale of the Registrable Shares covered by
such Prospectus and any amendment or supplement thereto.
24
(g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Shares; (ii) take all steps
necessary to cause such Registrable Shares to be approved for listing on each
Trading Market as soon as possible thereafter; (iii) provide to the Purchaser
evidence of such listing; and (iv) maintain the listing of such Registrable
Shares on each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Shares, use its
best efforts to register or qualify or cooperate with the Purchaser or any
Member selling Registrable Shares and Purchaser Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Shares for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any Purchaser 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 Shares covered by a
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise subject.
(i) Cooperate with the Purchaser to facilitate the timely
preparation and delivery of certificates representing Registrable Shares to be
delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement and
applicable securities laws, of all restrictive legends, and to enable such
Registrable Shares to be in such reasonable denominations and registered in such
names as any such Purchaser may request.
(j) Upon the occurrence of any event described in Section
6.2(c)(vii), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Cooperate with any reasonable due diligence investigation
undertaken by the Purchaser in connection with the sale of Registrable Shares,
including without limitation by making available any documents and information;
provided that the Company will not deliver or make available to any Purchaser
material, nonpublic information unless such Purchaser specifically requests in
advance to receive material, nonpublic information in writing and signs a
confidentiality, non-disclosure and indemnification agreement with respect to
all such non-public information.
25
(l) If Holders of a majority of the Registrable Shares being
offered pursuant to a Registration Statement select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, by providing customary legal opinions, comfort letters and
indemnification and contribution obligations.
(m) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchaser for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Shares and of printing prospectuses requested by the Purchaser), (c)
messenger, telephone and delivery expenses, (d) fees and disbursements of
counsel for the Company and up to $10,000 in the aggregate for a single
Purchaser's Counsel for all of the Purchasers purchasing in the Concurrent
Offering, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market.
6.4 Indemnification.
(a) Indemnification by the Company. The Company shall indemnify
and hold harmless the Purchaser, the officers, directors, partners, Members,
agents, investment advisors and employees of each of them, each Person who
controls the Purchaser (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, partners,
Members, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all Losses, as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or 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, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding the Purchaser furnished in
writing to the Company by the Purchaser expressly for use therein, or to the
extent that such information relates to the Purchaser or the Purchaser's
proposed method of distribution of Registrable Shares and was reviewed and
expressly approved in writing by the Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by the Purchaser of an
outdated or defective Prospectus after the Company has notified the Purchaser in
writing that the Prospectus is outdated or defective and prior to the receipt by
the Purchaser of the Advice contemplated in Section 6.5. The Company shall
26
notify the Purchaser 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 Purchaser and Members. The Purchaser and
its Members shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review) arising solely out of any
untrue statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of failure to comply with all prospectus delivery
requirements upon a re-sale of any Shares or 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 the Purchaser or a
Member to the Company specifically for inclusion in such Registration Statement
or such Prospectus or to the extent that (i) such untrue statements or omissions
are based solely upon information regarding the Purchaser or Member furnished in
writing to the Company by the Purchaser or Member expressly for use therein, or
to the extent that such information relates to the Purchaser or Member or the
Purchaser's or Member's proposed method of distribution of Registrable Shares
and was reviewed and expressly approved in writing by the Purchaser expressly
for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (ii) in the case of an
occurrence of an event of the type specified in Section 6.2(c)(v)-(vii), the use
by the Purchaser or Member of an outdated or defective Prospectus after the
Company has notified the Purchaser or Member in writing that the Prospectus is
outdated or defective and prior to the receipt by the Purchaser of the Advice
contemplated in Section 6.5. In no event shall the liability of any selling
Purchaser or Member hereunder be greater in amount than the dollar amount of the
net proceeds received by the Purchaser or such Member upon the sale of the
Registrable Shares giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
27
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the
reasonable fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding. All fees
and expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
6.4(a) or (b) is unavailable to an Indemnified Party (by reasons other than the
specified exclusions to indemnification), then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
28
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), the Purchaser shall not
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by the Purchaser from the sale of the
Registrable Shares subject to the Proceeding exceeds the amount of any damages
that the Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The indemnity and contribution
agreements contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.
6.5 Dispositions. The Purchaser agrees that it will comply with, and
indemnify and hold harmless all relevant Indemnified Parties in connection with
any failure of the Purchaser to comply with, prospectus delivery requirements of
the Securities Act as applicable to it in connection with sales of Registrable
Shares pursuant to the Registration Statement. The Purchaser further agrees
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Sections 6.2(c)(v), (vi) or (vii), the Purchaser will
discontinue disposition of such Registrable Shares under the Registration
Statement until the Purchaser's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 6.2(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.
The Company may provide appropriate stop orders to enforce the provisions of
this paragraph.
6.6 No Piggyback on Registrations. Except as set forth on Schedule 6.6
attached hereto, neither the Company nor any of its security holders (other than
the Purchaser in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Shares, and the
Company shall not after the date hereof enter into any agreement providing any
such right to any of its security holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Shares and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to the Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
the Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Shares the Purchaser
requests to be registered.
29
ARTICLE VII
MISCELLANEOUS
7.1 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchaser such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents. Notwithstanding anything to the contrary
herein, Shares may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such Company
Shares.
7.2 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses and facsimile numbers for such notices and communications are
those set forth on the signature pages hereof, or such other address or
facsimile number as ay be designated in writing hereafter, in the same manner,
by such Person.
7.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
if and to the extent that Aladdin Investment Advisors, LLC waives a comparable
provision of the Aladdin Investments LLC purchase agreement for the purchase of
common stock executed in connection with the Concurrent Offering, such waiver
shall, without any further action required on the part of Purchaser, constitute
a waiver of the corresponding provision of this Agreement. Purchaser understands
that the preceding sentence may result in the diminution of its rights by virtue
of the unilateral action of Aladdin Investment Advisors, LLC.
7.4 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
30
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. The Purchaser may assign its
rights under this Agreement to any Person to whom the Purchaser assigns or
transfers any Shares, provided such transferee agrees in writing to be bound,
with respect to the transferred Shares, by the provisions hereof that apply to
the "Purchaser." Notwithstanding anything to the contrary herein, Shares may be
assigned to any Person in connection with a bona fide margin account or other
loan or financing arrangement secured by such Shares.
7.6 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.7 Governing Law; Venue; Waiver Of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the state of New York.
THE COMPANY AND THE PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY
OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE
ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE,
AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY
OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT VENUE OF SUCH SUIT, ACTION OR PROCEEDING
IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND THE PURCHASER HEREBY WAIVE ALL RIGHTS TO A
TRIAL BY JURY.
31
7.8 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Shares, as applicable.
7.9 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.10 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.11 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.12 Replacement of Shares. If any certificate or instrument evidencing
any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Shares.
7.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchaser and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.14 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or the Purchaser or any Member enforces or
exercises its rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
32
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company by a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
7.15 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
[the balance of this page intentionally left blank]
33
IN WITNESS WHEREOF, the parties hereto have caused this Shares
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
LMIC, INC.
By:____________________________________
Name: Xxxx X. Xxxxxxx
Title: President & CEO
Address for Notice:
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile No.:
Telephone No.: (000) 000-0000
Attn:
ALADDIN INVESTMENTS, LLC
(a Delaware limited liability company)
By: ALADDIN INVESTMENT ADVISORS, LLC
(Manager)
By:_________________________________
Name:___________________
Title:
Address for Notice:
000 Xxxxxxx Xxxxxx 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No. (000) 000-0000
Attn:_________________________
34
