Exhibit 4.1
FORM OF SECURITIES PURCHASE AGREEMENT
Global Entertainment Corporation
0000 Xxxx XxXxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
The undersigned (the "INVESTOR") hereby confirms its agreement with you as
follows:
1. This Securities Purchase Agreement is made as of the date set forth below
between Global Entertainment Corporation, a Nevada corporation (the
"COMPANY"), and the Investor.
2. The Company has authorized the sale and issuance of 1,079,000 shares (the
"SHARES") of the common stock of the Company, $.001 par value per share
(the "COMMON STOCK"), together with warrants (the "WARRANTS") to purchase
an additional 107,900 shares of Common Stock, to certain investors in a
private placement (the "OFFERING"). The Shares and the Warrants are
sometimes collectively referred to herein as the "SECURITIES", and the
shares of Common Stock of the Company issuable upon exercise of the
Warrants are sometimes referred to herein as the "WARRANT SHARES".
3. The terms of the Offering contemplate that each purchaser will receive,
for a purchase price of $5.75, one Share together with a Warrant to
purchase an additional one-tenth of a Warrant Share; provided, however,
that no Warrants will be issued to purchase fractional shares and the
number of Warrant Shares subject to each Warrant will be rounded up or
down, as applicable, to the nearest whole share based on the total number
of Shares purchased by the Investor. The Company and the Investor agree
that the Investor will purchase from the Company and the Company will
issue and sell to the Investor, for an aggregate purchase price of
$________ (the "PURCHASE PRICE"), 1,079,000 Shares together with Warrants
to purchase an additional 107,900 Warrant Shares, subject to the Terms and
Conditions for Purchase of Securities attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein. Unless
otherwise requested by the Investor in Exhibit B, certificates
representing the Securities purchased by the Investor will be registered
in the Investor's name and address as set forth below.
4. The Investor represents that (a) it has had no position, office or other
material relationship within the past three (3) years with the Company or
its affiliates, (b) neither it, nor any group of which it is a member or
to which it is related, beneficially owns (including the right to acquire
or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any National Association of
Securities Dealers, Inc. ("NASD") member.
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Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
DATED AS OF: April ___, 2006
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[Investor Name]
By:
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Name:
Title:
Address:
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Facsimile: -----------------------------
AGREED AND ACCEPTED:
Global Entertainment Corporation
By: ____________________________
Name:
Title:
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ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES
1. AGREEMENT TO SELL AND PURCHASE THE SECURITIES; SUBSCRIPTION DATE.
1.1 PURCHASE AND SALE. At the Closing (as defined in Section 2), the
Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and subject to the conditions set forth herein, and at
the Purchase Price, the Securities described in paragraph 3 of the Securities
Purchase Agreement attached hereto (collectively with this Annex I and the other
exhibits attached hereto, this "AGREEMENT"). A form of Warrant described in
paragraph 3 of the Securities Purchase Agreement is attached hereto as Exhibit
A.
1.2 OTHER INVESTORS. As part of the Offering, the Company proposes
to enter into Securities Purchase Agreements in the same form as this Agreement
with certain other investors (the "OTHER INVESTORS"), and the Company expects to
complete sales of Securities to them. The Investor and the Other Investors are
sometimes collectively referred to herein as the "INVESTORS," and this Agreement
and the Securities Purchase Agreements executed by the Other Investors are
sometimes collectively referred to herein as the "AGREEMENTS." The Company may
accept executed Agreements from Investors for the purchase of Securities
commencing upon the date on which the Company provides the Investors with the
proposed purchase price and concluding upon the date (the "SUBSCRIPTION DATE")
on which the Company has notified Xxxxxx Capital Markets, LLC (in its capacity
as lead placement agent for the offering of Securities, the "LEAD PLACEMENT
AGENT") in writing that it will no longer accept Agreements for the purchase of
Securities in the Offering, but in no event shall the Subscription Date be later
than March 31, 2006. Each Investor must complete a Securities Purchase
Agreement, a Stock and Warrant Certificate Questionnaire (in the form attached
as Exhibit B hereto) and an Investor Questionnaire (in the form attached as
Exhibit C hereto) in order to purchase Securities in the Offering.
1.3 PLACEMENT AGENT FEES. The Investor acknowledges that the Company
intends to pay to each of Xxxxxx Capital Markets, LLC, Xxxxxxx Xxxxxx Xxxxxx and
Taglich Brothers, Inc. (as placement agents for the Securities, the "PLACEMENT
AGENTS") compensation in respect of the sale of Securities to the Investor,
including cash commissions, warrants to purchase Common Stock of the Company and
the reimbursement of certain costs and expenses.
2. DELIVERY OF THE SECURITIES AT CLOSING. The completion of the purchase
and sale of the Securities (the "CLOSING") shall occur on a date specified by
the Company and the Lead Placement Agent (the "CLOSING DATE"), which date shall
not be later than March 31, 2006 (the "OUTSIDE DATE"), and of which the
Placement Agents will notify the Investors in advance. At the Closing, the
Company shall deliver to the Investor one or more stock and warrant certificates
representing the Securities set forth in paragraph 3 of the Securities Purchase
Agreement, each such certificate to be registered in the name of the Investor
or, if so indicated on the Stock and Warrant Certificate Questionnaire attached
hereto as Exhibit B, in the name of a nominee designated by the Investor. In
exchange for the delivery of the stock and warrant certificates representing
such Securities, the Investor shall deliver the Purchase Price to the Company by
wire transfer of immediately available funds pursuant to the instructions set
forth on Exhibit D or
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otherwise pursuant to the Company's written instructions. On the Closing Date,
the Company shall cause Squire, Xxxxxxx & Xxxxxxx L.L.P., counsel to the
Company, to deliver to the Investors a legal opinion, dated the Closing Date,
substantially in the form attached hereto as Exhibit E (the "LEGAL OPINION").
The Company's obligation to issue and sell the Securities to the Investor
shall be subject to the following conditions, any one or more of which may be
waived by the Company: (a) prior receipt by the Company of an executed copy of
this Agreement; (b) completion of purchases and sales of Securities under the
Agreements with the Other Investors; (c) the accuracy in all material respects
of the representations and warranties made by the Investor in this Agreement on
the date hereof and, if different, on the Closing Date; (d) the fulfillment in
all material respects of the obligations of the Investor to be fulfilled by it
under this Agreement on or prior to the Closing; and (e) the absence of any
order, writ, injunction, judgment or decree that questions the validity of the
Agreements or the right of the Company or the Investor to enter into such
Agreements or to consummate the transactions contemplated hereby and thereby.
The Investor's obligation to purchase the Securities shall be subject to the
following conditions, any one or more of which may be waived by the Investor:
(a) the completion of purchases and sales under the Agreements with the Other
Investors for an aggregate purchase price of not less than ________ Million
Dollars ($________); (b) the delivery at Closing of the Legal Opinion to the
Investor by counsel to the Company; (c) the accuracy in all material respects of
the representations and warranties made by the Company in this Agreement on the
date hereof and, if different, on the Closing Date; (d) the fulfillment in all
material respects of the obligations of the Company to be fulfilled by it under
this Agreement on or prior to the Closing; (e) the absence of any order, writ,
injunction, judgment or decree that questions the validity of the Agreements or
the right of the Company or the Investor to enter into such Agreements or to
consummate the transactions contemplated hereby and thereby; and (f) the
delivery to the Investor by the Secretary or Assistant Secretary of the Company
of a certificate stating that the conditions specified in this paragraph have
been fulfilled. In the event that the Closing does not occur on or before the
Outside Date as a result of the Company's failure to satisfy any of the
conditions set forth above (and such condition has not been waived by the
Investor), the Company shall return any and all funds paid hereunder to the
Investor no later than one (1) Business Day following the Outside Date and the
Investors shall have no further obligations hereunder. For purposes of this
Agreement, "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which the American Stock Exchange or commercial banks located in
Phoenix, Arizona are permitted or required by law to close.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
hereby represents and warrants to, and covenants with, the Investor as of the
date hereof and the Closing Date, as follows:
3.1 ORGANIZATION. The Company is duly incorporated and validly
existing in good standing under the laws of the State of Nevada, and each of its
subsidiaries is duly incorporated and validly existing in good standing under
the laws of its respective state of incorporation. The Company and its
subsidiaries have full corporate power and authority to own, operate and occupy
their respective properties and to conduct their businesses as presently
conducted and each is registered or qualified to do business and in good
standing in each jurisdiction in which it owns or leases property or transacts
business and where the failure to be
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so qualified would have a Material Adverse Effect (as defined below), and no
proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification. For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" shall mean a material adverse effect on the financial condition,
properties, business, or results of operations of the Company and its
subsidiaries, taken as a whole, except that any of the following, either alone
or in combination, shall not be deemed a Material Adverse Effect: (i) effects
caused by changes or circumstances affecting general market conditions in the
U.S. economy or which are generally applicable to the industries in which the
Company operates, provided that such effects do not adversely affect the Company
in a disproportionate manner, (ii) effects resulting from or relating to the
announcement or disclosure of the sale of the Securities or other transactions
contemplated by this Agreement, or (iii) effects caused by any event, occurrence
or condition resulting from or relating to the taking of any action in
accordance with this Agreement.
3.2 DUE AUTHORIZATION. The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations under the
Agreements. The execution and delivery of the Agreements, and the consummation
by the Company of the transactions contemplated hereby and thereby, have been
duly authorized by all necessary corporate action and no further action on the
part of the Company or its Board of Directors or stockholders is required. The
Agreements have been validly executed and delivered by the Company and
constitute legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except to the extent (i)
rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, (ii) such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and (iii) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 NON-CONTRAVENTION. The execution and delivery of the Agreements,
the issuance and sale of the Securities to be sold by the Company under the
Agreements, the fulfillment of the terms of the Agreements and the consummation
of the transactions contemplated hereby and thereby will not (A) result in a
conflict with or constitute a violation of, or default (with the passage of time
or otherwise) under, (i) any material bond, debenture, note or other evidence of
indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which the Company or its properties are bound, (ii)
the Articles of Incorporation, by-laws or other organizational documents of the
Company, as amended, or (iii) any law, administrative regulation, ordinance or
order of any court or governmental agency, arbitration panel or authority
binding upon the Company or its properties or (B) result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction
whatsoever upon any of the material properties or assets of the Company or an
acceleration of indebtedness pursuant to any obligation, agreement or condition
contained in any material bond, debenture, note or any other evidence of
indebtedness or any material indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of the property or assets of the Company is subject. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body is required for the execution and delivery of the Agreements
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by the Company and the valid issuance or sale of the Securities by the Company
pursuant to the Agreements, other than such as have been made or obtained, and
except for any filings required to be made under federal or state securities
laws.
3.4 CAPITALIZATION. The outstanding capital stock of the Company as
of November 30, 2005 is as described in the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended November 30, 2005. The Company has not
issued any capital stock since November 30, 2005 other than through the exercise
of outstanding warrants or stock options that were reflected as outstanding as
of November 30, 2005 in such Quarterly Report on Form 10-QSB. The Securities to
be sold pursuant to the Agreements (including the Warrant Shares) have been duly
authorized, and when issued and paid for in accordance with the terms of the
Agreements, will be duly and validly issued, fully paid and nonassessable,
subject to no lien, claim or encumbrance (except for any such lien, claim or
encumbrance created, directly or indirectly, by the Investor). Assuming the
accuracy of the Investor's representations hereunder, the issuance by the
Company of the Securities, and the issuance of the Warrant Shares upon exercise
of the Warrants, is exempt from registration under the Securities Act of 1933
(as amended, the "SECURITIES ACT"). The outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with the registration requirements
of federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities.
Except as described in the SEC Reports (as defined in Section 4.9), there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable or
exercisable for, any unissued shares of capital stock or other equity interest
in the Company, or any contract, commitment, agreement, understanding or
arrangement of any kind to which the Company is a party and providing for the
issuance or sale of any capital stock of the Company, any such convertible,
exchangeable or exercisable securities or any such rights, warrants or options.
Without limiting the foregoing, (i) no preemptive right, co-sale right, right of
first refusal or other similar right exists with respect to the issuance and
sale of the Shares, the Warrants or the Warrant Shares, except as provided in
the Agreements and (ii) no securities or instruments containing anti-dilution or
similar provisions will be triggered by the issuance of the Shares, the Warrants
or the Warrant Shares. There are no shareholders agreements, voting agreements
or other similar agreements with respect to the Common Stock to which the
Company is a party. No stockholder of the Company or other party has any right
to require the Company to register in the Registration Statement the sale of any
shares owned or potentially owned by such stockholder (other than the Placement
Agents, who have certain registration rights with respect to warrants to be
issued to them as compensation relating to the Offering).
3.5 LEGAL PROCEEDINGS. There is no material legal or governmental
proceeding pending, or to the knowledge of the Company, threatened, to which the
Company is a party or of which the business or property of the Company is
subject that is required to be disclosed and that is not so disclosed in the SEC
Reports. The Company is not subject to any injunction, judgment, decree or order
of any court, regulatory body, administrative agency or other government body
that questions the validity of the Agreements or the rights of the Company to
enter into the Agreements and to consummate the transactions contemplated hereby
and thereby, or the terms of which are reasonably likely to have a Material
Adverse Effect.
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3.6 NO VIOLATIONS. The Company is not in violation of its Articles
of Incorporation, bylaws or other organizational documents, as amended, or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the
Company, which violation, individually or in the aggregate, is reasonably likely
to have a Material Adverse Effect, and the Company is not in default (and there
exists no condition which, with the passage of time or otherwise, would
constitute a default) in the performance of any bond, debenture, note or any
other evidence of indebtedness or any indenture, mortgage, deed of trust or any
other material agreement or instrument to which the Company is a party or by
which the Company or its properties are bound, which default is reasonably
likely to have a Material Adverse Effect.
3.7 GOVERNMENTAL PERMITS, ETC. The Company has all necessary
franchises, licenses, certificates and other authorizations from any foreign,
federal, state or local government or governmental agency, department or body
that are currently necessary for the operation of the business of the Company as
currently conducted, except where the failure to currently possess such
franchises, licenses, certificates and other authorizations is not reasonably
likely to have a Material Adverse Effect.
3.8 INTELLECTUAL PROPERTY.
(a) Except for matters which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect, (i) the
Company has ownership of, or a license or other legal right to use, all
patents, copyrights, trade secrets, trademarks, customer lists, designs,
manufacturing or other processes, computer software, systems, data
compilation, research results or other proprietary rights used in the
business of the Company (collectively, "INTELLECTUAL PROPERTY") and (ii)
all of the Intellectual Property owned by the Company consisting of
patents, registered trademarks and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights or the
corresponding offices of other jurisdictions and have been maintained and
renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and such other
jurisdictions.
(b) Except for matters which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect, all
material licenses or other material agreements under which (i) the Company
employs rights in Intellectual Property, or (ii) the Company has granted
rights to others in Intellectual Property owned or licensed by the Company
are in full force and effect, and there is no default by the Company with
respect thereto.
(c) The Company believes that it has taken all steps reasonably
required in accordance with sound business practice and business judgment
to establish and preserve the ownership of all material Intellectual
Property owned by the Company.
(d) Except for matters which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect, to the
knowledge of the Company, (i) the present business, activities and
products of the Company do not infringe any
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intellectual property of any other person; (ii) the Company is not making
unauthorized use of any confidential information or trade secrets of any
person; and (iii) the activities of any of the employees of the Company,
acting on behalf of the Company do not violate any agreements or
arrangements related to confidential information or trade secrets of third
parties.
(e) No proceedings are pending, or to the knowledge of the Company,
threatened in writing, which challenge the rights of the Company to the
use of Intellectual Property, except for matters which are not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.
3.9 FINANCIAL STATEMENTS. The financial statements of the Company
and the related notes contained in the SEC Reports present fairly and accurately
in all material respects the financial position of the Company as of the dates
therein indicated, and the results of its operations, cash flows and the changes
in shareholders' equity for the periods therein specified, subject, in the case
of unaudited financial statements for interim periods, to normal year-end audit
adjustments. As of their respective dates, such financial statements complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the Securities and Exchange Commission (the
"SEC") with respect thereto. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis at the times and throughout the periods
therein specified, except that unaudited financial statements may not contain
all footnotes required by generally accepted accounting principles.
3.10 NO MATERIAL ADVERSE CHANGE. Except as disclosed in Schedule
3.10, since November 30, 2005, there has not been (i) an event, circumstance or
change that has had or is reasonably likely to have a Material Adverse Effect,
(ii) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company, or (iii) any loss or damage (whether or not
insured) to the physical property of the Company which has had a or is
reasonably likely to have Material Adverse Effect.
3.11 AMEX COMPLIANCE. The Common Stock is registered pursuant to
Section 12(b) of the Securities Exchange Act of 1934 (as amended, the "EXCHANGE
ACT") and is listed on the American Stock Exchange ("AMEX"), and the Company has
taken no action intended to, or that could potentially have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from AMEX. Assuming the accuracy of the Investor's
representations hereunder, the issuance of the Securities does not require
shareholder approval, including, without limitation, pursuant to AMEX Rule 713.
3.12 REPORTING STATUS. The Company has timely (including extensions
permitted pursuant to the Exchange Act Rule 12b-25) made all filings required
under the Exchange Act during the twelve (12) months preceding the date of this
Agreement, and all of those documents complied in all material respects with the
SEC's requirements as of their respective filing dates, and the information
contained therein as of the respective dates thereof did not 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 light of the
circumstances under
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which they were made not misleading. The Company is currently eligible to
register the resale of the Shares and the Warrant Shares by the Investors
pursuant to a registration statement on Form S-3 under the Securities Act (the
"REGISTRATION STATEMENT").
3.13 NO MANIPULATION; DISCLOSURE OF INFORMATION. The Company has not
taken and will not take any action designed to or that might reasonably be
expected to cause or result in an unlawful manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares, the Warrants or the
Warrant Shares.
3.14 ACCOUNTANTS. Xxxxxx & Xxxxxx, LLP, who expressed their opinion
with respect to the consolidated financial statements to be incorporated by
reference from the Company's Annual Report on Form 10-KSB for the year ended May
31, 2005 into the Registration Statement and the prospectus which forms a part
thereof (the "PROSPECTUS"), have advised the Company that they are, and to the
knowledge of the Company they are, independent accountants as required by the
Securities Act and the rules and regulations promulgated thereunder.
3.15 CONTRACTS. Except for matters which are not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect and those
contracts that are substantially or fully performed or expired by their terms,
the contracts listed as exhibits to or described in the SEC Reports that are
material to the Company and all amendments thereto, are in full force and effect
on the date hereof, and neither the Company nor, to the Company's knowledge, any
other party to such contracts is in breach of or default under any of such
contracts.
3.16 TAXES. Except for matters which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect, the Company has
filed all necessary federal, state and foreign income and franchise tax returns
and has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened in writing
against the Company.
3.17 TRANSFER TAXES. On the Closing Date, all stock transfer or
other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Securities hereunder will be, or
will have been, fully paid or provided for by the Company and the Company will
have complied with all laws imposing such taxes.
3.18 INVESTMENT COMPANY. The Company is not an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended, and will not be deemed an "investment company" as a result of the
transactions contemplated by the Agreements.
3.19 INSURANCE. The Company maintains insurance of the types and in
the amounts that the Company reasonably believes is adequate for its businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.
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3.20 OFFERING PROHIBITIONS. The Company has not distributed and will
not distribute prior to the Closing Date any offering material in connection
with the offering and sale of the Securities other than the Confidential Private
Placement Memorandum dated March 17, 2006 (as amended or supplemented, the
"PRIVATE PLACEMENT MEMORANDUM"). Neither the Company nor any person acting on
its behalf or at its direction has in the past or will in the future take any
action to sell, offer for sale or solicit offers to buy any securities of the
Company which would bring the offer or sale of the Securities as contemplated by
this Agreement within the provisions of Section 5 of the Securities Act. Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D of the Securities Act) in connection with
the sale of the Securities. The Company shall be responsible for the payment of
any placement agent's fees, financial advisory fees, or brokers' commissions
(other than for persons engaged by an Investor or its investment advisor)
relating to or arising out of the transactions contemplated by the Agreements.
The Company shall pay, and hold the Investor harmless against, any liability,
loss or expense (including, without limitation, attorney's fees and
out-of-pocket expenses) arising in connection with any claims relating to
placement agent fees, financial advisory fees or brokers' commissions in
connection with the sale of the Securities by the Company. Other than the
Placement Agents, the Company has not engaged any placement agent or other agent
in connection with the sale of the Securities.
3.21 LISTING. The Company shall promptly secure the listing of all
Shares and Warrant Shares on AMEX and comply with all requirements of AMEX with
respect to the issuance of the Shares, the Warrants and the Warrant Shares and
the listing of the Shares and Warrant Shares on AMEX. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 3.21.
3.22 RELATED PARTY TRANSACTIONS. To the knowledge of the Company, no
transaction has occurred between or among the Company or any of its affiliates,
officers or directors or any affiliate or affiliates of any such officer or
director that with the passage of time will be required to be disclosed pursuant
to Section 13, 14 or 15(d) of the Exchange Act that has not been disclosed in
the SEC Reports.
3.23 BOOKS AND RECORDS. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the operations of, the Company. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances 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 accordance 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. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 under the
Exchange Act) that are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed in to ensure that information
required to be disclosed by the
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Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure.
3.24 FOREIGN CORRUPT PRACTICES. Neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company has, in the course of its actions for, or on behalf of, the Company (i)
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
3.25 XXXXXXXX-XXXXX ACT. The Company is in compliance with all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are applicable to
the Company as of the date hereof, and all applicable rules and regulations
promulgated by the SEC thereunder that are applicable to the Company as of the
date hereof, except where such noncompliance would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect.
3.26 DISCLOSURE. The Company confirms that neither it nor any other
person acting on its behalf has provided the Investor or its agents with any
information that constitutes or could reasonably be expected to constitute
material, nonpublic information (including, without limitation, any information
disclosed in the Private Placement Memorandum or otherwise), other than the
existence of the transactions contemplated hereby. The Company understands and
confirms that the Investor will rely on the foregoing representations in
effecting transactions in securities of the Company. No event or circumstance
has occurred or information exists with respect to the Company or its business,
properties, operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure (as opposed to voluntary public
disclosure) or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company's reports
filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act). The
Company acknowledges and agrees that the Investor is not making or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth herein and in the Investor
Questionnaire.
3.27 PROPOSED DIRECTORS. Promptly following the Closing, the Company
will appoint to its Board of Directors the persons identified on Exhibit F
attached hereto (or, if any such person is unwilling or unable to serve as a
member of the Company's Board of Directors, such other person(s) as shall be
acceptable to the Company and the Lead Placement Agent).
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.
4.1 INVESTOR KNOWLEDGE AND STATUS. The Investor represents and
warrants to, and covenants with, the Company that: (i) the Investor is an
"accredited investor" as defined
9
in Regulation D under the Securities Act, is knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to,
investments in securities presenting an investment decision similar to that
involved in the purchase of the Securities, has had the opportunity to ask
questions and receive answers concerning the terms and conditions of the
Offering, and has requested, received, reviewed and considered all information
it deemed relevant in making an informed decision to purchase the Securities;
(ii) the Investor understands that the Securities are "restricted securities"
and have not been registered under the Securities Act and is acquiring the
Securities set forth in paragraph 3 of the Securities Purchase Agreement in the
ordinary course of its business and for its own account for investment only, has
no present intention of distributing any of such Securities (or any Warrant
Shares) and has no arrangement or understanding with any other persons regarding
the distribution of such Securities (or any Warrant Shares) (provided, however,
that by making the representations herein, the Investor does not agree to hold
any of the Securities (or any Warrant Shares) for any minimum or other specific
term and reserves the right to dispose of the Securities (and any Warrant
Shares) at any time in accordance with or pursuant to an effective registration
statement or an exemption under the Securities Act); (iii) the Investor will
not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Securities (or any Warrant Shares) except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (iv) the Investor has answered all questions
in paragraph 4 of the Securities Purchase Agreement and the Investor
Questionnaire attached hereto as Exhibit C for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company promptly of any change in any of such
information until such time as the Investor has sold all of its Shares and
Warrant Shares or until the Company is no longer required to keep the
Registration Statement effective; and (vi) the Investor has, in connection with
its decision to purchase the Securities set forth in paragraph 3 of the
Securities Purchase Agreement, relied only upon the representations and
warranties of the Company contained herein and the information contained in the
Private Placement Memorandum and in the SEC Reports. The Investor understands
that the issuance of the Securities and the Warrant Shares to the Investor has
not been registered under the Securities Act, or registered or qualified under
any state securities law, in reliance on specific exemptions therefrom, which
exemptions may depend upon, among other things, the representations made by the
Investor in this Agreement. No person (including without limitation any of the
Placement Agents) is authorized by the Company to provide any representation
that is inconsistent with or in addition to those contained herein, in the
Private Placement Memorandum or in the SEC Reports, and the Investor
acknowledges that it has not received or relied on any such representations.
4.2 POWER AND AUTHORITY. The Investor represents and warrants to the
Company that (i) the Investor has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated hereby
and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and (ii) this Agreement constitutes a valid and
binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except to the extent (a) rights to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws, (b) such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights
10
generally and (c) such enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
4.3 SHORT POSITION. The Investor has not, prior to the Closing Date,
established any hedge or other position in the Common Stock that is outstanding
on the Closing Date and that is designed to or could reasonably be expected to
lead to or result in a disposition by the Investor or any other person or
entity. For purposes hereof, a "hedge or other position" would include, without
limitation, effecting any short sale or having in effect any short position
(whether or not such sale or position is against the box and regardless of when
such position was entered into) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to the
Common Stock or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Common Stock, including (without limitation) any "put
equivalent position" as defined in Rule 16a-1(h) under the Exchange Act.
4.4 NO INVESTMENT, TAX OR LEGAL ADVICE. The Investor understands
that nothing in the Private Placement Memorandum, the SEC Reports, this
Agreement, or any other materials presented to the Investor in connection with
the purchase and sale of the Securities 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 Securities. Without limiting the forgoing, the Investor
acknowledges that the law firm of Xxxxxxx & Xxxxx Xxxxxxx Xxxx LLP has served as
counsel to the Lead Placement Agent and that the law firm of Squire, Xxxxxxx &
Xxxxxxx L.L.P. has served as counsel to the Company, and that neither such firm
has represented or otherwise provided legal advice or counsel to the Investor in
connection with the transactions contemplated hereby.
4.5 CONFIDENTIAL INFORMATION. The Investor covenants that from the
date hereof it will maintain in confidence all material non-public information
regarding the Company received by the Investor from the Company, including the
receipt and content of any Suspension Notice (as defined in Section 6.2(d))
until such information (i) becomes generally publicly available other than
through a violation of this provision by the Investor or its agents or (ii) is
required to be disclosed in legal proceedings (such as by deposition,
interrogatory, request for documents, subpoena, civil investigation demand,
filing with any governmental authority or similar process); provided, however,
that before making any disclosure in reliance on this Section 4.5, the Investor
will give the Company at least fifteen (15) days prior written notice (or such
shorter period as required by law) specifying the circumstances giving rise
thereto and will furnish only that portion of the non-public information which
is legally required and will exercise its commercially reasonable efforts to
ensure that confidential treatment will be accorded any non-public information
so furnished.
4.6 ACKNOWLEDGMENTS REGARDING PLACEMENT AGENTS. The Investor
acknowledges that the Placement Agents have acted solely as placement agents for
the Company in connection with the Offering of the Securities by the Company,
and that the Placement Agents have made no representation or warranty whatsoever
with respect to the accuracy or completeness of information, data or other
related disclosure material that has been provided to the Investor. The Investor
further acknowledges that in making its decision to enter into this
11
Agreement and purchase the Securities, it has relied on its own examination of
the Company and the terms of, and consequences of holding, the Securities. The
Investor further acknowledges that the provisions of this Section 4.6 are for
the benefit of, and may be enforced by, any or all of the Placement Agents.
4.7 ADDITIONAL ACKNOWLEDGEMENT. The Investor acknowledges that it
has independently evaluated the merits of the transactions contemplated by this
Agreement, that it has independently determined to enter into the transactions
contemplated hereby, that it is not relying on any advice from or evaluation by
any Other Investor, and that it is not acting in concert with any Other Investor
in making its purchase of the Securities hereunder. The Investor has not taken
any actions that would deem the Investor to be a member of a "group" for
purposes of Section 13(d) of the Exchange Act.
4.8 DEEMED DISPOSITION. The Investor will not, prior to the date the
Registration Statement becomes effective, enter into any transaction, including
any hedging transaction, that constitutes a deemed disposition of any of the
Shares or Warrant Shares, that will be covered with Shares or Warrant Shares
registered pursuant to the Registration Statement.
4.9 SEC REPORTS. The Investor has received and reviewed copies of
the Company's Annual Report on Form 10-KSB for the fiscal year ended May 31,
2005 (and any amendments thereto filed at least two (2) Business Days prior to
the date hereof), the Company's Information Statement Relating to Annual
Election of Directors dated September 27, 2005, the Company's Quarterly Report
on Form 10-QSB for the fiscal quarter ended November 30, 2005 (and any
amendments thereto filed at least two (2) Business Days prior to the date
hereof) and each of the Company's Current Reports on Form 8-K filed since
December 1, 2005 and at least two (2) Business Days prior to the date hereof
(collectively, the "SEC REPORTS").
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Notwithstanding
any investigation made by any party to this Agreement or by any of the Placement
Agents, all covenants, agreements, representations and warranties made by the
Company and the Investor herein shall survive the execution of this Agreement,
the delivery to the Investor of the Securities being purchased and the payment
therefor.
6. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
6.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:
(a) subject to receipt of necessary information from the Investors,
prepare and file with the SEC, within fifteen (15) Business Days after the
Closing Date (the "REQUIRED FILING DATE"), a Registration Statement on
Form S-3 to enable the resale of the Shares and the Warrant Shares by the
Investors from time to time;
(b) use its best efforts, subject to receipt of necessary
information from the Investors, to cause the Registration Statement to
become effective as soon as practicable, but in no event later than ninety
(90) days after the Registration Statement is filed by the Company, or one
hundred and twenty (120) days in the event the SEC reviews such filing;
12
(c) use its best efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the
Prospectus as may be necessary to keep the Registration Statement current
and effective for a period ending on the earlier of (i) the second
anniversary of the Closing Date, (ii) the date on which the Investor may
sell all Shares and Warrant Shares pursuant to paragraph (k) of Rule 144
under the Securities Act or any successor rule ("RULE 144") or (iii) such
time as all Shares and Warrant Shares purchased by such Investor in this
Offering have been sold pursuant to a registration statement or Rule 144,
and to notify each Investor promptly upon the Registration Statement and
each post-effective amendment thereto, being declared effective by the
SEC;
(d) submit to the SEC, within three (3) Business Days after the
Company learns that no review of the Registration Statement will be made
by the staff of the SEC or that the staff of the SEC has no further
comments on the Registration Statement, as the case may be, a request for
acceleration of effectiveness of the Registration Statement to a time and
date not later than forty-eight (48) hours after the submission of such
request;
(e) ensure that the Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not
contain any 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 case of prospectuses, in the light of the
circumstances in which they were made) not misleading;
(f) furnish to the Investor such number of copies of the
Registration Statement and the Prospectus (including supplemental
prospectuses) as the Investor may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the
Shares and Warrant Shares by the Investor;
(g) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Investor; provided,
however, that the Company shall not be required to qualify to do business
or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented;
(h) bear all expenses (other than underwriting discounts and
commissions, if any) in connection with the procedures in paragraph (a)
through (g) of this Section 6.1 and the registration of the Shares and the
Warrant Shares pursuant to the Registration Statement;
(i) advise the Investors, promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the
initiation of any proceeding for that purpose; and it will promptly use
its commercially reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if such
stop order should be issued; and
13
(j) with a view to making available to the Investor the benefits of
Rule 144 and any other rule or regulation of the SEC that may at any time
permit the Investor to sell Shares and Warrant Shares to the public
without registration, the Company covenants and agrees to use its
commercially reasonable efforts to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, until
the earlier of (A) such date as all of the Investor's Shares and Warrant
Shares may be resold pursuant to Rule 144(k) or any other rule of similar
effect or (B) such date as all of the Investor's Shares and Warrant Shares
shall have been resold; (ii) file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities
Act and under the Exchange Act; and (iii) furnish to the Investor upon
request, as long as the Investor owns any Shares or Warrant Shares, (A) a
written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a copy of the
Company's most recent Annual Report on Form 10-KSB or Quarterly Report on
Form 10-QSB, and (C) such other information as may be reasonably requested
in order to avail the Investor of any rule or regulation of the SEC that
permits the selling of any such Shares or Warrant Shares without
registration. It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 6.1 that the Investor
shall furnish to the Company such information regarding itself, the Shares
and Warrant Shares to be sold by Investor, and the intended method of
disposition of such securities as shall be required to effect the
registration of the Shares and the Warrant Shares. The Company understands
that the Investor disclaims being an underwriter, but acknowledges that a
determination by the SEC that the Investor is deemed an underwriter shall
not relieve the Company of any obligations it has hereunder.
6.2 TRANSFER OR RESALE; SUSPENSION.
(a) The Investor understands that except as provided herein: (i) the
Securities (and the Warrant Shares) have not been and are not being
registered under the Securities Act or any state securities laws, and
neither the Shares, the Warrants nor the Warrant Shares may be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, or (B) the Investor shall have delivered to the Company an
opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such Shares or Warrant Shares to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption
from such registration; (ii) any sale of the Shares, Warrants or Warrant
Shares made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of Shares. Warrants or Warrant Shares under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as the term is defined in the Securities Act) may
require compliance with some other exemption under the Securities Act or
the rules and regulations of the SEC thereunder, and (iii) neither the
Company nor any other person is under an obligation to register the
Securities (or the Warrant Shares) under the Securities Act or any state
securities laws or to comply with the terms and conditions of any
exemption thereunder.
(b) The Investor understands that the certificates or other
instruments representing the Shares, the Warrants and the Warrant Shares
shall bear any legend as
14
required by the "blue sky" laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
(c) Except in the event that paragraph (d) below applies, the
Company shall: (i) if deemed necessary by the Company, prepare and file
from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a
supplement or amendment to any document incorporated therein by reference
or file any other required document so that such Registration Statement
will not 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 not misleading, and so that, as thereafter delivered to
purchasers of the Shares or Warrant Shares being sold thereunder, such
Prospectus will not 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 light of the circumstances under which
they were made, not misleading; (ii) provide the Investor copies of any
documents filed pursuant to Section 6.2(c)(i); and (iii) upon request,
inform each Investor who so requests that the Company has complied with
its obligations in Section 6.2(c)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet
been declared effective, the Company will notify the Investor to that
effect, will use its best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify
the Investor pursuant to Section 6.2(c)(i) hereof when the amendment has
become effective).
(d) Subject to paragraph (d) below, in the event: (i) of any request
by the SEC or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement or related Prospectus or for
additional information; (ii) of the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares or Warrant Shares for
sale in any jurisdiction or the initiation of any proceeding for such
purpose; or (iv) of any event or circumstance which necessitates the
making of any changes in the Registration Statement or Prospectus, or any
document incorporated or deemed to be incorporated therein by reference,
so that, in the case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
15
therein not misleading, and that in the case of the Prospectus, it will not
contain any 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; then
the Company shall promptly deliver a certificate in writing to the Investor (the
"SUSPENSION NOTICE") to the effect of the foregoing and, upon receipt of such
Suspension Notice, the Investor will refrain from selling any Shares or Warrant
Shares pursuant to the Registration Statement (a "SUSPENSION") until the
Investors are advised in writing by the Company that the current Prospectus may
be used, and has received copies of any additional or supplemental filings that
are incorporated or deemed incorporated by reference in any such Prospectus. In
the event of any Suspension, the Company will use its reasonable best efforts to
cause the use of the Prospectus so suspended to be resumed as soon as reasonably
practicable after delivery of a Suspension Notice to the Investors. In addition
to and without limiting any other remedies (including, without limitation, at
law or at equity) available to the Investor, the Investor shall be entitled to
specific performance in the event that the Company fails to comply with the
provisions of this Section 6.2(d).
(e) Notwithstanding the foregoing paragraphs of this Section 6.2,
the Company shall use its commercially reasonable efforts to ensure that (i) a
Suspension shall not exceed thirty (30) days individually, and (ii) no more than
two (2) Suspensions shall occur during any twelve (12) month period (each
Suspension that satisfies the foregoing criteria being referred to herein as a
"QUALIFYING SUSPENSION").
(f) If a Suspension is not then in effect, the Investor may sell
Shares and Warrant Shares under the Registration Statement, provided that it
complies with any applicable prospectus delivery requirements. Upon receipt of a
request therefor, the Company will provide an adequate number of current
Prospectuses to the Investor and to any other parties requiring such
Prospectuses.
(g) The legend set forth in Section 6.2(b) shall be removed and the
Company shall issue a certificate without such legend or any other legend to the
holder of the Shares, Warrants or Warrant Shares upon which it is stamped, if
(i) such securities are registered for resale under the Securities Act and such
registration statement is effective, or (ii) in connection with a sale,
assignment or other transfer, such holder provides the Company with an opinion
of counsel, in a form reasonably acceptable to the Company, to the effect that
such sale, assignment or transfer of such Shares or Warrant Shares may be made
without registration under the applicable requirements of the Securities Act.
The Company agrees that it shall, immediately prior to the Registration
Statement being declared effective, deliver to its transfer agent an opinion
letter of counsel, opining that at any time the Registration Statement is
effective, the transfer agent shall be authorized to issue, in connection with
the sale of the Shares or Warrant Shares, certificates representing such Shares
or Warrant Shares without restrictive legend, provided the Shares or Warrant
Shares are to be sold pursuant to the Prospectus contained in the Registration
Statement and the such Investor acknowledges its obligation to comply with
applicable prospectus delivery requirements. Upon receipt of such opinion, the
Company shall cause the transfer agent to confirm, for the benefit of the
Investor, that no further opinion of counsel is required at the time of transfer
in order to issue such Shares or
16
Warrant Shares without restrictive legend. Following the effective date of the
Registration Statement or at such earlier time as a legend is no longer required
for the Shares or Warrant Shares, the Company will use its commercially
reasonable efforts following the delivery by the Investor to the Company or the
Company's transfer agent of a legended certificate representing such Shares or
Warrant Shares, to deliver or cause to be delivered to the Investor or at the
Investor's direction a certificate representing such Shares or Warrant Shares
that is free from all restrictive and other legends. Following the effective
date of the Registration Statement and upon the delivery to the Investor of any
certificate representing Shares or Warrant Shares that is free from all
restrictive and other legends, the Investor agrees that any sale of such Shares
or Warrant Shares shall be made pursuant to the effective Registration Statement
and, in compliance with applicable prospectus delivery requirements, and in
accordance with the plan of distribution described therein or pursuant to an
available exemption from the registration requirements of the Securities Act. In
addition, provided that the Investor is not then an "affiliate" of the Company
as defined in applicable regulations of the SEC, the Company shall, at the
request of the Investor, remove the restrictive legend from any Shares or
Warrant Shares held by the Investor following the expiration of the holding
period required by Rule 144(k) under the Securities Act (or any successor rule).
6.3 INDEMNIFICATION. For the purpose of this Section 6.3:
(a) the term "SELLING SHAREHOLDER" shall mean the Investor, the
directors, officers, partners, members, employees, agents, representatives of,
and each person, if any, who controls the Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act;
(b) the term "REGISTRATION STATEMENT" shall include any final
Prospectus, exhibit, supplement or amendment included in or relating to, and any
document incorporated by reference in, the Registration Statement (or deemed to
be a part thereof) referred to in Section 6.1; and
(c) the term "UNTRUE STATEMENT" shall mean any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement or the Prospectus a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus), in the light of the circumstances under which they were made not
misleading.
(d) (i) The Company agrees to indemnify and hold harmless each
Selling Shareholder from and against any losses, claims, damages or liabilities
to which such Selling Shareholder may become subject (under the Securities Act
or otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon (a) any
untrue statement of a material fact contained in the Registration Statement or
the Prospectus; (b) any inaccuracy in the representations and warranties of the
Company contained in the Agreement or the failure of the Company to perform its
obligations hereunder; or (c) any breach by the Company of any of its
representations and warranties in this Agreement or the failure by the Company
to comply with any agreement or covenant contained in this Agreement or to
17
fulfill any undertaking included in the Registration Statement, and the Company
will reimburse such Selling Shareholder for any reasonable legal expense or
other actual accountable out of pocket expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement made in such Registration Statement or the
Prospectus in reliance upon and in conformity with written information furnished
to the Company by such Selling Shareholder specifically for use in preparation
of the Registration Statement, or any inaccuracy in representations made by such
Selling Shareholder herein or in the Investor Questionnaire, or the failure of
such Selling Shareholder to comply with its covenants and agreements contained
herein, or any statement or omission in any Prospectus that is corrected in any
subsequent Prospectus that was delivered to the Selling Shareholder prior to the
pertinent sale or sales by the Selling Shareholder.
(ii) The Investor agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of
the Company) from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of, or are
based upon, (a) any inaccuracy in the representations made by the
Investor herein or in the Investor Questionnaire, (b) any failure by
the Investor to comply with the covenants and agreements contained
herein, or (c) any untrue statement of a material fact contained in
the Registration Statement or the Prospectus if, and only if, (i)
such untrue statement was made in reliance upon and in conformity
with written information furnished by the Investor specifically for
use in preparation of the Registration Statement or (ii) such untrue
statement or omission was contained in a Prospectus delivered to a
purchaser by the Investor that was corrected in a subsequent
Prospectus that was delivered to the Investor prior to the pertinent
sale or sales by the Investor, and the Investor will reimburse the
Company (or such officer, director or controlling person), as the
case may be, for any reasonable legal expense or other actual
accountable out-of-pocket expenses reasonably incurred in
investigating, defending or preparing to defend any such action,
proceeding or claim. The Investor's obligation to indemnify
(including any reimbursement obligation) shall be limited to the net
amount of the proceeds received by the Investor from the sale of the
Shares and Warrant Shares pursuant to the Registration Statement.
(iii) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to
this Section 6.3, such indemnified person shall notify the
indemnifying person
18
in writing of such claim or of the commencement of such action, but
the omission to so notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party under
this Section 6.3 (except to the extent that such omission materially
and adversely affects the indemnifying party's ability to defend
such action) or from any liability otherwise than under this Section
6.3. Subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person, the
indemnifying person shall be entitled to participate therein, and,
to the extent that it shall elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from
such indemnified party, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof
(unless it has failed to assume the defense thereof and appoint
counsel reasonably satisfactory to the indemnified party), such
indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified
person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that
would make it inappropriate, in the reasonable opinion of counsel to
the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person;
provided, however, that no indemnifying person shall be responsible
for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified
parties. In no event shall any indemnifying person be liable in
respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written
consent of the indemnified person, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified
person is or could reasonably have been a party and indemnification
could have been sought hereunder by such indemnified person, unless
such settlement includes an unconditional release of such
indemnified person from all liability on claims that are the subject
matter of such proceeding.
(iv) If the indemnification provided for in this Section 6.3
is unavailable to or insufficient to hold harmless an indemnified
party under subsection (d)(i) or (d)(ii) above in respect of any
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and the
Investor on the other in connection with the
19
statements or omissions or other matters which resulted in such
losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other
things, in the case of an untrue statement, whether the untrue
statement relates to information supplied by the Company on the one
hand or the Investor on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such untrue statement. The Company and the Investor agree
that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation (even if
the Investors were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the
equitable considerations referred to above in this subsection (d).
The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this
subsection (d), the Investor shall not be required to contribute any
amount in excess of the net amount of the proceeds received by the
Investor from the sale of the Shares and Warrant Shares pursuant to
the Registration Statement. 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
Investor's obligation in this subsection to contribute is several
with the Other Investors in proportion to their sales of Shares and
Warrant Shares to which such loss relates and not joint. The parties
to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 6.3, and are fully
informed regarding said provisions. They further acknowledge that
the provisions of this Section 6.3 fairly allocate the risks in
light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in
the Registration Statement as required by the Securities Act and the
Exchange Act.
6.4 TERMINATION OF RESTRICTIONS. The restrictions imposed hereunder upon
the transferability of the Shares, Warrants and Warrant Shares shall cease and
terminate as to any particular number of the Shares or Warrant Shares when such
Shares or Warrant Shares shall have been effectively registered under the
Securities Act and sold or otherwise disposed of in accordance with the intended
method of disposition set forth in the Registration Statement covering such
Shares or Warrant Shares or at such time as an opinion of counsel satisfactory
to the Company shall have been rendered to the effect that such restrictions are
not necessary in order to comply with the Securities Act.
20
6.5 INFORMATION AVAILABLE. So long as the Registration Statement is
effective covering the resale of Shares and Warrant Shares owned by the
Investor, the Company will furnish (or, to the extent such information is
available electronically through the Company's filings with the SEC, the Company
will make available) to the Investor:
(a) as soon as practicable after it is available, one copy of (i)
its Annual Report to Shareholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted
accounting principles by a national firm of certified public accountants)
and (ii) if not included in substance in the Annual Report to
Shareholders, its Annual Report on Form 10-KSB (the foregoing, in each
case, excluding exhibits);
(b) upon the reasonable request of the Investor, all exhibits
excluded by the parenthetical to subparagraph (a)(ii) of this Section 6.5
as filed with the SEC and all other information that is made available to
shareholders; and
(c) upon the reasonable request of the Investor, an adequate number
of copies of the Prospectuses to supply to any other party requiring such
Prospectuses; and the Company, upon the reasonable request of the
Investor, will meet with the Investor or a representative thereof at the
Company's headquarters during the Company's normal business hours to
discuss all information relevant for disclosure in the Registration
Statement covering the Shares and Warrant Shares and will otherwise
reasonably cooperate with the Investor conducting an investigation for the
purpose of reducing or eliminating the Investor's exposure to liability
under the Securities Act, including the reasonable production of
information at the Company's headquarters; provided, that the Company
shall not be required to disclose any confidential information to or meet
at its headquarters with the Investor until and unless the Investor shall
have entered into a confidentiality agreement in form and substance
reasonably satisfactory to the Company with the Company with respect
thereto.
6.6 PUBLIC STATEMENTS. The Company shall, on or before 8:30 a.m.,
New York City Time, on the Business Day following the Closing Date, issue a
press release describing the material terms of the transactions contemplated by
the Agreements (which press release shall comply with the provisions of Rule
135c under the Exchange Act) and, within the time required by applicable SEC
regulations, shall file a Current Report on Form 8-K describing the terms of the
transactions contemplated by the Agreements in the form required by the Exchange
Act, and attaching the form of the Agreements an exhibit to such filing
(including all attachments). The Company will not issue any public statement,
press release or any other public disclosure listing the Investor as one of the
purchasers of the Securities without the Investor's prior written consent,
except as may be required by applicable law or rules of the AMEX or any other
stock exchange or market on which the Company's securities are listed or traded.
7. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be delivered (A) if within the United
States, by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if from
outside the United States, by International Federal Express (or
21
comparable service) or facsimile, and shall be deemed given (i) if delivered by
first-class registered or certified mail domestic, upon the Business Day
received, (ii) if delivered by nationally recognized overnight carrier, one (1)
Business Day after timely delivery to such carrier, (iii) if delivered by
International Federal Express (or comparable service), two (2) Business Days
after timely delivery to such carrier, (iv) if delivered by facsimile, upon
electric confirmation of receipt and shall be addressed as follows, or to such
other address or addresses as may have been furnished in writing by a party to
another party pursuant to this paragraph:
(a) if to the Company, to:
Global Entertainment Corporation
0000 Xxxx XxXxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 000000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxx Capital Markets, LLC
0000 Xxxx XxXxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Investor, at its address on the signature page to the
Securities Purchase Agreement.
8. AMENDMENTS; WAIVER. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Investor. Any waiver of a provision of this Agreement must be in writing and
executed by the party against whom enforcement of such waiver is sought.
9. HEADINGS. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
22
10. ENTIRE AGREEMENT; SEVERABILITY. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. If any provision contained in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
11. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Arizona, without giving
effect to the principles of conflicts of law.
12. COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
13. INDEPENDENT NATURE OF INVESTOR'S OBLIGATIONS AND RIGHTS. The
obligations of the Investor under the Agreement is several and not joint with
the obligations of any Other Investor, and the Investor shall not be responsible
in any way for the performance of the obligations of any Other Investor under
the Agreements. Nothing contained herein or in ay other Agreement, and no action
taken by any Investor pursuant hereto or thereto, shall be deemed to constitute
the Investors as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Investors are in any way acting
in concert or as a group with respect to such obligations or the transactions
contemplated by the Agreements and the Company acknowledges that the Investors
are not acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Agreements. The Investor confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. The Investor shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Agreements, and it shall not be necessary for any Other Investor to be joined as
an additional party in any proceeding for such purpose.
[remainder of page intentionally left blank]
23
EXHIBIT A
FORM OF WARRANT
[Intentionally omitted - on file with Company]
A-24
EXHIBIT B
STOCK AND WARRANT CERTIFICATE QUESTIONNAIRE
[Intentionally omitted - on file with Company]
B-1
EXHIBIT C
INVESTOR QUESTIONNAIRE
[Intentionally omitted - on file with Company]
D-1
EXHIBIT D
CLOSING ESCROW ACCOUNT INFORMATION
[Intentionally omitted - on file with Company]
D-2
EXHIBIT E
FORM OF LEGAL OPINION OF COMPANY COUNSEL
[Intentionally omitted - on file with Company]
F-1
EXHIBIT F
PROPOSED DIRECTORS
[Intentionally omitted - on file with Company]
F-2
