SECURITIES PURCHASE AND EXCHANGE AGREEMENT
THIS SECURITIES PURCHASE AND EXCHANGE
AGREEMENT (“Agreement”) is made as of the 16th day of October, 2009 by and among
Avantair, Inc., a Delaware corporation (the “Company”), the existing investors
identified as such on the signature pages affixed hereto (each an “Existing
Investor” and collectively the “Existing Investors”) and the new investors
identified as such on the signature pages affixed hereto (each, a “New Investor”
and collectively the “New Investors”). The Existing Investors and the
New Investors are collectively referred to herein individually as an “Investor”
and collectively as the “Investors.”
Recitals
A. The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended; and
B. Prior
to the date hereof, the Company and the Existing Investors have entered into one
or more (i) Securities Purchase Agreements (as amended, the “Existing Purchase
Agreements”) pursuant to which the Existing Investors have acquired units
consisting of an aggregate of (A) 1,634,400 shares (the “Existing Shares”) of
common stock, par value $0.0001 per share, of the Company (together with any
securities into which such shares may be reclassified the “Common Stock”) and
(B) Warrants to acquire an aggregate of up to 817,200 shares (the “Existing
Warrant Shares”) of Common Stock at an exercise price of $4.00 per share (the
“Existing Warrants”) at a per unit price of $2.50 (the “Existing Per Unit
Price”) and (ii) Registration Rights Agreements (as amended, the “Existing
Registration Rights Agreements” and together with the Existing Purchase
Agreements, the “Existing Agreements”) pursuant to which the Company has agreed
to provide certain registration rights with respect to the Existing Shares and
the Existing Warrant Shares under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, and applicable state
securities laws; and
C. The
New Investors wish to purchase from the Company, and the Company wishes to sell
and issue to the New Investors, upon the terms and conditions stated in this
Agreement, an aggregate of 8,818,892 shares of Common Stock (the “New Shares”),
at a purchase price of $0.95 per share (the “Per Share Purchase Price”) (the
“Financing”); and
D. Contemporaneous
with the sale of the New Shares, the Existing Investors wish to effect the
exchange (the “Exchange”) of their Existing Warrants for shares of Common Stock
(the “Exchange Shares”) at an exchange rate equal to 0.63158 Exchange Shares for
each Existing Warrant Share (rounded down to the nearest whole share) (the
“Exchange Rate”); and
E. Contemporaneous
with the consummation of the Financing and the Exchange, (i) the Company, the
Investors and EarlyBird Capital, LLC will execute and deliver a Registration
Rights Agreement, in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”), pursuant to which the Company will agree to
provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and applicable
state securities laws with respect to the Existing Shares, the New Shares and
the Exchange Shares and (ii) the Existing Agreements will be terminated and be
of no further force and effect; and
F. Pursuant
to Section 9(d) of the Certificate of Designations establishing the terms of the
Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the
“Series A Preferred Stock”), the Exchange requires the consent of the holders of
at least 50% of the issued and outstanding shares of the Series A Preferred
Stock (the “Majority Holders”); and
G. Certain
of the Investors constitute the Majority Holders and as such desire to consent
to the Exchange pursuant to the terms of the Series A Preferred Stock (the
“Consenting Holders”).
In consideration of the mutual promises
made herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1.
Definitions. In
addition to those terms defined above and elsewhere in this Agreement, for the
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate” means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.
“Business Day” means a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Company’s Knowledge”
means the actual knowledge of the executive officers (as defined in Rule 405
under the 0000 Xxx) of the Company, after due inquiry.
“Confidential
Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, computer
program code, performance specifications, support documentation, drawings,
specifications, designs, financial information, business and marketing plans,
and customer and supplier lists and related information).
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“Control” (including
the terms “controlling”, “controlled by” or “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“Effective Date” means
the date on which the initial Registration Statement is declared effective by
the SEC.
“Effectiveness
Deadline” means the date on which the initial Registration Statement is
required to be declared effective by the SEC under the terms of the Registration
Rights Agreement.
“Intellectual
Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (ii) trademarks, service marks, trade dress, trade names,
corporate names, logos, slogans and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any of
the foregoing; and (v) proprietary computer software (including but not limited
to data, data bases and documentation).
“Material Adverse
Effect” means a material adverse effect on (i) the assets, liabilities,
results of operations, condition (financial or otherwise), or business of the
Company and its Subsidiaries taken as a whole, (ii) the validity of the
Transaction Documents or (iii) the ability of the Company to perform its
obligations under the Transaction Documents.
“Person” means an
individual, corporation, partnership, limited liability company, trust, business
trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.
“Purchase Price” means
Eight Million Three Hundred Seventy-Seven Nine Hundred Forty-Seven and 35/100
Dollars ($8,377,947.35).
“Registration
Statement” has the meaning set forth in the Registration Rights
Agreement.
“SEC Filings” has the
meaning set forth in Section 4.6.
“Shares” means,
collectively, the Exchange Shares and the New Shares.
“SSF Investor” means
any Investor which is an Affiliate of AWM Investment Co.
“Specified Investor”
means (i) any SSF Investor, (ii) any Person to whom an SSF Investor may have
assigned some or all of its rights hereunder in accordance with the terms hereof
in connection with the sale or other transfer of some or all of the New Shares
acquired by such SSF Investor, and (iii) any subsequent transferee of any or all
of such New Shares and rights.
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“Specified Investor
Shares” means any New Shares held by any Specified Investor.
“Subsidiary” of any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first Person.
“Transaction
Documents” means this Agreement and the Registration Rights
Agreement.
“1933 Act” means the
Securities Act of 1933, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.
“1934 Act” means the
Securities Exchange Act of 1934, as amended, or any successor statute, and the
rules and regulations promulgated thereunder.
2. Financing and Exchange;
Consent.
2.1 Financing. Subject
to the terms and conditions of this Agreement, on the Closing Date, each of the
New Investors shall severally, and not jointly, purchase, and the Company shall
sell and issue to the Investors, the New Shares in the respective amounts set
forth opposite the New Investors’ names on the signature pages attached hereto
in exchange for the Purchase Price as specified in Section 3 below.
2.2 Exchange. Subject
to the terms and conditions of this Agreement, the Exchange shall become
effective on the Closing Date without any further action by the Company or the
Existing Holders. Without limiting the generality of the foregoing,
on the Closing Date, the Existing Warrants shall be deemed to be cancelled and
shall be of no further force and effect and shall thereafter represent only the
right to receive the Exchange Shares at the Exchange Rate upon the surrender of
the Existing Warrants to the Company by the holders thereof. No
Exchange Shares shall be issued to any holder of an Existing Warrant unless and
until such Existing Warrant is surrendered or the holder notifies the Company
that its Existing Warrant has been lost or destroyed and executes in favor of
the Company an affidavit of loss and indemnification agreement in customary
form. Upon surrender by an Existing Investor of an Existing Warrant
to the Company (or, in the event of the loss or destruction of an Existing
Warrant, the delivery of the affidavit of loss and indemnification agreement
referenced above), the Company shall cause the Transfer Agent to issue to the
Existing Investor a certificate or certificates, registered in such name or
names as the Existing Investor may designate, representing the Exchange Shares
to be received by the Existing Investor.
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2.3 Termination of Existing
Agreements. Simultaneous with the consummation of the
Financing and the Exchange and without any further action by the Company or the
Existing Holders, the Existing Agreements shall be terminated and be of no
further force and effect.
2.4 Consent. Pursuant
to Section 9(d) of the terms of the Series A Preferred Stock the Consenting
Holders, constituting the Majority Holders, hereby irrevocably consent to the
Exchange.
3. Closing. Subject
to any other arrangement between the Company and a particular Investor, upon
confirmation that the other conditions to closing specified herein have been
satisfied or duly waived by the Investors, (i) the Company shall deliver to the
Specified Investors a certificate or certificates, registered in such name or
names as the Specified Investors may designate, representing the Specified
Investor Shares, (ii) the Company shall deliver to the Transfer Agent
irrevocable instructions to issue to the other New Investors a certificate or
certificates, registered in such name or names as such New Investors may
designate, representing the New Shares to be issued to them, and (iii) the New
Investors shall cause a wire transfer in same day funds to be sent to the
account of the Company as instructed in writing by the Company, in an amount
representing such New Investor’s pro rata portion of the Purchase Price as set
forth on the signature pages to this Agreement. The closing of the
Financing and the Exchange (the “Closing”) shall take place at the offices of
Xxxxxxxxxx Xxxxxxx PC, 1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other location and on such other date as the Company and
the Investors shall mutually agree. The date on which the Closing
occurs is referred to herein as the “Closing Date.”
4. Representations and
Warranties of the Company. The Company hereby represents and
warrants to the Investors that, except as set forth in the schedules delivered
herewith (collectively, the “Disclosure Schedules”):
4.
1 Organization, Good Standing
and Qualification. Each of the Company and its Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now conducted and to own its
properties. Each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not had and could not reasonably be expected to have a
Material Adverse Effect. The Company’s Subsidiaries are listed on
Schedule 4.1
hereto.
4.2 Authorization. The
Company has full power and authority and has taken all requisite action on the
part of the Company, its officers, directors and stockholders necessary for (i)
the authorization, execution and delivery of the Transaction Documents, (ii) the
authorization of the performance of all obligations of the Company hereunder or
thereunder, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Shares. The Transaction Documents constitute the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally and to
general equitable principles.
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4.3 Capitalization. Schedule 4.3 sets
forth as of the date hereof (a) the authorized capital stock of the Company; (b)
the number of shares of capital stock issued and outstanding; (c) the number of
shares of capital stock issuable pursuant to the Company’s stock plans; and (d)
the number of shares of capital stock issuable and reserved for issuance
pursuant to securities exercisable for, or convertible into or exchangeable for
any shares of capital stock of the Company. All of the issued and
outstanding shares of the Company’s capital stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of pre-emptive rights
and were issued in full compliance with applicable state and federal securities
law and any rights of third parties. Except as described on Schedule 4.3, all of
the issued and outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights, were issued in full compliance with applicable state and
federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim. Except as described on Schedule 4.3, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on
Schedule 4.3,
there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated by this Agreement, neither the Company nor
any of its Subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind. Except as described on Schedule 4.3 and
except for the Registration Rights Agreement, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among the Company and any of the securityholders of the
Company relating to the securities of the Company held by
them. Except as described on Schedule 4.3 and
except as provided in the Registration Rights Agreement, no Person has the right
to require the Company to register any securities of the Company under the 1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.
Except as described on Schedule 4.3, the
issuance and sale of the Shares hereunder will not obligate the Company to issue
shares of Common Stock or other securities to any other Person (other than the
Investors) and will not result in the adjustment of the exercise, conversion,
exchange or reset price of any outstanding security.
Except as described on Schedule 4.3, the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase any
equity interest in the Company upon the occurrence of certain
events.
4.4 Valid
Issuance. The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws and except for U.S. citizenship
requirements set forth in Article Seventh of the Company’s Amended and Restated
Certificate of Incorporation and in Article VI of the Company’s Amended and
Restated Bylaws.
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4.5 Consents. The execution, delivery and performance by the
Company of the Transaction Documents and the offer, issuance and sale of the
Shares require no consent of, action by or in respect of, or filing with, any
Person, governmental body, agency, or official other than filings that have been
made pursuant to applicable state securities laws and post-sale filings pursuant
to applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods. Subject to the accuracy of
the representations and warranties of each Investor set forth in Section 5
hereof, the Company has taken all action necessary to exempt (i) the issuance
and sale of the Shares, and (ii) the other transactions contemplated by the
Transaction Documents from the provisions of any stockholder rights plan or
other “poison pill” arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company’s Amended and Restated Certificate of Incorporation or Amended and
Restated Bylaws that is or could reasonably be expected to become applicable to
the Investors as a result of the transactions contemplated hereby, including
without limitation, the issuance of the Shares and the ownership, disposition or
voting of the Shares by the Investors or the exercise of any right granted to
the Investors pursuant to this Agreement or the other Transaction
Documents.
4.6 Delivery of SEC Filings;
Business. The Company has made available to the Investors
through the XXXXX system, true and complete copies of the Company’s most recent
Annual Report on Form 10-K for the fiscal year ended June 30, 2009 (the “10-K”),
and all other reports filed by the Company pursuant to the 1934 Act since the
filing of the 10-K and prior to the date hereof (collectively, the “SEC
Filings”). The SEC Filings are the only filings required of the
Company pursuant to the 1934 Act for such period. The Company and its
Subsidiaries are engaged in all material respects only in the business described
in the SEC Filings and, as of their respective dates, the SEC Filings contain a
complete and accurate description in all material respects of the business of
the Company and its Subsidiaries, taken as a whole.
4.7 Use of
Proceeds. The net proceeds of the sale of the New Shares
hereunder shall be used by the Company for the repayment of existing
indebtedness, working capital and general corporate purposes.
4.8 No Material Adverse
Change. Since June 30, 2009, except as identified and
described in the SEC Filings or as described on Schedule 4.8, there
has not been:
(i) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the 10-K, except for changes in the ordinary course of business which have
not had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
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(ii) any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company, other than the
Exchange;
(iii) any
material damage, destruction or loss, whether or not covered by insurance to any
assets or properties of the Company or its Subsidiaries;
(iv) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;
(v) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);
(vi) any
change or amendment to the Company's Amended and Restated Certificate of
Incorporation or Amended and Restated Bylaws, or material change to any material
contract or arrangement by which the Company or any Subsidiary is bound or to
which any of their respective assets or properties is subject, other than a
reverse split, if any, contemplated by Section 7.6;
(vii) any
material labor difficulties or labor union organizing activities with respect to
employees of the Company or any Subsidiary;
(viii) any
material transaction entered into by the Company or a Subsidiary other than in
the ordinary course of business;
(ix) the
loss of the services of any key employee, or material change in the composition
or duties of the senior management of the Company or any
Subsidiary;
(x) the
loss or threatened loss of any customer which has had or could reasonably be
expected to have a Material Adverse Effect; or
(xi) any
other event or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect.
4.9 SEC
Filings. At the time of filing thereof, the SEC Filings
complied as to form in all material respects with the requirements of the 1934
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
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4.10 No Conflict, Breach,
Violation or Default. Subject to the accuracy of the
representations and warranties of each Investor set forth in Section 5 hereof,
the execution, delivery and performance of the Transaction Documents by the
Company and the issuance and sale of the Shares will not conflict with or result
in a breach or violation of any of the terms and provisions of, or constitute a
default under (i) the Company’s Amended and Restated Certificate of
Incorporation or the Company’s Amended and Restated Bylaws, both as in effect on
the date hereof (true and complete copies of which have been made available to
the Investors through the XXXXX system), or (ii)(a) any statute, rule,
regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company, any Subsidiary or any of their
respective assets or properties, or (b) any agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company or a Subsidiary is
bound or to which any of their respective assets or properties is
subject.
4.11 Tax
Matters. The Company and each Subsidiary has timely prepared
and filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
shown thereon or otherwise owed by it, except for such failures to timely file
or pay taxes as could not reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate. The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods
are adequate in all material respects, and there are no material unpaid
assessments against the Company or any Subsidiary nor, to the Company’s
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and its
Subsidiaries, taken as a whole. All taxes and other assessments and
levies that the Company or any Subsidiary is required to withhold or to collect
for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due, except for such failures to
withhold, collect or pay taxes as could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate. There are
no tax liens or claims pending or, to the Company’s Knowledge, threatened
against the Company or any Subsidiary or any of their respective assets or
property. Except as described on Schedule 4.11, there
are no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.
4.12 Title to
Properties. Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.13 Certificates, Authorities
and Permits. The Company and each Subsidiary possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by it, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or such Subsidiary, could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.
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4.14 Labor
Matters.
(a) Except as set forth on Schedule
4.14, the Company is not a
party to or bound by any collective bargaining agreements or other agreements
with labor organizations. The Company has not violated in any
material respect any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and
hours.
(b) (i) There are no existing, or to the
Company's Knowledge, threatened, strikes, slow-downs, work stoppages, job
actions, lockouts or any other disruptions of or by the Company's employees,
(ii) there are no unfair labor practices or petitions for election pending or,
to the Company's Knowledge, threatened before the National Labor Relations Board
or any other federal, state or local labor commission relating to the Company's
employees, (iii) no demand for recognition or certification heretofore made by
any labor organization or group of employees is pending with respect to the
Company and (iv) to the Company's Knowledge, the Company enjoys good labor and
employee relations with its employees and labor organizations, taken as a
whole.
(c) The Company is, and at all times has
been, in compliance in all material respects with all applicable laws respecting
employment (including laws relating to classification of employees and
independent contractors) and employment practices, terms and conditions of
employment, wages and hours, and immigration and
naturalization. There are no claims pending against the Company
before the Equal Employment Opportunity Commission or any other administrative
body or in any court asserting any violation of Title VII of the Civil Rights
Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or
any other federal, state or local Law, statute or ordinance barring
discrimination in employment.
(d) Except as disclosed in the SEC Filings
or as described on Schedule
4.14, the Company is not a
party to, or bound by, any employment or other contract or agreement that
contains any severance, termination pay or change of control liability or
obligation, including, without limitation, any “excess parachute payment,” as
defined in Section 280G(b) of the Internal Revenue Code.
(e) Except as specified in Schedule
4.14, each of the Company's
employees is a Person who is either a United States citizen or is entitled to
work in the United States. To the Company's Knowledge, the Company
has no liability for the improper classification by the Company of such
employees as independent contractors or leased employees prior to the
Closing.
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4.15 Intellectual
Property.
Except as set forth on Schedule
4.15:
(a) All
Intellectual Property of the Company and its Subsidiaries is currently in
compliance with all legal requirements (including timely filings, proofs and
payments of fees) and is valid and enforceable, except where the failure to be
in compliance has not had and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate. No
Intellectual Property of the Company or its Subsidiaries which is necessary for
the conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has been or is now
involved in any cancellation, dispute or litigation, and, to the Company’s
Knowledge, no such action is threatened. Neither the Company nor any
Subsidiary owns any patent or patent application.
(b) All
of the licenses and sublicenses and consent, royalty or other agreements
concerning Intellectual Property which are necessary for the conduct of the
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted to which the Company or any
Subsidiary is a party or by which any of their assets are bound (other than
generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, “License Agreements”) are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the
Company’s Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally, and
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement.
(c) The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses. The Company and its Subsidiaries have a
valid and enforceable right to use all third party Intellectual Property and
Confidential Information used or held for use in the respective businesses of
the Company and its Subsidiaries, except where the failure to have such right
has not had and could not reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate.
(d) The
conduct of the Company’s and its Subsidiaries’ businesses as currently conducted
does not infringe or otherwise impair or conflict with (collectively,
“Infringe”) any Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party, and, to the Company’s
Knowledge, the Intellectual Property of the Company and its Subsidiaries which
are necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be
conducted are not being Infringed by any third party. There is no
litigation or order pending or outstanding or, to the Company’s Knowledge,
threatened, that seeks to limit or challenge or that concerns the ownership,
use, validity or enforceability of any Intellectual Property or Confidential
Information of the Company and its Subsidiaries and the Company’s and its
Subsidiaries’ use of any Intellectual Property or Confidential Information owned
by a third party, and, to the Company’s Knowledge, there is no valid basis for
the same.
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(e) The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Intellectual Property or Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be
conducted.
(f) The
Company and its Subsidiaries have taken reasonable steps to protect the
Company’s and its Subsidiaries’ rights in their Intellectual Property and
Confidential Information. Each employee, consultant and contractor
who has had access to Confidential Information which is necessary for the
conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company’s standard forms thereof. Except under confidentiality
obligations, there has been no material disclosure of any of the Company’s or
its Subsidiaries’ Confidential Information to any third party.
4.16 Environmental
Matters. Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or is subject to any claim relating to any Environmental
Laws, and there is no pending or, to the Company’s Knowledge, threatened
investigation that might lead to such a claim, in each case, which violation,
contamination, liability or claim has had or could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.
4.17 Litigation. Except
as described on Schedule 4.17, there
are no pending actions, suits or proceedings against or affecting the Company,
its Subsidiaries or any of its or their properties, which could reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate;
and to the Company’s Knowledge, no such actions, suits or proceedings are
threatened or contemplated. Neither the Company nor any Subsidiary,
nor, to the Company’s Knowledge, any director or officer thereof, is or since
January 1, 2004 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 Company’s
Knowledge, there is not pending or contemplated, any investigation by the SEC
involving the Company or any current or former director or officer of the
Company. The SEC 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 1933 Act or the 1934 Act.
-12-
4.18 Financial
Statements. The financial statements included in each SEC
Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (“GAAP”) (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934
Act). Except as set forth in the financial statements of the Company
included in the SEC Filings filed prior to the date hereof or as described on
Schedule 4.18,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
contingent or otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect.
4.19 Insurance
Coverage. The Company and each Subsidiary maintains in full
force and effect insurance coverage that is customary for comparably situated
companies for the business being conducted and properties owned or leased by the
Company and each Subsidiary, and the Company reasonably believes such insurance
coverage to be adequate against all liabilities, claims and risks against which
it is customary for comparably situated companies to insure.
4.20 OTCBB
Compliance. The Common Stock is registered pursuant to Section
12(g) of the 1934 Act and is quoted on The OTC Bulletin Board quotation service
(the “OTCBB”), and, except as contemplated by Section 7.6, the Company has taken
no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the 1934 Act or removal from quotation of
the Common Stock from the OTCBB, nor has the Company received any notification
that the SEC, the OTCBB or the Financial Industry Regulatory Authority, Inc. is
contemplating terminating such registration or quotation.
4.21 Brokers and
Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company, other than as
described in Schedule
4.21.
4.22 No Directed Selling Efforts
or General Solicitation. Neither the Company nor any Person
acting on its behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Shares.
4.23 Other
Offerings. 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 Company security or solicited any offers to buy any
security, under circumstances that would adversely affect reliance by the
Company on Section 4(2) for the exemption from registration for the transactions
contemplated hereby or would require registration of the Shares under the 1933
Act.
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4.24 Private
Placement. Subject to the accuracy of the representations and
warranties of each Investor set forth in Section 5 hereof, the offer and sale of
the Shares to the Investors as contemplated hereby is exempt from the
registration requirements of the 1933 Act.
4.25 Questionable
Payments. Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary, has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary; or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
4.26 Transactions with
Affiliates. Except as disclosed in the SEC Filings or as
disclosed on Schedule
4.26, none of the officers or directors of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than as
holders of stock options and/or warrants, and for services as 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 or
director or, to the Company’s Knowledge, any entity in which any officer or
director has a substantial interest or is an officer, director, trustee or
partner.
4.27 Internal
Controls. The Company is in material compliance with the
provisions of the Xxxxxxxx-Xxxxx Act of 2002 currently applicable to the
Company. 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 GAAP 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 1934
Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including the Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which the
Company’s most recently filed periodic report under the 1934 Act, 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 period covered by the most recently filed periodic report under the
1934 Act (such date, the "Evaluation Date"). The Company presented in
its most recently filed periodic report under the 1934 Act 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 308
of Regulation S-K) or, to the Company's Knowledge, in other factors that could
significantly affect the Company's internal controls. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the 1934 Act.
-14-
4.28 Disclosures. Except
as expressly identified on Schedule 4.28 (such
information, the “Non-public Information”), neither the Company nor any Person
acting on its behalf has provided the Investors or their agents or counsel with
any information that constitutes or might constitute material, non-public
information, other than the terms of the transactions contemplated
hereby. The written materials delivered to the Investors in
connection with the transactions contemplated by the Transaction Documents do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
5. Representations and
Warranties of the Investors. Each of the Investors hereby
severally, and not jointly, represents and warrants to the Company
that:
5.1 Organization and Existence;
Address. Such Investor, if an entity, is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Shares pursuant to this Agreement. The
address of such Investor furnished by him or it on the signature pages hereto is
such Investor’s principal residence if he is an individual or its principal
business address if it is a corporation or other entity
5.2 Authorization. The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and each
will constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.
5.3 Purchase Entirely for Own
Account. The Shares to be received by such Investor hereunder
will be acquired for such Investor’s own account, not as nominee or agent, and
not with a view to the resale or distribution of any part thereof in violation
of the 1933 Act, and such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
1933 Act without prejudice,
however, to such Investor’s right at all times to sell or otherwise dispose of
all or any part of such Shares in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed
a representation or warranty by such Investor to hold the Shares for any period
of time. Such Investor is not a broker-dealer registered with
the SEC under the 1934 Act or an entity engaged in a business that would require
it to be so registered.
-15-
5.4 Investment
Experience. Such Investor acknowledges that it can bear the
economic risk and complete loss of its investment in the Shares and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated
hereby. Such Investor understands and recognizes that the purchase of
the Shares is highly speculative and involves a high degree of risk and that
only investors who can afford the loss of their entire investment should
consider investing in the Company. Such Investor has also reviewed
the risk factors in the SEC Filings.
5.5 Disclosure of
Information. Such Investor has had an opportunity to receive
all information related to the Company requested by it and to ask questions of
and receive answers from the Company regarding the Company, its business and the
terms and conditions of the offering of the Shares. Such Investor
acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by such Investor
shall modify, limit or otherwise affect such Investor’s right to rely on the
Company’s representations and warranties contained in this
Agreement.
5.6 Restricted
Securities. Such Investor understands that the Shares are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.
5.7 Legends. It
is understood that, except as provided below, certificates evidencing the Shares
may bear the following or any similar legend:
(a) “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold without restriction pursuant to Rule
144, or (iii) the Company has received an opinion of counsel reasonably
satisfactory to it that such transfer may lawfully be made without registration
under the Securities Act of 1933 or qualification under applicable state
securities laws.”
(b) If
required by the authorities of any state in connection with the issuance of sale
of the Shares, the legend required by such state authority.
5.8 Accredited
Investor. Such Investor is an accredited investor as defined
in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General
Solicitation. Such Investor did not learn of the investment in
the Shares as a result of any general solicitation or general
advertising.
5.10 Brokers and
Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of such Investor.
-16-
5.11 Prohibited
Transactions. Since the earlier of (a) such time as such
Investor was first contacted by the Company or any other Person acting on behalf
of the Company regarding the transactions contemplated hereby or (b) thirty (30)
days prior to the date hereof, neither such Investor nor any Affiliate of such
Investor which (x) had knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to such Investor’s investments or trading or
information concerning such Investor’s investments, including in respect of the
Shares, or (z) is subject to such Investor’s review or input concerning such
Affiliate’s investments or trading (collectively, “Trading Affiliates”) has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the 0000 Xxx) with respect to the Common Stock, granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Shares (each, a “Prohibited
Transaction”). Prior to the earliest to occur of (i) the termination
of this Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline,
such Investor shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction. Such Investor
acknowledges that the representations, warranties and covenants contained in
this Section 5.11 are being made for the benefit of the Investors as well as the
Company and that each of the other Investors shall have an independent right to
assert any claims against such Investor arising out of any breach or violation
of the provisions of this Section 5.11.
5.12 Ownership of Existing
Warrants. If such Investor is an Existing Investor, such
Investor owns beneficially and of record the Existing Warrants set forth opposite such Investor’s name on the signature pages affixed
hereto, free and clear of
all pledges, liens, encumbrances and adverse claims with respect
thereto, other than those
created by the Existing Agreements and those arising under applicable securities
laws.
5.13 Need for Additional
Financing. Such Investor understands that it is likely that
the Company will need to obtain additional financing following consummation of
the sale of the Shares in order to fully execute its current business plan and
objectives. Such financing could be in the form of a sale or sales of
equity or debt or equipment lease financing or a combination of the foregoing.
Such financing could lead to material dilution to the Company’s then existing
equity holders and could provide for terms that restrict the operations of the
Company. There can be no assurance that any additional financing
following the sale of the Shares will be available to the Company on
commercially reasonable terms or at all. In the event the Company is
unable to obtain additional financing, it may not be able to fully execute its
business plan and objectives and could be forced to curtail some or all of its
operations.
6. Conditions to
Closing.
6.1 Conditions to the Investors’
Obligations. The obligation of each Investor to consummate the Financing
and/or the Exchange, as applicable, at the Closing 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):
-17-
(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct at all times prior to and on 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 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on 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.
(b) 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 Shares and the consummation of the other transactions
contemplated by the Transaction Documents, all of which shall be in full force
and effect.
(c) The
Company shall have executed and delivered the Registration Rights
Agreement.
(d) The
Company shall have received gross proceeds from the sale of the New Shares as
contemplated hereby of at least Seven Million Nine Hundred Thousand Dollars
($7,900,000); provided, however, that no New Investor can assert this Section
6.1(d) as a condition to its obligations hereunder unless it and its Affiliates
who are also New Investors are otherwise ready, willing and able to fund their
respective purchases of the New Shares.
(e) [reserved]
(f) The
Company shall have provided written evidence reasonably satisfactory to the
Investors that the Company has received customary financing commitments for the
acquisition of at least four additional aircraft of the type and quality
currently used by the Company in its business.
(g) 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.
(h) The
Company shall have delivered a Certificate, 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), (d), (e) and (k) of this Section 6.1.
-18-
(i) The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Shares, certifying the current versions of the Amended and Restated Certificate
of Incorporation and Amended and Restated Bylaws of the Company and certifying
as to the signatures and authority of persons signing the Transaction Documents
and related documents on behalf of the Company.
(j) The
Investors shall have received an opinion from DLA Piper LLP (US), the Company's
counsel, dated as of the Closing Date, substantially in the form of Exhibit
B.
(k) No
stop order or suspension of trading shall have been imposed by the SEC or any
other governmental or regulatory body with respect to public trading in the
Common Stock.
6.2 Conditions to Obligations of
the Company. The Company's obligation to consummate the Financing and the
Exchange at the Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the Closing Date of the following conditions, any of
which may be waived by the Company:
(a) The
representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date. The Investment Representations
shall be true and correct in all respects when made, and shall be true and
correct in all respects on the Closing Date with the same force and effect as if
they had been made on and as of said date. The Investors shall have
performed in all material respects all obligations and covenants herein required
to be performed by them on or prior to the Closing Date.
(b) The
Investors shall have executed and delivered the Registration Rights
Agreement.
(c) The
New Investors shall have delivered the Purchase Price to the
Company.
(e) The
Existing Investors shall have surrendered for cancellation all of the Existing
Warrants for exchange pursuant to the terms of the Exchange.
6.3 Termination of Obligations
to Effect Closing; Effects.
(a) The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing shall terminate as follows:
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(i)
Upon the mutual written consent of the Company and the Investors agreeing to
acquire a majority of the New Shares;
(ii)
By the Company if any of the conditions set forth in Section 6.2 shall have
become incapable of fulfillment, and shall not have been waived by the
Company;
(iii)
By an Investor (with respect to itself only) if any of the conditions set forth
in Section 6.1 shall have become incapable of fulfillment, and shall not have
been waived by the Investor; or
(iv)
By either the Company or any Investor (with respect to itself only) if the
Closing has not occurred on or prior to November 30, 2009;
provided,
however, that, except in the case of clause (i) 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.
(b) In
the event of termination by the Company or any Investor of its obligations to
effect the Closing pursuant to this Section 6.3, written notice thereof shall
forthwith be given to the other Investors by the Company 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 6.3 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.
7. Covenants and Agreements of
the Company.
7.1 [reserved]
7.2 Reports. The
Company will furnish to the Investors and/or their assignees such information
relating to the Company and its Subsidiaries as from time to time may reasonably
be requested by the Investors and/or their assignees; provided, however, that
the Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
7.3 No Conflicting
Agreements. The Company will not take any action, enter into
any agreement or make any commitment that would conflict or interfere in any
material respect with the Company’s obligations to the Investors under the
Transaction Documents.
-20-
7.4 [reserved]
7.5 Compliance with
Laws. The Company will comply in all material respects with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities.
7.6 Listing of Underlying Shares
and Related Matters. The Company shall use its commercially
reasonable best efforts to qualify for the listing of the outstanding Common
Stock (including the Existing Shares and the Shares) on the NASDAQ Capital
Market as promptly as practicable after the Closing, including without
limitation (i) registering the Common Stock under Section 12(b) of the 1934 Act
and (ii) subject to approval of the Company’s Board of Directors, effecting a
reverse split of the outstanding Common Stock (including the calling of a
special meeting of stockholders to approve a reverse
split). Following any such listing, the Company will use commercially
reasonable efforts to continue the listing and trading of its Common Stock on
the NASDAQ Capital Market (or any other stock exchange maintained by the NASDAQ
Stock Market) and, in accordance, therewith, will use commercially reasonable
efforts to comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of such stock exchange or market, as
applicable.
7.7 Termination of
Covenants. The provisions of Sections 7.2 through 7.5 shall
terminate and be of no further force and effect on the date on which the
Company’s obligations under the Registration Rights Agreement to register or
maintain the effectiveness of any registration covering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate.
7.8 Removal of
Legends. In connection with any sale or disposition of the
Shares by an Investor pursuant to Rule 144 or pursuant to any other exemption
under the 1933 Act such that the purchaser acquires freely tradable shares and
upon compliance by the Investor with the requirements of this Agreement, the
Company shall or, in the case of Common Stock, shall cause the transfer agent
for the Common Stock (the “Transfer Agent”) to issue replacement certificates
representing the Shares sold or disposed of without restrictive
legends. Upon the earlier of (i) registration for resale pursuant to
the Registration Rights Agreement or (ii) the Shares becoming freely tradable by
a non-affiliate pursuant to Rule 144 the Company shall (A) deliver to the
Transfer Agent irrevocable instructions that the Transfer Agent shall reissue a
certificate representing shares of Common Stock without legends upon receipt by
such Transfer Agent of the legended certificates for such shares, together with
either (1) a customary representation by the Investor that Rule 144 applies to
the shares of Common Stock represented thereby or (2) a statement by the
Investor that such Investor has sold the shares of Common Stock represented
thereby in accordance with the Plan of Distribution contained in the
Registration Statement, and (B) cause its counsel to deliver to the Transfer
Agent one or more blanket opinions to the effect that the removal of such
legends in such circumstances may be effected under the 1933
Act. From and after the earlier of such dates, upon an Investor’s
written request, the Company shall promptly cause certificates evidencing the
Investor’s Shares to be replaced with certificates which do not bear such
restrictive legends. With respect only to the Specified Investor
Shares, when the Company is required to cause an unlegended certificate to
replace a previously issued legended certificate, if: (1) the unlegended
certificate is not delivered to a Specified Investor within three (3) Business
Days of submission by that Specified Investor of a legended certificate and
supporting documentation to the Transfer Agent as provided above and (2) prior
to the time such unlegended certificate is received by the Specified Investor,
the Specified Investor, or any third party on behalf of such Specified Investor
or for the Specified Investor’s account, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Specified Investor of Specified Investor Shares represented by such
certificate (a “Buy-In”), then the Company shall pay in cash to the Specified
Investor (for costs incurred either directly by such Specified Investor or on
behalf of a third party) the amount by which the total purchase price paid for
Common Stock as a result of the Buy-In (including brokerage commissions, if any)
exceeds the proceeds received by such Specified Investor as a result of the sale
to which such Buy-In relates. The Specified Investor shall provide
the Company written notice indicating the amounts payable to the Specified
Investor in respect of the Buy-In.
-21-
7.9 Subsequent Equity
Sales.
(a) From
the date hereof until ninety (90) days after the Closing Date, without the
consent of the Required Investors (as defined in the Registration Rights
Agreement), neither the Company nor any Subsidiary shall issue shares of Common
Stock or Common Stock Equivalents. Notwithstanding the foregoing, the
provisions of this Section 7.9(a) shall not apply to (i) the issuance of Common
Stock or Common Stock Equivalents upon the conversion or exercise of any
securities of the Company or a Subsidiary outstanding on the date hereof,
provided that the terms of such security are not amended after the date hereof
to decrease the exercise price or increase the Common Stock or Common Stock
Equivalents receivable upon the exercise, conversion or exchange thereof, (ii)
the issuance of any Common Stock or Common Stock Equivalents pursuant to any
Company equity incentive plan approved by the Company’s stockholders and in
place as of the date hereof or (iii) the transactions described on Schedule
7.9(a).
(b) From
the date hereof until the earlier of (i) three (3) years after the Closing Date
or (ii) the date on which no Specified Investor holds any Specified Investor
Shares, without the consent of the Specified Investors holding a majority of the
Specified Investor Shares held by all of the Specified Investors as of such
date, the Company shall not effect or enter into an agreement to effect any
Subsequent Financing involving a “Variable Rate Transaction”. The
term “Variable Rate Transaction” shall mean a transaction in which the Company
issues or sells (i) any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into any
agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price. For the
avoidance of doubt, the issuance of a security which is subject to customary
anti-dilution protections, including where the conversion, exercise or exchange
price is subject to adjustment as a result of stock splits, reverse stock splits
and other similar recapitalization or reclassification events shall not be
deemed to be a “Variable Rate Transaction.”
-22-
7.10 Adoption of Equity Incentive
Plan. Promptly following the Closing, the Company shall adopt
and use its commercially reasonable best efforts to cause its stockholders to
approve an equity incentive plan containing customary terms and conditions for
the industry in which the Company operates.
7.11 Equal Treatment of
Investors. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents. For clarification
purposes, this provision constitutes a separate right granted to each Investor
by the Company and negotiated separately by each Investor, and is intended for
the Company to treat the Investors as a class and shall not in any way be
construed as the Investors acting in concert or as a group with respect to the
purchase, disposition or voting of Shares or otherwise.
8. Survival and
Indemnification.
8.1 Survival. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement.
8.2 Indemnification. The
Company agrees to indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney 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)
(collectively, “Losses”) to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction Documents, and will
reimburse any such Person for all such amounts as they are incurred by such
Person.
8.3 Conduct of Indemnification
Proceedings. Any
person entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and provided, further, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation. It
is understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more than
one separate firm of attorneys at any time for all such indemnified
parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.
-23-
9. Miscellaneous.
9.1 Successors and
Assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Investors, as
applicable, provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Shares in a transaction complying with
applicable securities laws without the prior written consent of the Company or
the other Investors. The provisions of this Agreement shall inure to
the benefit of and be binding upon the respective permitted successors and
assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.2 Counterparts;
Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
may also be executed via facsimile, which shall be deemed an
original.
9.3 Titles and
Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.4 Notices. Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by
an internationally recognized overnight air courier, then such notice shall be
deemed given one Business Day after delivery to such carrier. All
notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days’
advance written notice to the other party:
-24-
If to the Company:
0000
Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx,
Xxxxxxx 00000
Attention: Chief
Executive Officer
Fax: (000)
000-0000
With a copy to:
DLA Piper
LLP (US)
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx,
Xxx Xxxx 00000-0000
Attention: Xxxxx
Xxxx
Fax: (000)
000-0000
If to the Investors:
to the
addresses set forth on the signature pages hereto.
9.5 Expenses. The
parties hereto shall pay their own costs and expenses in connection herewith,
except that the Company shall pay the reasonable fees and expenses of Xxxxxxxxxx
Xxxxxxx PC not to exceed $25,000, upon the occurrence of the Closing; it being
understood that Xxxxxxxxxx Xxxxxxx PC has only rendered legal advice to the
Special Situations Funds participating in this transaction and not to the
Company or any other Investor in connection with the transactions contemplated
hereby, and that each of the Company and each Investor has relied for such
matters on the advice of its own respective counsel. Such expenses
shall be paid upon demand. The Company shall reimburse the Investors
upon demand for all reasonable out-of-pocket expenses incurred by the Investors,
including without limitation reimbursement of attorneys’ fees and disbursements,
in connection with any amendment, modification or waiver of this Agreement or
the other Transaction Documents. In the event that legal proceedings
are commenced by any party to this Agreement against another party to this
Agreement in connection with this Agreement or the other Transaction Documents,
the party or parties which do not prevail in such proceedings shall severally,
but not jointly, pay their pro rata share of the reasonable attorneys’ fees and
other reasonable out-of-pocket costs and expenses incurred by the prevailing
party in such proceedings.
9.6 Amendments and
Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investors. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Shares purchased under this Agreement at the time outstanding,
each future holder of all such Shares, and the Company.
-25-
9.7 Publicity. Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or the Investors (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investors, as the case may be, shall allow the
Investors or the Company, as applicable, to the extent reasonably practicable in
the circumstances, reasonable time to comment on such release or announcement in
advance of such issuance. By 9:00 a.m. (New York City time) on the
trading day immediately following the Closing Date, the Company shall issue a
press release disclosing the consummation of the transactions contemplated by
this Agreement and the Non-public Information. No later than the
fourth trading day following the Closing Date, the Company will file a Current
Report on Form 8-K attaching the press release described in the foregoing
sentence as well as copies of the Transaction Documents. In addition,
the Company will make such other filings and notices in the manner and time
required by the SEC. The Company understands and acknowledges that,
subject to the provisions of Section 5.11, the Investors shall be free to trade
in the securities of the Company from and after the time the press release is
required to be disseminated pursuant to this Section 9.7.
9.8 Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the
extent permitted by applicable law, the parties hereby waive any provision of
law which renders any provision hereof prohibited or unenforceable in any
respect.
9.9 Entire
Agreement. This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
9.10 Further
Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
-26-
9.11 Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without regard to the choice of law principles thereof. Each
of the parties hereto irrevocably submits to the exclusive jurisdiction of the
courts of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such
court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY
RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER.
9.12 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 any other Investor under any Transaction
Document. The decision of each Investor to purchase Shares 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 Documents. 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 Shares 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. The Company acknowledges that each of
the Investors has been provided with the same Transaction Documents for the
purpose of closing a transaction with multiple Investors and not because it was
required or requested to do so by any Investor.
[signature
page follows]
-27-
IN WITNESS WHEREOF, the parties have
executed this Agreement or caused their duly authorized officers to execute this
Agreement as of the date first above written.
|
The
Company:
|
||
|
By:
|
/s/ Xxxxxx X.
Xxxxx
|
|
|
Name:
|
Xxxxxx
X. Xxxxx
|
|
|
Title:
|
C.E.O.
|
|
-28-
|
Existing
Investors:
|
Xxxxxx
Xxxxxx
|
||
|
By:
|
/s/ Xxxxxx Xxxxxx
|
||
|
Name:
|
Xxxxxx
Xxxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 24,000
Number of
Exchange Shares: 15,158
|
Existing
Investors:
|
Xxxx
X. X’Xxxxx
|
||
|
By:
|
/s/ Xxxx X. X’Xxxxx
|
||
|
Name:
|
Xxxx
X. X’Xxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 48,000
Number of
Exchange Shares: 30,316
|
Existing
Investors:
|
A.
Xxxxxxx Xxxxx
|
||
|
By:
|
/s/ A. Xxxxxxx Xxxxx
|
||
|
Name:
|
A.
Xxxxxxx Xxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 48,000
Number of
Exchange Shares: 30,316
|
Existing
Investors:
|
Xxxxxx
X. Xxxxx
|
||
|
By:
|
/s/ Xxxxxx X. Xxxxx
|
||
|
Name:
|
Xxxxxx
X. Xxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 24,000
Number of
Exchange Shares: 15,158
-29-
|
Existing
Investors:
|
Kleemann
Family 2004 Revocable Trust
|
||
|
By:
|
/s/ Xxxxxxx Xxxxxxxx
|
||
|
Name:
|
Xxxxxxx
Xxxxxxxx
|
||
|
Title:
|
Trustee
|
||
Number of
Existing Warrants: 84,000
Number of
Exchange Shares: 53,053
|
Existing
Investors:
|
Dalewood
Associates LP
|
||
|
By:
|
/s/ Xxxxxx Xxxxxx
|
||
|
Name:
|
Xxxxxx
Xxxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 40,000
Number of
Exchange Shares: 25,263
|
Existing
Investors:
|
BRMR,
LLC
|
||
|
By:
|
/s/ Xxxxx Xxxxxxxxxx
|
||
|
Name:
|
Xxxxx
Xxxxxxxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 200,000
Number of
Exchange Shares: 126,316
|
Existing
Investors:
|
Xxxx
X. Xxxxx
|
||
|
By:
|
/s/ Xxxx X. Xxxxx
|
||
|
Name:
|
Xxxx
X. Xxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 19,200
Number of
Exchange Shares: 12,126
-30-
|
Existing
Investors:
|
Xxxxxx Xxxxxx & Xxxxxxxxx Xxxxxx | ||||
|
By:
|
/s/ Xxxxxx Xxxxxx
|
By:
|
/s/ Xxxxxxxxx Xxxxxx
|
||
|
Name:
|
Xxxxxx
Xxxxxx
|
Name:
|
Xxxxxxxxx
Xxxxxx
|
||
|
Title:
|
Investor
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 40,000
Number of
Exchange Shares: 25,263
|
Existing
Investors:
|
Xxxxx
Xxxxxxxx
|
||
|
By:
|
/s/ Xxxxx Xxxxxxxx
|
||
|
Name:
|
Xxxxx
Xxxxxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 20,000
Number of
Exchange Shares: 12,632
|
Existing
Investors:
|
Xxxxxx
Xxxxxx
|
||
|
By:
|
/s/ Xxxxxx Xxxxxx
|
||
|
Name:
|
Xxxxxx
Xxxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 20,000
Number of
Exchange Shares: 12,632
|
Existing
Investors:
|
Xxxxxxx
Xxxxxx Xxxxxxxxx Revocable Trust, dated June 15, 1997 as
amended
|
||
|
By:
|
/s/ Xxxxxxx X. Xxxxxxxxx
|
||
|
Name:
|
Xxxxxxx
X. Xxxxxxxxx
|
||
|
Title:
|
Trustee
|
||
Number of
Existing Warrants: 50,000
Number of
Exchange Shares: 31,579
-31-
|
Existing
Investors:
|
Xxxxxxx
X. XxXxxxx Revocable Trust
|
||
|
By:
|
/s/ Xxxxxxx X. XxXxxxx
|
||
|
Name:
|
Xxxxxxx
X. XxXxxxx
|
||
|
Title:
|
Trustee
|
||
Number of
Existing Warrants: 40,000
Number of
Exchange Shares: 25,263
|
Existing
Investors:
|
X.
Xxxxxx Xxxxxxxx
|
||
|
By:
|
/s/ X. Xxxxxx Xxxxxxxx
|
||
|
Name:
|
X.
Xxxxxx Xxxxxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 60,000
Number of
Exchange Shares: 37,895
|
Existing
Investors:
|
Xxxxx
Xxxxxx
|
||
|
By:
|
/s/ Xxxxx Xxxxxx
|
||
|
Name:
|
Xxxxx
Xxxxxx
|
||
|
Title:
|
Investor
|
||
Number of
Existing Warrants: 100,000
Number of
Exchange Shares: 63,158
-32-
|
New
Investors:
|
SPECIAL
SITUATIONS FUND III QP, L.P.
|
||
|
By:
|
/s/ Xxxxx X. Greenhouse
|
||
|
Name:
|
Xxxxx
X. Greenhouse
|
||
|
Title:
|
General
Partner
|
||
Aggregate
Purchase Price: $3,750,000.55
Number of
Shares: 3,947,369
Address
for Notice:
000
Xxxxxxx Xxxxxx
Xxxxx
0000
Xxx Xxxx,
XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn: Xxxx X. Xxxxxxxx,
Esq.
Telephone:
000.000.0000
Facsimile:
973.597.2400
|
SPECIAL
SITUATIONS CAYMAN FUND, L.P.
|
||
|
By:
|
/s/ Xxxxx X. Greenhouse
|
|
|
Name:
|
Xxxxx
X. Greenhouse
|
|
|
Title:
|
General
Partner
|
|
Aggregate
Purchase Price: $1,250,000.50
Number of
Shares: 1,315,790
Address
for Notice:
000
Xxxxxxx Xxxxxx
Xxxxx
0000
Xxx Xxxx,
XX 00000
-33-
with a
copy to:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn: Xxxx
X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS PRIVATE EQUITY
FUND, L.P.
|
By:
|
/s/ Xxxxx X. Greenhouse
|
|
|
Name:
|
Xxxxx
X. Greenhouse
|
|
|
Title:
|
General
Partner
|
Aggregate
Purchase Price: $1,000,000.40
Number of
Shares: 1,052,632
000
Xxxxxxx Xxxxxx
Xxxxx
0000
Xxx Xxxx,
XX 00000
with a
copy to:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn: Xxxx
X. Xxxxxxxx, Esq.
Telephone: 973.597.2500
Facsimile: 973.597.2400
-34-
|
/s/ Xxxxx X. Greenhouse
|
|
|
Xxxxx
X. Greenhouse
|
Aggregate
Purchase Price: $403,750
Number of
Shares: 425,000
000
Xxxxxxx Xxxxxx
Xxxxx
0000
Xxx Xxxx,
XX 00000
with a
copy to:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn: Xxxx
X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
-35-
|
Other
New Investors:
|
Carpe
Diem Partners LLC
|
||
|
By: Carpe
Diem Capital Management LLC
|
|||
|
By:
|
/s/ Xxxx Xxxxxxxxx
|
||
|
Name:
|
Xxxx
Xxxxxxxxx
|
||
|
Title:
|
President
|
||
Aggregate
Purchase Price: $118,750
Number of
Shares: 125,000
|
Other
New Investors:
|
Xxxxxxx
Xxxxxxxx
|
||
|
By:
|
/s/ Xxxxxxx
Xxxxxxxx
|
||
|
Name:
|
Xxxxxxx
Xxxxxxxx
|
||
|
Title:
|
Investor
|
||
Aggregate
Purchase Price: $50,350
Number of
Shares: 53,000
|
Other
New Investors:
|
BBS
Capital Fund, LP
|
||
|
By:
|
/s/ Xxxxx Xxxxx
|
||
|
Name:
|
Xxxxx
Xxxxx
|
||
|
Title:
|
Principle
|
||
Aggregate
Purchase Price: $304,000
Number of
Shares: 320,000
|
Other
New Investors:
|
Hound
Partners LP
|
||
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx
|
||
|
Name:
|
Xxxxxxxx
Xxxxxxxx
|
||
|
Title:
|
Managing
Member of General
Partner
|
||
Aggregate
Purchase Price: $153,063.05
Number of
Shares: 161,119
-36-
|
Other
New Investors:
|
Hound
Partners Offshore Fund LP
|
||
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx
|
||
|
Name:
|
Xxxxxxxx
Xxxxxxxx
|
||
|
Title:
|
Managing
Member of General
Partner
|
||
Aggregate
Purchase Price: $196,936.90
Number of
Shares: 207,302
|
Other
New Investors:
|
Xxxxxx
Xxxxxx Xx.
|
||
|
By:
|
/s/ Xxxxxx Xxxxxx Xx.
|
||
|
Name:
|
Xxxxxx
Xxxxxx Xx.
|
||
|
Title:
|
Investor
|
||
Aggregate
Purchase Price: $33,250
Number of
Shares: 35,000
|
Other
New Investors:
|
Xxxxxxx
X. Xxxxxxxxx Trust dtd 7/22/92
|
||
|
By:
|
/s/ Xxxxxxx X. Xxxxxxxxx
|
||
|
Name:
|
Xxxxxxx
X. Xxxxxxxxx
|
||
|
Title:
|
Trustee
|
||
Aggregate
Purchase Price: $725,345.95
Number of
Shares: 763,522
|
Other
New Investors:
|
Xxxxx
Xxxxxx
|
||
|
By:
|
/s/ Xxxxx Xxxxxx
|
||
|
Name:
|
Xxxxx
Xxxxxx
|
||
|
Title:
|
Investor
|
||
Aggregate
Purchase Price: $250,000
Number of
Shares: 263,158
-37-
|
Other
New Investors:
|
Amstel
Investments LLC
|
||
|
By:
|
/s/ Rockwell X.
Xxxxxxxx
|
||
|
Name:
|
Rockwell
X. Xxxxxxxx
|
||
|
Title:
|
Manager | ||
Aggregate
Purchase Price: $142,500
Number of
Shares: 150,000
-38-
Exhibit
A
Form of Registration Rights
Agreement
-39-
Exhibit
B
Form of Opinion of Company
Counsel
Counsel’s
opinion shall be based on a customary review of the transaction documents, the
Company’s charter and by-laws, all material contracts and the provisions of
applicable law and shall be subject only to customary limitations and
qualification. Such opinion shall be to substantially the following
effect:
1. Based
solely upon a certificate of good standing issued by applicable public
officials, dated October 13, 2009, the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of
Delaware. Based solely upon certificates of good standing issued by
applicable public officials, dated on or prior to October 14, 2009, the Company
is duly qualified to do business as a foreign corporation and is in good
standing in the following states: California, Florida, Massachusetts,
Nevada and New Jersey. The Company has all corporate power and
authority that are required to own and operate its properties and assets and to
carry on its business as now conducted and as proposed to be conducted (all as
described in the Company’s Annual Report on Form 10-K for its fiscal year ended
June 30, 2009).
2. The
Company has the corporate power and authority and has taken all requisite
corporate action necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) the authorization of the performance of all
obligations of the Company under the Transaction Documents, and (iii) the
authorization, issuance and delivery of the Shares. The Transaction
Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except that (a)
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally, (b) the
remedies of specific performance and injunctive and other forms of injunctive
relief may be subject to general principles of equity, regardless of whether
such enforcement is considered in a proceeding at law or in equity and (c)
indemnification and contribution provisions may be limited by applicable
law..
3. The
Shares have been duly authorized and, when issued, sold and delivered against
payment therefor in accordance with the provisions of the Agreement, will be
duly and validly issued, fully paid and non-assessable and free of any
preemptive rights or rights of first refusal or similar rights under the
statutory provisions of the Delaware General Corporation Law, the Company’s
Amended and Restated Certificate of Incorporation or Amended and Restated
By-laws, each as amended to date, or any Material Agreement (as defined in
Paragraph 6 below).
4. The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Shares require no consent of, action by
or in respect of, or filing with, any Person, governmental body, agency, or
official known to us other than those that have been made or obtained which are
in full force and effect and post-sale filings pursuant to applicable state and
federal securities laws.
-40-
5. The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Shares does not and will not conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under (i) the Company’s Amended and Restated Certificate of
Incorporation or Amended and Restated Bylaws, each as amended to date, (ii) any
Applicable Law or, to our knowledge, any order of any governmental agency or
body or any court having jurisdiction over the Company, any Subsidiary or any of
their respective assets or properties, or (iii) any of the material agreements
and instruments listed in the officer’s certificate attached hereto (the
“Material Agreements”).
6. Except
as described in the Disclosure Schedules, to our knowledge, but without our
having made any independent investigation, there are no pending actions, suits
or proceedings against or affecting the Company or its Subsidiaries that would
be required to be disclosed in the SEC Filings.
7. Assuming
the representations made by the Company and the Investors in the Transaction
Documents are true and correct, the initial sale of the Shares as contemplated
by the Transaction Documents is exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended.
-41-
