Exhibit 99.1
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
XXXXXXX.XXX, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of April 27, 2000
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"), dated as
of April 27, 2000, among XxxXxxx.xxx, Inc., a Delaware corporation (the
"Company"), and the investors signatory hereto (each such investor is a
"Purchaser" and all such investors are, collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company, an
aggregate principal amount of $32,000,000 of the Company's 6.75% Convertible
Debentures, in the tranches described in this Agreement, which shall be in the
form of Exhibit A (the "Debentures"), and which are convertible into shares of
the Company's common stock, $.001 par value per share (the "Common Stock").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase from the Company an
aggregate principal amount of $12,000,000 of Debentures (the "Initial Tranche
Debentures"), an aggregate principal amount of $10,000,000 of additional
Debentures in an additional closing (the "Second Tranche Debentures") and an
aggregate principal amount of $10,000,000 of additional Debentures in an
additional closing (the "Third Tranche Debentures").
1.2 (a) The Initial Tranche Closing. (i) The closing of the purchase
and sale of the Initial Tranche Debentures (the "Initial Closing") shall take
place at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
("Xxxxxxxx Xxxxxxxxx"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
immediately following the execution hereof or such later date as the parties
shall agree. The date of the Initial Closing is hereinafter referred to as the
("Initial Closing Date").
(ii) At the Initial Closing, the parties shall deliver or shall
cause to be delivered the following: (A) the Company shall deliver to each
Purchaser (1) Debentures in the aggregate principal amount for Initial Tranche
Debentures indicated below such Purchaser's name on the signature page to this
Agreement, registered in the name of such Purchaser, (2) a Common Stock purchase
warrant, in the form of Exhibit D, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire the number of
shares of Common Stock providing a 25% Warrant coverage for the principal amount
of Debentures being acquired (collectively, the "Initial Tranche Warrants"), (3)
a legal opinion of Xxxxx & Xxxxxxx, L.L.P., outside counsel to the Company, in
the form of Exhibit C, (4) an executed Registration Rights Agreement, dated the
date hereof, among the Company and the Purchasers,
in the form of Exhibit B (the "Registration Rights Agreement"), and (5) Transfer
Agent Instructions, in the form of Exhibit E, delivered to and acknowledged by
the Company's transfer agent (the "Transfer Agent Instructions"); and (B) each
Purchaser shall deliver to the Company (1) the purchase price indicated below
such Purchaser's name on the signature page to this Agreement in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose, and (2) an executed Registration
Rights Agreement and Convertible Debentures Purchase Agreement.
(b)(i) The Second and Third Closings. Subject to the terms and
conditions set forth in this Agreement, the Company and the Purchaser shall have
the right to deliver a written notice to the other (the "Second Tranche Notice"
and the "Third Tranche Notice" as applicable), requiring each other to either
sell or buy (severally, and not jointly), as the case may be, additional
Debentures (1) The Second Tranche Notice may be delivered no earlier than the
150th day following the date on which the Underlying Shares Registration
Statement (as defined in Section 2(g)) is first declared effective by the
Securities and Exchange Commission (the "Commission") (such date, the "Effective
Date"); provided, that if the Effective Date for the Underlying Shares
Registration Statement required to be filed following the Initial Closing shall
have occurred by the 60th day following the Initial Closing Date, then the
Second Tranche Notice may first be delivered on September 25, 2000, and (2) the
Third Tranche Notice may be delivered no earlier than the 300th day following
the Effective Date, provided, that, if the Effective Date for the Underlying
Shares Registration Statement required to be filed following the Second Closing
shall have occurred by the 30th day following the Second Closing Date, then the
Third Tranche Notice may first be delivered on December 22, 2000. In no case
shall the closing of the purchase and sale of the Second Tranche Debentures and
Second Tranche Warrants (the "Second Closing Date") or the closing of the
purchase and sell of the Third Tranche Debentures and Third Tranche Warrants
(the "Third Closing Date") take place unless and until all of the conditions
listed in Section 4.2 have been satisfied by the Company or waived by the
Purchasers. Each of the First Closing Date and the Third Closing Date are
collectively the "Closings", and each of the Second Closing and Third Closing
are sometimes referred to as an "Additional Closing". The date of the Second
Tranche Closing is hereinafter referred to as the "Second Closing Date" and the
date of the Third Tranche Closing is hereinafter referred to as the "Third
Closing Date". Each of the Initial Closing Date, Second Closing Date and Third
Closing Date are sometimes referred to as a "Closing Date".
(ii) At the Second Closing, the parties shall deliver or shall cause
to be delivered the following: (A) the Company shall deliver to each Purchaser
(1) Second Tranche Debentures in the aggregate principal amount indicated below
such Purchaser's name on the signature page to this Agreement, (2) a Common
Stock purchase warrant, in the form of Exhibit D, pursuant to which such
Purchaser shall have the right to acquire the number of shares of Common Stock
providing a 25% Warrant coverage for the principal amount of Debentures being
acquired (all warrants issued to Purchasers at the Second Closing are referred
to herein as the "Second Tranche Warrants"), and (3) all other certificates and
instruments required hereunder to be delivered by the Company at or prior to the
Second Closing; and (B) each Purchaser shall deliver to the Company the purchase
price for Second Tranche Debentures indicated below such Purchaser's name on the
signature page to this Agreement in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose.
(iii) At the Third Closing, the parties shall deliver or shall cause
to be delivered the following: (A) the Company shall deliver to each Purchaser
(1) Third Tranche Debentures in the aggregate principal amount indicated below
such Purchaser's name on the signature page to this Agreement, (2) a Common
Stock purchase warrant, in the form of Exhibit D, pursuant to which such
Purchaser shall have the right to acquire the number of shares of Common Stock
providing a 25% Warrant coverage for the principal amount of Debentures being
acquired (all warrants issued to Purchasers at the Third Closing are referred to
herein as the "Third Tranche Warrants") and the Initial Tranche Warrants, Second
Tranche Warrants and Third Tranche Warrants are sometimes collectively referred
to herein as the "Warrants"), and (3) all other certificates and instruments
required hereunder to be delivered by the Company at or prior to the Third
Closing; and (B) each Purchaser shall deliver to the Company the purchase price
for Third Tranche Debentures indicated below such Purchaser's name on the
signature page to this Agreement in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose.
1.3 Certain Defined Terms. For purposes of this Agreement,
"Conversion Price," "Original Issue Date" and "Trading Day" shall have the
meanings set forth in the Debentures; "Business Day" shall mean any day except
Saturday, Sunday and any day which shall be a federal legal holiday in the
United States or a day on which banking institutions in the State of New York or
the Commonwealth of Virginia are authorized or required by law or other
governmental action to close. A "Person" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is an entity,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in
good standing, as the case may be, could not, individually or in the aggregate,
(x) adversely affect the legality, validity or enforceability of the Securities
(as defined below) or any of this Agreement, the Registration Rights Agreement,
the Transfer Agent Instructions (collectively, the "Transaction Documents"), (y)
have or result in a material adverse effect on the results of operations,
assets, prospects, or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate or articles of incorporation,
by-laws or other charter or organizational documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except
as disclosed in Schedule 2.1(c), the Company owns all of the capital stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of securities of the Company or any Subsidiary
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company or any Subsidiary by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the
Debentures and the Warrants and except as disclosed in Schedule 2.1(c), there
are no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
(d) Issuance of the Debentures and the Warrants. The
Debentures and the Warrants will be duly and validly issued, free and clear of
all liens, encumbrances and rights of first refusal of any kind (collectively,
"Liens"). On the date hereof and on each Closing Date, the Company will have
(and will, at all times while Debentures and Warrants are outstanding, maintain)
an adequate reserve of duly authorized shares of Common Stock, reserved for
issuance to the holders of such Debentures and Warrants, to enable it to perform
its conversion, exercise and other obligations thereunder. The Company has duly
reserved 15,000,000 shares of Common Stock for issuance to the Purchasers as
Underlying Shares upon conversion of the Initial Tranche Debentures and Initial
Tranche Warrants. The shares of Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants are collectively
referred to herein as the "Underlying Shares." The Debentures, the Warrants and
the Underlying Shares are collectively referred to herein as, the "Securities."
When issued in accordance with the Debentures and the Warrants, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable,
free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Commission of the registration statements meeting
the requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchasers (each, an "Underlying Shares
Registration Statement" and collectively the "Underlying Shares Registration
Statements"), (iii) applicable Blue Sky filings, and (iv) in all other cases
where the failure to obtain such consent, waiver, authorization or order, or to
give such notice or make such filing or registration could not have or result
in, individually or in the aggregate, a Material Adverse Effect (collectively,
the "Required Approvals").
(g) Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, individually or in the aggregate,
have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgement or order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents" and,
together with the Schedules to this Agreement the "Disclosure Materials") on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as required under the Exchange Act. The
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since March 31, 2000, except as
specifically disclosed in the SEC Documents or Schedule 2.1(j), (a) there has
been no event, occurrence or development that has or that could result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (c) the Company
has not altered its method of accounting or the identity of its auditors and (d)
the Company has not declared or made any payment or distribution of cash or
other property to its stockholders or officers or directors (other than in
compliance with existing Company stock option plans with respect to its capital
stock, stock purchase plan and earnout agreements with acquired companies), or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable to Cardinal
Capital Management, Inc. by the Company, no fees or commissions will be payable
by the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person, with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor, to the
Company's knowledge, any Person acting on the Company's behalf has solicited any
offer to buy or sell the Securities by means of any form of general solicitation
or advertising.
(n) Seniority. As of the date of this Agreement, no
indebtedness of the Company is senior to the Debentures in right of payment,
whether with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money security interests
(which will be senior as to underlying assets covered thereby) and capital lease
obligations (as to the property covered thereby).
(o) Listing and Maintenance Requirements. Except as set forth
in the SEC Documents, the Company has not, in the twelve months preceding the
date hereof received written notice from any stock exchange, market or trading
facility on which the Common Stock is or has been listed (or on which it has
been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, market
or trading facility. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
(p) Patents and Trademarks. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective business as described in the SEC Documents where the failure to so
have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon the rights of any Person where such
failure could have or result in a Material Adverse Effect. To the best knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights where such failure could have or result in a Material Adverse
Effect.
(q) Registration Rights; Rights of Participation. Except as
set forth on Schedule 6(b) to the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(r) Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(s) Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company and its Subsidiaries. Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and its Subsidiaries are
in compliance and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.
(t) Absence of Certain Proceedings. Except as described in the
SEC Documents, (i) neither the Company nor any Subsidiary, nor any director or
officer thereof, is or
has been the subject of any Action involving (A) a claim of violation of or
liability under federal or state securities laws or (B) a claim of breach of
fiduciary duty; (ii) the Company does not have pending before the Commission any
request for confidential treatment of information and the Company has no
knowledge of any expected such request that would be made prior to the
Effectiveness Date (as defined in the Registration Rights Agreement); and (iii)
there has not been, and to the best of the Company's knowledge there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.
(v) Labor Relations. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(w) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of this Agreement and the Registration Rights Agreement and the
consummation by it of the transaction contemplated hereby and thereby, including
purchase by such Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed by such Purchaser,
and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of the Registration Rights Agreement to sell or otherwise dispose of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state
securities laws. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute the
Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, on each Closing Date it
will be and at each exercise date under its respective Warrants, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or to the best knowledge of such Purchaser, subsequent
to any advertisement, article, notice or other communication regarding the
Securities 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.
(h) Change of Control. Such Purchaser understands and agrees
that the Company has made no representation or warranty regarding any future
Change of Control Transactions (as defined below) and has not discussed any such
event with such Purchaser.
(i) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a
private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption, depends in part on,
and the Company will rely upon the accuracy and truthfulness of, the foregoing
representations and such Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company, without requiring a
legal opinion as described in the immediately preceding sentence, hereby
consents to and agrees to register on the books of the Company and with any
transfer agent for the securities of the Company any transfer of Securities by a
Purchaser to an Affiliate of such Purchaser or to one or more funds or managed
accounts under common management with such Purchaser, and any transfer among any
such Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement. The Purchasers may not transfer Debentures or
Warrants to a competitor of the Company without the prior consent of the
Company.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Debentures or exercise of the Warrants
occurs at any time while an Underlying Shares Registration Statement for the
applicable Underlying Shares is effective under the Securities Act or, in the
event there is not an effective Underlying Shares Registration Statement, at
such time, in the opinion of counsel to the Company, such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on Effective Date
for each Underlying Shares Registration Statement. The Company agrees that, in
the event any Underlying Shares are issued with a legend in accordance with this
Section 3.1(b), it will, within three Trading Days after request therefor by a
Purchaser, provide such Purchaser with a certificate or certificates
representing such Underlying Shares, free from such legend at such time as such
legend would not have been required under this Section 3.1(b) had such issuance
occurred on the date of such request. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Debentures and (ii)
exercise of the Warrants will result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Underlying Shares
upon (x) conversion of the Debentures and (y) exercise of the Warrants is
unconditional and absolute, subject to the limitations set forth in the
Debentures or in the Warrants, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including causing its attorneys to render and deliver any legal opinion required
in order to permit a Purchaser to sell Underlying Shares under Rule 144 upon
notice of an intention to sell or other form of notice having a similar effect.
Upon the request of any such Person, the Company shall deliver to such Person a
written certification
of a duly authorized officer as to whether it has complied with such
requirements.
3.4 Integration. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares. If on any date the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from (a) issuing (a) 175% of the number of Underlying
Shares as would then be issuable upon a conversion in full of the Debentures,
and (b) the number of Underlying Shares issuable upon exercise in full of the
Warrants (the "Current Required Minimum"), in either case, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate of incorporation to
increase the number of shares of Common Stock which the Company is authorized to
issue to at least such number of shares as reasonably requested by the
Purchasers in order to provide for such number of authorized and unissued shares
of Common Stock to enable the Company to comply with its issuance, conversion,
exercise and reservation of shares obligations as set forth in this Agreement,
the Debentures and the Warrants (the sum of (x) the number of shares of Common
Stock then outstanding plus all shares of Common Stock issuable upon exercise of
all outstanding options, warrants and convertible instruments, and (y) the
Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the earlier to occur of (x)
the 25th day after the date on which the Commission shall have indicated that
they approve of or have no further comments on the preliminary proxy materials
to be delivered by the Company to its shareholders in connection with the
meeting contemplated by this Section and (y) the 90th day after request by a
holder of a conversion or other issuance that would require the actions
contemplated in this Section) and (c) within five Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
(i) in the time and manner required by any national securities exchange, market,
trading or quotation facility on which the Common Stock is then traded, prepare
and file with such national securities exchange or market or trading or
quotation facility on which the Common Stock is then listed for trading an
additional shares listing application covering a number of shares of Common
Stock which is not less than the Initial Minimum, (ii) take all steps necessary
to cause such shares of Common Stock to be approved for listing on any such
national securities exchange or market or trading or quotation facility on which
the Common Stock is then listed as soon as possible thereafter, and (iii)
provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon. If the number of Underlying
Shares issuable
upon conversion in full of the then outstanding Debentures and
upon exercise of the then unexercised portion of the Warrants exceeds 85% of the
number of Underlying Shares previously listed on account thereof with any such
required exchanges, then the Company shall take the necessary actions to list
immediately a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Debentures in full and upon exercise
in full of the Warrants in accordance with this Agreement, the Debentures and
the Warrants, respectively, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
3.7 Conversion and Exercise Procedures. The Transfer Agent
Instructions, Conversion Notice (as defined in the Debentures) and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the conversion of the Debentures and exercise of the Warrants,
including the form of legal opinion, if necessary, that shall be rendered to the
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to convert their Debentures and
exercise their Warrants.
3.8 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Debentures and exercises of the Warrants and
shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debentures and the Warrants.
3.9 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale or grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities including the issuance of any debt or other instrument at any time
over the life thereof convertible into or exchangeable for Common Stock, or any
other transaction intended to be exempt or not subject to registration under the
Securities Act (a "Subsequent Placement") for a period of 90 Trading Days after
the Effective Date for the immediately preceding Closing or the expiration
without a Closing of the time during which a Closing may take place hereunder,
provided, that such 90 Trading Day period shall be extended for the number of
Trading Days during such period (A) in which trading in the Common Stock is
suspended by the Nasdaq Stock Market or such market or quotation system on which
the Common Stock is then listed, or (B) during which the Underlying Shares
Registration Statement is not effective, or (C) during which the prospectus
included in the Underlying Shares Registration Statement may not be used by the
holders thereof for the resale of Underlying Shares, except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan or stock
purchase plan heretofore or hereinafter duly adopted by the Company, (ii) shares
of Common Stock issuable upon exercise of any currently outstanding warrants and
upon conversion of any currently outstanding convertible securities of the
Company or pursuant to existing obligations, in each case disclosed in Schedule
2.1(c), and (iii) shares of
Common Stock issuable upon conversion of Debentures and upon exercise of the
Warrants in accordance with the Debentures or the Warrants, unless (A) the
Company delivers to each of the Purchasers a written notice (the "Subsequent
Placement Notice") of its intention to effect such Subsequent Placement, which
Subsequent Placement Notice shall describe in reasonable detail the proposed
terms of such Subsequent Placement, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Placement shall be effected,
and attached to which shall be a term sheet or similar document relating thereto
and (B) such Purchaser shall not have notified the Company by 5:00 p.m. (New
York City time) by the fifth Trading Day after its receipt of the Subsequent
Placement Notice of its willingness to provide (or to cause its sole designee to
provide), subject to completion of mutually acceptable documentation, financing
to the Company on the same terms set forth in the Subsequent Placement Notice.
If the Purchasers shall fail to notify the Company of their intention to enter
into such negotiations within such time period, the Company may effect the
Subsequent Placement substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Placement Notice;
provided, that the Company shall provide the Purchasers with a second Subsequent
Placement Notice, and the Purchasers shall again have the right of first refusal
set forth above in this paragraph (a), if the Subsequent Placement subject to
the initial Subsequent Placement Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Placement Notice within thirty
Trading Days after the date of the initial Subsequent Placement Notice with the
Person (or an Affiliate of such Person) identified in the Subsequent Placement
Notice. If the Purchasers shall indicate a willingness to provide financing in
excess of the amount set forth in the Subsequent Placement Notice, then each
Purchaser shall be entitled to provide financing pursuant to such Subsequent
Placement Notice up to an amount equal to such Purchaser's pro-rata portion of
the aggregate principal amount of Debentures purchased by such Purchaser under
this Agreement, but the Company shall not be required to accept financing from
the Purchasers in an amount in excess of the amount set forth in the Subsequent
Placement Notice.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement to be registered, in an Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph (a)(i)- (iii) of
Section 3.9(a), the Company shall not, for a period of not less than 90 Trading
Days after each Effective Date without the prior written consent of the
Purchasers (i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) permit to be declared effective any registration
statement which registers any securities of the Company. Any days that a
Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 Trading Day period for the
purposes of (i) and (ii) above. The restriction set forth in this Section 3.9(b)
shall not apply to a registration of securities for the account of the Company
and not for any Shareholders thereof with an underwritten public offering by the
Company through a regionally or nationally recognized underwriter ("equity lines
of credit", "warrant line financings" or similar financings structures shall not
satisfy this exception).
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
(i) on the Initial Closing Date, issue a press release reasonably acceptable to
the Purchasers disclosing the transactions contemplated hereby, (ii) file with
the Commission a Report on Form 8-K disclosing the transactions contemplated
hereby within ten Business Days after the Initial Closing Date, and (iii) timely
file with the Commission a Form D promulgated under the Securities Act as
required under Regulation D promulgated under the Securities Act and provide a
copy thereof to the Purchasers promptly after the filing thereof. The Company
shall, no less than one Business Day prior to the filing of any disclosure
required by clauses (ii) and (iii) above, provide a copy thereof to the
Purchasers. Such filings will not be made without the consent of the Purchasers,
not to be unreasonably withheld or delayed. The Company and the Purchasers shall
consult with each other in issuing any other press releases or otherwise making
public statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law or stock market
regulations, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
3.11 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices or
capital lease obligations), to redeem more than $1,000,000 of any Company equity
or equity-equivalent securities or to settle any outstanding litigation.
3.12 Reimbursement. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the reasonable cost of any investigation and preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which a Purchaser is a named party, the Company will pay such Purchaser the
charges, as reasonably determined by such Purchaser, for the time of any
officers or employees of such Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearings, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither
the Purchasers nor any such Affiliates, partners, directors, agents, employees
or controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or entity in connection with the transactions contemplated by this
Agreement.
3.13 Certain Trading Restrictions. (a) Each Purchaser agrees that it
will not enter into and will not encourage or assist others into entering on its
behalf into any Short Sales (as hereinafter defined) or have other Persons do so
on their behalf for so long as its holds Debentures. For purposes hereof, a
"Short Sale" by a Purchaser shall mean a sale of Common Stock by a Purchaser
that is marked as a short sale and that is made at a time when there is no
equivalent offsetting long position in the Common Stock held by such Purchaser.
For purposes of determining whether there is an equivalent offsetting long
position in the Common Stock held by a Purchaser, on any date of computation,
Underlying Shares that would be issuable upon the conversion in full of the
Debentures or exercise in full of the Warrants held by such Purchaser shall be
deemed to be held long by such Purchaser.
(b) For so long as such Purchaser owns Debentures, such
Purchaser agrees that in each Trading Day during a Restricted Period (as defined
below), it will not sell a number of shares of Common Stock in excess of the
greater of (x) 30% of the volume of all shares of Common Stock sold on such
Trading Day (as reported by Bloomberg, L.P.), inclusive of the shares sold by it
during such Trading Day, and (y) $1,000,000 of Common Stock. A "Restricted
Period" means each of (i) the five Trading Days immediately preceding the 30th
day from the Effective Date of each Registration Statement, (ii) the five
Trading Days immediately preceding each 30th day anniversary of a Closing Date.
3.14 The Company shall not issue or sell any of the principal amount of
the Debentures to any Person other than the Purchasers.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers
to Purchase Initial Tranche Debentures and Initial Tranche Warrants at the
Initial Closing. The obligation of each Purchaser to acquire Initial Tranche
Debentures and Initial Tranche Warrants at the Initial Closing is subject to the
satisfaction or waiver by such Purchaser, at or before the Initial Closing Date,
of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
shall be true and correct in all material respects as of the date when made and
as of the First Closing Date as though made on and as of such date;
(ii) Delivery of Closing Items. The Company shall have
delivered to the Purchasers all of the items required to have been delivered by
the Company under Section 1.2(a)(ii) not later than May 2, 2000;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(iv) Adverse Changes. Since the date of execution of this
Agreement, no event or series of events which reasonably would be expected to
have or result in a Material Adverse Effect shall have occurred; and
(v) No Suspensions of Trading in Common Stock; Listing. The
trading in the Common Stock shall not have been suspended by the Commission or
on the Nasdaq Stock Market (except for any suspensions of trading of not more
than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this
Agreement, and the Common Stock shall have been at all times since such date
been listed for trading on the Nasdaq Stock Market.
4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase Debentures and Warrants at Second and Third Closings. The obligation of
each Purchaser to acquire Debentures and Warrants at the Second Closing and
Third Closing (as the case may be) is subject to the satisfaction or waiver by
such Purchaser, at or before the applicable Closing Date, of each of the
following conditions (the parties agree that the Purchasers shall, if one or
more of the conditions set forth below are not satisfied, have the right to
purchase at such Closing less than the $10,000,000 of the Securities otherwise
to have been acquired by them at such Closing, in such amount, if any, as they
may determine in their sole discretion):
(i) Prior Closing. In the case of the Second Closing, the
Initial Closing shall have occurred and, in the case of the Third Closing, the
Second Closing shall have occurred;
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
shall be true and correct in all material respects as of the date when made and
as of such Closing Date as though made on and as of such Closing Date (and
provided further that the Company shall update Schedule 2.1(c) between five and
ten Business Days immediately prior to such Closing Date);
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to such Closing Date;
(iv) Underlying Shares Registration Statement. The
Effective Date for
the Underlying Shares Registration Statement covering the resale of Underlying
Shares issuable in connection with the Debentures and Warrants sold at each
prior Closing shall have not less than 30 Trading Days prior to such Closing
Date and such Underlying Shares Registration Statement shall have, since such
Effective Date, remained effective at all times, not subject to any actual or
threatened stop order or suspension;
(v) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(vi) Adverse Changes. Since the Initial Closing Date, no
event or series of events which reasonably would be expected to have or result
in a Material Adverse Effect shall have occurred;
(vii) No Suspensions of Trading in Common Stock; Listing.
The trading in the Common Stock shall not have been suspended by the Commission
or on the Nasdaq Stock Market (except for any suspensions of trading of not more
than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the Initial Closing Date, and the
Common Stock shall have been at all times since the Initial Closing Date listed
for trading on the Nasdaq Stock Market;
(viii) Change of Control. No Change of Control in the
Company shall have occurred. "Change of Control" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
in excess of 50% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
(ix) Performance of Conversion and Exercise Obligations.
The Company shall have delivered Underlying Shares upon conversion of the
Debentures and exercise, if any, of the Warrants in accordance with their
respective terms;
(x) Closing Threshold. For the 20 Trading Days immediately
preceding such Closing Date, the average daily trading volume of the Common
Stock on the Nasdaq Stock Market as reported by Bloomberg LP, shall be at least
220,000 shares and the average of the Per Share Market Value for such 20 Trading
Day period shall be at least $3.00 (subject to adjustment in the event if stock
splits and similar events); and
(xi) Shareholder Approval. No approval of the shareholders
of the
Company shall be required under the rules of the Nasdaq Stock Market in
order to issue 130% of the Underlying Shares issuable upon the conversion in
full of the Debentures and exercise in full of the Warrants issuable at such
Closing.
(xii) Issuance of Debentures and Warrants. The Company
shall have reserved for issuance to the Purchasers upon the conversion of the
Debentures and the exercise of the Warrants a number of shares of Common Stock
equal to no less than the sum of (i) 175% of the shares of Common Stock which
would be issuable upon conversion in full of such Debentures, assuming that such
conversion occurred at the Variable Conversion Price on the date of such
Closing, that such Debentures remain outstanding for three years and that no
interest thereon is ever paid in cash, and (ii) the number of shares of Common
Stock issuable upon exercise in full of the Warrants issuable at such Closing
assuming that the applicable Conversion Price for application in the calculation
for the exercise price equaled the Variable Conversion Price on the date of such
Closing.
(xiii) Market Cap Thresholds. (a) the aggregate of the
$10,000,000 to be delivered to the Company at the Second Closing shall not
exceed 6% of the Company's market cap (which equals the product of the number of
shares of Common Stock outstanding on the measurement date and the closing sales
price of the Common Stock on the Trading Day immediately preceding the Closing
Date) on the Trading Day immediately prior to the Second Closing Date and (b)
the aggregate of the $10,000,000 to be delivered to the Company at the Third
Closing shall not exceed 5% of the Company's market cap on the Trading Day
immediately prior to the Third Closing Date.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. At the Initial Closing the Company shall
reimburse the Purchasers for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents by
paying to Xxxxxxxx Xxxxxxxxx $25,000 (minus prior payments) for the preparation
and negotiation of the Transaction Documents, and $10,000 at each of the Second
Closing and Third Closing. The amount contemplated by the immediately preceding
sentence shall be retained by the Purchasers and shall not be delivered to the
Company at a Closing. Other than the amount contemplated in the immediately
preceding sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
5.2 Entire Agreement; Amendments. The Transaction Documents, together
with the Exhibits and Schedules thereto contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: XxxXxxx.xxx, Inc.
1860 Xxxxxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: General Counsel
With copies to: Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxxxxxx Xx., XX
Xxxxxxxxxx, X.X. 00000
Facsimile No.: (000) 000-0000
Attn: X. Xxxxx Xxxx, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or require ment of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and
conversion (as the case may be) of the Warrants and the Debentures.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.12 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the Purchasers will be entitled to specific performance of the obligations of
the Company under the Transaction Documents. The Company and each of the
Purchasers agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of its obligations described in the
foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
5.13 Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
XXXXXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer and
Chairman of the Board
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
STRONG RIVER INVESTMENTS, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
Title: Attorney-in-fact
First Tranche Debentures Purchase Price: $6,000,000
Second Tranche Debentures Purchase Price: $5,000,000
Third Tranche Debentures Purchase Price: $5,000,000
Address for Notice:
Strong River Investments, Inc.
x/x Xxxxxxxx-Xxxx 0 Xxxxxx (XXX) Xxxxxxx
Xxxxxxxx Cay I, Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xxxx Xxxx, Xxxxxxxx, XXX
With copies to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
MONTROSE INVESTMENTS LTD.
By: /s/ Xxxxx X'Xxxx
---------------------------
Name: Xxxxx X'Xxxx
Title: Authorized Signatory
First Tranche Debentures Purchase Price: $6,000,000
Second Tranche Debentures Purchase Price: $5,000,000
Third Tranche Debentures Purchase Price: $5,000,000
Address for Notice:
Montrose Investments Ltd.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxx and Xxx Xxxxxx
With copies to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq. and
Xxxx X. Xxxxx, Esq.
