EXECUTION COPY
NOTE REPURCHASE AGREEMENT
This Note Repurchase Agreement, dated as of December 18, 2003 (the
"Agreement"), is entered into by and among P-Com, Inc., a Delaware corporation
(the "Company"), and North Sound Legacy Fund LLC (f/k/a DMG Legacy Fund LLC),
North Sound Legacy Institutional Fund LLC (f/k/a DMG Legacy Institutional Fund
LLC) and North Sound Legacy International Ltd. (f/k/a DMG Legacy International
Ltd.) (each, a "Holder" and collectively, the "Holders").
WHEREAS, the Holders are the present holders of three convertible
promissory notes, each dated December 10, 2003, issued by P-Com in the aggregate
original principal amount of $3,000,000 (the "Notes").
WHEREAS, P-Com desires to repurchase the Notes from the Holders in
accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
REPURCHASE OF NOTE
1.1 Repurchase of Notes. Upon the following terms and conditions, the
Holders shall transfer and sell to the Company and the Company shall repurchase
from the Holders the Notes.
1.2 Repurchase Price. The aggregate repurchase price for the Notes shall
be equal to the aggregate original principal amount of the Notes, which is Three
Million Dollars ($3,000,000), plus all accrued and unpaid interest thereon, if
any (the "Repurchase Price"). The Repurchase Price shall be paid by the Company
at the Closing (as defined below) in accordance with Section 1.3(b) hereof.
1.3 Closing.
(a) Subject to the satisfaction or waiver of the conditions set
forth in Article V hereof, the closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Sheppard,
Mullin, Xxxxxxx & Xxxxxxx LLP, 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx 00000, at 10:00 A.M. local time, on December 18, 2003 or at such
other place and time as the Company and the Holder may mutually agree (the
"Closing Date").
(b) At the Closing, the Company shall pay the Repurchase Price by
delivery to the Holders of (i) a cash payment of $750,000, plus all accrued and
unpaid interest on the Notes, if any (the "Cash Consideration"), by wire
transfer to one or more accounts designated by the Holders; and (ii) one or more
certificates representing 2,000 shares of the Company's Series D Convertible
Preferred Stock (the "Shares"), which shall have the relative rights, privileges
and
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preferences set forth in the form of Certificate of Designation, Preferences and
Rights of Series D Convertible Preferred Stock of P-Com, Inc. attached hereto as
Exhibit A (the "Certificate of Designation"). Simultaneously, the Holders shall
deliver the original Notes to the Company for cancellation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Holders. Each of the Holders,
severally but not jointly, represents and warrants to the Company as follows:
(a) Purchase for Own Account, Etc. Such Holder is acquiring the
Securities (as defined herein) for its own account for investment purposes only
and not with a present view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration requirements of
the Securities Act and/or sales registered under the Securities Act. Such Holder
has substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company.
Such Holder understands that it must bear the economic risk of this investment
indefinitely, unless the Securities are registered pursuant to the Securities
Act and any applicable state securities or blue sky laws or an exemption from
such registration is available, and that the Company has no present intention of
registering the resale of any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 2.1(a)
to the contrary, by making the representations herein, such Holder does not
agree to hold the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption from the registration
requirements under the Securities Act.
(b) Accredited Investor Status. Such Holder is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Holder understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and such
Holder's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Holder set forth herein in order to
determine the availability of such exemptions and the eligibility of such Holder
to acquire the Securities.
(d) Information. All materials relating to the business, finances
and operations of the Company (including the Company's most recent Annual Report
on Form 10-K and most recent Quarterly Report on Form 10-Q) and materials
relating to the offer and sale of the Securities that have been specifically
requested by such Holder or its counsel have been made available to such Holder
and its counsel, if any. Neither such inquiries nor any other investigation
conducted by such Holder or its counsel or any of its representatives shall
modify, amend or affect such Holder's right to rely on the Company's
representations and warranties
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contained in Section 2.2 below. Such Holder understands that its investment in
the Securities involves a high degree of risk, including the risk of loss of its
entire investment in the Securities.
(e) Governmental Review. Such Holder understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) Transfer or Resale. Such Holder understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(A) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (B)
such Holder shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (C) sold under and in compliance with Rule 144 promulgated
under the Securities Act (including any successor rule, "Rule 144"); or (D) sold
or transferred to an affiliate of such Holder that agrees to sell or otherwise
transfer the Securities only in accordance with the provisions of this Section
2.1(f) and that is an accredited investor; and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws (other than pursuant to the terms of
the Registration Rights Agreement). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement, provided such pledge is consistent with applicable laws, rules and
regulations.
(g) Legends. Such Holder understands that the Shares and, until such
time as the Conversion Shares (as defined herein) have been registered under the
Securities Act (including registration pursuant to Rule 416 thereunder) as
contemplated by the Registration Rights Agreement or otherwise may be sold by
such Holder under Rule 144, the certificates for the Conversion Shares may bear
a restrictive legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state of the United States or in any other
jurisdiction. The securities represented hereby may not be offered,
sold or transferred in the absence of an effective registration
statement for the securities under applicable securities laws unless
offered, sold or transferred pursuant to an available exemption from
the registration requirements of those laws.
The Company shall, within three business days after any registration
statement covering the Securities (including, without limitation, the
Registration Statement contemplated by the Registration Rights Agreement) is
declared effective, deliver to its transfer agent an opinion letter of counsel,
opining that at any time such registration statement is effective, the transfer
agent shall issue, in connection with the issuance of the Conversion Shares,
certificates representing such Conversion Shares without the restrictive legend
above, provided such
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Conversion Shares are to be sold pursuant to the prospectus contained in such
registration statement. Upon receipt of such opinion, the Company shall cause
the transfer agent to confirm, for the benefit of the holders, that no further
opinion of counsel is required at the time of transfer in order to issue such
shares without such restrictive legend.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped, if, unless otherwise required by state securities laws, (i) the
sale of such Security is registered under the Securities Act (including
registration pursuant to Rule 416 thereunder); (ii) such holder provides the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Security may be made without registration under the
Securities Act; or (iii) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144. In the event the above
legend is removed from any Security and thereafter the effectiveness of a
registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance written notice to such Holder the
Company may require that the above legend be placed on any such Security that
cannot then be sold pursuant to an effective registration statement or under
Rule 144 and such Holder shall cooperate in the replacement of such legend. Such
legend shall thereafter be removed when such Security may again be sold pursuant
to an effective registration statement or under Rule 144.
(h) Residency. Such Holder is a resident of the jurisdiction set
forth under such Holder's name on the signature page hereto executed by such
Holder.
(i) Title. Such Holder holds good and valid title to its respective
Note, free and clear of any Liens, and such Holder has not heretofore assigned,
transferred or otherwise disposed of any interest in such Note.
(j) Authorization. Such Holder has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and the
Registration Rights Agreement. The execution, delivery and performance by such
Holder of this Agreement and the Registration Rights Agreement and the
consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the delivery of the original of its respective
Note to the Company) have been duly and validly authorized by all necessary
corporate action on the part of such Holder.
(k) Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Holder and are valid and binding obligations of such Holder
enforceable against such Holder in accordance with their terms.
The representations and warranties made by each Holder in Sections 2.1(a)
through 2.1(h), inclusive, are made solely for the purpose of permitting the
Company to make a determination that the issuance of the Shares pursuant to this
Agreement complies with applicable U.S. federal and state securities laws and
not for any other purpose. Accordingly, the
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Company may not rely on such representations and warranties (contained in
Sections 2.1(a) through 2.1(h), inclusive) for any other purpose.
2.2 Representations and Warranties of the Company. Except as set forth on
a Disclosure Schedule executed and delivered by the Company to the Holders (the
"Disclosure Schedule"), the Company represents and warrants to each Holder as
follows:
(a) Organization and Qualification. The Company and each of its
direct and indirect subsidiaries (collectively, the "Subsidiaries") is a
corporation duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. For purposes of this Agreement, "Material Adverse Effect" means any
material adverse effect on (i) the Securities, (ii) the ability of the Company
to perform its obligations under this Agreement or the other Transaction
Documents or (iii) the business, operations, properties, prospects, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents, to issue the Shares in
accordance with the terms hereof and to issue the Conversion Shares upon
conversion of the Shares in accordance with the terms thereof; (ii) the
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Shares and the issuance and reservation for issuance of the Conversion
Shares) have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or any
committee of the Board of Directors is required, and (iii) this Agreement
constitutes, and, upon execution and delivery by the Company of the other
Transaction Documents, such Transaction Documents will constitute, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms. Neither the execution, delivery or performance by the Company
of its obligations under this Agreement or the other Transaction Documents, nor
the consummation by it of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Shares or the issuance or
reservation for issuance of the Conversion Shares) requires any consent or
authorization of the Company's stockholders.
(c) Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Shares) exercisable or
exchangeable for, or convertible into, any shares of capital stock and the
number of shares to be reserved for issuance upon conversion of the Shares is
set forth in Section 2.2(c) of the Disclosure Schedule. All of such outstanding
shares of capital stock have been, or upon issuance in accordance with the terms
of any such exercisable, exchangeable or convertible securities will be, validly
issued, fully paid and non-assessable. No shares of capital stock of the
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Company (including the Conversion Shares) are subject to preemptive rights or
any other similar rights of the stockholders of the Company or any liens or
encumbrances. Except for the Securities and as set forth in Section 2.2(c) of
the Disclosure Schedule, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, nor are any such issuances or arrangements
contemplated, (ii) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
its or their securities under the Securities Act (except the Registration Rights
Agreement); (iii) there are no outstanding securities or instruments of the
Company that contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem any security of the Company; and (iv) the Company
does not have any shareholder rights plan, "poison pill" or other anti-takeover
plans or similar arrangements. Section 2.2(c) of the Disclosure Schedule sets
forth all of the securities or instruments issued by the Company or any of its
Subsidiaries that contain anti-dilution or similar provisions that will be
triggered by, and all of the resulting adjustments that will be made to such
securities and instruments as a result of, the issuance of the Securities in
accordance with the terms of this Agreement or the Certificate of Designation.
The Company has furnished to each Holder, true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Certificate of Incorporation"), the Company's Bylaws as in effect on the date
hereof (the "Bylaws"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company. The Company or one of its Subsidiaries has the unrestricted right
to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital securities of its Subsidiaries as
owned by the Company or any such Subsidiary.
(d) Issuance of Securities. The Shares are duly authorized and, upon
issuance in accordance with the terms of this Agreement, (i) will be validly
issued and free from all taxes, liens, claims and encumbrances (other than
restrictions on transfer contained in this Agreement or the Certificate of
Designation), (ii) will not be subject to preemptive rights, rights of first
refusal or other similar rights of stockholders of the Company or any other
person and (iii) will not impose personal liability on the holder thereof. The
Conversion Shares are duly authorized and reserved for issuance, and, upon
conversion of the Shares in accordance with the terms thereof, (I) will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances (other than restrictions on transfer contained in this
Agreement), (II) will not be subject to preemptive rights, rights of first
refusal or other similar rights of stockholders of the Company or any other
person and (III) will not impose personal liability upon the holder thereof.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Shares and the issuance and
reservation for issuance of the Conversion Shares) will not (i) result in a
violation of the Certificate of Incorporation or Bylaws, (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
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give to others any rights of termination, amendment (including, without
limitation, the triggering of any anti-dilution provisions), acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including United States federal and
state securities laws, rules and regulations and rules and regulations of any
self-regulatory organizations to which either the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except, with respect to clauses (ii) and (iii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not, individually or in the aggregate, have a Material Adverse Effect).
(f) Compliance. Neither the Company nor any of its Subsidiaries is
in violation of its Certificate of Incorporation, Bylaws or other organizational
documents, and neither the Company nor any of its Subsidiaries is in default
(and no event has occurred that with notice or lapse of time or both would put
the Company or any of its Subsidiaries in default) under, nor has there occurred
any event giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party. The businesses of the Company and its Subsidiaries are not being
conducted, and shall not be conducted so long as any Holder (or any of its
affiliates) own any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate have not had and would not
have a Material Adverse Effect. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity, made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds, violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee. The Company
and its Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate federal, state, provincial or foreign regulatory authorities
that are material to the conduct to its business, and neither the Company nor
any of its Subsidiaries has received any notice of proceeding relating to the
revocation or modification of any such certificate, authorization or permit.
(g) SEC Documents, Financial Statements. Since December 31, 1998,
the Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, the "SEC
Documents"). The Company has delivered or made available to each Holder true and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be
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stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent filings made prior to the date hereof). As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"),
consistently applied, during the periods involved (except as may be otherwise
indicated in such financial statements or the notes thereto or, in the case of
unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to immaterial year-end audit adjustments). Except as set
forth in the financial statements of the Company included in the Select SEC
Documents (as defined below), the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements, which liabilities and obligations referred to in clauses (i) and
(ii), individually or in the aggregate, are not material to the financial
condition or operating results of the Company. For purposes of this Agreement,
"Select SEC Documents" means the Company's (A) Proxy Statement for its 2003
Annual Meeting, (B) Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 (C) Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2003, June 30, 2003 and September 30, 2003 and (D) all Current
Reports on Form 8-K filed since December 31, 2002.
(h) Absence of Certain Changes. Since December 31, 2002, there has
been no material adverse change and no material adverse development in the
business, properties, operations, prospects, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole. The Company
has not taken any steps, and does not currently expect to take any steps, to
seek protection pursuant to any bankruptcy or receivership law, nor does the
Company or any of its Subsidiaries have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings with respect
to the Company or any of its Subsidiaries.
(i) Transactions With Affiliates. None of the officers, directors,
or employees of the Company or any of its Subsidiaries is presently a party to
any transaction with the Company or any of its Subsidiaries (other than for
ordinary course services solely in their capacity as officers, directors or
employees), 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 such
officer, director or employee or any corporation, partnership, trust or other
entity in which any such officer, director, or employee has an ownership
interest of five percent or more or is an officer, director, trustee or partner.
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(j) Absence of Litigation. Except as disclosed in the Select SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body (including, without limitation, the SEC) pending or affecting the
Company, any of its subsidiaries, or any of their respective directors or
officers in their capacities as such. To the knowledge of the Company or any of
its subsidiaries, there are no actions, suits, proceedings, inquiries or
investigations before or by any court, public board, government agency,
self-regulatory organization or body (including, without limitation, the SEC)
threatened against the Company, any of its subsidiaries, or any of their
respective directors or officers in their capacities as such, which, if
determined adversely, could, either individually or in the aggregate, have a
Material Adverse Effect. There are no facts that, if known by a potential
claimant or governmental authority, could give rise to a claim or proceeding
that, if asserted or conducted with results unfavorable to the Company or any of
its subsidiaries, could reasonably be expected to have a Material Adverse
Effect.
(k) Intellectual Property. Each of the Company and its Subsidiaries
owns or is duly licensed (and, in such event, has the unfettered right to grant
sublicenses) to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intellectual Property") necessary for the
conduct of its business as now being conducted and as presently contemplated to
be conducted in the future (collectively, the "Company Intellectual Property").
Section 2.2(k) of the Disclosure Schedule sets forth a list of all material
Company Intellectual Property owned and/or used by the Company in its business.
Neither the Company nor any Subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any third party
Intellectual Property. Neither the Company nor any of its Subsidiaries has
received written notice of any pending conflict with or infringement upon any
third party Intellectual Property. Neither the Company nor any of its
Subsidiaries has entered into any consent agreement, indemnification agreement,
forbearance to xxx or settlement agreement with respect to the validity of the
Company's or its Subsidiaries' ownership of or right to use its Company
Intellectual Property and there is no reasonable basis for any such claim to be
successful. The Company Intellectual Property are valid and enforceable and no
registration relating thereto has lapsed, expired or been abandoned or canceled
or is the subject of cancellation or other adversarial proceedings, and all
applications therefor are pending and in good standing. The Company and its
Subsidiaries have complied, in all material respects, with their respective
contractual obligations relating to the protection of the Company Intellectual
Property used pursuant to licenses. No person is infringing on or violating the
Company Intellectual Property owned or used by the Company or its Subsidiaries.
(l) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to all
personal property owned by them that is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such 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 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
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leases with such exceptions as are not material and do not materially interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(m) Tax Status. Except as set forth in the Select SEC Documents, the
Company and each of its Subsidiaries has made or filed all foreign, U.S.
federal, state, provincial and local income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to any statute of limitations relating to the assessment or
collection of any foreign, federal, state, provincial or local tax. None of the
Company's tax returns is presently being audited by any taxing authority.
(n) Insurance. The Company and each of its Subsidiaries has in force
fire, casualty, product liability and other insurance policies, with extended
coverage, sufficient in amount to allow it to replace any of its material
properties or assets that might be damaged or destroyed or sufficient to cover
liabilities to which the Company may reasonably become subject, and such types
and amounts of other insurance with respect to its business and properties, on
both a per occurrence and an aggregate basis, as are customarily carried by
persons engaged in the same or similar business as the Company. No default or
event has occurred that could give rise to a default under any such policy.
(o) Environmental Matters. There is no environmental litigation or
other environmental proceeding pending or threatened by any governmental
regulatory authority or others with respect to the current or any former
business of the Company or any of its Subsidiaries or any partnership or joint
venture currently or at any time affiliated with the Company or any of its
Subsidiaries. No state of facts exists as to environmental matters or Hazardous
Substances (as defined below) that involves the reasonable likelihood of a
material capital expenditure by the Company or any of its Subsidiaries that may
otherwise have a Material Adverse Effect. No Hazardous Substances have been
treated, stored or disposed of, or otherwise deposited, in or on the properties
owned or leased by the Company or any of its Subsidiaries or by any partnership
or joint venture currently or at any time affiliated with the Company or any of
its Subsidiaries in violation of any applicable environmental laws. The
environmental compliance programs of the Company and each of its Subsidiaries
comply in all respects with all environmental laws, whether foreign, federal,
state, provincial or local, currently in effect. For purposes of this Agreement,
"Hazardous Substances" means any substance, waste, contaminant, pollutant or
material that has been determined by any governmental authority to be capable of
posing a risk of injury to health, safety, property or the environment.
(p) Listing. The Company is not in violation of the listing
requirements of the OTC Electronic Bulletin Board (the "Bulletin Board") on
which it trades, does not reasonably
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anticipate that the Common Stock will be delisted by the Bulletin Board for the
foreseeable future, and has not received any notice regarding the possible
delisting of the Common Stock from the Bulletin Board. The Company has secured
the listing of the Conversion Shares upon each national securities exchange,
automated quotation system or over-the-counter market upon which shares of
Common Stock are currently listed (subject to official notice of issuance).
(q) Anti-Takeover Provisions. The Company and its board of directors
have 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 its Certificate of Incorporation or the laws of the state of its
incorporation that is or could become applicable to any Holder as a result of
the transactions contemplated by this Agreement, including without limitation,
the Company's issuance of the Securities and such Holder's ownership of the
Securities. Except as specifically contemplated by this Agreement, the Company
is not required to obtain any consent, approval, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency or other third party in order for it to
execute, deliver or perform any of its obligations under this Agreement or any
of the other Transaction Documents, in each case in accordance with the terms
hereof or thereof.
(r) Acknowledgment Regarding Holders' Purchase of the Securities.
The Company acknowledges and agrees that each Holder is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby, and
that such Holder is not (i) an officer or director of the Company, (ii) an
"affiliate" of the Company (as defined in Rule 144) or (iii) a "beneficial
owner" of more than 9.999% of the Common Stock (as defined for purposes of Rule
13d-3 of the Exchange Act). The Company further acknowledges that no Holder is
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the other Transaction Documents and
the transactions contemplated hereby and thereby, and any advice given by a
Holder or any of its representatives or agents in connection with this Agreement
or the other Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to such Holder's purchase of the Securities. The
Company further represents to each Holder that the Company's decision to enter
into this Agreement and the other Transaction Documents has been based solely on
the independent evaluation by the Company and its representatives.
(s) No General Solicitation or Integrated Offering. Neither the
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Securities being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of securities of the Company for purposes of the Securities Act,
which result of such integration would require registration under the Securities
Act, or any applicable stockholder approval provisions.
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(t) No Brokers. The Company has taken no action that would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by any Holder relating to this Agreement or the transactions
contemplated hereby.
(u) Acknowledgment Regarding Securities. The number of Conversion
Shares issuable upon conversion of the Shares may increase in certain
circumstances. The Company's directors and executive officers have studied and
fully understand the nature of the Securities being sold hereunder. The Company
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Shares in accordance with the terms thereof is absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders and the availability of remedies provided for in
any of the Transaction Documents relating to a failure or refusal to issue
Conversion Shares. Taking the foregoing into account, the Company's Board of
Directors has determined in its good faith business judgment that the issuance
of the Shares hereunder and the consummation of the other transactions
contemplated hereby are in the best interests of the Company and its
stockholders.
(v) Disclosure. All information relating to or concerning the
Company and/or any of its Subsidiaries set forth in this Agreement or provided
to the Holders pursuant to Section 2.1(d) hereof or otherwise by the Company in
connection with the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, prospects, operations
or financial conditions, which has not been publicly disclosed but, under
applicable law, rule or regulation, would be required to be disclosed by the
Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to a primary issuance of the Company's
securities.
ARTICLE III
COVENANTS
3.1 Best Efforts. The parties shall use their respective best efforts
timely to satisfy each of the conditions described in Article V of this
Agreement.
3.2 Form D; Blue Sky Laws. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and, at the
request of any Holder, promptly provide a copy thereof to such Holder after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the Securities
for sale to the Holders pursuant to this Agreement under applicable securities
or "blue sky" laws of the states of the United States or obtain exemption
therefrom, and shall provide evidence of any such action so taken to each Holder
on or prior to the Closing Date. The Company shall issue a press release
describing the material terms of the transactions contemplated hereby (the
"Press Release") as soon as practicable after the Closing, but in no event later
than the commencement of the first trading day following the Closing Date. The
Press Release shall be subject to prior review and comment by the Holders.
Within two days after the Closing Date, the Company shall file a Form 8-K with
the SEC concerning this Agreement and the transactions contemplated hereby,
which Form 8-K shall attach this Agreement
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and its Exhibits as exhibits to such Form 0-X (xxx "0-X Xxxxxx"). From and after
the 8-K Filing, the Company hereby acknowledges that no Holder shall be in
possession of any material nonpublic information received from the Company, any
of its Subsidiaries or any of its respective officers, directors, employees or
agents, that is not disclosed in the 8-K Filing. The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any Holder with any
material nonpublic information regarding the Company or any of its Subsidiaries
from and after the 8-K Filing without the express written consent of such
Holder; provided, however, that if any Holder exercises its rights under Section
3.12 hereof, it shall be deemed to have given such express written consent. In
the event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the other
Transaction Documents, each Holder shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material nonpublic information without the prior approval by the
Company, its Subsidiaries or any of its or their respective officers, directors,
employees or agents. No Holder shall have any liability to the Company, its
Subsidiaries or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing,
neither the Company nor any Holder shall issue any other press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Holders, to make any press release or other public disclosure
with respect to such transactions as is required by applicable law and
regulations (provided that any such press release or other public disclosure
shall be subject to prior review and comment by the Holders).
3.3 Reporting Status. So long as any Holder (or any of its affiliates)
beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
3.4 Financial Information. At the request of any Holder, the Company shall
send (via electronic transmission or otherwise) the following reports (or
notification of their availability to the public) to such Holder until such
Holder transfers, assigns or sells all of its Securities: (i) within ten days
after the filing with the SEC, a copy of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q, its proxy statements and any Current Reports on
Form 8-K; and (ii) within one day after release, copies of all press releases
issued by the Company or any of its Subsidiaries.
3.5 Reservation of Shares. The Company shall reserve such number of shares
of its authorized but unissued shares of Common Stock to provide for full
conversion of the Shares and the issuance of the Conversion Shares in connection
therewith and as otherwise required by the Certificate of Designation and the
Registration Rights Agreement (collectively, the "Issuance Obligations") that is
equal to (i) the aggregate number of shares of Common Stock issuable in
satisfaction of the Issuance Obligations immediately following the consummation
of the transactions contemplated by this Agreement, multiplied by (ii) 125%. In
the event such number of shares becomes insufficient to satisfy the Issuance
Obligations, the Company shall take all
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necessary action to authorize and reserve such additional shares of Common Stock
necessary to satisfy the Issuance Obligations.
3.6 Listing. The Company shall maintain, so long as any Holder (or any of
its affiliates) beneficially owns any Securities, the listing of all Conversion
Shares from time to time issuable upon conversion of the Shares on each national
securities exchange, automated quotation system or electronic bulletin board on
which shares of Common Stock are currently listed. The Company will use its best
efforts to continue the listing and trading of its Common Stock on the Bulletin
Board or the Nasdaq National Market (the "National Market"), the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") and will
comply in all respects with the reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers, Inc. (the
"NASD"), such exchanges, or such electronic system, as applicable. The Company
shall promptly provide to each Holder copies of any notices it receives
regarding the continued eligibility of the Common Stock for trading on the
Bulletin Board or on any securities exchange or automated quotation system on
which securities of the same class or series issued by the Company are then
listed or quoted, if any.
3.7 Corporate Existence. So long as any Holder (or any of its affiliates)
beneficially owns any Securities, the Company shall maintain its corporate
existence, and in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, the Company shall ensure that the
surviving or successor entity in such transaction and, if an entity different
from the successor or acquiring entity, the entity whose securities into which
the Common Stock shall become convertible or exchangeable in such transaction
(i) assumes the Company's obligations under this Agreement and the other
Transaction Documents and the agreements and instruments entered into in
connection herewith and therewith regardless of whether or not the Company would
have had a sufficient number of shares of Common Stock authorized and available
for issuance in order to effect the conversion of all the Shares outstanding as
of the date of such transaction and (ii) except in the event of a merger,
consolidation of the Company into any other corporation, or the sale or
conveyance of all or substantially all of the assets of the Company where the
consideration consists solely of cash, the surviving or successor entity and, if
an entity different from the successor or acquiring entity, the entity whose
securities into which the Common Stock shall become convertible or exchangeable
in such transaction, is a publicly traded corporation whose common stock is
listed for trading on the National Market, the NYSE or the AMEX.
3.8 No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of the Securities to be integrated with
any other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
3.9 Legal Compliance. The Company shall conduct its business and the
business of its Subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
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3.10 Redemptions and Dividends. So long as any Holder (or any of its
affiliates) beneficially owns any Securities, the Company shall not, without
first obtaining the written approval of such Holder, repurchase or redeem,
declare or pay any cash dividend or distribution on, or otherwise repay or
prepay on account of, any shares of capital stock or other outstanding
indebtedness of the Company, other than the Shares (collectively, "Restricted
Payments"). Notwithstanding the foregoing, so long as the Company has not
defaulted on its obligations to any Holder under this Agreement or any of the
other Transaction Documents, and no default would result from the payment of
such Restricted Payments, the Company may make Restricted Payments without the
written approval of the Holders holding a majority of the Shares then
outstanding; provided, however, that the aggregate amount of Restricted Payments
made without such approval shall not exceed, in the aggregate, $2,500,000.
3.11 Information. So long as any Holder beneficially owns any Securities,
the Company shall furnish to such Holder:
(a) concurrently with the filing with the SEC of its annual reports
on Form 10-K, a certificate of the President, a Vice President or a senior
financial officer of the Company stating that, based upon such examination or
investigation and review of this Agreement as in the opinion of the signer is
necessary to enable the signer to express an informed opinion with respect
thereto, neither the Company nor any of its Subsidiaries is or has during such
period been in default in the performance or observance of any of the terms,
covenants or conditions hereof, or, if the Company or any of its Subsidiaries
shall be or shall have been in default, specifying all such defaults, and the
nature and period of existence thereof, and what action the Company or such
Subsidiary has taken, is taking or proposes to take with respect thereto; and
(b) the information the Company must deliver to any holder or to any
prospective transferee of Securities in order to permit the sale or other
transfer of such Securities pursuant to Rule 144A of the SEC or any similar rule
then in effect.
The Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
3.12 Inspection of Properties and Books. So long as any Holder
beneficially owns any Securities, such Holder and its representatives and agents
(collectively, the "Inspectors") shall have the right, at such Holder's expense,
to visit and inspect any of the properties of the Company and of its
Subsidiaries, to examine the books of account and records of the Company and of
its Subsidiaries, to make or be provided with copies and extracts therefrom, to
discuss the affairs, finances and accounts of the Company and of its
Subsidiaries with, and to be advised as to the same by, its and their officers,
employees and independent public accountants (and by this provision the Company
authorizes such accountants to discuss such affairs, finances and accounts,
whether or not a representative of the Company is present) all at such
reasonable times and intervals and to such reasonable extent as such Holder may
desire; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to such Holder) of any such information
that the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
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information is necessary to avoid or correct a misstatement or omission in any
Registration Statement filed pursuant to the Registration Rights Agreement, (ii)
the release of such information is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or (iii) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. Such Holder agrees that
it shall, upon learning that disclosure of such information is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the information deemed confidential.
3.13 Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by a Holder in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and if a Holder effects a pledge of
Securities, it shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company shall execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Holder.
3.14 Variable Securities. The Company shall not, in any manner, issue or
sell any rights, warrants or options to subscribe for or purchase Common Stock,
or any other securities directly or indirectly convertible into or exchangeable
or exercisable for Common Stock, at an effective conversion, exchange or
exercise price that varies or may vary with the market price of the Common
Stock, including by way of one or more reset(s) to any fixed price.
ARTICLE IV
TRANSFER AGENT INSTRUCTIONS.
(a) Upon conversion of the Shares by any person, (i) if the DTC
Transfer Conditions (as defined below) are satisfied, the Company shall cause
its transfer agent to electronically transmit all Conversion Shares by crediting
the account of such person or its nominee with the Depository Trust Company
("DTC") through its Deposit Withdrawal Agent Commission system; or (ii) if the
DTC Transfer Conditions are not satisfied, the Company shall issue and deliver,
or instruct its transfer agent to issue and deliver, physical certificates
(subject to the legend and other applicable provisions hereof and the
Certificate of Designation), registered in the name of such person its nominee,
representing the Conversion Shares. Even if the DTC Transfer Conditions are
satisfied, any person effecting a conversion of Shares may instruct the Company
to deliver to such person or its nominee physical certificates representing the
Conversion Shares, as applicable, in lieu of delivering such shares by way of
DTC Transfer. For purposes of this Agreement, "DTC Transfer Conditions" means
that (A) the Company's transfer agent is participating in the DTC Fast Automated
Securities Transfer program and (B) the certificates for the Conversion Shares
required to be delivered do not bear a legend and the person effecting such
conversion or exercise is not then required to return such certificate for the
placement of a legend thereon.
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(b) The Company warrants that no instruction other than such
instructions referred to in this Article IV, and stop transfer instructions to
give effect to Section 2.1(f) hereof in the case of the transfer of the
Conversion Shares prior to registration of the Conversion Shares under the
Securities Act or without an exemption therefrom, shall be given by the Company
to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement. Nothing in this Article IV shall affect in any way
the Holders' obligations and agreement set forth in Section 2.1(g) hereof to
resell the Securities pursuant to an effective registration statement or under
an exemption from the registration requirements of applicable securities law.
(c) If any Holder provides the Company and the transfer agent with
an opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, or any Holder provides the Company
with reasonable assurances that such Securities may be sold under Rule 144, the
Company shall permit the transfer and, in the case of the Conversion Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Holders.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND HOLDERS
5.1 Conditions to the Obligations of the Company. The obligation of the
Company hereunder to deliver the Cash Consideration and to issue the Shares in
exchange for the Holders' delivery of the original Notes is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(a) Each Holder shall have executed this Agreement and each other
Transaction Document to which such Holder is a party and delivered the same to
the Company.
(b) Each Holder shall have delivered the original of its respective
Note, in genuine and unaltered form, to the Company for cancellation.
(c) The representations and warranties of each Holder shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and such Holder shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by such Holder at or
prior to the Closing Date.
(d) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby that prohibits the consummation of any of the transactions contemplated
by this Agreement.
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5.2 Conditions to the Obligations of the Holders. The obligation of the
Holders hereunder to deliver the original Notes to the Company in exchange for
the Company's delivery of the Cash Consideration and the Shares is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that such conditions are for each Holder's sole benefit and
may be waived by any Holder at any time in such Holder's sole discretion:
(a) The Company shall have executed this Agreement and each other
Transaction Document to which the Company is a party and delivered executed
originals of the same to such Holder.
(b) The Certificate of Designation shall have been filed and
accepted for filing with the Secretary of State of the State of Delaware and a
copy thereof certified by the Secretary of State of the State of Delaware shall
have been delivered to such Holder.
(c) The Company shall have delivered to such Holder one or more duly
executed certificates representing the Shares (in such denominations as such
Holder may request), registered in such Holder's name.
(d) The Common Stock shall be authorized for quotation and listed on
the Bulletin Board and trading in the Common Stock (or on the Bulletin Board
generally) shall not have been suspended by the SEC or the Bulletin Board.
(e) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. Such Holder shall have received a certificate,
executed by an officer of the Company after reasonable investigation, dated as
of the Closing Date to the foregoing effect and as to such other matters as may
reasonably be requested by such Holder.
(f) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby that questions the validity of, challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(g) There shall have been no material adverse changes and no
material adverse developments in the business, properties, operations,
prospects, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, since the date hereof, and no information that
is materially adverse to the Company and of which such Holder is not currently
aware shall come to the attention of such Holder.
(h) Such Holder shall have received a copy of resolutions, duly
adopted by the Board of Directors of the Company, which shall be in full force
and effect at the time of the Closing, authorizing the execution, delivery and
performance by the Company of this Agreement and the other Transaction Documents
and the consummation by the Company of the transactions
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contemplated hereby and thereby, certified as such by the Secretary or Assistant
Secretary of the Company, and such other documents they reasonably request in
connection with the Closing.
(i) Such Holder shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in the form attached hereto as Exhibit B.
ARTICLE VI
DEFINITIONS
Capitalized terms used but not otherwise defined in this Agreement
shall have the meanings set forth below:
"Common Stock" means the Company's common stock, par value $0.0001
per share.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Shares.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision.
"Lien" means any mortgage, pledge, assessment, security interest,
lease, lien (statutory or otherwise), adverse claim, levy, charge or other
encumbrance of any kind, or any conditional sale or other title retention
agreement, and any financing statement filed under the Uniform Commercial Code
or comparable law of any jurisdiction.
"Registration Rights Agreement" means the form of registration
rights agreement attached hereto as Exhibit B, pursuant to which the Company
will agree to register the resale by each Holder of the Conversion Shares.
"Regulation D" means Regulation D, as promulgated by the SEC under
the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" or "Securities" means the Shares and the Conversion
Shares.
"Transaction Documents" means this Agreement, the Certificate of
Designation and the Registration Rights Agreement.
ARTICLE VII
GOVERNING LAW; MISCELLANEOUS.
7.1 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and
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to be performed in the State of Delaware. The Company and each Holder
irrevocably consent to the exclusive jurisdiction of the United States federal
courts and the state courts located in the County of New Castle, State of
Delaware, in any suit or proceeding based on or arising under this Agreement and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
any Holder to serve process in any other manner permitted by law. The Company
agrees that a final non-appealable judgment in any such suit or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
7.2 Counterparts. This Agreement may be executed in two or more
counterparts, all of which 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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed execution page(s)
hereof to be physically delivered to the other party within five days of the
execution hereof, provided that the failure to so deliver any manually executed
execution page shall not affect the validity or enforceability of this
Agreement.
7.3 Construction. Whenever the context requires, the gender of any word
used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles and sections
of this Agreement, and all references to schedules are to schedules attached
hereto, each of which is made a part hereof for all purposes. The descriptive
headings of the several articles and sections of this Agreement are inserted for
purposes of reference only, and shall not affect the meaning or construction of
any of the provisions hereof.
7.4 Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
7.5 Entire Agreement; Amendments. This Agreement and the other Transaction
Documents (including any schedules and exhibits hereto and thereto) contain the
entire understanding of the Holders, the Company, their affiliates and persons
acting on their behalf with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither the Company nor
any Holder makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived other than
by an instrument in writing signed by the party to be charged with enforcement,
and no provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Holders. No consideration shall be paid to
any Holder by the Company in connection with an amendment hereto unless each
Holder similarly affected by such amendment
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receives a pro rata amount of consideration from the Company, and, unless a
Holder agrees otherwise, each amendment hereto shall similarly affect each
Holder.
7.6 Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally, by responsible overnight carrier or by
confirmed facsimile, and shall be effective five days after being placed in the
mail, if mailed, or upon receipt or refusal of receipt, if delivered personally
or by responsible overnight carrier or confirmed facsimile, in each case
addressed to a party. The initial addresses for such communications shall be as
follows, and each party shall provide notice to the other parties of any change
in such party's address:
If to the Company:
P-Com, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy simultaneously transmitted by like means (which
transmittal shall not constitute notice hereunder) to:
Xxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: C. Xxxxxx Xxxxxxx, Esq.
If to a Holder, to the address set forth under such Holder's name on
the signature page hereto.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Except as
provided herein, the Company shall not assign this Agreement or any rights or
obligations hereunder. Any Holder may assign or transfer the Securities pursuant
to the terms of this Agreement and of such Securities, or assign such Holder's
rights hereunder or thereunder to any other person or entity, except for direct
competitors of the Company or persons or entities that have publicly announced
plans to compete directly with the Company. In addition, and notwithstanding
anything to the contrary contained in this Agreement or the other Transaction
Documents, the Securities may be pledged and all rights of any Holder under this
Agreement or any other Transaction Document may be assigned, without further
consent of the Company, to a bona fide pledgee in connection with such Holder's
margin or brokerage account.
7.8 Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
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7.9 Survival. The agreements and covenants set forth in Articles III, IV
and VII hereof shall survive the Closing notwithstanding any due diligence
investigation conducted by or on behalf of any Holder. Moreover, none of the
representations and warranties made by the Company herein shall act as a waiver
of any rights or remedies any Holder may have under applicable U.S. federal or
state securities laws.
7.10 Publicity. The Company and each Holder shall have the right to
approve before the issuance of any press releases, SEC or, to the extent
applicable, NASD filings, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Holders, to make any press release
or SEC or, to the extent applicable, NASD filings with respect to such
transactions as is required by applicable law and regulations (although the
Holders shall be consulted by the Company in connection with any such press
release and filing prior to its release and shall be provided with a copy
thereof and must provide specific consent to the use of its name in connection
therewith).
7.11 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
7.12 Indemnification. From and after the Closing, the Company shall
defend, protect, indemnify and hold harmless each Holder and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement, collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, any other Transaction Document or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, any other Transaction Document or any other certificate, instrument
or document contemplated hereby or thereby or (iii) any cause of action, suit or
claim brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company) and arising
out of or resulting from (A) the execution, delivery, performance or enforcement
of this Agreement, any other Transaction Document or any other certificate,
instrument or document contemplated hereby or thereby, (B) any disclosure made
by such Holder pursuant to Section 3.2 or subclause (i) of Section 3.12 hereof,
or (C) the status of such Holder as an investor in the Company. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
-22-
procedures with respect to the rights and obligations under this Section 7.12
shall be the same as those set forth in Section 6(c) of the Registration Rights
Agreement.
7.13 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Holder hereunder or pursuant to any of the other Transaction
Documents or any Holder enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, 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.
7.14 Expenses. Each party shall pay its own costs and expenses incurred in
connection with the negotiation, execution, delivery and performance of this
Agreement and the other Transaction Documents; provided, however, that at the
Closing, the Company shall pay the reasonable fees, expenses and disbursements
of counsel to the Holders in an amount not to exceed $17,500 in the aggregate.
7.15 Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement and the other
Transaction Documents. As such, the language used herein and therein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
7.16 Equitable Relief. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
hereunder (including, but not limited to, its obligations pursuant to Article IV
hereof) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement (including, but not
limited to, its obligations pursuant to Article IV hereof), that each Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer of the
Securities, without the necessity of showing economic loss and without any bond
or other security being required.
7.17 Knowledge. As used in this Agreement, the term "knowledge" of any
person or entity shall mean and include (i) actual knowledge of any of the
Company's officers or directors and (ii) that knowledge that a reasonably
prudent business person could have obtained in the management of his or her
business affairs after making due inquiry and exercising due diligence that a
prudent business person should have made or exercised, as applicable, with
respect thereto.
7.18 Exculpation Among Holders. The Company acknowledges that the
obligations of each Holder under this Agreement and each of the other
Transaction Documents are several and not joint with the obligations of any
other Holder, and no Holder shall be responsible in any way
-23-
for the performance of the obligations of any other Holder under the Transaction
Documents. Each Holder acknowledges that it has independently evaluated the
merits of the transactions contemplated by this Agreement and the other
Transaction Documents, that it has independently determined to enter into the
transactions contemplated hereby and thereby, that it is not relying on any
advice from or evaluation by any other Holder, and that it is not acting in
concert with any other Holder in making its purchase of securities hereunder or
in monitoring its investment in the Company. The Holders and, to its knowledge,
the Company agree that the no action taken by any Holder pursuant hereto or to
the other Transaction Documents, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert or would
deem such Holders to be members of a "group" for purposes of Section 13(d) of
the Exchange Act, and the Holders have not agreed to act together for the
purpose of acquiring, holding, voting or disposing of equity securities of the
Company. The Company has elected to provide all Holders with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Holders. The Company acknowledges that
such procedure with respect to the Transaction Documents in no way creates a
presumption that the Holders are in any way acting in concert or as a "group"
for purposes of Section 13(d) of the Exchange Act with respect to the
Transaction Documents or the transactions contemplated hereby or thereby. Each
Holder acknowledges that it has been represented by its own separate legal
counsel in their review and negotiation of the Transaction Documents.
7.19 Business Days and Trading Days. For purposes of this Agreement, the
term "business day" means any day other than a Saturday or Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law, regulation or executive order to close, and the term "trading day" means
any day on which the Bulletin Board or, if the Common Stock is not then traded
on the Bulletin Board, the principal national securities exchange, automated
quotation system or other trading market where the Common Stock is then listed,
quoted or traded, is open for trading.
[Signature Page Follows]
-24-
IN WITNESS WHEREOF, the undersigned Holder and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPANY:
P-COM, INC., a Delaware corporation
By: /s/ Xxx Xxxxxxxx
-------------------------------------
Name: Xxx Xxxxxxxx
Title: President and CEO
HOLDER:
NORTH SOUND LEGACY FUND LLC
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: CFO
RESIDENCE:
ADDRESS:
Telephone:
Facsimile:
Attention:
[SIGNATURE PAGE TO NOTE REPURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned Holder and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPANY:
P-COM, INC., a Delaware corporation
By: /s/ Xxx Xxxxxxxx
-------------------------------------
Name: Xxx Xxxxxxxx
Title: President and CEO
HOLDER:
NORTH SOUND LEGACY INSTITUTIONAL
FUND LLC
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: CFO
RESIDENCE:
ADDRESS:
Telephone:
Facsimile:
Attention:
[SIGNATURE PAGE TO NOTE REPURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned Holder and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
P-COM, INC., a Delaware corporation
By: /s/ Xxx Xxxxxxxx
-------------------------------------
Name: Xxx Xxxxxxxx
Title: President and CEO
HOLDER:
NORTH SOUND LEGACY INTERNATIONAL LTD.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: CFO
RESIDENCE:
ADDRESS:
Telephone:
Facsimile:
Attention:
[SIGNATURE PAGE TO NOTE REPURCHASE AGREEMENT]
EXHIBIT A
Certificate of Designation
EXHIBIT B
Registration Rights Agreement
