SECURITIES PURCHASE AGREEMENT
Exhibit 99.2
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 31, 2006, by and
among ProLink Holdings Corp., a Delaware corporation with headquarters located at 000 Xxxxx Xxxxxx
Xx., Xxxxxxxx, Xxxxxxx 00000 (the “Company”), and the investors listed on the Schedule of Investors
attached hereto as Exhibit A (individually, an “Investor” and collectively, the
“Investors”).
BACKGROUND
A. The Company and each Investor are executing and delivering this Agreement in reliance upon
the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares
of Series C Convertible Preferred Stock, par value $0.001 per share, of the Company (the “Preferred
Stock”), set forth opposite such Investor’s name in column two (2) on the Schedule of Investors in
Exhibit A (which aggregate amount for all Investors together shall be up to 1,500 shares of
Preferred Stock and shall collectively be referred to herein as the “Preferred Shares”) and (ii)
warrants, in substantially the form attached hereto as Exhibit B (the “Warrants”) to
acquire up to that number of shares of the Common Stock, par value $0.0001 per share, of the
Company (the “Common Stock”), set forth opposite such Investor’s name in column three (3) on the
Schedule of Investors (the shares of Common Stock issuable upon exercise of or otherwise pursuant
to the Warrants, collectively, the “Warrant Shares”).
C. The Preferred Shares and the Warrants issued pursuant to this Agreement, and the Warrant
Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares (the
“Conversion Shares”) are collectively are referred to herein as the “Securities”.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Investors agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:
“Action” means any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened in writing against
or affecting the Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency, regulatory authority (federal,
state, county, local or foreign), stock market, stock exchange or trading facility.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144.
“Agreement” has the meaning set forth in the Preamble.
“Business Day” means any day except Saturday, Sunday and any day which shall be a federal
legal holiday or a day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Article II.
“Closing Date” means the date on which the Closing occurs, but shall be no later than January
8, 2007.
“Commission” means the Securities and Exchange Commission.
“Company” has the meaning set forth in the Preamble.
“Company Counsel” means Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
“Disclosure Materials” has the meaning set forth in Section 3.1(h).
“Effective Date” means the date that the Registration Statement required by Section 2(a) of
the Registration Rights Agreement is first declared effective by the Commission.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“GAAP” has the meaning set forth in Section 3.1(h).
“Intellectual Property Rights” has the meaning set forth in Section 3.1(p).
“Investor” has the meaning set forth in the Preamble.
“Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other
restrictions of any kind.
“Losses” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation and reasonable attorneys’ fees and disbursements and other
expenses incurred in connection with investigating, preparing or defending any action, claim or
proceeding, pending or threatened and the costs of enforcement thereof.
“Material Adverse Effect” has the meaning set forth in Section 3.1(b).
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“Material Permits” has the meaning set forth in Section 3.1(n).
“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.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.
“Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the registrable securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
“Registration Statement” means a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale by the Investors of the Conversion Shares
and the Warrant Shares.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the
Closing Date, among the Company and the Investors, in the form of Exhibit C hereto.
“Regulation D” has the meaning set forth in the Preamble.
“Rule 144” and “Rule 424” means Rule 144 and Rule 424, respectively, promulgated by the
Commission pursuant to the Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having substantially the same effect
as such Rule.
“SEC” means the Securities and Exchange Commission.
“Securities” has the meaning set forth in the Preamble.
“Securities Act” means the Securities Act of 1933, as amended.
“Subsidiary” means any “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission under the Exchange Act.
“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market, or (ii)
if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded in
the over-the-counter market is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding to
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its functions of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i) or (ii) hereof, then Trading Day shall mean a Business Day.
“Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.
“Transaction Documents” means this Agreement, the Registration Rights Agreement, and any other
documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means American Stock Transfer & Trust Company, or any successor transfer
agent for the Company.
“Warrants” has the meaning set forth in the Preamble.
“Warrant Shares” has the meaning set forth in the Preamble.
ARTICLE II
PURCHASE AND SALE
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and
not jointly, purchase from the Company, such number of Preferred Shares and Warrants for the price
set forth opposite such Investor’s name on Exhibit A hereto under the headings “Preferred
Shares” and “Warrants.” The date and time of the Closing and shall be 11:00 a.m., New York City
Time, on the Closing Date. The Closing shall take place at the offices of the Company’s Counsel.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the
following:
(i) one or more stock certificates (or copies thereof provided by the Transfer Agent), free
and clear of all restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Preferred Shares set forth opposite such Investor’s
name on Exhibit A hereto under the heading “Preferred Shares,” registered in the name of
such Investor;
(ii) a Warrant, issued in the name of such Investor, pursuant to which such Investor shall
have the right to acquire such number of Warrant Shares set forth opposite such Investor’s name on
Exhibit A hereto under the heading “Warrant Shares”;
(iii) a legal opinion of Company Counsel, in the form of Exhibit D, executed by such
counsel and delivered to the Investors;
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(iv) the Registration Rights Agreement, duly executed by the Company;
(v) a Certificate of an officer of the Company, executed on behalf of the Company by its Chief
Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (a), (b), (c) and (d) of Section 2.3(a).
(vi) a Certificate of the Secretary of the Company attesting as to (i) the Certificate of
Incorporation of the Company; (ii) the By-laws of the Company; (iii) the signatures and titles of
the officers of the Company executing this Agreement or any of the other agreements to be executed
and delivered by the Company; and (iv) resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement and the transactions
contemplated hereby; and
(vii) Irrevocable Transfer Agent Instructions to the Transfer Agent with respect to the
issuance of the Securities, in form and substance reasonably acceptable to the Investors.
(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
following
(i) the purchase price set forth opposite such Investor’s name on Exhibit A hereto
under the heading “Purchase Price” in United States dollars and in immediately available funds,
by wire transfer to an account designated in writing to such Investor by the Company for such
purpose; and
(ii) the Registration Rights Agreement, duly executed by such Investor.
2.3 Conditions Precedent.
(a) The obligation of each Investor to consummate the Closing and to purchase and pay for
the Securities being purchased by it pursuant to this Agreement is subject to the fulfillment to
such Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any
of which may be waived by such Investor (as to itself only):
(i) The representations and warranties made by the Company in Section 3.1 hereof qualified
as to materiality shall be true and correct as of the date of this Agreement and through and as
of the Closing Date, except to the extent any such representation or warranty expressly speaks
as of an earlier date, in which case such representation or warranty shall be true and correct
as of such earlier date, and, the representations and warranties made by the Company in Section
3.1 hereof not qualified as to materiality shall be true and correct in all material respects as
of the date of this Agreement and through and as of the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects as of such earlier
date. The Company shall have performed in all material respects all obligations and covenants
herein required to be performed by it on or prior to the Closing Date.
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(ii) The Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the purchase and sale of
the Securities and the consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect.
(iii) No proceeding challenging this Agreement or the transactions contemplated hereby, or
seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted
before any court, arbitrator or governmental body, agency or official and shall be pending.
(iv) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(v) If allowed pursuant to the Delaware General Corporation Law (the “DGCL”) and other
applicable laws, the Board of Directors of the Company shall have approved and filed an
amendment (the “Amendment”) to Section 3(c) of the Certificate of Designation, Preferences and
Rights of Series C Convertible Preferred Stock, as filed with the Secretary of State of the
State of Delaware on December 29, 2006, such that the rights of the holders of the Preferred
Stock as set forth in Section 3(c) will apply so long as any of the shares of the Preferred
Stock remain issued and outstanding.
(vi) The Company shall have delivered or cause to be delivered to each Investor the items
set forth in Section 2.2(a).
(vii) Investors purchasing an aggregate of at least $9.75 million of Securities shall have
delivered an executed signature page to this Agreement and the purchase price set forth opposite
such Investor’s name on Exhibit A hereto under the heading “Purchase Price” shall have
been delivered to the Company in United States dollars and in immediately available funds
pursuant to Section 2.2(b)(i).
(b) The obligation of the Company to consummate the Closing and to issue and sell the
Securities at the Closing is subject to the satisfaction of the following conditions precedent,
any of which may be waived by the Company:
(i) The representations and warranties contained herein of such Investor shall be true and
correct on and as of the Closing Date with the same force and effect as though made on and as of
the Closing Date (it being understood and agreed by the Company that, in the case of any
representation and warranty of each Investor contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation and warranty need be true
and correct only in all material respects in order to satisfy as to such representation or
warranty the condition precedent set forth in the foregoing provisions of this Section 2.3(b)).
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(ii) Each Investor shall have delivered or cause to be delivered to the Company the items
set forth in Section 2.2(b).
2.4 Termination; Liabilities Consequent Thereon. This Agreement may be terminated and
the transactions contemplated hereunder abandoned at any time prior to the Closing only as follows:
(a) Upon the mutual written consent of the Company and the Investors;
(b) By the Company if any of the conditions set forth in Section 2.3(b) shall have become
incapable of fulfillment, and shall not have been waived by the Company;
(c) By an Investor (with respect to itself only) if any of the conditions set forth in
Section 2.3(a) shall have become incapable of fulfillment, and shall not have been waived by the
Investor; or
(d) By either the Company or any Investor (with respect to itself only) if the Closing has
not occurred on or prior to January 8, 2007;
provided, however, that, except in the case of clause (a) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach of any of its
representations, warranties, covenants or agreements contained in this Agreement or the other
Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s
seeking to terminate its obligation to effect the Closing.
In the event of termination by the Company or any Investor of its obligations to effect the
Closing pursuant to this Section 2.4, written notice thereof shall forthwith be given to the other
Investors and the other Investors shall have the right to terminate their obligations to effect the
Closing upon written notice to the Company and the other Investors. Nothing in this Section 2.4
shall be deemed to release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair the right of any
party to compel specific performance by any other party of its obligations under this Agreement or
the other Transaction Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than those
listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company
owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and
all Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and similar rights.
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(b) Organization and Qualification. Each of the Company and each Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and each Subsidiary is duly qualified to
conduct business and is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate, have or reasonably be expected to result
in (i) an adverse effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material and adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii)
an adverse impairment to the Company’s ability to perform on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).
(c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations 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 in connection therewith. Each Transaction
Document has been (or upon delivery will have 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.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, 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), such as could not,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and Approvals. The Company is not 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
or the
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issuance of shares upon conversion of the Preferred Shares or the exercise of the Warrants,
other than (i) the filing with the Commission of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, (ii) filings required by state
securities laws, which the Company will promptly, and in any event prior to the Effectiveness Date
under the Registration Statement, make (at the sole expense of the Company) in order to permit the
holders of the Securities to resell Securities to Persons in each State in the U.S.A., (iii) the
filings required in accordance with Section 4.4, and (iv) those that have been made or obtained
prior to the date of this Agreement.
(f) Issuance of the Securities. The Securities and any shares of Common Stock issued
upon conversion or exercise thereof have been duly authorized and, when issued and paid for in
accordance with the Transaction Documents, the Company’s Certificate of Designation, Preferences
and Rights of Series C Convertible Preferred Stock or the Warrants, as applicable, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens. The Company has
reserved from its duly authorized capital stock all of the Securities issuable pursuant to this
Agreement and any shares of Common Stock issuable upon conversion or exercise thereof.
(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance
under the Company’s various option and incentive plans, is set forth in Schedule 3.1(g).
Except as set forth in Schedule 3.1(g), no securities of the Company are entitled to
preemptive or similar rights, and 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. Except as a result of the purchase and sale of the Securities and except as
disclosed in Schedule 3.1(g), there are no outstanding options, warrants, scrip 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. Except as set forth in Schedule 3.1(g), the issue and sale of the Securities will
not, immediately or with the passage of time, obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Investors) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC Reports; Financial Statements. The Company has filed all reports required to
be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a)
or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the
Company was required by law to file such reports) (the foregoing materials being collectively
referred to herein as the “SEC Reports” and, together with the Schedules to this Agreement (if
any), the “Disclosure Materials”) on a timely basis or has timely filed a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any such extension.
The Company has delivered to the Investors a copy of all SEC Reports filed within the 10 days
preceding the date hereof. As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any
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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. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with 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, or in the case of unaudited interim
financial statements, to the extent they may exclude footnotes or may be condensed or summary
statements 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.
(i) Press Releases. The press releases disseminated by the Company during the two (2)
years preceding the date of this Agreement taken as a whole do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading.
(j) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has
been no event, occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or not required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of accounting or the identity of
its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock option plans. The
Company does not have pending before the Commission any request for confidential treatment of
information.
(k) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii)
except as set forth in the SEC Reports, could, if there were an unfavorable decision, individually
or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. Except
as set forth in the SEC Reports or in Schedule 3.1(k), neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of breach of fiduciary
duty. There has not been, and to the knowledge of the Company, 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. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company or any Subsidiary
under the Exchange Act or the Securities Act.
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(l) Labor Relations. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such default or violation
has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body,
or (iii) is or has been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. The Company is in compliance
with the applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations thereunder, except where such noncompliance could not have or reasonably be expected to
result in a Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits would not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither
the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(o) Title to Assets. The Company and the Subsidiaries have good and marketable title
to all real property owned by them that is material to their respective businesses and good and
marketable title in all personal property owned by them that is material to their respective
businesses, in each case free and clear of all Liens, except for Liens as do not materially affect
the value of such property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance, except as could
not, individually or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect.
(p) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to
use, all patents, patent applications, trademarks, trademark applications, service marks, trade
names, copyrights, licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports and which the failure
to so have could, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person. Except as set forth
in the SEC Reports, to the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of the Intellectual
Property Rights.
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(q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses in which the Company and the Subsidiaries are engaged. The Company has
no reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.
(r) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
(s) Internal Accounting Controls. The Company and the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14)
for the Company and designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in which the Company’s
Form 10-K or 10-Q, as the case may be, is being prepared. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of the end of the Company’s
most recently ended fiscal quarter (such date, the “Evaluation Date”). The Company presented in
its most recently filed Form 10-K or Form 10-Q the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or, to the Company’s knowledge, in other factors that could significantly affect the
Company’s internal controls.
(t) Certain Fees. Except as described in Schedule 3.1(t), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Investors shall have no obligation with respect
to any fees or with respect to any claims (other than such fees or commissions owed by an Investor
pursuant to written agreements executed by such Investor which fees or commissions shall be the
sole responsibility of such Investor) 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.
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(u) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(e), no registration under the
Securities Act is required for the offer and sale of the Securities or any shares of Common Stock
issuable upon the conversion or exercise thereof by the Company to the Investors under the
Transaction Documents. Except as described in Schedule 3.1(u), the Company has not granted
or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have
any securities of the Company registered with the Commission or any other governmental authority
that have not been satisfied.
(v) Investment Company. The Company is not, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended.
(w) Application of Takeover Protections. The Company has taken all necessary action,
if any, in order to render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company’s issuance of the Securities and
the Investors’ ownership of the Securities.
(x) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by the Transaction
Documents other than as specified in this Agreement.
(y) Non-Public Information. Neither the Company nor any other Person acting on its
behalf has provided any Investor or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such information.
3.2 Representations and Warranties of the Investors. Each Investor hereby, for
itself and for no other Investor, represents and warrants to the Company as follows:
(a) Organization; Authority. Such Investor 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 applicable Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such Investor of the
transactions contemplated by this Agreement has been duly authorized by all necessary corporate or,
if such Investor is not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Investor. Each of this Agreement and the Registration
Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in
accordance with terms hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Investor 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
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Securities or any part thereof, without prejudice, however, to such Investor’s right at all
times to sell or otherwise dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws. Subject to the immediately preceding sentence,
nothing contained herein shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time. Such Investor is acquiring the Securities hereunder in the
ordinary course of its business. Such Investor does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities.
(c) Investor Status/Residence. At the time such Investor was offered the Securities,
it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act. Such Investor, other than LB I Group Inc., is not a registered broker-dealer under
Section 15 of the Exchange Act. Each Investor represents that, to the extent that he or she is an
individual, that he or she is a resident of the state set forth opposite his or her name on
signature page, and, to the extent that it is an organizational entity, they it has been organized
under the laws of the state or country set forth opposite its name on signature page.
(d) Experience of Such Investor. Such Investor, 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. Such Investor
understands that it must bear the economic risk of this investment in the Securities indefinitely,
and is able to bear such risk and is able to afford a complete loss of such investment.
(e) General Solicitation. Such Investor is not purchasing the Securities as a result
of 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.
(f) Access to Information. Such Investor 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 Subsidiaries and their respective
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 that 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.
Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or
its representatives or counsel shall modify, amend or affect such Investor’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) Independent Investment Decision. Such Investor has independently evaluated the
merits of its decision to purchase Securities pursuant to this Agreement, such decision has been
independently made by such Investor and such Investor confirms that it has only relied on the
advice
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of its own business and/or legal counsel and not on the advice of any other Investor’s
business and/or legal counsel in making such decision.
(h) No Conflicts. The execution, delivery and performance by such Investor of this
Agreement and the consummation by such Investor of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents of such Investor or (ii) 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 of, any agreement, indenture or instrument to which such Investor is a party, or (iii)
assuming the accuracy of the Company’s representations in Section 3.1, result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state securities laws)
applicable to such Investor, except in the case of clauses (ii) and (iii) above, for such that are
not material and do not otherwise affect the ability of such Investor to consummate the
transactions contemplated hereby.
The Company acknowledges and agrees that each Investor does not make or has not made any
representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Securities may only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of the Securities other than pursuant to an effective
registration statement, to the Company, to an Affiliate of an Investor or in connection with a
pledge as contemplated in Section 4.1(b), 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.
(b) Certificates evidencing the Securities will contain the following legend, until such time
as they are not required under Section 4.1(c):
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE
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PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from time to time pledge, and/or
grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement
in connection with a bona fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent of the Company and
no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice shall be required
of such pledge. At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates evidencing Securities shall not be required to contain such legend or any
other legend (i) after the Securities have been registered for resale under the Securities Act,
(ii) after the Securities have been sold pursuant to a Registration Statement that is effective
under the Securities Act covering the resale of such Securities, (iii) following any sale of such
Securities pursuant to Rule 144 if the holder provides the Company with a legal opinion (and the
documents upon which the legal opinion is based) reasonably acceptable to the Company to the effect
that the Securities can be sold under Rule 144, (iv) if the holder provides the Company with a
legal opinion (and the documents upon which the legal opinion is based) reasonably acceptable to
the Company to the effect that the Securities are eligible for sale under Rule 144(k), or (iv) if
the holder provides the Company with a legal opinion (and the documents upon which the legal
opinion is based) reasonably acceptable to the Company to the effect that the legend is not
required under applicable requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the Staff of the SEC). The Company shall cause its
counsel to issue a legal opinion to the Transfer Agent on the Effective Date. Following the
Effective Date or at such earlier time as a legend is no longer required for certain Securities,
the Company will no later than five Trading Days following the delivery by an Investor to the
Company or the Transfer Agent of (i) a legended certificate representing such Securities, (ii) an
opinion of counsel to the extent required by Section 4.1(a) and (iii) reasonable written
assurances to the effect that any of the Shares or Warrant Shares, as the case may be, sold or to
be sold by such Investor have been, or will be, sold in accordance with the plan of distribution
set forth in the Prospectus and in compliance with the prospectus delivery requirements under the
Securities Act, deliver or cause to be delivered to such Investor a certificate representing such
Securities that is free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section.
If within three Trading Days after the Company’s receipt of a legended certificate and the
other documents as specified in Clauses (i), (ii), (iii) and (iv) of the paragraph immediately
above, the Company shall fail to issue and deliver to such Investor a certificate representing such
Securities that is free from all restrictive and other legends, and if on or after such Trading Day
the Investor
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purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Investor of shares of Common Stock that the Investor anticipated
receiving from the Company without any restrictive legend (the “Covering Shares”), then the Company
shall, within five Trading Days after the Investor’s request, pay cash to the Investor in an amount
equal to the excess (if any) of the Investor’s total purchase price (including brokerage
commissions, if any) for the Covering Shares, over the product of (A) the number of Covering
Shares, times (B) the closing bid price on the date of delivery of such certificate and the other
documents as specified in Clauses (i), (ii) and (iii) of the paragraph immediately above.
4.2 Furnishing of Information. As long as any Investor owns the 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 the Exchange Act. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to the Investors and
make publicly available in accordance with Rule 144(c) such information as is required for the
Investors to sell such Securities under Rule 144. 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 such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.3 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 Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market.
4.4 Securities Laws Disclosure; Publicity. By 5:30 p.m. (New York time) on the
Closing Date, the Company shall issue a press release reasonably acceptable to the Investors
disclosing the transactions contemplated hereby and by 8:30 a.m. (New York time) on the first
business day after the Closing Date, the Company shall issue a file a Current Report on Form 8-K
disclosing the material terms of the transactions contemplated hereby. In addition, the Company
will make such other filings and notices in the manner and time required by the Commission and the
Trading Market on which the Common Stock is listed. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Investor, or include the name of any Investor in any
filing with the Commission (other than the Registration Statement and any exhibits to filings made
in respect of this transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written consent of such
Investor, except to the extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Investors with prior notice of such disclosure.
4.5 Limitation on Issuance of Future Priced Securities. During the six months
following the Closing Date, the Company shall not issue any security that would be a “Future Priced
Securities” as such term is described by NASD IM-4350-1.
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4.6 Non-Public Information. The Company covenants and agrees that neither it nor any
other Person acting on its behalf will provide any Investor or its agents or counsel with any
information that the Company believes constitutes material non-public information, unless prior
thereto such Investor shall have executed a written agreement regarding the confidentiality and use
of such information. The Company understands and confirms that each Investor shall be relying on
the foregoing representations in effecting transactions in securities of the Company.
4.7 Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Securities for working capital and general corporate purposes. The Company also may use a portion
of the net proceeds, currently intended for general corporate purposes, to acquire or invest in
technologies, products or services that complement its business, although the Company has no
present material commitments with respect to these types of transactions. Pending these uses, the
Company intends to invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities, or as otherwise pursuant to the Company’s customary investment
policies.
4.8 Right of First Offer. From and after the date hereof, each time the Company
proposes to offer any shares of, or securities convertible into or exercisable for any shares of,
any class of its capital stock (“Offered Shares”), the Company shall first make an offering of such
Offered Shares to each Investor who continues to own at least fifty percent (50%) of the Preferred
Shares purchased by such Investor on the Closing Date pursuant to this Agreement (or at least fifty
percent (50%) of the shares of Common Stock received upon conversion if such Preferred Shares have
been converted) as adjusted for stock splits or stock dividends (each, a “Qualifying Investor” and
collectively, the “Qualifying Investors”) in accordance with the following provisions:
(a) The Company shall deliver a notice (the “RFO Notice”) to the Qualifying
Investors stating (i) its bona fide intention to offer such Offered Shares, (ii) the number of such
Offered Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to
offer such Offered Shares.
(b) Within 10 business days after delivery of the RFO Notice, the Qualifying Investor may
elect to purchase or obtain, at the price and on the terms specified in the RFO Notice, up to that
portion of such Offered Shares which equals the proportion that the number of shares of Common
Stock issued and held, or issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Qualifying Investor bears to the sum of the total number of shares of
Common Stock then outstanding (on an as-converted, fully diluted basis taking into account all
outstanding options, warrants and other securities convertible into or exercisable for capital
stock of the Company). Such purchase shall be completed at the same closing as that of any third
party purchasers or at an additional closing thereunder.
(c) The Company may, during the 90 day period following the expiration of the
period provided in Section 4.8(b) hereof, offer the remaining unsubscribed portion of the Offered
Shares to any person or persons at a price not less than, and upon terms no more favorable to the
offeree than those specified in the RFO Notice. If the Company does not enter into an agreement
for the sale of the Offered Shares within such period, or if such agreement is not consummated
within 120 days of the execution thereof, the right provided hereunder shall be deemed to be
revived and
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such Offered Shares shall not be offered unless first reoffered to the Qualifying Investors in
accordance herewith.
(d) The right of first offer in this Section 4.8 shall not be applicable to (i)
the issuance of securities in connection with stock dividends, stock splits or similar
transactions; (ii) the issuance or sale of Common Stock (or options therefor) pursuant to a stock
option plan, restricted stock purchase plan or other stock plan; (iii) the issuance of securities
to financial institutions, equipment lessors, brokers or similar persons in connection with
commercial credit arrangements, equipment financings, commercial property lease transactions or
similar transactions; (iv) the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities outstanding as of the date of this Agreement, including
without limitation, warrants, notes or options; (v) the issuance of securities in connection with
bona fide acquisition, merger, strategic alliance or similar transaction; (vi) the issuance of
securities for bona fide services; or (vii) the issuance of securities in a registered public
offering. In addition to the foregoing, the right of first offer in this Section 4.8 shall not be
applicable with respect to any Investor and any subsequent securities issuance, if (i) at the time
of such subsequent securities issuance, the Investor is not an “accredited investor,” as that term
is then defined in Rule 501(a) under the Securities Act, and (ii) such subsequent securities
issuance is otherwise being offered only to accredited investors.
4.9 Amendment to Certificate of Designation. If allowed pursuant to the DGCL and
other applicable laws, the Board of Directors of the Company shall approve and file the Amendment
to Section 3(c) of the Certificate of Designation, Preferences and Rights of Series C Convertible
Preferred Stock, as filed with the Secretary of State of the State of Delaware on December 29,
2006, such that the rights of the holders of the Preferred Stock as set forth in Section 3(c) will
apply so long as any of the shares of the Preferred Stock remain issued and outstanding. If the
approval and filing of the Amendment as described in the preceding sentence is not allowed pursuant
to the DGCL and other applicable laws, the Company shall hold a meeting of its stockholders within
six (6) months of the Closing to approve the filing of the Amendment (a “Stockholders Meeting”).
All Investors, by execution hereof, give their proxy to Pequot Mariner Master Fund, L.P. and Pequot
Scout Fund, L.P. to vote their shares in favor of the Amendment at such Stockholders Meeting and
each of the Company’s officers and directors shall give their proxy to Pequot Mariner Master Fund,
L.P. and Pequot Scout Fund, L.P. to vote their shares in favor of the Amendment at such
Stockholders Meeting on or prior to the Closing.
4.10 Indemnification by the Company.
(a) The Company shall, notwithstanding any termination of this Agreement, indemnify and hold
harmless each Investor, the officers, directors, partners, members, agents and employees of each of
them, each Person who controls any such Investor (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members,
agents and employees of each such controlling Person, to the fullest extent permitted by applicable
law, from and against any and all Losses, as incurred, arising out of or relating to (i) any
misrepresentation or breach of any representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby, or (ii) any breach of any covenant, agreement or obligation of the
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Company contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby.
(b) Promptly after receipt by any Person (the “Indemnified Person”) of notice of any demand,
claim or circumstances which would or might give rise to a claim or the commencement of any action,
proceeding or investigation in respect of which indemnity may be sought pursuant to this Section
4.10, such Indemnified Person shall promptly notify the Company in writing and the Company shall
assume the defense thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company shall not
relieve the Company of its obligations hereunder except to the extent that the Company is
materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of
counsel to such Indemnified Person representation of both parties by the same counsel would be a
conflict of interest due to actual or potential differing interests between them. The Company
shall not be liable for any settlement of any proceeding effected without its written consent,
which consent shall not be unreasonably withheld, but if settled with such consent, or if there be
a final judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified
Person from and against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. Without the prior written consent of the Indemnified Person, which consent
shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Person from all liability arising out of such
proceeding.
ARTICLE V
MISCELLANEOUS
MISCELLANEOUS
5.1 Fees and Expenses. The Company shall pay, at the Closing, the reasonable fees of
counsel to the Investors up to a maximum of $25,000 in connection with the preparation of the
Transaction Documents. Each Investor and the Company shall pay any additional fees and expenses of
its own 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 the
Transaction Documents. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of the Securities under this Agreement.
5.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.
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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 (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time)
on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:
| If to the Company: | ProLink Holdings Corp. | |||
| 000 Xxxxx Xxxxxx Xx. | ||||
| Xxxxxxxx, XX 00000 | ||||
| Facsimile No.: 000-000-0000 | ||||
| Attn: Xxxx X. Xxxxx | ||||
| With a copy to: | Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. | |||
| The Chrysler Center | ||||
| 000 Xxxxx Xxxxxx | ||||
| Xxx Xxxx, Xxx Xxxx 00000 | ||||
| Attention: Xxxxxxx X. Xxxx, Esq. | ||||
| If to an Investor: | To the address set forth under such Investor’s name | |||
| on the signature pages hereof; |
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 by the Company and the Investor or Investors holding no less
than a majority of the outstanding Preferred Shares. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
This Agreement shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement or any of the Transaction Documents.
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
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Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to
whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the
“Investors.”
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. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement 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 agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees or agents) may be
commenced non-exclusively in the state and federal courts sitting in the City of New York, Borough
of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the
non-exclusive jurisdiction of the New York Courts 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 Proceeding, any claim that it is not personally subject to
the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such 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.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any
and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce
any provisions of a Transaction Document, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its attorney’s fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
5.9 Survival. The representations, warranties, agreements and covenants contained
herein shall survive the Closing and the delivery of the Securities.
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) with the same force and
effect as if such facsimile signature page were an original thereof.
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5.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Investor exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice
to the Company, any relevant notice, demand or election in whole or in part without prejudice to
its future actions and rights.
5.13 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities. If a replacement certificate or instrument evidencing any Securities is
requested due to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a replacement.
5.14 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
5.16 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
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any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor independently of
any other Investor. Nothing contained herein or in any Transaction Document, and no action taken
by any Investor pursuant 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 Transaction Document. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction Documents. Each
Investor 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 Investor to be joined as an additional party in any
proceeding for such purpose.
5.17 Limitation of Liability. Notwithstanding anything herein to the contrary, the
Company acknowledges and agrees that the liability of an Investor arising directly or indirectly,
under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of
the assets of such Investor, and that no trustee, officer, other investment vehicle or any other
Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest
of such a Investor shall be personally liable for any liabilities of such Investor.
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SIGNATURE PAGES FOLLOW]
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.
| PROLINK HOLDINGS CORP. | ||||
| Title: |
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SIGNATURE PAGES FOR INVESTORS FOLLOW]
SIGNATURE PAGES FOR INVESTORS FOLLOW]
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Investor Signature Page
By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
December 31, 2006 (the “Purchase Agreement”) by and among ProLink Holdings Corp. and the Investors
(as defined therein), as to the number of shares of Preferred Stock and Warrants set forth below,
and authorizes this signature page to be attached to the Purchase Agreement or counterparts
thereof.
| Name of Investor: | ||||||
| By: | ||||||
Title: |
||||||
| Address: | ||||||
| Telephone No.: | ||||||
| Facsimile No.: | ||||||
| Email Address: | ||||||
| Number of Preferred Shares: | ||||||
| Number of Warrants: | ||||||
| Aggregate Purchase Price: $ | ||||||
