EXECUTION COPY
EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into as of
the date set forth on the signature page hereof by and between LOUDEYE CORP., a
Delaware corporation (together with its successors and permitted assigns, the
"Issuer"), and the undersigned investor (together with its successors and
permitted assigns, the "Investor"). Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in Section 9.1.
RECITALS
Subject to the terms and conditions of this Agreement, the Investor
desires to subscribe for and purchase, and the Issuer desires to issue and sell
to the Investor, certain shares of the Issuer's common stock, par value $.01 per
share (the "Common Stock"). The Issuer is offering an aggregate of ten million
eight hundred eleven thousand (10,810,811) shares of Common Stock in a private
placement to the Investor, and other investors who execute a series of
agreements similar to this Agreement (who, together with the Investor, are
collectively hereinafter referred to as the "Investors"), at a purchase price of
$1.85 per share and on the other terms and conditions contained in this
Agreement (the "Offering"), provided that the Issuer reserves the right to sell
a lesser or greater number of shares.
TERMS OF AGREEMENT
In consideration of the mutual representations and warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
1. SUBSCRIPTION AND ISSUANCE OF COMMON STOCK
SUBSCRIPTION AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, the Issuer will issue and sell to the Investor and
the Investor subscribes for and will purchase from the Issuer the number of
shares of Common Stock set forth on the signature page hereof (the "Shares") for
the aggregate purchase price set forth on the signature page hereof, which shall
be equal to the product of the number of Shares subscribed for by the Investor
times the per share purchase price specified in the above Recitals to this
Agreement (the "Purchase Price").
TRANSFER RESTRICTIONS. The Shares may be disposed of only in compliance
with state and federal securities laws. In connection with any transfer of
Shares other than pursuant to an effective registration statement, to the
Issuer, or to an Affiliate of Investor, the Issuer may require the transferor
thereof to provide to the Issuer an opinion of counsel selected by the
transferor, at the expense of the Investor or transferee, the form and substance
of which opinion shall be reasonably satisfactory to the Issuer, to the effect
that such transfer does not require registration of such transferred Shares
under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of an Investor under this Agreement.
LEGEND. Any certificate or certificates representing the Shares shall
bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF
1933, AS AMENDED AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF
ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND ALSO MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH ANY
APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE
HOLDER, WHICH MAY RESTRICT THE TRANSFER OF SUCH SECURITIES IN CERTAIN
CIRCUMSTANCES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED, WITHOUT
CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE.
REMOVAL OF LEGENDS. Any legend endorsed on a certificate evidencing the
Shares shall be removed upon the request of the Investor, and the Issuer shall
issue a certificate without such legend to the holder of such Shares, if such
Shares are being sold pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144(k) promulgated thereunder, and the
purchaser thereof may immediately resell such Shares without restriction and
without registration; provided, however, that in the case of a sale pursuant to
Rule 144(k), such holder of Shares shall provide such information as is
reasonably requested by the Issuer to ensure that such Shares may be sold in
reliance on Rule 144(k).
LEGAL, TAX OR INVESTMENT ADVICE. The Investor understands that nothing
in this Agreement or any other materials presented to such Investor in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. The Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Shares.
2. CLOSING
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CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall take place on a date designated by the Issuer, which date shall
be on or before February 17, 2004. The Closing shall take place at the offices
of Xxxxx & Company LLC, the placement agent, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000. At the Closing, unless the Investor and the Issuer otherwise agree
(i) the Investor shall pay the Purchase Price to the Issuer, by wire transfer of
immediately available funds to an account designated in writing by the Issuer;
(ii) the Issuer shall issue to the Investor the Shares, and deliver to the
Investor certificates for the Shares duly registered in the name of the
Investor, within three business days, or as soon as practicable thereafter, and
(iii) all other agreements and other documents referred to in this Agreement
which are required for the Closing shall be executed and delivered (if that is
not done prior to the Closing).
TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
by mutual written consent of the Issuer and the Investor;
by the Investor, upon a material breach of any representation
and warranty, covenant or agreement on the part of the Issuer set forth in this
Agreement, or if any material representation and warranty of the Issuer shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.1 would be incapable of being satisfied by the date of
the Closing; or
by the Issuer, upon a material breach of any representation
and warranty, covenant or agreement on the part of the Investor set forth in
this Agreement, or if any material representation and warranty of the Investor
shall have become untrue in any material respect, in either case such that the
conditions in Section 8.2 would be incapable of being satisfied by the date of
the Closing.
EFFECT OF TERMINATION. In the event of termination of this Agreement
pursuant to Section 2.2, this Agreement shall forthwith become void, there shall
be no liability on the part of the Issuer or the Investor to each other and all
rights and obligations of any party hereto shall cease; provided, however, that
nothing herein shall relieve any party from liability for the willful breach of
any of its representations and warranties, covenants or agreements set forth in
this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE ISSUER
As a material inducement to the Investor entering into this Agreement and
subscribing for the Shares, the Issuer represents and warrants to the Investor
as follows:
CORPORATE STATUS. The Issuer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties and
assets and to conduct its business as now conducted
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except where the failure to do so would not have a Material Adverse Effect. Each
subsidiary as referred to in the SEC Reports (as hereinafter defined) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own and lease its properties and assets and to conduct its
business as now conducted except where the failure to do so would not have a
Material Adverse Effect. The Issuer and its subsidiaries are each qualified to
do business as a foreign corporation and are in good standing in all states
where the conduct of their respective businesses or their ownership or leasing
of property requires such qualification, except where the failure to so qualify
would not have a Material Adverse Effect.
CORPORATE POWER AND AUTHORITY. The Issuer has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. At the time of
the Closing, the Issuer will have taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
ENFORCEABILITY. This Agreement has been duly executed and delivered by
the Issuer and (assuming it has been duly authorized, executed and delivered by
the Investor) constitutes a legal, valid and binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (iii) with
respect to the indemnification provisions set forth herein, as and to the extent
limited by public policy.
NO VIOLATION. The execution and delivery by the Issuer of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Issuer with the terms and provisions hereof (including,
without limitation, the Issuer's issuance to the Investor of the Shares as
contemplated by and in accordance with this Agreement), will not result in a
default under (or give any other party the right, with the giving of notice or
the passage of time (or both), to declare a default or accelerate any obligation
under) or violate any provision of the Certificate of Incorporation or By-Laws
of the Issuer or any material Contract to which the Issuer is a party (except to
the extent such a default, acceleration, or violation would not, in the case of
a Contract, have a Material Adverse Effect on the Issuer), or violate any
Requirement of Law applicable to the Issuer, or result in the creation or
imposition of any material Lien upon any of the capital stock, properties or
assets of the Issuer or any of its Subsidiaries (except where such violations of
any Requirement of Law or creations or impositions of any Liens would not have a
Material Adverse Effect on the Issuer).
CONSENTS/APPROVALS. Except for the filing of a registration statement
in accordance with Article 6 hereof and filings with the SEC, the securities
commissions of the states in which the Shares are to be issued, and The Nasdaq
Stock Market, no consents, permits, filings, authorizations or other actions of
any Governmental Authority are required to be obtained or made by the Issuer for
the Issuer's execution, delivery and performance of this Agreement which have
not already been obtained or made. No consent, approval, waiver or other action
by any Person under any Contract to which the Issuer is a party or by which the
Issuer or any of its properties or assets are bound is required or necessary for
the execution, delivery or performance
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by the Issuer of this Agreement and the consummation of the transactions
contemplated hereby, except where the failure to obtain such consents would not
have a Material Adverse Effect on the Issuer.
VALID ISSUANCE. Upon payment of the Purchase Price by the Investor and
delivery to the Investor of the certificates for the Shares, such Shares will be
validly issued, fully paid and non-assessable, free from all Liens with respect
to the issuance of such Shares and will not be subject to any preemptive or
similar rights.
SEC FILINGS, OTHER FILINGS AND NASDAQ COMPLIANCE. The Issuer has timely
made all filings required to be made by it under the Exchange Act. The Issuer
has delivered or made accessible to the Investor true, accurate and complete
copies of (i) Issuer's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002; (ii) the Issuer's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 2003, June 30, 2003 (as amended) and September
30, 2003; (iii) the Issuer's definitive proxy statement dated June 19, 2003
relating to its 2003 Annual Meeting of Stockholders; and (iv) the Issuer's
Current Report on Form 8-K dated January 9, 2004 (the "SEC Reports"). The SEC
Reports, when filed, complied in all material respects with all applicable
requirements of the Exchange Act. None of the SEC Reports, at the time of
filing, 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 not misleading in light of the circumstances in which they
were made. The Issuer has filed in a timely manner all documents that the Issuer
was required to file under the Exchange Act during the 12 months preceding the
date of this Agreement. The Issuer has reasonable grounds to believe that it
meets all of the requirements to register the resale of the Shares in a
secondary offering on a registration statement on Form S-3 under the Securities
Act. The Issuer has taken, or will have taken prior to the Closing, all
necessary actions to ensure its continued inclusion in, and the continued
eligibility of the Common Stock for trading on, The Nasdaq Stock Market under
all currently effective inclusion requirements. Each balance sheet included in
the SEC Reports (including any related notes and schedules) fairly presents in
all material respects the consolidated financial position of the Issuer as of
its date, and each of the other financial statements included in the SEC Reports
(including any related notes and Schedules) fairly presents in all material
respects the consolidated results of operations of the Issuer for the periods or
as of the dates therein set forth in accordance with GAAP consistently applied
during the periods involved (except that the interim reports are subject to
adjustments which might be required as a result of year end audit and except as
otherwise stated therein).
COMMISSIONS. The Issuer has not incurred any other obligation for any
finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby, except that the Issuer will pay a 5%
commission to Xxxxx & Company LLC ("Xxxxx"), the placement agent for the
Offering.
CAPITALIZATION. The authorized capital stock of the Issuer consists of
100,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock. All
issued and outstanding shares of capital stock of the Issuer have been, and as
of the Closing Date will be, duly authorized and validly issued and are fully
paid and non-assessable. As of February 9, 2004, the Issuer has issued and
outstanding 57,016,656 shares of Common Stock and no shares of Preferred Stock.
Except as described in this Section 3.9 and on Schedule 3.9, there are no
outstanding options,
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warrants, rights (including conversion or preemptive rights and rights of first
refusal and similar rights) or agreements, orally or in writing, for the
purchase or acquisition from the Issuer of any shares of capital stock and the
Issuer is not a party to or subject to any agreement or understanding, and there
is no agreement or understanding between any person and/or entities, which
affects or relates to the voting or giving of written consents with respect to
any security or by a director of the Issuer. The Issuer has no obligation,
contingent or otherwise, to redeem or repurchase any equity security or any
security that is a combination of debt and equity.
(1)
MATERIAL CHANGES. To the Issuer's knowledge, except as set forth in the
SEC Reports or as otherwise contemplated herein, since September 30, 2003, there
has been no Material Adverse Change in the Issuer and its subsidiaries taken as
a whole. Except as set forth in the SEC Reports, since September 30, 2003, there
has not been (i) any direct or indirect redemption, purchase or other
acquisition by the Issuer of any shares of the Common Stock or (ii) declaration,
setting aside or payment of any dividend or other distribution by the Issuer
with respect to the Common Stock.
LITIGATION. Except as disclosed in the SEC Reports, or on Schedule
3.11, there is no action, suit, proceeding or, to the Issuer's knowledge, any
investigation pending or currently threatened against the Issuer or any of its
subsidiaries that questions the validity of this Agreement or the right of the
Issuer to enter into it, or to consummate the transactions contemplated hereby,
or that could reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect on the Issuer or any change in the
current equity ownership of the Issuer. The foregoing includes, without
limitation, actions pending or, to the Issuer's knowledge, threatened involving
the prior employment of any of the Issuer's employees or their use in connection
with the Issuer's business of any information or techniques allegedly
proprietary to any of their former employers. Neither the Issuer nor any of its
subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Issuer or any of its subsidiaries currently pending or which the Issuer or any
of its subsidiaries currently intends to initiate.
RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as contemplated in
this Agreement and as disclosed on Schedule 3.12, the Issuer has not granted or
agreed to grant any registration rights, including piggyback rights, to any
person or entity, and, to the knowledge of the Issuer, no stockholder of the
Issuer has entered into any agreements with respect to the voting of capital
shares of the Issuer.
OFFERINGS. Subject in part to the truth and accuracy of Investor's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, and neither the Issuer nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
COMPLIANCE WITH CERTIFICATE OF INCORPORATION AND BY-LAWS; COMPLIANCE
WITH LAWS. The Issuer is not in violation or default of any provisions of its
Certificate of Incorporation or
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Bylaws. The business and operations of the Issuer have been conducted in
accordance with all applicable laws, rules and regulations of all governmental
agencies, authorities and instrumentalities (including, without limitation,
under the federal and state securities laws, Employee Retirement Income Security
Act of 1974, as amended and all laws relating to the employment of labor),
except for such violations which would not, individually or in the aggregate,
have a Material Adverse Effect.
NASDAQ SMALLCAP MARKET. The Common Stock is listed on The Nasdaq
SmallCap Market and, to the knowledge of the Issuer, there are no proceedings to
revoke or suspend such listing. The issuance of the Shares will not contravene
any NASDAQ Marketplace Rule. The Common Stock is registered pursuant to Section
12(g) of the Exchange Act. The Issuer has taken no action designed to, or which
to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act, delisting the Common Stock from The
Nasdaq SmallCap Market. The Issuer has not received any notification that, and
has no knowledge that, the SEC or the NASD is contemplating terminating such
listing or registration. The issuance of the Shares does not require stockholder
approval, including, without limitation, as may be required pursuant to the
Nasdaq Marketplace Rules.
TAX MATTERS. The Issuer has filed all tax returns and reports as
required by federal, state, local, and foreign law and has paid all taxes shown
thereon that have become due and payable. Such returns and reports were
materially accurate and complete when filed and reflect all taxes and other
assessments due thereunder to be paid by the Issuer, except those contested by
it in good faith. The provision for taxes of the Issuer included in the
provision for accrued liabilities in the Issuer's Financial Statements is
adequate for taxes due or accrued as of the dates thereof. The Issuer has never
had any material tax deficiency proposed or assessed against it.
XXXXXXXX-XXXXX. The Chief Executive Officer and the Chief Financial
Officer of the Issuer have signed, and the Issuer has furnished to the SEC, all
certifications required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of
2002, and neither the Issuer nor any of its officers has received notice from
any governmental entity questioning or challenging the accuracy, completeness,
form or manner of filing or submission of such certifications.
DISCLOSURE. The Issuer is aware of no facts which lead it to believe
that the Disclosure Documents, as of their respective dates, contain any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
As a material inducement to the Issuer entering into this Agreement and issuing
the Shares, the Investor represents and warrants to the Issuer as follows:
POWER AND AUTHORITY. The Investor, if other than a natural person, is
an entity duly
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organized, validly existing and in good standing under the laws of the state of
its incorporation or formation. The Investor has the corporate, partnership or
other power and authority under applicable law to execute and deliver this
Agreement and consummate the transactions contemplated hereby, and has all
necessary authority to execute, deliver and perform its obligations under this
Agreement and consummate the transactions contemplated hereby. The Investor has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement and the transactions contemplated hereby and, when delivered,
this Agreement will constitute the valid and legally binding obligation of the
Investor, enforceable against it in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (iii) with
respect to the indemnification provisions set forth herein, as and to the extent
limited by public policy.
NO VIOLATION. The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Investor with the terms and provisions hereof, will not result
in a default under (or give any other party the right, with the giving of notice
or the passage of time (or both), to declare a default or accelerate any
obligation under) or violate any charter or similar documents of the Investor,
if other than a natural person, or any Contract to which the Investor is a party
or by which it or its properties or assets are bound, or violate any Requirement
of Law applicable to the Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor.
CONSENTS/APPROVALS. No consents, filings, authorizations or actions of
any Governmental Authority are required for the Investor's execution, delivery
and performance of this Agreement. No consent, approval, waiver or other actions
by any Person under any Contract to which the Investor is a party or by which
the Investor or any of its properties or assets are bound is required or
necessary for the execution, delivery and performance by the Investor of this
Agreement and the consummation of the transactions contemplated hereby.
INVESTMENT INTENT. The Investor is acquiring the Shares hereunder for
its own account and with no present intention of distributing or selling such
Shares and further agrees not to transfer such Shares in violation of the
Securities Act or any applicable state securities law, and no one other than the
Investor has any beneficial interest in the Shares. The Investor agrees that it
will not sell or otherwise dispose of any of the Shares unless such sale or
other disposition has been registered under the Securities Act or, in the
opinion of counsel acceptable to the Issuer, is exempt from registration under
the Securities Act and has been registered or qualified or, in the opinion of
such counsel acceptable to the Issuer, is exempt from registration or
qualification under applicable state securities laws. The Investor understands
that the offer and sale by the Issuer of the Shares being acquired by the
Investor hereunder has not been registered under the Securities Act by reason of
their contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof, and that the reliance of the Issuer on such exemption from registration
is predicated in part on these representations and warranties of the Investor.
The Investor acknowledges that pursuant to Section 1.3 of this Agreement a
restrictive legend consistent with the foregoing has been or will be placed on
the certificates for the Shares. The Investor is acquiring the Shares
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hereunder in the ordinary course of its business. The Investor does not have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Shares.
ACCREDITED INVESTOR. The Investor is an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D under the Securities Act (a copy
of which is attached hereto as Exhibit A), and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the investment to be made by it hereunder.
ADEQUATE INFORMATION. The Investor has received from the Issuer, and
has reviewed, such information which the Investor considers necessary or
appropriate to evaluate the risks and merits of an investment in the Shares,
including without limitation, the documents listed on Exhibit B, which have been
received by Investor as part of an informational packet of materials from the
Issuer (the "Disclosure Documents"). The Investor acknowledges that each of the
SEC Reports, including the risk factors contained therein, are specifically
incorporated herein by reference and form an integral part of this Agreement.
The Investor also acknowledges that the additional risk factors set forth on
Exhibit B and contained in the Disclosure Documents are specifically
incorporated herein by reference and forms an integral part of this Agreement.
OPPORTUNITY TO QUESTION. The Investor has had the opportunity to
question, and has questioned, to the extent deemed necessary or appropriate,
representatives of the Issuer so as to receive answers and verify information
obtained in the Investor's examination of the Issuer, including the information
that the Investor has received and reviewed as referenced in Section 4.7 hereof
in relation to its investment in the Shares.
NO OTHER REPRESENTATIONS. No oral or written representations have been
made to the Investor in connection with the Investor's acquisition of the Shares
which were in any way inconsistent with the information reviewed by the
Investor. The Investor acknowledges that no representations or warranties of any
type or description have been made to it by any Person with regard to the
Issuer, any of its Subsidiaries, any of their respective businesses, properties
or prospects or the investment contemplated herein, other than the
representations and warranties set forth in Article 3 hereof.
KNOWLEDGE AND EXPERIENCE. The Investor has such knowledge and
experience in financial, tax and business matters, including substantial
experience in evaluating and investing in common stock and other securities
(including the common stock and other securities of speculative companies), so
as to enable the Investor to utilize the information referred to in Section 4.6
hereof and any other information made available by the Issuer to the Investor in
order to evaluate the merits and risks of an investment in the Shares and to
make an informed investment decision with respect thereto. The Investor is able
to bear the economic risk of an investment in the Shares and is able to afford a
complete loss of such investment.
INDEPENDENT DECISION. The Investor is not relying on the Issuer, any
other potential investor, or on any legal or other opinion in the materials
reviewed by the Investor with respect to the financial or tax considerations of
the Investor relating to its investment in the Shares. The Investor has relied
solely on the representations and warranties, covenants and agreements of the
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Issuer in this Agreement (including the Exhibits hereto) and on its examination
and independent investigation in making its decision to acquire the Shares.
GENERAL SOLICITATION. The Investor 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.
RESIDENCE. If the Investor is an individual, then such Investor resides
in the state or province identified in the address of such Investor set forth on
the signature page hereto; if such Investor is a partnership, corporation,
limited liability company or other entity, then the office or offices of such
Investor in which its investment decision was made is located at the address or
addresses of such Investor set forth on the signature page hereto.
NO PRIOR SHORT SELLING. At no time during the 30 days prior to the
Closing has the Investor engaged in or effected, in any manner whatsoever,
directly or indirectly, in any "short sale" (as such term is defined in Rule
3b-3 of the Exchange Act) of the Common Stock (a "Short Sale").
BENEFICIAL OWNERSHIP. At the Closing, the Investor will not, after
giving effect to the Shares purchased hereunder, beneficially own in excess of
19.99% of the number of shares of Common Stock of the Issuer then outstanding,
determined in accordance with Rule 13d-3 of the Exchange Act).
COMMISSIONS. The Investor has not incurred any obligation for any
finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby.
NO BROKER -DEALER. The Investor is not required to be registered as a
broker-dealer pursuant to Section 15 of the Exchange Act.
5. COVENANTS
PUBLIC ANNOUNCEMENTS. Each party to this Agreement agrees that it shall
not issue or release any public announcement with respect to this Agreement or
the transactions provided for herein, which names the other party, without the
prior consent of the other party. Notwithstanding the foregoing, nothing in this
Section 5.1 shall prevent any party hereto from making such public announcements
or filings as it may consider necessary in order to satisfy its legal
obligations. On or before the third business day following the Closing, the
Issuer will issue a press release acceptable to each of the parties hereto
describing the transactions contemplated by this Agreement, and promptly
thereafter file a Current Report on Form 8-K with the SEC, attaching such press
release.
FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be reasonably necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the
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transactions contemplated hereby. Each of the Investor and the Issuer shall make
on a prompt and timely basis all governmental or regulatory notifications and
filings required to be made by it with or to any Governmental Authority in
connection with the consummation of the transactions contemplated hereby. The
Issuer and the Investor each agree to cooperate with the other in the
preparation and filing of all forms, notifications, reports and information, if
any, required or reasonably deemed advisable pursuant to any Requirement of Law
or the rules of Nasdaq Stock Market in connection with the transactions
contemplated by this Agreement and to use their respective commercially
reasonable efforts to agree jointly on a method to overcome any objections by
any Governmental Authority to any such transactions. Except as may be
specifically required hereunder, neither of the parties hereto or their
respective Affiliates shall be required to agree to take any action that in the
reasonable opinion of such party would result in or produce a Material Adverse
Effect on such party.
NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give prompt
notice to the other party of the occurrence, or non-occurrence, of any event
which would be likely to cause any representation and warranty herein to be
untrue or inaccurate, or any covenant, condition or agreement herein not to be
complied with or satisfied.
CONFIDENTIAL INFORMATION; STANDSTILL. (a) The Investor agrees that no
portion of the Confidential Information (as defined below) shall be disclosed to
third parties, except as may be required by law, without the prior written
consent of the Issuer provided that the Investor may share such information with
such of its officers and professional advisors as may need to know such
information to assist the Investor in its evaluation thereof on the condition
that such parties agree to be bound by the terms hereof. All Confidential
Information received by the Investor shall be promptly returned or destroyed, as
directed by the Issuer. "Confidential Information" means all written data,
reports, records or materials and any and all other confidential or disclosure
information or materials obtained from the Issuer or its professional advisors,
which are not yet publicly available. Confidential Information excludes
information that is publicly available or already known to the Investor through
a source not bound by any confidentiality obligation. Notwithstanding the
foregoing, the Issuer and Investor acknowledge and agree that the Issuer has not
provided any Confidential Information to Investor in connection with this
Agreement or the transactions contemplated hereby.
(b) For a period of one year from the Closing Date, the
Investor will not, without the prior written consent of the Issuer (i) propose
to enter into any acquisition of all or substantially all of the assets or stock
of the Issuer or a merger or other business combination involving the Issuer;
(ii) seek to control the management, Board of Directors or policies of the
Issuer; or (iii) form, join or in any way participate in a "group" (within the
meaning of Section 13(d) (3) of the Securities Act of 1934) with respect to any
securities of the Issuer in connection with any of the foregoing.
Notwithstanding the foregoing, this section shall not restrict the Investor's
acquisition or disposition of shares of the Issuer's Common Stock through open
market purchases or sales.
5.5 CERTAIN TRADING RESTRICTIONS.
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(a) Restrictions. From and after the Closing, for so long as a
the Investor continues to hold any Shares acquired hereunder, the Investor will
not, nor will it knowingly through its Affiliates engage in any Short Sales,
except on those days (each a "Permitted Day") on which the aggregate short
position with respect to the Common Stock of the Investor prior to giving effect
to any Short Sales by the Investor on such Permitted Day does not exceed such
Investor's Permitted Share Position (as defined below) on such Permitted Day;
provided, however, that the Investor will only be entitled to engage in
transactions that constitute Short Sales on a Permitted Day to the extent that
following such transaction, the aggregate short position with respect to the
Common Stock of the Investor does not exceed such Investor's Permitted Share
Position. For purposes of Section 5.5, the Investor's "Permitted Share Position"
means, with respect to any date of determination, the number of shares of Common
Stock owned by the Investor (including Shares).
(b) Other Transactions Permitted. Subject to Section 5.5(a)
and applicable securities laws, the Issuer acknowledges and agrees that nothing
in Section 5.5 shall prohibit the Investor from, and Investor is permitted to,
engage, directly or indirectly, in hedging transactions involving the Shares and
the Common Stock (including, without limitation, by way of short sales,
purchases and sales of options, swap transactions and synthetic transactions) at
any time.
5.6 FORM D FILING. The Issuer agrees that it shall file in a timely
manner a Form D relating to the sale of the Shares under this Agreement,
pursuant to Regulation D promulgated under the Securities Act.
6. REGISTRATION RIGHTS
The Investor shall have the following registration rights with respect to the
Registrable Securities owned by it:
TRANSFER OF REGISTRATION RIGHTS. Subject to the provisions of this
Agreement, the Investor may assign the registration rights with respect to the
Shares to any party or parties to which it may from time to time transfer the
Shares, provided that the transferee agrees in writing with the Issuer to be
bound by the applicable provisions of this Agreement regarding such registration
rights and indemnification relating thereto. Upon assignment of any registration
rights pursuant to this Section 6.1, the Investor shall deliver to the Issuer a
notice of such assignment which includes the identity and address of any
assignee and such other information reasonably requested by the Issuer in
connection with effecting any such registration (collectively, the Investor and
each such subsequent holder is referred to as a "Holder"). Notwithstanding
anything to the contrary herein, the rights of a Holder pursuant to Article 6
may be assigned only to a transferee or assignee of any Registrable Securities
if such transferee or assignee acquires at least 500,000 shares of such Holder's
Registrable Securities (equitably adjusted for any stock splits, subdivisions,
stock dividends, changes, combinations or the like) or less if the shares being
transferred constitute all of such transferring Holder's Registrable Securities.
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REQUIRED REGISTRATION. The Issuer shall use best efforts to file a
Registration Statement on Form S-3 (the "Shelf Registration Statement") on or
before March 31, 2004, pursuant to which the Shares shall be registered for
resale. The Issuer shall use reasonable efforts to cause the SEC to declare the
Shelf Registration Statement effective as soon as practicable after filing and
to thereafter maintain the effectiveness of the Shelf Registration Statement
until such time as the Issuer reasonably determines, based on an opinion of
counsel, that the Holders will be eligible to sell all of the Shares then owned
by the Holders without the need for continued registration of the Shares in the
three month period immediately following the termination of the effectiveness of
the Shelf Registration Statement. Notwithstanding the foregoing, the Issuer's
obligations contained in this Section 6.2 shall terminate on the second
anniversary of the date of this Agreement. The Issuer covenants that it will
provide written notice to the Investor that the Issuer's registration statement
on Form S-3 registering the Shares sold hereunder to the Investor has been
declared effective by the SEC, which notice shall be given promptly after the
Issuer has received notice of such effectiveness from the SEC.
REGISTRATION PROCEDURES.
In case of the Shelf Registration Statement effected by the
Issuer subject to this Article 6, the Issuer shall keep the Investor, on behalf
of each Holder, advised in writing as to the initiation of such registration,
and as to the completion thereof. In addition, subject to Section 6.2 above, the
Issuer shall, to the extent applicable to the Shelf Registration Statement:
(i) prepare and file with the SEC such
amendments and supplements to the Shelf Registration Statement as may be
necessary to keep such registration, effective and comply with provisions of the
Securities Act with respect to the disposition of all securities covered thereby
during the period referred to in Section 6.2;
(ii) update, correct, amend and supplement the
Shelf Registration Statement as necessary;
(iii) notify Holder when the Shelf Registration
Statement is declared effective by the SEC, and furnish such number of
prospectuses, including preliminary prospectuses, and other documents incident
thereto as Holder may reasonably request from time to time;
(iv) use its commercially reasonable efforts to
register or qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions of the United States where an exemption is
not available and as Holder may reasonably request to enable it to consummate
the disposition in such jurisdiction of the Registrable Securities (provided
that the Issuer will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this provision, or (ii) consent to general service of process in any such
jurisdiction, or (iii) subject itself to taxation in any jurisdiction where it
is not already subject to taxation);
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(v) notify Holder at any time when a prospectus
relating to the Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in the Shelf Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and at the request of Holder, the Issuer will prepare a
supplement or amendment to such prospectus, so that, as thereafter delivered to
purchasers of such shares, such prospectus will not contain any untrue
statements of a material fact or omit to state any fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(vi) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Issuer are then listed and obtain all necessary approvals from The Nasdaq Stock
Market for trading thereon;
(vii) provide a transfer agent and registrar for
all such Registrable Securities not later than the effective date of the Shelf
Registration Statement; and
(viii) upon the sale of any Registrable Securities
pursuant to the Shelf Registration Statement, direct the transfer agent to
remove all restrictive legends from all certificates or other instruments
evidencing the Registrable Securities.
Notwithstanding anything stated or implied to the contrary in
Section 6.3(a) above, the Issuer shall not be required to consent to any
underwritten offering of the Registrable Securities or to any specific
underwriter participating in any underwritten public offering of the Registrable
Securities.
Each Holder agrees that upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section 6.3(a)(v),
such Holder will forthwith discontinue such Holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6.3(a)(v) and, if so directed by the
Issuer, will deliver to the Issuer at the Issuer's expense all copies, other
than permanent file copies, then in such Holder's possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
Except as required by law, all expenses incurred by the Issuer
in complying with this Article 6, including but not limited to, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel and accountants for the Issuer, blue sky fees and
expenses (including fees and disbursements of counsel related to all blue sky
matters) ("Registration Expenses") incurred in connection with any registration,
qualification or compliance pursuant to this Article 6 shall be borne by the
Issuer. All underwriting discounts and selling commissions applicable to a sale
incurred in connection with any registration of Registrable Securities and the
legal fees and other expenses of a Holder shall be borne by such Holder.
FURTHER INFORMATION. If Registrable Securities owned by a Holder are
included in any registration, such Holder shall furnish the Issuer such
information regarding itself as the Issuer
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may reasonably request and as shall be required in connection with any
registration (or amendment or supplement thereto), referred to in this
Agreement, and Holder shall indemnify the Issuer with respect thereto in
accordance with Article 7 hereof. The Investor hereby represents and warrants to
the Issuer that it has accurately and completely provided the requested
information and answered the questions numbered (a) through (d) on the signature
pages of this Agreement, and the Investor agrees and acknowledges that the
Issuer may rely on such information as being true and correct for purposes of
preparing and filing the Shelf Registration Statement at the time of filing
thereof and at the time it is declared effective, unless the Investor has
notified the Issuer in writing to the contrary prior to such time.
RIGHT OF SUSPENSION
Notwithstanding any other provision of this Agreement or any
related agreement to the contrary, if any, the Issuer shall have the right, at
any time, to suspend the effectiveness of the Shelf Registration Statement and
offers and sales of the Registrable Securities covered thereby whenever, in the
good faith judgement of the Issuer, (i) continuing such effectiveness or
permitting such offers and sales could reasonably be expected to have an adverse
effect upon a proposed sale of all or substantially all of the assets of the
Issuer or a merger, acquisition, reorganization, recapitalization or similar
current transaction materially affecting the capital structure or equity
ownership of the Issuer, (ii) there exists a material development or a potential
material development with respect to or involving the Issuer that the Issuer
would be obligated to disclose in the prospectus used in connection with the
Shelf Registration Statement, which disclosure, in the good faith judgment of
the Issuer, after considering the advice of counsel, would be premature or
otherwise inadvisable at such time, or (iii) the Shelf Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances, not misleading (a "Suspension
Event"). In the event that the Issuer shall determine to so suspend the
effectiveness of the Shelf Registration Statement and offers and sales of the
Registrable Securities covered thereby, the Issuer shall, in addition to
performing those acts required to be performed under the Securities Act and/or
the Exchange Act or deemed advisable by the Issuer, deliver to each Holder
written notice thereof, signed by the Chief Financial Officer or Chief Executive
Officer of the Issuer. Upon receipt of such notice, the Holders shall
discontinue disposition of the Registrable Securities covered by the Shelf
Registration Statement and prospectus until such Holders (x) are advised in
writing by the Issuer that the use of the Shelf Registration Statement and
prospectus (and offers and sales thereunder) may be resumed, (y) have received
copies of a supplemental or amended prospectus, if applicable, and (z) have
received copies of any additional or supplemental filings which are incorporated
or deemed to be incorporated by reference into such prospectus. The Issuer will
exercise commercially reasonable efforts to ensure that the use of the Shelf
Registration Statement and prospectus may be resumed as quickly as practicable,
provided, however, that in the event of a Suspension Event, the Issuer's
obligation under Section 6.2 to maintain the effectiveness of the registration
statement until the first anniversary of the date of the effectiveness of the
registration statement shall be extended on a day-for-day basis equal to the
amount of time that such Shelf Registration Statement shall have been suspended.
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(b) The Issuer's right to suspend the effectiveness of the
Shelf Registration Statement and the offers and sales of the Registrable
Securities covered thereby, as described above, shall be for a period of time
(the "Suspension Period") beginning on the date of the occurrence of the
Suspension Event and expiring on the earlier to occur of (i) the date on which
the Suspension Event ceases, or (ii) forty five (45) days after the occurrence
of the Suspension Event; provided, however, that there shall not be more than
two Suspension Periods in any 12 month period.
7. INDEMNIFICATION
INDEMNIFICATION RELATING TO REGISTRATION RIGHTS.
With respect to any registration, effected or to be effected
pursuant to Article 6 of this Agreement, the Issuer shall indemnify each Holder
of Registrable Securities whose securities are included in a registration
statement, each of such Holder's directors and officers, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a "Controlling Person") from and against all losses,
damages, liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) or deficiencies of any such Holder or any such
underwriter or Controlling Person if any of the foregoing arise out of:
(i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration;
(ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein, in the light of the circumstances under which it was made,
not misleading; or
(iii) any violation by the Issuer of the
Securities Act or any rule or regulation promulgated thereunder applicable to
the Issuer, or of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Issuer,
in each case, relating to any action or inaction required of the Issuer in
connection with any such registration, and subject to Section 7.2 below will
reimburse each such Person entitled to indemnity under this Section 7.1 for all
legal and other expenses reasonably incurred in connection with investigating or
defending any such loss, damage, liability, claim, charge, action, proceeding,
demand, judgment, settlement or deficiency; provided, however, that, the
foregoing indemnity and reimbursement obligation shall not be applicable to the
extent that any such matter arises out of or is based on (A) any untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in reliance upon and in conformity with written information furnished to the
Issuer by or on behalf of such Holder or by or on behalf of such an underwriter
specifically for use in such prospectus, offering circular or other document, or
(B) the failure of the Holder to
- 19 -
comply with its obligations to discontinue disposition of Registrable Securities
during the suspension of a registration statement as set forth in Section
6.5(a).
With respect to any registration, qualification or compliance
effected or to be effected pursuant to this Agreement, each Holder of
Registrable Securities whose securities are included in a registration
statement, shall indemnify the Issuer or any Controlling Person, and the
directors and officers of the Issuer or any Controlling Person, from and against
all losses, damages, liabilities, claims, charges, actions, proceedings,
demands, judgments, settlement costs and expenses of any nature whatsoever
(including, without limitation, reasonable attorneys' fees and expenses) or
deficiencies of the Issuer if any of the foregoing arise out of:
(i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance;
(ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein, in the light of the circumstances under which it was made,
not misleading; or
(iii) any violation by such Holder of the
Securities Act or any rule or regulation promulgated thereunder applicable to
the Issuer or such Holder or of any blue sky or other state securities laws or
any rule or regulation promulgated thereunder applicable to the Issuer or such
Holder,
in each case, relating to any action or inaction required of such Holder in
connection with any such registration, qualification or compliance, and subject
to Section 7.2 below will reimburse the Issuer for all legal and other expenses
reasonably incurred in connection with investigating or defending any such loss,
damage, liability, claim, charge, action, proceeding, demand, judgment,
settlement or deficiency; provided, however, that, the foregoing indemnity and
reimbursement obligation shall only be applicable to the extent that any such
matter arises out of or is based on any untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in reliance upon and in
conformity with written information furnished to the Issuer by or on behalf of
the Holder specifically for use in such prospectus, offering circular or other
document; provided, however, that, the obligation of the Holder hereunder shall
be limited to an amount equal to the proceeds to the Holder of Registrable
Securities sold as contemplated hereunder.
INDEMNIFICATION PROCEDURES. Each Person entitled to indemnification
under this Section (an "Indemnified Party") shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an "Indemnifying Party") of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, if and
after such assumption the Indemnified Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as
- 20 -
described below. In any such action, any Indemnified Party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the contrary or (ii) the named
parties in any such action (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
or conflicting interests between them. The Indemnifying Party shall not be
liable for any settlement of any proceeding effected without its written consent
(which shall not be unreasonably withheld or delayed by such Indemnifying
Party), but if settled with such consent or if there be final judgment for the
plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and
against any loss, damage or liability by reason of such settlement or judgment.
8. CONDITIONS TO CLOSING
CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR. The obligations of the
Investor to proceed with the Closing is subject to the following conditions any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
Representations and Warranties. Each of the representations
and warranties of the Issuer contained in this Agreement shall be true and
correct in all material respects as of the Closing as though made on and as of
the Closing, except (i) for changes specifically permitted by this Agreement,
and (ii) that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date, except in
any case for such failures to be true and correct which would not, individually
or in the aggregate, have a Material Adverse Effect on the Issuer. Unless the
Investor receives written notice to the contrary at the Closing, Investor shall
be entitled to assume that the preceding is accurate in all respects at the
Closing.
Agreement and Covenants. The Issuer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Investor receives written notice to the contrary at the
Closing, Investor shall be entitled to assume that the preceding is accurate in
all respects at the Closing.
No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
Opinion of Issuer's Counsel. The Holder shall have received an
opinion of Issuer's counsel, dated the Closing Date, with respect to legal
matters customary for private offerings of this type.
- 21 -
Securities Exemptions. The offer and sale of the Shares
pursuant to this Agreement shall be exempt from the registration requirements of
the Securities Act and the registration and/or qualification requirements of all
applicable state securities laws.
No Suspension of Trading or Listing of Common Stock. The
Common Stock of the Issuer (i) shall be designated for quotation or listed on
Nasdaq and (ii) shall not have been suspended from trading on Nasdaq.
Officer's Certificate. The Issuer shall have delivered to the
Investor a certificate of the Issuer executed by the an officer of the Issuer
attaching and certifying to the truth and correctness of (1) the Issuer's
Certificate of Incorporation; (2) the Issuer's By-laws; and (3) the resolutions
adopted by the Issuer's Board of Directors in connection with the transactions
contemplated by this Agreement.
CONDITIONS TO THE OBLIGATIONS OF THE ISSUER. The obligations of the
Issuer to proceed with the Closing is subject to the following conditions any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
Representations and Warranties. Each of the representations
and warranties of the Investor contained in this Agreement shall be true and
correct as of the Closing as though made on and as of the Closing, except (i)
for changes specifically permitted by this Agreement, and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. Unless the Issuer receives
written notification to the contrary at the Closing, the Issuer shall be
entitled to assume that the preceding is accurate in all respects at the
Closing.
Agreement and Covenants. The Investor shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Issuer receives written notification to the contrary at the
Closing, the Issuer shall be entitled to assume that the preceding is accurate
in all respects at the Closing.
No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
Securities Exemptions. The offer and sale of the Shares
pursuant to this Agreement shall be exempt from the registration requirements of
the Securities Act and the registration and/or qualification requirements of all
applicable state securities laws.
No Suspension of Trading or Listing of Common Stock. The
Common Stock of the Issuer (i) shall be designated for quotation or listed on
Nasdaq and (ii) shall not have been suspended from trading on Nasdaq.
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9. MISCELLANEOUS
DEFINED TERMS. As used herein the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in effect
on the date hereof.
"Certificate of Incorporation" means the Issuer's Certificate
of Incorporation, as the same may be supplemented, amended or restated from time
to time.
"Closing" has the meaning in Article 2 of this Agreement.
"Common Stock" has the meaning specified in the Recitals to
this Agreement.
"Contract" means any indenture, lease, sublease, loan
agreement, mortgage, note, restriction, commitment, obligation or other
contract, agreement or instrument.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity or official
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Investor" has the meaning specified in the Recitals to this
Agreement.
"Issuer" means LOUDEYE CORP., a Delaware corporation.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a material and
adverse change in (or effect on) the financial condition, properties, assets,
liabilities, rights, obligations, operations or business, of a Person and its
Subsidiaries taken as a whole. As used in this Agreement with reference to the
Issuer, "Material Adverse Change (or Effect)" shall not include any change,
event, violation, inaccuracy, circumstance or effect directly and primarily
resulting from (i) changes in general economic conditions or changes affecting
the industry generally in which the Issuer operates (provided that such changes
do not affect the Issuer in a substantially disproportionate manner) or (ii)
changes in the trading prices for the Issuer's Common Stock which are unrelated
to a breach by the Issuer of this Agreement.
- 23 -
"Person" means an individual, partnership, corporation,
business trust, joint stock company, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
"Purchase Price" has the meaning specified in Section 1.1 of
this Agreement.
"Register", "registered" and "registration" refer to a
registration of the offering and sale or resale of Common Stock effected by
preparing and filing a registration statement in compliance with the Securities
Act and the declaration or ordering of the effectiveness of such registration
statement.
"Registrable Securities" means all Shares of Common Stock
acquired by the Investors and any other shares of Common Stock or other
securities issued in respect of such shares by way of a stock dividend or stock
split or in connection with a combination or subdivision of the Issuer's Common
Stock or by way of a recapitalization, merger or consolidation or reorganization
of the Issuer; provided, however, that, as to any particular securities, such
securities will cease to be Registrable Securities when they have been sold
pursuant to registration or in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale.
"Requirements of Law" means as to any Person, the certificate
of incorporation, by-laws or other organizational or governing documents of such
person, and any domestic or foreign and federal, state or local law, rule,
regulation, statute or ordinance or determination of any arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its property
is subject.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning specified in Section 3.7 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning specified in Section 1.1 of this
Agreement.
"Subsidiary" means as to any Person, a corporation or limited
partnership of which more than 50% of the outstanding capital stock or
partnership interests having full voting power is at the time directly or
indirectly owned or controlled by such Person.
OTHER DEFINITIONAL PROVISIONS.
All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
- 24 -
Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
All accounting terms shall have a meaning determined in
accordance with GAAP.
As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
The words "hereof," "herein" and "hereunder," and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole (including any Exhibits hereto) and not to any particular provision of
this Agreement.
NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and Fax numbers (or to
such other addresses or Fax numbers which such party shall subsequently
designate in writing to the other party):
if to the Issuer to:
Loudeye Corp.
0000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Xxxxx Xxxxx, Chief Financial Officer
Fax: (000) 000-0000
if to the Investor, to the address set forth next to its name
on the signature page hereto.
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered by
hand, by messenger or by courier, or if sent by facsimile, upon confirmation of
receipt.
STOCK SPLITS, DIVIDENDS AND OTHER SIMILAR EVENTS. The provisions of
this Agreement shall be appropriately adjusted to reflect any stock split, stock
dividend, reorganization or other similar event that may occur with respect to
the Issuer after the date hereof.
- 25 -
ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) and other documents delivered at the Closing pursuant hereto, contain
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between or among the parties
with respect to such subject matter. The Exhibits constitute a part hereof as
though set forth in full above.
EXPENSES; TAXES. Except as otherwise provided in this Agreement, the
parties shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes
based on the income of the Investor) arising out of the initial issuance of the
Shares (but not with respect to subsequent transfers) by the Issuer to the
Investor and consummation of the transactions contemplated by this Agreement
shall be paid by the Issuer.
AMENDMENT; WAIVER. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Issuer and Investors holding, or obligated to purchase, at least two thirds
of the Registrable Securities or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No failure to exercise, and no
delay in exercising, any right, power or privilege under this Agreement shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision,
nor shall any waiver be implied from any course of dealing between the parties.
No extension of time for performance of any obligations or other acts hereunder
or under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts. The rights and remedies
of the parties under this Agreement are in addition to all other rights and
remedies, at law or equity, that they may have against each other.
BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and legal assigns. The rights and obligations of this
Agreement may not be assigned by any party without the prior written consent of
the other party.
COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
HEADINGS. The headings contained in this Agreement are for convenience
of reference only and are not to be given any legal effect and shall not affect
the meaning or interpretation of this Agreement.
GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of New
York applicable to contracts executed and to be wholly performed within such
State. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
- 26 -
SEVERABILITY. The parties stipulate that the terms and provisions of
this Agreement are fair and reasonable as of the date of this Agreement.
However, any provision of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated. If, moreover, any of those provisions shall for any reason be
determined by a court of competent jurisdiction to be unenforceable because
excessively broad or vague as to duration, activity or subject, it shall be
construed by limiting, reducing or defining it, so as to be enforceable.
[SIGNATURES AND OTHER INFORMATION ON NEXT FIVE PAGES]
- 27 -
IN WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed and delivered as of the date set forth below.
NAME OF INVESTOR: ADDRESS FOR NOTICES (Please Print):
___________________________ ____________________________________
____________________________________
SIGNATURE: ____________________________________
Attention:__________________________
By:___________________________ Fax:________________________________
Name:
Title: Tax Identification #:_______________
Exact Name to appear on Stock Certificate: ____________________________________
Number of Shares Subscribed For: ________________________
Aggregate Purchase Price (see Section 1.1): $_______________________
The Investor hereby provides the following additional information:
(a) Excluding the shares of Common Stock subscribed for above, set
forth below is the number of shares of Common Stock and options rights or
warrants of LOUDEYE CORP. ("Options" and together with the Common Stock,
"Securities") which the Investor beneficially owns or of which the Investor is
the record owner on the date hereof. Please refer to the definition of
beneficial ownership on Exhibit C attached hereto. If none, please so state.
Number of Shares: __________________ (excluding the Shares subscribed for above)
Number of Options: __________________
Please indicate by an asterisk (*) above if the Investor disclaims "beneficial
ownership" of any of the above listed Securities, and indicate in response to
question (b) below who has beneficial ownership.
(b) If the Investor disclaims "beneficial ownership" in question
(a), please furnish the following information with respect to the person(s)
other than the Investor who is the beneficial owner(s) of the Securities in
question. If not applicable, please check box: [ ]
Name of Beneficial Owner:_____________________________________
Relationship to the Investor:_________________________________
Number of Securities Beneficially Owned:______________________
- 28 -
NAME OF INVESTOR:_____________
(c) As to the Securities indicated as being "beneficially owned"
in answers to question (a) and (b) does any person other than the person
identified as the "beneficial owner" have:
(i) the sole or shared power to vote or to direct the
vote of any such Securities?
Yes_____ No ______
or (ii) the sole or shared power to dispose or to direct the
disposition of any such Securities (referred to as "dispositive power")?
Yes ______ No ________
If the answer is "Yes" to either of the forgoing questions, the Investor should
set forth below the name and address of each person who has either such power or
with whom the indicated "beneficial owner" shares such power, together with such
number of shares to which such rights relates.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
IF THE INVESTOR IS AN ENTITY OR A TRUST:
The Investor must list the name of each natural person associated with the
Investor entity or trust who has or shares voting or dispositive power with
respect to the shares indicated as being "beneficially owned" in answers to
questions (a) or (c). For an investment or holding company, the investment
manager(s) would normally be the person(s) who hold(s) or share(s) voting and
dispositive power. For a trust, the natural person(s) holding or sharing voting
or dispositive power would normally be the trustee(s). For other types of
entities, the natural person(s) holding or sharing voting or dispositive power
would normally be the officer(s) empowered by the board of directors to make
such decisions, or if there is no such officer, each of the directors.
Disclosure is required for each natural person who in practice has voting or
dispositive power, regardless of that person's formal title or position within
the organization.
- 29 -
NAME OF INVESTOR:____________
TYPE OF POWER:
NAME OF NATURAL VOTING/DISPOSITIVE/
PERSON BOTH ADDRESS POSITION OR TITLE
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(d) In any pending legal proceeding, is the Investor or any of its
affiliates a party, or does the Investor or any such associate have an interest,
adverse to the Issuer or any affiliate of the Issuer?
Yes _______ No ___________
If the answer is "Yes," please describe, and state the nature and amount of,
such interest.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(e) Is there any family relationship (including relationships by
blood, marriage, and adoption, except those more remote than first cousin)
between the Investor or any of its affiliates and any director or officer of the
Issuer, any affiliate of the Issuer or any person who has been chosen to become
a director or officer of the Issuer?
Yes ______ No _________
If the answer is "Yes," please describe the relationship.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- 30 -
NAME OF INVESTOR:_____________
(f) Are any of the Securities listed in response to question (a)
the subject of a voting agreement, contract or other arrangement whereby others
have voting control over, or any other interest in, any of the Investor's
Securities?
[ ] Yes [ ] No
If the answer is "Yes", please give details:
____________________________________________.
(g) Please describe each position, office or other material
relationship which the Investor has had with the Issuer or any of its
affiliates, including any Subsidiary of the Issuer, within the past three years.
Please include a description of any loans or other indebtedness, and any
contracts or other arrangements or transactions involving a material amount,
payable by the Investor to the Issuer or any of its affiliates, including its
Subsidiaries, or by the Issuer or any of its affiliates, including its
Subsidiaries, to the Investor. "Affiliates" of the Issuer include its directors
and executive officers, and any other person controlling or controlled by the
Issuer. IF NONE, PLEASE SO STATE.
Answer:
(h) Please provide the name and address of other person(s), if
any, to whom any proxy statements, registration statements (including notice of
effectiveness thereof), prospectuses or similar documents and information should
be delivered by the Issuer on behalf of the Investor in the future, with respect
to the Investor's shares:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
(i) Please advise of special stock certificate delivery
requirements for closing, if any:
(j) Please advise if a NASD member has placed with you the Shares
being purchased hereunder: (Name of Member:) ___________________________________
- 31 -
ACCEPTED: LOUDEYE CORP.
By: _______________________ Dated: __________________, 2004
Name:
Title:
- 32 -
EXHIBIT A
[Copy of Rule 501(a) under Regulation D is attached]
EXHIBIT B
DISCLOSURE DOCUMENTS
THE INVESTOR IS URGED TO REVIEW THE FOLLOWING DOCUMENTS WHICH ARE DELIVERED
HEREWITH AND INCORPORATED BY REFERENCE HEREIN AS IF RESTATED HEREIN:
1. Form 10-K for the fiscal year ended December 31, 2002
Forms 10-Q for the quarters ended March 31, 2003, June 30,
2003 (as amended) and September 30, 2003
Definitive Proxy Statement dated June 19, 2003
Form 8-K dated January 9, 2004]
2. Recent Press Releases
3. SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK
MAY DEPRESS OUR STOCK PRICE. BECAUSE THE MARKET PRICES FOR TECHNOLOGY-RELATED
STOCKS ARE LIKELY TO REMAIN VOLATILE, OUR STOCK PRICE MAY BE MORE ADVERSELY
AFFECTED THAN OTHER COMPANIES BY SUCH FUTURE SALES.
Sales of substantial numbers of shares of our Common Stock in the
public market, or the perception that significant sales are likely, could
adversely affect the market price of our Common Stock. Compliance with the
registration rights provisions of the Subscription Agreement could create the
perception that all Shares that are a part of this Offering will soon be
available for sale, and this number of Shares is greater than the average
trading volume for our shares. No prediction can be made as to the effect, if
any, that market sales of such Shares will have on the market price of our
Common Stock. Sales of substantial amounts of such Shares in the public market
could adversely affect the market price of our Common Stock.
4. THE OFFERING PRICE OF THE SHARES MAY NOT BEAR ANY RELATIONSHIP
TO OUR ASSETS, BOOK VALUE, EARNINGS HISTORY, OR OTHER ESTABLISHED CRITERIA. AS A
RESULT, YOU MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The offering price of the Shares was established based on such factors
as our capital requirements, financial conditions and prospects, percentage of
ownership to be held by investors following this Offering, and the general
condition of securities markets at the time of the Offering. The offering price
does not necessarily bear any relationship to our assets, book value, earnings
history or other established criteria of value. As a result, you may experience
immediate and substantial dilution.
B-1
5. WE ARE UNABLE TO DETERMINE WITH CERTAINTY WHEN THE
REGISTRATION STATEMENT TO BE FILED WITH THE SEC WILL BE DECLARED EFFECTIVE.
CONSEQUENTLY, YOU MAY NOT BE ABLE TO SELL YOUR SHARES FOR A SUBSTANTIAL PERIOD
OF TIME.
Although we have undertaken to register the Shares for resale by you,
you should be aware that we are unable to determine with certainty when the
registration statement to be filed with the SEC will become effective. In
addition, the SEC may seek to review our registration statement, in which case,
the period necessary to achieve effectiveness of the registration statement with
the SEC will be affected by our ability to provide the SEC with sufficient
disclosures satisfactory to the SEC. The length of the SEC review process is
uncertain and may extend to a number of months. As you are aware, the Shares
being sold in this Offering are restricted in nature and may not be publicly
resold absent the effectiveness of the registration statement or pursuant to an
applicable exemption from registration. Consequently, you may not be able to
sell your Shares for a substantial period of time.
6. WE MAY ALLOCATE THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH
WHICH YOU MAY NOT AGREE.
We will have broad discretion in how we apply the net proceeds from
this Offering. Because the net proceeds of this Offering are not required to be
allocated to any specific investment or transaction, you cannot determine at
this time the value or appropriateness of our application of the net proceeds,
and you and other shareholders may not agree with our decisions. For example, we
may attempt to acquire other businesses or assets using a portion of the net
proceeds of this Offering which otherwise could have been used for working
capital. There can be no assurance that we will be able to acquire any desirable
businesses or assets or that, if acquired, that we will be able to successfully
develop or integrate such businesses or assets.
B-2
EXECUTION COPY
EXHIBIT C
Explanation of "BENEFICIAL OWNERSHIP"
Securities that are subject to a power to vote or dispose are deemed
beneficially owned by the person who holds such power, directly or indirectly.
This means that the same securities may be deemed beneficially owned by more
than one person, if such power is shared. In addition, the beneficial ownership
rules provide that shares which may be acquired upon exercise of an option or
warrant, or which may be acquired upon the termination of a trust, discretionary
account or similar arrangement, which can be effected within a period of 60 days
from the date of determination, are deemed to be "beneficially" owned.
Furthermore, shares that are subject to rights or powers even though such rights
or powers to acquire are not exercisable within the 60-day period may also be
deemed to be beneficially owned if the rights or powers were acquired "with the
purpose or effect of changing or influencing the control of the issuer or in
connection with or as a participant in any transaction having such purpose or
effect."
In determining whether securities are "beneficially owned," benefits
which are substantially equivalent to those of ownership by virtue of any
contract, understanding, relationship, agreement or other arrangement should
cause the securities to be listed as "beneficially owned."
Thus, for example, securities held for a person's benefit in the name
of others or in the name of any estate or trust in which such person may be
interested should also be listed. Securities held by a person's spouse, children
or other members of such person's family who are such person's dependents or who
live in such person's household should be listed as "beneficially owned" unless
such person does not enjoy benefits equivalent to those of ownership with
respect to such securities.
If a person has a proprietary or beneficial interest in a controlled
corporation, partnership, personal holding company, trust or estate which owns
of record or beneficially any securities, such person should state the amount of
such securities owned by such controlled corporation, partnership, personal
holding company, trust or estate in lieu of allocating such person's proprietary
interest, and by note or otherwise, please indicate that. In any case, the name
of the controlled corporation, partnership, personal holding company, or estate
must be stated.
In all cases the nature of the beneficial ownership should be stated.
