EXHIBIT 10.33
BIGSTRING CORPORATION
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
May 19, 2006 and is by and among BIGSTRING CORPORATION, a Delaware corporation,
with its principal office at 0 Xxxxxxx Xxxx, Xxxxx X, Xxx Xxxx, Xxx Xxxxxx 00000
(the "Company"), and each investor listed on Schedule 1 hereto (each such
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investor individually, a "Purchaser" and, collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers desire to purchase from the Company, in aggregate 400,000
authorized but unissued shares of the Company's Series A Preferred Stock, par
value $0.0001 per share (the "Series A Preferred Stock") and 1,000,000 Warrants
(as defined below), at an aggregate purchase price of $2,000,000, all upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, simultaneously with entering into this Agreement, the Company
and the Purchasers are entering into that certain Registration Rights Agreement,
dated as of the date hereof, in the form attached hereto as Exhibit B (the
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"Registration Rights Agreement"), pursuant to which the Company shall register
for resale the Conversion Shares (as defined below) and the Warrant Shares (as
defined below) on the terms set forth therein;
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
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have the following respective meanings:
"Affiliate" of any Person means any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, as such terms are used and construed
under Rule 144 (as defined below), and with respect to Tudor, in addition to the
foregoing, the term "Affiliate" shall also include the Related Entities.
"Board" means the Board of Directors of the Company.
"Business Day" means any day except Saturday, Sunday and any day
which is a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Certificate of Designations" means the Certificate of Designations
of the Series A Preferred Stock filed on or before the Closing (as defined
below) by the Company with the Secretary of State of the State of Delaware,
establishing the rights, preferences and privileges of the Series A Preferred
Stock, in the form attached hereto as Exhibit A.
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"Closing" has the meaning set forth in Section 2.4.
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"Common Stock" means the Company's common stock, par value $0.0001
per share.
"Conversion Shares" means the Common Stock issuable upon conversion
of the Shares (as defined below) pursuant to the terms of the Certificate of
Designations.
"Effective Date" means the earlier of (i) the date that is one
hundred twenty (120) days after the Closing Date (as defined in Section 2.4) or
(ii) the date that the registration statement required to be filed by the
Company under the Securities Act pursuant to the terms of the Registration
Rights Agreement becomes effective.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations promulgated thereunder.
"Exercise Price" means $1.25 per Share, subject to adjustment under
the terms of the Warrants.
"Fully Diluted Common Stock" means the outstanding Common Stock and
the shares of Common Stock issued or issuable upon conversion of the Shares and
exercise of the Warrants (assuming full conversion and exercise).
"Majority Purchasers" has the meaning set forth in Section 8.9.
"Material Adverse Effect" means any event, occurrence or development
that has had, or that could reasonably be expected to have, individually or in
the aggregate with other events, occurrences or developments, a material adverse
effect on the assets, liabilities (contingent or otherwise), business, affairs,
operations, prospects or condition (financial or otherwise) of the Company.
"Person" (whether or not capitalized) means an individual, entity,
partnership, limited liability company, corporation, association, trust, joint
venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
"Qualified Public Offering" means a bona fide public offering,
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock for the account of the Company, by a
reputable investment bank on a firm-commitment underwriting basis, in which the
gross cash proceeds to the Company (before underwriting discounts, commissions
and fees) are in excess of $30,000,000, and following which offering the Common
Stock is listed on a national securities exchange or admitted to quotation on
the NASDAQ National Market or Capital Market.
"Related Entities" includes, with respect to Tudor, any entities for
which any of the Tudor Entities or its Affiliates serve as a general partner
and/or investment advisor or in a similar capacity, and all mutual funds or
other pooled investment vehicles or entities under the control or management of
any of the Tudor Entities or its Affiliates. For purposes of this Agreement, (a)
"Tudor Entities" means each of the following: Tudor Investment Corporation,
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Tudor Group Holdings LLC, their respective Affiliates, and any Affiliate or
Affiliated Group of Tudor Investment Corporation and/or Tudor Group Holdings
LLC, and (b) with respect to the Tudor Entities, "Affiliated Group" has the
meaning given to it in Section 1504 of the Internal Revenue Code of 1986, as
amended, and in addition includes any analogous combined, consolidated, or
unitary group, as defined under any applicable state, local or foreign income
tax law.
"Rule 144" means Rule 144 promulgated under the Securities Act and
any successor or substitute rule, law or provision.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
all of the rules and regulations promulgated thereunder.
"Shares" means the shares of Series A Preferred Stock issued and
sold by the Company to the Purchasers hereunder.
"Share Price" means $5.00 per Share.
"Subsidiaries" means the subsidiaries of the Company listed on
Schedule 2-3.17 to the Disclosure Schedule.
"Transaction Documents" means, collectively, the Registration Rights
Agreement, the Certificate of Designations and the Warrants.
"Tudor" means, collectively, Witches Rock Portfolio Ltd., The Tudor
BVI Global Portfolio Ltd. and Tudor Proprietary Trading, L.L.C.
"Warrants" means the warrants to purchase Common Stock, dated as of
the date hereof, issued by the Company to the Purchasers pursuant hereto, in
substantially the form attached hereto as Exhibit C.
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"Warrant Shares" means the shares of Common Stock issued or issuable
upon the exercise of the Warrants.
2. Purchase and Sale of Shares and Warrants.
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2.1 Filing of Certificate of Designations. The Company shall adopt
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and file with the Secretary of State of the State of Delaware on or before the
Closing the Certificate of Designations.
2.2 Purchase and Sale of Shares. Subject to and upon the terms and
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conditions set forth in this Agreement, the Company agrees to issue and sell to
each Purchaser, and each Purchaser hereby agrees, severally and not jointly, to
purchase from the Company, at the Closing, the number of Shares set forth
opposite such Purchaser's name on Schedule 1 hereto, at
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the Share Price.
2.3 Issuance of Warrants. Subject to and upon the terms and
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conditions set forth in this Agreement, the Company agrees to issue to each
Purchaser at the Closing, for no further cash consideration, a Warrant to
purchase the number of Warrant Shares set forth opposite such Purchaser's name
on Schedule 1 hereto at an exercise price equal to the Exercise Price.
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2.4 Closing. The closing of the purchase and sale of the Shares and
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Warrants (the "Closing") shall take place at 10:00 am (Eastern Time) at the
offices of Xxxxx, Xxxxxxxx & Flexner LLP, 000 Xxxx Xxxxxx, Xxxxxx XX 00000, on
the date hereof, or on such other date and at such time as may be agreed upon
between the Purchasers, on the one hand, and the Company, on the other hand (the
"Closing Date"). At the Closing, the Company shall deliver to each Purchaser (i)
a single stock certificate (or more, if reasonably requested by the Purchaser),
registered in the name of such Purchaser, representing the number of Shares
purchased by such Purchaser and (ii) a Warrant in the name of such Purchaser for
the number of Warrant Shares as described in Section 2.3 hereof, against payment
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by or on behalf of such Purchaser of the aggregate purchase price, as set forth
opposite such Purchaser's name on Schedule 1 hereto, by wire transfer of
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immediately available funds to such account as the Company shall designate in
writing.
3. Representations and Warranties of the Company. The Company hereby
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represents and warrants to each Purchaser, as of the date hereof and except as
set forth on the disclosure schedule attached hereto as Schedule 2 (the
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"Disclosure Schedule"), as follows:
3.1 Incorporation. Each of the Company and the Subsidiaries is a
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corporation or other entity duly organized, validly existing and in good
standing under the laws of the State of Delaware (or such other applicable
jurisdiction of incorporation or formation as is indicated on Schedule 2-3.17 to
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the Disclosure Schedule), and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted
or the character of the property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not result in a Material Adverse Effect. Each of the Company and the
Subsidiaries has all requisite corporate power and authority to carry on its
business as now conducted and to carry out the transactions contemplated hereby.
Neither the Company nor any of the Subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation (or other charter document) or
By-laws.
3.2 Capitalization. The authorized capital stock of the Company
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consists of:
(a) Common Stock. 249,000,000 shares of Common Stock, of which
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54,770,125 shares are duly issued and outstanding as of the Closing Date.
(b) Preferred Stock. 1,000,000 shares of preferred stock, par
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value $0.0001 per share (the "Preferred Stock"), of which 400,000 shares have
been designated as Series A Preferred Stock to be issued pursuant to this
Agreement, and of which no other shares are outstanding as of the Closing Date.
The rights, preferences and privileges of the Series A
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Preferred Stock are as stated in the Certificate of Designations.
(c) All shares of the Company's issued and outstanding capital
stock have been duly authorized, are validly issued and outstanding, and are
fully paid and nonassessable.
(d) Except for (i) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement, (ii) the Warrants and (iii)
as set forth in Schedule 2-3.2(d) to the Disclosure Schedule, there are no
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existing options, warrants, calls, preemptive (or similar) rights, subscriptions
or other rights, agreements, arrangements or commitments of any character
obligating the Company to issue, transfer or sell, or cause to be issued,
transferred or sold, any shares of the capital stock of the Company or other
equity interests in the Company or any securities convertible into or
exchangeable for such shares of capital stock or other equity interests,
including the Shares, the Warrants and the Warrant Shares, and there are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of its capital stock or other equity interests. The
issue and sale of the Shares, the Warrants and the Warrant Shares will not
obligate the Company to issue or sell, pursuant to any pre-emptive right or
otherwise, shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities.
3.3 Registration Rights. Except as set forth on Schedule 2-3.3 to
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the Disclosure Schedule, the Company has not granted or agreed to grant to any
Person any right (including shelf, "piggy-back" and demand registration rights)
to have any capital stock or other securities of the Company registered with the
SEC or any other government authority.
3.4 Authorization. All corporate action on the part of the Company,
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its officers and directors necessary for the authorization, execution, delivery
and performance of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated herein and therein has been taken.
When executed and delivered by the Company, each of this Agreement and the
Transaction Documents shall constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally and by general equitable principles.
The Company has all requisite corporate power and authority to enter into this
Agreement and the Transaction Documents and to carry out and perform its
obligations under their respective terms.
3.5 Valid Issuance of the Shares. The Shares, the Conversion Shares,
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the Warrants and the Warrant Shares have been duly authorized, and the Shares,
the Conversion Shares and the Warrant Shares, upon issuance pursuant to the
terms hereof, of the Series A Preferred Stock and of the Warrants, respectively,
will be validly issued, fully paid and nonassessable and not subject to any
encumbrances, preemptive rights or any other similar contractual rights of the
stockholders of the Company or any other Person (other than the Purchasers). The
Company has reserved from its duly authorized capital stock the number of shares
of Common Stock issuable upon conversion in full of the Shares and the number of
shares of Common Stock issuable upon the exercise in full of the Warrants.
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3.6 SEC Documents. The Company has furnished to the Purchasers true
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and complete copies of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2005 (the "2005 10-KSB"). As of its filing date, the 2005
10-KSB complied in all material respects with the requirements of the Exchange
Act, and the 2005 10-KSB did not contain any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the 2005 10-KSB comply in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto in effect at the time of filing. All material agreements to
which the Company is a party or to which the property or assets of the Company
are subject are included as part of or specifically identified in the 2005
10-KSB to the extent required by the rules and regulations of the SEC as in
effect at the time of filing. The Company has prepared and filed, on a timely
basis, with the SEC all filings and reports required by the Securities Act and
the Exchange Act.
3.7 Financial Statements. Except as set forth on Schedule 2-3.7 to
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the Disclosure Schedule, the financial statements and supporting schedules
included in the 2005 10-KSB and in any of the Company's registration statements
filed with the SEC or other of the Company's reports filed with the SEC pursuant
to Section 13 of the Exchange Act (collectively, the "Financial Statements"),
are complete and correct in all material respects and present fairly the
consolidated financial position of the Company and its Subsidiaries as of the
dates specified and the consolidated results of their operations and cash flows
for the periods specified, in each case, in conformity with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as indicated therein or in the notes thereto.
3.8 Consents. Except for (a) the filing and effectiveness of any
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registration statement required to be filed by the Company under the Securities
Act pursuant to the terms of the Registration Rights Agreement and (b) a Form D
filing and any required state "blue sky" law filings in connection with the
transactions contemplated hereunder or under the Transaction Documents, all
consents, approvals, orders and authorizations required on the part of the
Company in connection with the execution or delivery of, or the performance of
the obligations under, this Agreement and the Transaction Documents, and the
consummation of the transactions contemplated herein and therein, have been
obtained and will be effective as of the date hereof. The execution and delivery
by the Company of this Agreement and the Transaction Documents, the consummation
of the transactions contemplated herein and therein, and the issuance of the
Shares, the Conversion Shares, the Warrants and the Warrant Shares, do not
require the consent or approval of the stockholders of, or any lender to, the
Company.
3.9 No Conflict; Compliance With Laws.
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(a) The execution, delivery and performance by the Company of
this Agreement and the Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby, including the issuance of the
Shares, the Conversion Shares, the Warrants and the Warrant Shares, do not and
will not (i) conflict with or violate any provision of the Certificate of
Incorporation (or other charter documents) or By-laws of the Company or any of
the Subsidiaries, (ii) breach, conflict with or result in any violation of or
default (or an event that with notice or lapse of time or both would become a
default) under, or
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give rise to a right of termination, amendment, acceleration or cancellation
(with or without notice or lapse of time, or both) of any obligation, contract,
commitment, lease, agreement, mortgage, note, bond, indenture or other
instrument or obligation to which the Company or any of the Subsidiaries is a
party or by which they or any of their properties or assets are bound, except
such as does not constitute a Material Adverse Effect, or (iii) result in a
violation of any statute, law, rule, regulation, order, ordinance or restriction
applicable to the Company, the Subsidiaries or any of their properties or
assets, or any judgment, writ, injunction or decree of any court, judicial or
quasi-judicial tribunal applicable to the Company, the Subsidiaries or any of
their properties or assets.
(b) None of the Company and the Subsidiaries (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any of the Subsidiaries), nor has the Company or any of the
Subsidiaries received written notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties or assets is bound (whether or not such default or violation has been
waived) or (ii) is in violation of any statute, rule or regulation of any
governmental authority, including, without limitation, all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety, communications and employment and
labor matters, except in each case such as does not constitute a Material
Adverse Effect.
3.10 Brokers or Finders. Except as set forth on Schedule 2-3.10 to
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the Disclosure Schedule, none of the Company and the Subsidiaries has dealt with
any broker or finder in connection with the transactions contemplated by this
Agreement or the Transaction Documents, and none of the Company and the
Subsidiaries has incurred, or shall incur, directly or indirectly, any liability
for any brokerage or finders' fees or agents' commissions or any similar charges
in connection with this Agreement or the Transaction Documents, or any
transaction contemplated hereby or thereby.
3.11 Absence of Litigation. Except as set forth on Schedule 2-3.11
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to the Disclosure Schedule, there are no pending or, to the Company's knowledge,
threatened actions, suits, claims, proceedings or investigations against or
involving the Company or any of the Subsidiaries except to the extent described
in the 2005 10-KSB.
3.12 No Undisclosed Liabilities; Indebtedness. Since December 31,
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2005, the Company and the Subsidiaries have incurred no liabilities or
obligations, whether known or unknown, asserted or unasserted, fixed or
contingent, accrued or unaccrued, matured or unmatured, liquidated or
unliquidated, or otherwise, other than liabilities and obligations that arose in
the ordinary course of business and do not constitute a Material Adverse Effect.
Except for indebtedness reflected in the Company's financial statement contained
in the 2005 10-KSB, the Company has no indebtedness outstanding as of the date
hereof. The Company is not in default with respect to any outstanding
indebtedness or any instrument relating thereto.
3.13 Contracts. All contracts, agreements, instruments and other
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documents required to be filed as exhibits to any of the periodic reports
required to be filed by the Company under the Exchange Act are legal, valid,
binding and in full force and effect and are enforceable by the Company or its
Subsidiary in accordance with their respective terms, except as such may
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be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles.
3.14 Title to Assets. Each of the Company and the Subsidiaries has
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good and marketable title to all real and personal property owned by it that is
material to the business of the Company and the Subsidiaries, in each case free
and clear of all liens and encumbrances, except those, if any, disclosed in the
Financial Statements or 2005 10-KSB or incurred in the ordinary course of
business consistent with past practice. Any real property and facilities held
under lease by the Company or the Subsidiaries are held by it or them under
valid, subsisting and enforceable leases (subject to laws of general application
relating to bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and other equitable remedies) with which
the Company and the Subsidiaries are in compliance in all material respects.
3.15 Labor Relations. No labor or employment dispute exists or, to
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the knowledge of the Company, is imminent or threatened, with respect to any of
the employees or consultants of the Company that constitutes or will constitute
a Material Adverse Effect.
3.16 Intellectual Property. The Company is the sole and exclusive
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owner of, or has the exclusive right to use, all right, title and interest in
and to all material foreign and domestic patents, patent rights, trademarks,
service marks, trade names, brands, copyrights (whether or not registered and
including pending applications for registration) and other proprietary rights or
information, owned or used by the Company, including the patent application for
Universal Recallable, Erasable, Secure and Timed Delivery Email, Serial No.
10/827,199 and the service xxxx for the word "BigString", Serial No. 78336856
(collectively, the "Rights"), and in and to each material invention, software,
trade secret, and technology used by the Company or any of the Subsidiaries (the
Rights and such other items, the "Intellectual Property"), and, to the Company's
knowledge, the Company owns and has the right to use the same, free and clear of
any claim or conflict with the rights of others (subject to the provisions of
any applicable license agreement). Except as set forth on Schedule 2-3.16 to the
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Disclosure Schedule, there have been no claims made, or to the knowledge of the
Company, pending claims, against the Company or any of the Subsidiaries
asserting the invalidity, abuse, misuse, or unenforceability of any of the
Intellectual Property or conflict of the Intellectual Property with the rights
of others, and, to the Company's knowledge, there are no reasonable grounds for
any such claims.
3.17 Subsidiaries; Joint Ventures. Except for the Subsidiaries
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listed on Schedule 2-3.17 to the Disclosure Schedule, the Company has no
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subsidiaries and (i) does not otherwise own or control, directly or indirectly,
any other Person and (ii) does not hold equity interests, directly or
indirectly, in any other Person. Except as described in the 2005 10-KSB, the
Company is not a participant in any joint venture, partnership, or similar
arrangement material to the business of the Company and its Subsidiaries.
3.18 Taxes. The Company and each of the Subsidiaries has filed (or
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has had filed on its behalf), will timely file or will cause to be timely filed,
or has timely filed for an extension of the time to file, all material Tax
Returns (as defined below) required by applicable law to be filed by it or them
prior to or as of the date hereof, and such Tax Returns are, or will be
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at the time of filing, true, correct and complete in all material respects. Each
of the Company and the Subsidiaries has paid (or has had paid on its behalf) or,
where payment is not yet due, has established (or has had established on its
behalf and for its sole benefit and recourse) or will establish or cause to be
established in accordance with United States generally accepted accounting
principles on or before the date hereof an adequate accrual for the payment of,
all material Taxes (as defined below) due with respect to any period ending
prior to or as of the date hereof. "Taxes" shall mean any and all taxes,
charges, fees, levies or other assessments, including income, gross receipts,
excise, real or personal property, sales, withholding, social security,
retirement, unemployment, occupation, use, goods and services, license, value
added, capital, net worth, payroll, profits, franchise, transfer and recording
taxes, fees and charges, and any other taxes, assessment or similar charges
imposed by the Internal Revenue Service or any taxing authority (whether state,
county, local or foreign) (each, a "Taxing Authority"), including any interest,
fines, penalties or additional amounts attributable to or imposed upon any such
taxes or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any Taxing Authority, including information returns, any documents with respect
to accompanying payments of estimated Taxes, or with respect to or accompanying
requests for extensions of time in which to file any such return, report,
document, declaration or other information. There are no claims or assessments
pending against the Company or any of the Subsidiaries for any material alleged
deficiency in any Tax, and neither the Company nor any of the Subsidiaries has
been notified in writing of any material proposed Tax claims or assessments
against the Company or any of the Subsidiaries. No Tax Return of the Company or
any of the Subsidiaries is or has been the subject of an examination by a Taxing
Authority. Each of the Company and the Subsidiaries has withheld from each
payment made to any of its past or present employees, officers and directors,
and any other person, the amount of all material Taxes and other deductions
required to be withheld therefrom and paid the same to the proper Taxing
Authority within the time required by law.
3.19 Pensions and Benefits.
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(a) Schedule 2-3.19(a) to the Disclosure Schedule contains a true
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and complete list of each "employee benefit plan" within the meaning of Section
3(3) of the United States Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including, without limitation, multiemployer plans within the
meaning of Section 3(37) of ERISA, and all retirement, profit sharing, stock
option, stock bonus, stock purchase, severance, fringe benefit, deferred
compensation, and other employee benefit programs, plans, or arrangements,
whether or not subject to ERISA, under which (i) any current or former
directors, officers, employees or consultants of the Company has any present or
future right to benefits and which are contributed to, sponsored by or
maintained by the Company or any of the Subsidiaries, or (ii) the Company or any
of the Subsidiaries has any present or future liability. All such programs,
plans, or arrangements shall be collectively referred to as the "Company Plans."
Each Company Plan is included as part of or specifically identified in the 2005
10-KSB to the extent required by the rules and regulations of the SEC as in
effect at the time of filing.
(b) (i) Each Company Plan has been established and administered
in all material respects in accordance with its terms and in compliance with the
applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended
(the "Code"), and other applicable laws, rules and regulations; (ii) each
Company Plan which is intended to be qualified
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within the meaning of Section 401(a) of the Code is so qualified and has
received a favorable determination letter as to its qualification (or if
maintained pursuant to a prototype form of instrument the sponsor thereof has
received a favorable opinion letter as to its qualification), and to the
Company's knowledge nothing has occurred, whether by action or failure to act,
that could reasonably be expected to cause the loss of such qualification; and
(iii) no Company Plan provides retiree health or life insurance benefits
(whether or not insured), and neither the Company nor the Subsidiaries have any
obligations to provide any such retiree benefits other than as required pursuant
to Section 4980B of the Code or other applicable law.
(c) No Company Plan is a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA) or a plan subject to the minimum funding
requirements of Section 302 or ERISA or Section 412 of the Code or Title IV of
ERISA, and neither the Company, the Subsidiaries, nor any member of their
Controlled Group has any liability or obligation in respect of, any such
multiemployer plan or plan. With respect to any Company Plan and to the
Company's knowledge, (i) no actions, suits or claims (other than routine claims
for benefits in the ordinary course) are pending or threatened, and (ii) no
administrative investigation, audit or other administrative proceeding by the
Department of Labor, the Pension Benefit Guaranty Corporation, the Internal
Revenue Service or other governmental agencies are pending, threatened or in
progress.
3.20 Private Placement; Communications with Purchasers. Neither the
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Company nor any person acting on the Company's behalf has sold or offered to
sell or solicited any offer to buy the Shares, Warrants, Warrant Shares or
Conversion Shares by means of any form of general solicitation or advertising.
None of the Company, its Affiliates and any person acting on the Company's
behalf has, directly or indirectly, at any time within the past six (6) months,
made any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of the
exemption from registration under Regulation D, or other exemption, under the
Securities Act in connection with the sale or issuance of the Shares, Conversion
Shares, Warrants or Warrant Shares as contemplated hereby or by the terms of the
Transaction Documents or (ii) cause the offering or issuance of the Shares,
Conversion Shares, Warrants or Warrant Shares pursuant to this Agreement or any
of the Transaction Documents to be integrated with prior offerings by the
Company for purposes of any applicable law, regulation or stockholder approval
provisions in a manner that would eliminate the availability of the exemption
described in the immediately preceding clause (i) or require any stockholder
approval.
3.21 Regulatory Matters. None of the Company and the Subsidiaries
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is, or is an Affiliate of, or following the receipt of the proceeds of this
offering will be, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. None of the Company and the Subsidiaries is a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.
3.22 Material Changes. Except as set forth on Schedule 2-3.22 to the
---------------- ---------------
Disclosure Schedule, since December 31, 2005, the Company has conducted its
business only in the ordinary course, consistent with past practice, and since
such date there has not occurred: (i) a Material Adverse Effect; (ii) any
amendments or changes in the charter documents or by-laws of the Company or the
Subsidiaries other than the filing of the Certificate of Designations; (iii)
10
any: (A) incurrence, assumption or guarantee by the Company or the Subsidiaries
of any debt for borrowed money other than (1) equipment leases made in the
ordinary course of business, consistent with past practice and (2) any such
incurrence, assumption or guarantee with respect to an amount of $25,000 or
less; (B) issuance or sale of any securities convertible into or exchangeable
for securities of the Company other than to directors, employees and consultants
pursuant to existing equity compensation or stock purchase plans of the Company;
(C) issuance or sale of options or other rights to acquire from the Company or
the Subsidiaries, directly or indirectly, securities of the Company or any
securities convertible into or exchangeable for any such securities, other than
options issued to directors, employees and consultants in the ordinary course of
business, consistent with past practice; (D) issuance or sale of any stock, bond
or other corporate security other than to directors, employees and consultants
pursuant to existing equity compensation or stock purchase plans of the Company;
(E) declaration or making of any payment or distribution to stockholders or
purchase or redemption of any share of its capital stock or other security other
than to or from directors, officers and employees of the Company or the
Subsidiaries as compensation for or in connection with services rendered to the
Company or the Subsidiaries (as applicable) or for reimbursement of expenses
incurred on behalf of the Company or the Subsidiaries (as applicable); (F) sale,
assignment or transfer of any of its intangible assets except in the ordinary
course of business, consistent with past practice, or cancellation of any debt
or claim except in the ordinary course of business, consistent with past
practice; (G) waiver of any right of substantial value whether or not in the
ordinary course of business; (H) material change in officer compensation, except
in the ordinary course of business and consistent with past practice; or (I)
other commitment (contingent or otherwise) to do any of the foregoing; (iv) any
creation, sufferance or assumption by the Company or any of the Subsidiaries of
any lien on any asset or any making of any loan, advance or capital contribution
to or investment in any Person, in an aggregate amount which exceeds $25,000
outstanding at any time; (v) any entry into, amendment of, relinquishment,
termination or non-renewal by the Company or the Subsidiaries of any material
contract, license, lease, transaction, commitment or other right or obligation,
other than in the ordinary course of business, consistent with past practice; or
(vi) any transfer or grant of a right with respect to the Intellectual Property
Rights owned or licensed by the Company or the Subsidiaries, except as among the
Company and the Subsidiaries.
3.23 Regulatory Permits. The Company and the Subsidiaries possess
-------------------
all certificates, approvals, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to
conduct their businesses as described in the 2005 10-KSB, except where the
failure to possess such permits does not constitute a Material Adverse Effect
(the "Material Permits"), and the Company has not received any written notice of
proceedings relating to the revocation or modification of any Material Permits
except as described in the 2005 10-KSB.
3.24 Transactions with Affiliates and Employees. Except as set forth
------------------------------------------
in the 2005 10-KSB, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company, is presently a
party to any transaction or agreement with the Company (other than for services
as employees, officers and directors) exceeding $60,000, including any contract,
agreement or other arrangement providing for the
11
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
3.25 Insurance. The Company and the Subsidiaries are insured by
---------
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary for the business in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew existing insurance coverage for itself and the
Subsidiaries as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary or appropriate to continue business.
3.26 Solvency. Based on the consolidated financial condition of the
--------
Company and the Subsidiaries as of the date hereof, (i) the fair saleable value
of the Company's assets exceeds the amount that will be required to be paid on
or in respect of the Company's existing debts and other liabilities (including
known and contingent liabilities) as they mature; (ii) the Company's assets do
not constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted, including
its capital needs taking into account the particular capital requirements of the
business conducted by the Company, projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debts when such amounts
are required to be paid. The Company has no present intention to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).
3.27 Internal Accounting Controls. Except as disclosed in the 2005
-----------------------------
10-KSB, the Company maintains 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 United States generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or specific
authorizations, (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, and (v) the Company is otherwise in compliance with
the Securities Act, the Exchange Act and all other rules and regulations
promulgated by the SEC and applicable to the Company, including such rules and
regulations to implement the Xxxxxxxx-Xxxxx Act of 2002, as amended.
3.28 Disclosure. All disclosure provided to the Purchasers regarding
----------
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement furnished by or on behalf of the Company, taken
as a whole is true and correct and does not contain any untrue statement of
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
12
were made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or the Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 4.
4. Representations and Warranties of the Purchasers. Each Purchaser
--------------------------------------------------
represents and warrants, severally (as to itself) and not jointly, to the
Company as follows:
4.1 Authorization. All action on the part of such Purchaser and, if
-------------
applicable, its officers, directors, managers, members, shareholders and/or
partners necessary for the authorization, execution, delivery and performance of
this Agreement and the Registration Rights Agreement, and the consummation of
the transactions contemplated herein and therein, has been taken. When executed
and delivered, each of this Agreement and the Registration Rights Agreement will
constitute the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles. Such Purchaser
has all requisite power and authority to enter into each of this Agreement and
the Registration Rights Agreement, and to carry out and perform its obligations
under the terms of hereof and thereof.
4.2 Purchase Entirely for Own Account. Such Purchaser is acquiring
----------------------------------
the Shares and the Warrants for its own account for investment and not for
resale or with a view to distribution thereof in violation of the Securities
Act.
4.3 Investor Status; Etc. Such Purchaser certifies and represents to
--------------------
the Company that it is an institutional "Accredited Investor" as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act and was
not organized for the purpose of acquiring any of the Shares, Conversion Shares,
Warrants or Warrant Shares. Such Purchaser's financial condition is such that it
is able to bear the risk of holding the Shares for an indefinite period of time
and the risk of loss of its entire investment. Such Purchaser has sufficient
knowledge and experience in investing in companies similar to the Company so as
to be able to evaluate the risks and merits of its investment in the Company.
4.4 Securities Not Registered. Such Purchaser understands that the
-------------------------
Shares, Conversion Shares, Warrants and Warrant Shares have not been registered
under the Securities Act, by reason of their issuance by the Company in a
transaction exempt from the registration requirements of the Securities Act, and
that the Shares, Conversion Shares, Warrants and Warrant Shares must continue to
be held by such Purchaser unless a subsequent disposition thereof is registered
under the Securities Act, including pursuant to the registration statement
required under the Registration Rights Agreement, or is exempt from such
registration. Such Purchaser understands that the exemptions from registration
afforded by Rule 144 (the provisions of which are known to it) promulgated under
the Securities Act depend on the satisfaction of various conditions, and that,
if applicable, Rule 144 may afford the basis for sales only in limited amounts.
13
4.5 No Conflict. The execution and delivery of this Agreement and
-----------
the Registration Rights Agreement by such Purchaser, and the consummation of the
transactions contemplated hereby and thereby, will not conflict with or result
in any violation of or default by such Purchaser (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) the organizational documents of such Purchaser or (ii) any
agreement or instrument, permit, franchise, license, judgment, order, statute,
law, ordinance, rule or regulations, applicable to such Purchaser.
4.6 Brokers. Such Purchaser has not retained, utilized or been
-------
represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
4.7 Consents. All consents, approvals, orders and authorizations
--------
required on the part of such Purchaser in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated herein have been obtained and are effective as of the
date hereof.
4.8 Regulatory Permits. Such Purchaser possess all certificates,
-------------------
approvals, authorizations and permits issued by the appropriate federal, state,
local or foreign regulatory authorities necessary for Purchaser to enter into
this Agreement and the consummate the transactions contemplated herein.
4.9 Disclosure of Information. Such Purchaser believes it has
---------------------------
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares and the Warrants. Such Purchaser further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Shares and the Warrants and the business, properties, prospects and financial
condition of the Company.
5. Conditions Precedent.
--------------------
5.1. Conditions to the Obligation of the Purchasers to Consummate
--------------------------------------------------------------
the Closing. The obligation of each Purchaser to consummate the Closing and to
-----------
purchase and pay for the Shares to be purchased by it is subject to the
satisfaction (or waiver by such Purchaser) of the following conditions
precedent:
(a) The representations and warranties of the Company contained
herein shall be true and correct on and as of the date hereof and on and as of
the Closing Date. The Company shall have performed or complied with all
obligations and conditions herein required to be performed or complied with by
the Company on or prior to the Closing.
(b) No proceeding challenging this Agreement or the Transaction
Documents, or the transactions contemplated hereby or thereby, or seeking to
prohibit, alter, prevent or materially delay the Closing, shall have been
instituted before any court, arbitrator or governmental body, agency or official
or shall be pending against or involving the Company.
14
(c) This Agreement and the Transaction Documents, and the
transactions contemplated hereby and thereby, shall not be prohibited by any
law, rule, governmental order or regulation. All necessary consents, approvals,
licenses, permits, orders and authorizations of, or registrations, declarations
and filings with, any governmental or administrative agency or of or with any
other Person with respect to any of the transactions contemplated hereby and
thereby shall have been duly obtained or made and shall be in full force and
effect.
(d) All instruments and corporate proceedings of the Company in
connection with the transactions contemplated by this Agreement and the
Transaction Documents shall be satisfactory in form and substance to such
Purchaser, and such Purchaser shall have received copies (executed or certified,
as may be appropriate) of all documents which any Purchaser may have reasonably
requested in connection with such transactions.
(e) Such Purchaser shall have received from Xxxxxxxx, Xxxxxxxx &
Xxxxxx, P.C., outside counsel to the Company, an opinion addressed to such
Purchaser, dated the Closing Date and substantially in the form of Exhibit D
---------
hereto.
(f) The Registration Rights Agreement shall have been executed
and delivered to such Purchaser by the Company.
(g) Such Purchaser shall have received from the Company an
original Series A Preferred Stock certificate and an original Warrant, in each
case for the number of Shares and the number of Warrant Shares, respectively,
set forth opposite such Purchaser's name on Schedule 1 hereto.
----------
(h) The Company shall have delivered, in form and substance
satisfactory to such Purchaser, a certificate dated the Closing Date and signed
by the secretary or another appropriate executive officer of the Company,
certifying (i) that attached copies of the Certificate of Incorporation, the
By-Laws and resolutions of the Board approving this Agreement, the Transaction
Documents and the transactions contemplated hereby and thereby, are all true,
complete and correct and remain in full force and effect as of the date hereof,
and (ii) as to the incumbency and specimen signature of each officer of the
Company executing this Agreement, the Transaction Documents and any other
document delivered in connection herewith on behalf of the Company.
(i) The Company shall deliver to such Purchaser, a certificate in
form and substance satisfactory to such Purchaser, dated the Closing Date and
signed by the Company's chief executive officer, certifying that (i) the
representations and warranties of the Company contained in Section 3 hereof are
---------
true and correct in all respects on the Closing Date and (ii) the Company has
performed and complied with all of the agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Company on or before the Closing.
5.2. Conditions to the Obligation of the Company to Consummate the
--------------------------------------------------------------
Closing. The obligation of the Company to consummate the Closing and to issue
-------
and sell the Shares to each Purchaser at the Closing is subject to the
satisfaction of the following conditions precedent:
15
(a) The representations and warranties of the Purchasers
contained herein shall be true and correct in all respects on and as of the date
hereof and on and as of the Closing Date.
(b) The Registration Rights Agreement shall have been executed
and delivered by the Purchasers.
(c) The Purchasers shall have performed all obligations and
conditions herein required to be performed or complied with by the Purchasers on
or prior to the Closing.
(d) No proceeding challenging this Agreement or the Transaction
Documents, or the transactions contemplated hereby or thereby, or seeking to
prohibit, alter, prevent or materially delay the Closing, shall have been
instituted before any court, arbitrator or governmental body, agency or official
or shall be pending against or involving such Purchaser.
(e) This Agreement and the Transaction Documents, and the
transactions contemplated hereby and thereby, shall not be prohibited by any
law, rule, governmental order or regulation. All necessary consents, approvals,
licenses, permits, orders and authorizations of, or registrations, declarations
and filings with, any governmental or administrative agency or of or with any
other Person with respect to any of the transactions contemplated hereby and
thereby shall have been duly obtained or made and shall be in full force and
effect.
(f) All instruments and corporate proceedings in connection with
the transactions contemplated by this Agreement to be consummated at the Closing
shall be satisfactory in form and substance to the Company, and the Company
shall have received counterpart originals, or certified or other copies of all
documents, including, without limitation, records of corporate or other
proceedings, which it may have reasonably requested in connection therewith.
6. Certain Covenants and Agreements.
--------------------------------
6.1. Transfer of Securities. Each Purchaser agrees severally (as to
----------------------
itself only) and not jointly that it shall not sell, assign, pledge, transfer or
otherwise dispose of or encumber any of the Shares, Conversion Shares, Warrants
or Warrant Shares, except (i) pursuant to an effective registration statement
under the Securities Act, including such as required under the Registration
Rights Agreement, (ii) to an Affiliate (so long as such Affiliate agrees to be
bound by the terms and provisions of this Agreement as if, and to the fullest
extent as, such Purchaser), or (iii) pursuant to an available exemption from
registration under the Securities Act (including sales permitted pursuant to
Rule 144) and applicable state securities laws and, if reasonably requested by
the Company in the case of this clause (iii), upon delivery by such Purchaser of
either an opinion of counsel of such Purchaser reasonably satisfactory to the
Company to the effect that the proposed transfer is exempt from or does not
require registration under the Securities Act and
16
applicable state securities laws or a representation letter of such Purchaser
reasonably satisfactory to the Company setting forth a factual basis for
concluding that such proposed transfer is exempt from or does not require
registration under the Securities Act and applicable state securities laws;
provided, however, it is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144, except in unusual
circumstances. Any transfer or purported transfer of the Shares in violation of
this Section 6.1 shall be void. The Company shall not register any transfer of
-----------
the Shares in violation of this Section 6.1. The Company may, and may instruct
-----------
any transfer agent for the Company, to place such stop transfer orders as may be
required on the transfer books of the Company in order to ensure compliance with
the provisions of this Section 6.1.
-----------
6.2. Legends.
-------
(a) To the extent applicable, each certificate or other document
evidencing the Shares, the Conversion Shares and the Warrant Shares shall be
endorsed with the legend set forth below, and each Purchaser covenants that,
except to the extent such restrictions are waived by the Company, it shall not
transfer the shares represented by any such certificate without complying with
the restrictions on transfer described in this Agreement and the legends
endorsed on such certificate:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, REGISTRATION
UNDER SAID ACT."
(b) The legend set forth in Section 6.2(a) shall be removed from
---------------
the certificates evidencing the Shares, the Conversion Shares and the Warrant
Shares, (i) in connection with any sale of such Shares, Conversion Shares or
Warrant Shares pursuant to Rule 144 or any effective registration statement,
including such as required under the Registration Rights Agreement, or (ii) if
such Shares, Conversion Shares or Warrant Shares are eligible for sale under
Rule 144(k) (and the holder of such Shares, Conversion Shares or Warrant Shares
or has submitted a written request for removal of the legend indicating that the
holder has complied with the applicable provisions of Rule 144(k)) or (iii) if
such legend is not required under applicable requirements of the Securities Act
(including interpretations and pronouncements issued by the Staff of the SEC)
(and the holder of such Shares, Conversion Shares or Warrant Shares has
submitted a written request for removal of the legend indicating that such
legend is not required under applicable requirements of the Securities Act
(including such interpretations and pronouncements)) and, if reasonably
requested by the Company, the Company has received from Purchaser's counsel an
opinion, in such form as is reasonably satisfactory to Company's counsel, that
such legend is not so required. The Company shall cause its counsel to issue a
legal opinion to the Company's transfer agent, if required, promptly upon the
occurrence of any of the events in clauses (i), (ii) or (iii) above to effect
the removal of the legend on certificates evidencing the Shares, the Conversion
Shares or the Warrant Shares and shall also cause its counsel to issue a
"blanket" legal opinion to the Company's transfer agent, if required, promptly
after the effective date of any registration statement, including such as
required under the Registration Rights Agreement, covering the resale of the
Shares, any Conversion Shares or Warrant Shares to allow sales without
restriction pursuant to such registration statement. The Company agrees that at
such time as such legend is no longer required under this Section 6.2(b),
---------------
17
it will, no later than four (4) Business Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a certificate
representing the Shares, Conversion Shares or Warrant Shares issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Shares, Conversion Shares or Warrant Shares that
is free from all restrictive and other legends; provided that in the case of
removal of the legend in connection with a sale pursuant to Rule 144, the holder
of such Shares, Conversion Shares or Warrant Shares has submitted a written
request for removal of the legend indicating that the holder has complied with
the applicable provisions of Rule 144. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
6.3 Publicity. Except to the extent required by applicable laws,
---------
rules, regulations or stock exchange requirements, the Company shall not,
without the prior written consent of each of the Purchasers, disclose or publish
the name of such Purchaser in any press release or public announcement. Except
to the extent required by applicable laws, rules, regulations or stock exchange
requirements, each of the Purchasers and their Affiliates shall not, without the
written consent of the Company make any public announcement or issue any press
release with respect to the transactions contemplated by this Agreement. The
parties agree that the Company shall issue a press release promptly following
(and in no event more than one Business Day after) the Closing and, on or before
9:30 a.m., New York time, on the first trading day following the Closing Date
describing the terms of the transactions contemplated by this Agreement and the
Transaction Documents, and shall file such press release under cover of a
Current Report on Form 8-K, attaching such press release and the material
transaction documents (including, without limitation, this Agreement and the
Registration Rights Agreement) as exhibits to such filing (including all
attachments, the "8-K Filing"). The Company represents and warrants that, as of
the effective date of the Mandatory Registration Statement (as defined in the
Registration Rights Agreement), no Purchaser will be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of their respective officers, directors, employees or
representatives, and understands that the Purchasers may rely on such
representation and warranty in effecting transactions in the Company's
securities. From and after the 8-K Filing, notwithstanding the Company's offer
to disclose and discuss material non-public information with each Purchaser upon
such Purchaser's entering into a mutually satisfactory confidentiality
agreement, unless otherwise expressly agreed or consented to in writing in
advance by such Purchaser, the Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors or
employees not to, provide such Purchaser with any material nonpublic information
regarding the Company or any of its Subsidiaries; provided that the Company
shall not be deemed in breach of the foregoing as a result of (x) providing any
information to such Purchaser as a result of such Purchaser's exercise of its
inspection rights under Section 6.9 hereof or under the Registration Rights
-----------
Agreement or (y) the Company providing a notice of a Suspension Period (as
defined in the Registration Rights Agreement) and the other related
certifications in accordance with the Registration Rights Agreement.
6.4 Filing of Information. The Company covenants to timely file (or
---------------------
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company pursuant to all
applicable securities laws, including the Exchange Act. The Company further
covenants that it will take such further action as any holder of Shares,
18
Conversion Shares and Warrant Shares may reasonably request to satisfy the
provisions of Rule 144 applicable to the issuer of securities relating to
transactions for the sale of securities pursuant to Rule 144.
6.5 Use of Proceeds. The Company intends that the proceeds from the
---------------
sale of the Shares shall be used by the Company to (i) pay the Company's fees
and expenses incurred in connection with this offering and (ii) for other
general corporate and working capital purposes.
6.6 Integration. The Company shall not sell, offer for sale or
-----------
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares or the issuance of the
Warrants pursuant hereto.
6.7 Reservation of Common Stock for Issuance; Listing of Shares. The
-----------------------------------------------------------
Company agrees to reserve from its duly authorized capital stock the total
number of shares of Common Stock issuable upon the conversion in full of the
Conversion Shares and upon the exercise in full of the Warrants. The Company
agrees that at any time, if and when its shares of Common Stock are listed on a
national securities exchange or admitted for quotation on any national automated
quotation system, it will use reasonable efforts to promptly list and qualify
the Warrant Shares and Conversion Shares for trading on such exchange or
quotation on such system.
6.8 Required Approvals. As promptly as practicable after the date of
------------------
this Agreement, the Company shall make, or cause to be made, all filings with
any governmental or administrative agency or any other Person necessary to
consummate the transactions contemplated hereby.
6.9 Inspection Rights. Each Purchaser, or any officer, employee,
------------------
agent or representative thereof, shall have the right to visit and inspect any
of the properties of the Company or any of its Subsidiaries, to discuss the
affairs, finances, accounts and operations of the Company or any of its
Subsidiaries with their respective officers, directors, employees, agents or
representatives, and to review and copy such information as is reasonably
requested from time to time.
6.10 Purchasers' Right of First Offer in Subsequent Financings.
---------------------------------------------------------
(a) Subject to applicable securities laws, following the Closing
and prior to a Qualified Public Offering, the Company shall not, and shall not
agree to, issue, sell or exchange any Equity Securities (as defined below) in a
financing transaction (any transaction other than the excluded transactions
described in subsection (b) below being deemed to be a financing transaction) (a
"Financing"), unless the Company shall have first complied with this Section
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6.10. The Company shall deliver to each Purchaser a written notice (the "Offer")
----
of any proposed or intended Financing and offer to the Purchasers the
opportunity, but not the obligation, to participate in up to a portion of the
Financing determined, in aggregate, by multiplying the total amount of the
Financing by a fraction, the numerator of which is (i) the number of shares of
Common Stock (including Conversion Shares and Warrant Shares) held by
19
the Purchasers, in aggregate, as of the date immediately prior to the issuance
of such Equity Securities (such date being the "Measuring Date") and the
denominator of which is (ii) the total number of Fully Diluted shares of Common
Stock outstanding as of the Measuring Date. The aggregate amount of the
Purchasers' participation shall be allocated among them as they may determine.
The Offer shall describe the terms, including price and amount, of the Financing
and include a reasonably detailed calculation of the Purchasers' participation
right in accordance with the foregoing. The Purchasers shall provide written
notice to the Company within ten (10) Business Days from the giving of the Offer
of the amount, if any, of the Financing as to which they intend to exercise
their participation right as provided above. The Company shall have ninety (90)
days from the giving of the Offer to complete the Financing on terms not more
materially advantageous to purchasers in the Financing than those described in
the Offer, and if the Purchasers' have indicated an intent to participate in the
Financing, with the Purchasers' prior written consent, not to be unreasonably
withheld, as to any modifications to such terms that are materially less
favorable to purchasers in the Financing. The Company shall comply anew with the
requirements, as to an Offer and otherwise, of this Section 6.10 as to any
-------------
Financing not completed within such period. The term "Equity Securities" shall
mean (i) any Common Stock, preferred stock or other equity security of the
Company, (ii) any security convertible into or exercisable or exchangeable for,
with or without consideration, any Common Stock, preferred stock or other equity
security of the Company (including any option to purchase such a convertible
security), (iii) any security carrying any warrant or right to subscribe to or
purchase any Common Stock, preferred stock or other equity security or (iv) any
such warrant or right.
(b) The foregoing right of first offer shall not apply to any of
the following:
(i) Equity Securities issued after the date hereof to
employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option
plans or other compensation arrangements; provided, however, that any
such issuances are approved by the Board;
(ii) Equity Securities issued or issuable pursuant to any
rights or agreements, options, warrants or convertible securities that
are outstanding as of the date of this Agreement or that are issued or
granted thereafter, provided that the transaction pursuant to which
such rights or agreements, options, warrants or convertible securities
are issued or granted was conducted in compliance with this Section
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6.10;
----
(iii) any Equity Securities issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(iv) any Equity Securities that are issued by the Company in a
Qualified Public Offering;
(v) any Equity Securities issued in connection with bona fide
acquisitions, mergers or other strategic transactions approved by the
Board; and
(vi) any Equity Securities issued to any Person as a component
of any business relationship with such Person primarily for (x) joint
venture, technology licensing or development activities purposes, (y)
purposes of distribution, supply or
20
manufacture of the Company's products or services or (z) any purposes
other than raising capital, the terms of which business relationship
are approved by the Board.
6.11 Company Right of First Refusal. In the event, prior to a
---------------------------------
Qualified Public Offering, a Purchaser proposes to sell, assign, transfer or
otherwise dispose of any Shares, Conversion Shares, Warrants or Warrant Shares
in a transaction other than (a) pursuant to an effective registration statement
under the Securities Act, including such as required under the Registration
Rights Agreement, (b) to an Affiliate of such Purchaser, or (c) pursuant to Rule
144 under the Securities Act, then such Purchaser shall give written notice (the
"Sale Notice") to the Company of the proposed transaction, describing in
reasonable detail the price, amount, consideration, timing (which shall not be
inconsistent with the provisions of the following sentence), identification of
the proposed acquiror and other material terms of the proposed transaction, and
offering the Company the opportunity, but not the obligation, to acquire all,
but not part, of the Shares, Conversion Shares, Warrants or Warrant Shares under
such terms. The Company may exercise its purchase right pursuant to the
foregoing by providing a written notice to such effect to the relevant Purchaser
within five (5) Business Days from the giving of the Sale Notice, and upon such
notice the parties shall be bound to complete the transaction on the terms set
forth in the Sale Notice. If the Company declines to exercise its right pursuant
to the foregoing, including by failing to deliver an exercise notice within the
period provided above, such Purchaser may complete the transaction with the
proposed acquirer within the time and otherwise on the terms described in the
Sale Notice.
6.12 Purchasers' Right of Co-Sale.
----------------------------
(a) In the event, prior to a Qualified Public Offering, any of
Xxxxx X. Xxxxx or Xxxx X. Xxxxxx (each, a "Key Person") proposes to sell,
assign, transfer or otherwise dispose of any Equity Securities in a transaction
other than (i) pursuant to an effective registration statement under the
Securities Act, including such as required under the Registration Rights
Agreement, (ii) to an Affiliate of the Key Person, or (iii) pursuant to Rule 144
under the Securities Act, then such Key Person shall give written notice (the
"Key Person Sale Notice") to the Purchasers of the proposed transaction,
describing in reasonable detail the price, amount, consideration, timing (which
shall not be inconsistent with the provisions of the Purchasers' notice
provision below), identification of the proposed acquiror and other material
terms of the proposed transaction, and offering the Purchasers the opportunity,
but not the obligation, to include up to a number of their Shares, Conversion
Shares, Warrants or Warrant Shares in the transaction as provided below. The
aggregate number of Shares, Conversion Shares, Warrants or Warrant Shares that
the Purchasers', as a group, may include in the transaction shall be determined
based on their collective holdings of the Company's Equity Securities relative
to that of the Key Person (with any Shares, Warrants or other securities
exercisable for or convertible into Common Stock, treated for this purpose on a
fully exercised or converted basis). The aggregate amount of the Purchasers'
participation shall be allocated among them as they may determine. The
Purchasers may exercise their co-sale right pursuant to the foregoing by
providing a written notice to the Company, within five (5) Business Days from
the giving of the Key Person Sale Notice specifying the aggregate amount, and
allocations among the Purchasers, of the Shares, Conversion Shares, Warrants or
Warrant Shares that they elect to include in the transaction, and upon such
notice the parties shall be bound to complete the transaction on the terms set
forth in such notice and in the Key Person Sale Notice. If the Purchasers'
decline to exercise their co-sale right pursuant to the foregoing, including by
failing to deliver an exercise
21
notice within the period provided above, the Key Person may complete the
transaction with the proposed acquirer within the time and otherwise on the
terms described in the Key Person Sale Notice. The Key Person may not complete
the transaction unless the Purchasers' co-sale right pursuant to the foregoing
are satisfied.
(b) The co-sale right of the Purchasers set forth in this Section
-------
6.12 shall not apply to any sale, assignment, transfer or other disposition of
----
any Equity Securities by any Key Person which (i) individually or in the
aggregate for all Key Persons, over any twelve consecutive months does not
exceed 150,000 shares of Common Stock (with any Equity Securities exercisable
for or convertible into Common Stock treated for this purpose on a fully
exercised or converted basis) or (ii) is made without consideration to the Key
Person's ancestors, descendants, spouse, siblings, nieces, or nephews, or to
trusts for the benefit of such persons or the Key Person or pertains to the
estate of the Key Person, in each case for bona fide estate or tax planning
purposes.
7. Indemnification.
---------------
7.1 The Company agrees to indemnify, defend and hold harmless each
Purchaser and its Affiliates and their respective officers, directors, agents,
employees, subsidiaries, partners, members and controlling persons
(collectively, the "Purchaser Indemnitees") to the fullest extent permitted by
law from and against any and all claims, losses, liabilities, damages,
deficiencies, judgments, assessments, fines, settlements, costs or expenses
(including administrative, judicial or regulatory proceedings, interest,
penalties, costs of investigation and reasonable fees, disbursements and other
charges of counsel) (collectively, "Losses") based upon, arising out of or
otherwise in respect of any breach by the Company of any representation,
warranty, covenant or agreement of the Company contained in this Agreement or in
the Transaction Documents, or for any Losses claimed by any broker or placement
agent in connection with the transactions contemplated hereby or thereby.
7.2 As promptly as possible after receipt by a Purchaser Indemnitee
under this Section 7 of notice of the threat, assertion or commencement of any
---------
claim, action or proceeding, such Purchaser Indemnitee will, if a claim for
indemnification in respect thereof is to be made under this Section 7, notify
---------
the Company in writing of the commencement thereof and the Company shall have
the right to participate in and, to the extent the Company desires, to assume at
its expense the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that, the failure to notify the Company promptly of
the threat, assertion or commencement of any such claim, action or proceeding
shall not relieve the Company of any liability to the Purchaser Indemnitee under
this Section 7 except (and only) to the extent that it shall be finally
----------
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Company.
7.3 If any Purchaser Indemnitee shall have reasonably concluded that
there may be one or more legal defenses available to such Purchaser Indemnitee
party which are different from or additional to those available to the Company,
or that such claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Section 7, the
---------
Company shall not have the right to assume the defense of such action on behalf
of such Purchaser
22
Indemnitee, and the Company shall reimburse such Purchaser Indemnitee for the
fees and expenses of one separate counsel, for all Purchaser Indemnitees, which
are reasonably related to the matters covered by the indemnity agreement
provided in this Section 7. Subject to the foregoing, a Purchaser Indmenitee
---------
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the Company. The Company shall not be liable for
any settlement of any proceeding effected without its written consent, which
consent shall not be unreasonably withheld. The Company shall not, without the
prior written consent of the relevant Purchaser Indemnitee, effect any
settlement of any pending proceeding in respect of which such Purchaser
Indemnitee is a party, unless such settlement includes an unconditional release
of such Purchaser Indemnitee party from all liability on claims that are the
subject matter of such proceeding.
7.4. Limitations.
-----------
(a) Time Limit for Certain Claims. The Company shall not be
--------------------------------
liable for any Losses hereunder arising out of a breach of representation or
warranty unless a written claim for indemnification is given by the relevant
Purchaser Indemnitee to Company on or prior to the Effective Date.
(b) Maximum Amount. The Company shall not be liable hereunder for
--------------
any Losses incurred by any Purchaser on the value of its Shares as a result out
of a breach of representation or warranty hereunder in excess of purchase price
hereunder actually paid by such Purchaser for such Shares.
7.5 Applicability; Non-Exclusivity. Notwithstanding any term to the
------------------------------
contrary in this Section 7, the indemnification and contribution provisions of
---------
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder. The
parties hereby acknowledge and agree that in addition to remedies of the parties
hereto in respect of any and all claims relating to any breach or purported
breach of any representation, warranty, covenant or agreement that is contained
in this Agreement pursuant to the indemnification provisions of this Section 7,
---------
all parties shall always retain the right to pursue and obtain injunctive relief
in addition to any other rights or remedies hereunder.
8. Miscellaneous Provisions.
------------------------
8.1 Rights Cumulative. Each and all of the various rights, powers
------------------
and remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
8.2 Pronouns. All pronouns or any variation thereof shall be deemed
--------
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
23
8.3 Notices.
-------
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be given in writing and shall be deemed given if sent by
certified or registered mail (return receipt requested), overnight courier or
telecopy (with confirmation of receipt), or delivered by hand to the party to
whom such correspondence is required or permitted to be given hereunder. An
electronic communication ("Electronic Notice") shall be deemed written notice
for purposes of this Section 8.3 if sent with return receipt requested to the
-----------
electronic mail address specified by the receiving party either in this Section
-------
8.3 or on Schedule 1 hereto. Electronic Notice shall be deemed received at the
--- ----------
time the party sending Electronic Notice receives verification of receipt by the
receiving party.
(b) All correspondence to the Company shall be addressed as
follows:
BigString Corporation 0 Xxxxxxx Xxxx, Xxxxx X, Xxx Xxxx, XX 00000 Attention:
Xxxxx X. Xxxxx, President and Chief Executive Officer, Facsimile: (732)
741-2842, xxxxx@xxxxxxxxx.xxx, with copies to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
X.X. Xxx000
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
xxxxxxxx@xxxxxx.xxx
(c) All correspondence to the Purchasers shall be addressed
pursuant to the contact information set forth on Schedule 1 attached hereto.
----------
(d) Any entity may change the address to which correspondence to
it is to be addressed by notification as provided for herein.
8.4 Captions. The captions and paragraph headings of this Agreement
--------
are solely for the convenience of reference and shall not affect its
interpretation.
8.5 Expenses. Each party shall pay all costs and expenses that, it
--------
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement and the Transaction Documents; provided, however, that the
Company shall, at the Closing, reimburse the reasonable fees and expenses of
Xxxxx, Xxxxxxxx & Flexner LLP, counsel to the Purchasers, not to exceed $50,000.
8.6 Severability. Should any part or provision of this Agreement be
------------
held unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon
24
the parties hereto.
8.7 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal and substantive laws of the State of New York
and without regard to any conflicts of laws concepts which would apply the
substantive law of some other jurisdiction.
8.8 Waiver. No waiver of any term, provision or condition of this
------
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
8.9 Assignment. The rights and obligations of any party hereto shall
----------
inure to the benefit of and shall be binding upon the authorized successors and
permitted assigns of such party. The Company may not assign this Agreement or
any rights or obligations hereunder without the prior written consent of
Purchasers who hold a majority of the outstanding Shares (the "Majority
Purchasers"). Subject to the provisions of Article 6 hereof, each Purchaser may
assign or transfer any or all of its rights under this Agreement to any Person
to which it may sell, assign, transfer or otherwise dispose of any of its
Shares, Conversion Shares, Warrants or Warrant Shares, provided that such
assignee or transferee agrees in writing to be bound, with respect to the
transferred Shares, Conversion Shares, Warrants or Warrant Shares, by the
provisions hereof and of the Transaction Documents that apply to such assigning
or transferring Purchaser; whereupon such assignee or transferee shall be deemed
to be a "Purchaser" for all purposes of this Agreement.
8.10 Survival. The respective representations and warranties given
--------
by the parties hereto shall survive the Closing Date and the consummation of the
transactions contemplated herein for a period of time equal to the time for
which indemnification may be sought hereunder, without regard to any
investigation made by any party. The respective covenants and agreements agreed
to by a party hereto shall survive the Closing Date and the consummation of the
transactions contemplated herein in accordance with their respective terms and
conditions.
8.11 Entire Agreement. This Agreement, the exhibits and schedules
-----------------
hereto, the Transaction Documents and the other documents delivered pursuant
hereto constitutes the entire agreement between the parties hereto respecting
the subject matter hereof and supersedes all prior agreements, negotiations,
understandings, representations and statements respecting the subject matter
hereof, whether written or oral.
8.12 Amendments. Any amendment, supplement or modification of or to
----------
any provision of this Agreement, any waiver of any provisions of this Agreement
shall be effective only if made or given in writing and signed by the Company
and the Majority Purchasers; provided that any amendment, supplement,
modification or waiver that is materially and disproportionately adverse to any
particular Purchaser (as compared to all Purchasers as a group) shall require
the consent of such Purchaser.
8.13 No Third Party Rights. This Agreement is intended solely for
---------------------
the benefit of the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor
25
of, any Person (including, without limitation, any stockholder or debt holder of
the Company) other than the parties hereto; provided, that each of the Purchaser
Indemnitees that are not Purchasers are entitled to all rights and benefits as
third party beneficiaries of Article 7 of this Agreement.
---------
8.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document. The parties hereto confirm
that any facsimile copy of another party's executed counterpart of this
Agreement (or its signature page thereof) will be deemed to be an executed
original thereof.
[Signature Pages Follow]
26
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement under seal as of the day and year first above written.
BIGSTRING CORPORATION
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
PURCHASERS:
TUDOR INVESTMENT CORP., as investment adviser
to each Investor listed on Schedule 1 (other than Tudor
Proprietary Trading, L.L.C.)
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Director
TUDOR PROPRIETARY TRADING, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Director
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
Schedule 1
----------
Schedule of Purchasers
----------------------------------------------------------------------------------------------------------------------------
Name, Address and Tax ID Number Number of Shares Per Share Purchase Aggregate Number of Warrant
Price ($) Purchase Price Shares
($)
============================================================================================================================
Witches Rock Portfolio Ltd. 320,343 5.00 1,601,715.00 800,858
c/o Tudor Investment Corporation
00 Xxxxx Xxxxx
0xx Xxxxx
Xxxxxx, XX 00000
Tax ID.: 00-0000000
----------------------------------------------------------------------------------------------------------------------------
The Tudor BVI Global Portfolio Ltd. 51,777 5.00 258,885.00 129,442
c/o Tudor Investment Corporation
00 Xxxxx Xxxxx
0xx Xxxxx
Xxxxxx, XX 00000
Tax ID.: 00-0000000
----------------------------------------------------------------------------------------------------------------------------
Tudor Proprietary Trading, L.L.C. 27,880 5.00 139,400.00 69,700
c/o Tudor Investment Corporation
00 Xxxxx Xxxxx
0xx Xxxxx
Xxxxxx, XX 00000
Tax ID.: 00-0000000
----------------------------------------------------------------------------------------------------------------------------
TOTAL 400,000 2,000,000 1,000,000
----------------------------------------------------------------------------------------------------------------------------
Schedule 2
----------
Disclosure Schedule
[Omitted]
Exhibit A
---------
Form of Certificate of Designations of the Series A Preferred Stock
[Omitted]
Exhibit B
---------
Form of Registration Rights Agreement
[Omitted]
Exhibit C
---------
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, AND NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY BE SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, REGISTRATION UNDER SAID ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
May ___, 2006
BIGSTRING CORPORATION
COMMON STOCK PURCHASE WARRANT
Void after May ___, 2016
This WARRANT (this "Warrant") entitles [ ] (including any successors or
assigns, the "Holder"), for value received, to purchase from BIGSTRING
CORPORATION, a Delaware corporation, at any time and from time to time, subject
to the terms and conditions set forth herein, during the period starting from
5:00 a.m. on the Initial Exercise Date (as defined in Section 1 below) to 5:00
---------
p.m., Eastern time, on the Expiration Date (as defined in Section 1 below), at
---------
which time this Warrant shall expire and become void, all or any portion of the
Warrant Shares (as defined in Section 1 below) at the Exercise Price (as defined
---------
in Section 1 below). This Warrant is subject to the following terms and
---------
conditions:
1. Definitions. As used in this Warrant, the following terms shall have
-----------
the respective meanings set forth below or elsewhere in this Warrant:
"Affiliate" of any Person means any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, as such terms are used and construed
under Rule 144 under the Securities Act of 1933, as amended (the "Securities
Act"), including, without limitation, any other Person that serves as a general
partner, managing member and/or investment adviser or in a similar capacity of
such Person or any other Person for which such Person serves as a general
partner, managing member and/or investment adviser or in a similar capacity.
"Business Day" means any day except Saturday, Sunday and any day which
is a federal legal holiday or a day on which banking institutions in the State
of New York are authorized or required by law or other governmental action to
close.
"Common Stock" means the Company's common stock, par value $0.0001 per
share, (including any securities into which or for which such shares may be
exchanged, or converted,
pursuant to any stock dividend, stock split, stock combination,
recapitalization, reclassification, reorganization or other similar event).
"Company" means BigString Corporation, a Delaware corporation.
"Exercise Price" means $1.25 per share of Common Stock, subject to
adjustment under the terms of this Warrant.
"Expiration Date" means May ___, 2016.
"Fair Market Value" on any date of determination shall mean (i) if the
Common Stock is listed on a national securities exchange or admitted to
quotation on a national automated quotation system, then the last reported sale
price per share of Common Stock on such exchange or quotation system, as the
case may be, on the date immediately preceding the date of determination or, if
no such sale price is reported on such date, such price on the next preceding
trading day in which such price was reported, (ii) if the Common Stock is not
listed on a national securities exchange or quoted on a national automated
quotation system, but is actively traded over-the-counter, then the average of
the closing bid and asked prices over the five (5) trading days ended on the
trading day immediately preceding the date of determination or (iii) if such
Common Stock is not traded, quoted or listed on any national securities
exchange, national automated quotation system or the over-the-counter market,
then the fair market value of a share of Common Stock, as determined in good
faith by the Board of Directors of the Company.
"Holder" has the meaning set forth in the preamble of this Warrant.
"Initial Exercise Date" means May ___, 2006.
"Person" (whether or not capitalized) means an individual, entity,
partnership, limited liability company, corporation, association, trust, joint
venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
"SEC" means the Securities and Exchange Commission.
"Securities Purchase Agreement" means that certain Securities Purchase
Agreement dated May __, 2006, by and between the Company and the other parties
thereto.
"Warrant Shares" means an aggregate of [ ] shares of Common Stock,
subject to adjustments under the terms of this Warrant, issued or issuable upon
the exercise of this Warrant.
2. Exercise of Warrant.
-------------------
2.1 Method of Exercise. Subject to all of the terms and conditions
------------------
hereof, this Warrant may be exercised, in whole or in part, at any time and from
time to time during the period commencing on the Initial Exercise Date and
ending on the Expiration Date. Exercise shall be by presentation and surrender
to the Company at its principal office, or to the transfer agent of the Company,
of this Warrant and the Notice and Subscription form attached hereto as
2
Exhibit 1, executed by the Holder, which shall indicate the number of Warrant
---------
Shares for which the Holder intends to exercise this Warrant, together with
payment to the Company in accordance with Section 3 hereof in an amount equal to
---------
the product of (x) the Exercise Price multiplied by (y) the number of Warrant
Shares issuable upon such exercise. Upon and as of receipt by the Company (or
the transfer agent) of such properly completed and duly executed Notice and
Subscription form accompanied by payment as herein provided, the Holder shall be
deemed to be the Holder of record of the Warrant Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Warrant Shares shall not
then actually be, or have been, delivered to the Holder.
2.2 Delivery of Stock Certificates on Exercise. As soon as
-----------------------------------------------
practicable after an exercise of this Warrant, and in any event within five (5)
Business Days thereafter, the Company, at its expense, and in accordance with
applicable securities laws, shall cause to be issued in the name of and
delivered to the Holder, or as the Holder may direct (subject in all cases, to
the provisions of Section 8 hereof), a certificate or certificates for the
---------
number of Warrant Shares issued on the date of such exercise, plus, in lieu of
----
any fractional share to which the Holder would otherwise be entitled, an amount
of cash equal to such fraction multiplied by the Fair Market Value.
2.3 Shares To Be Fully Paid and Nonassessable. All Warrant Shares
------------------------------------------
issued upon an exercise of this Warrant shall be validly issued, fully paid and
nonassessable, free of all liens, taxes, charges and other encumbrances or
restrictions on sale (other than those expressly set forth herein).
2.4 Fractional Shares. No fractional shares of Common Stock or scrip
-----------------
representing fractional shares of Common Stock shall be issued upon the exercise
of this Warrant. With respect to any fraction of a share of Common Stock
otherwise issuable upon any exercise hereof, the Company shall make a cash
payment to the Holder as set forth in Section 2.2 hereof.
-----------
2.5 Issuance of New Warrants; Company Acknowledgment. Upon any
----------------------------------------------------
partial exercise of this Warrant, the Company, at its expense, will as soon as
practicable and, in any event within five (5) Business Days thereafter, issue
and deliver to the Holder a new Warrant, registered in the name of the Holder,
exercisable, in the aggregate, for the balance of the Warrant Shares. Moreover,
the Company shall, at the time of any exercise of this Warrant, upon the request
of the Holder, acknowledge in writing its continuing obligation to afford to the
Holder any rights to which the Holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant; provided, however,
that if the Holder does not make any such request, the continuing obligation of
the Company to afford to the Holder any such rights shall not be affected.
2.6 Payment of Taxes and Expenses. The Company shall pay any
--------------------------------
recording, filing, stamp or similar tax which may be payable in respect of any
transfer involved in the issuance of, and the preparation and delivery of
certificates (if applicable) representing, (i) any
3
Warrant Shares issued upon exercise of this Warrant and (ii) new or replacement
Warrants in the Holder's name or the name of any transferee of all or any
portion of this Warrant.
3. Payment of Exercise Price. The Exercise Price for the Warrant Shares
-------------------------
being purchased upon any exercise of this Warrant may be paid, at the election
of the Holder (i) in cash, by certified check or by wire transfer to an account
designated in writing by the Company, (ii) by cancellation of indebtedness owing
from the Company to the Holder, (iii) by the Holder surrendering a number of
Warrant Shares having a Fair Market Value on the date of exercise equal to,
greater than (but only if by a fractional share) or less than the Exercise
Price, in which case the Holder shall receive the number of Warrant Shares to
which it would otherwise be entitled upon such exercise, less the surrendered
shares, or (iv) any combination of the methods described in the foregoing
clauses (i), (ii) and (iii).
4. Adjustment of Exercise Price and Number of Warrant Shares. The
-------------------------------------------------------------
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events as follows:
4.1. Subdivision or Combination of Stock. If at any time or from
-------------------------------------
time to time after the date hereof, the Company shall subdivide (by way of stock
dividend, stock split or otherwise) its outstanding shares of Common Stock, the
Exercise Price in effect immediately prior to such subdivision shall be reduced
proportionately and the number of Warrant Shares (calculated to the nearest
whole share) shall be increased proportionately, and conversely, in the event
the outstanding shares of Common Stock shall be combined (whether by stock
combination, reverse stock split or otherwise) into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall be
increased proportionately and the number of Warrant Shares (calculated to the
nearest whole share) shall be decreased proportionately. The Exercise Price and
the number of Warrant Shares, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described in this
Section 4.1.
-----------
4.2 Adjustment for Stock Dividends. If at any time after the date
-------------------------------
hereof, the Company shall declare a dividend or make any other distribution upon
any class or series of capital stock of the Company payable in shares of Common
Stock or other rights securities convertible into or exercisable for shares of
Common Stock, the Exercise Price and the number of Warrant Shares shall be
adjusted proportionately. The Exercise Price and the number of Warrant Shares,
as so adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 4.2.
-----------
4.3 Adjustments for Reclassifications. If the Common Stock issuable
---------------------------------
upon exercise of this Warrant shall be changed into, or the right to receive,
the same or a different number of shares of any other class(es) or series of
stock or other securities or property, whether by reclassification or otherwise
(other than an adjustment under Section 4.1 and Section 4.2 or a merger,
------------ ------------
consolidation, or sale of assets provided for under Section 4.4), then and in
-----------
each such event, the Holder hereof shall have the right thereafter to receive
upon exercise of this Warrant the kind and amount of shares of stock and other
securities and property receivable upon such reclassification or other change in
respect of a number of shares of Common Stock equal to the number of Warrant
Shares otherwise issuable upon such exercise of this Warrant, all subject to
4
successive adjustments thereafter from time to time pursuant to and in
accordance with the provisions of this Section 4.
---------
4.4 Adjustments for Merger or Consolidation. In the event that, at
----------------------------------------
any time or from time to time after the date hereof, the Company shall (a)
effect a reorganization, (b) consolidate with or merge into any other Person, or
(c) sell or transfer all or substantially all of its properties or assets or
more than fifty percent (50%) of the voting capital stock of the Company
(whether issued and outstanding, newly issued, from treasury, or any combination
thereof) to any other person under any plan or arrangement contemplating the
consolidation or merger, sale or transfer, or dissolution of the Company, then,
in each such case, the Holder, upon the exercise of this Warrant at any time or
from time to time after the consummation of such reorganization, consolidation,
merger or sale or the effective date of such dissolution, as the case may be,
shall receive, in lieu of the Warrant Shares otherwise issuable upon such
exercise, the stock and property (including cash) to which the Holder would have
been entitled upon the consummation of such consolidation or merger, or sale or
transfer, or in connection with such dissolution, as the case may be, if the
Holder had exercised this Warrant immediately prior thereto (assuming the
payment by the Holder of the Exercise Price therefor as required hereby, which
payment shall be included in the assets of the Company for the purposes of
determining the amount available for distribution), all subject to successive
adjustments thereafter from time to time pursuant to, and in accordance with,
the provisions of this Section 4.
---------
4.5 Continuation of Terms. Upon any reorganization, consolidation,
---------------------
merger or transfer (and any dissolution following any such transfer) referred to
in this Section 4, this Warrant shall continue in full force and effect and the
---------
terms hereof shall be applicable to the shares of stock and other securities and
property to which the Holder has a right to receive upon the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer or owner of any such stock or other
securities and property, including, in the case of any such transfer, the Person
acquiring all or substantially all of the properties or assets or more than
fifty percent (50%) of the voting capital stock of the Company (whether issued
and outstanding, newly issued or from treasury or any combination thereof),
whether or not such Person shall have expressly assumed the terms of this
Warrant.
4.6 Certificate as to Adjustments. Upon the occurrence of each event
-----------------------------
requiring adjustment or readjustment of the Exercise Price and number of Warrant
Shares pursuant to this Section 4, this Warrant shall, without any action on the
---------
part of the Holder, be adjusted in accordance with this Section 4, and the
---------
Company, at its expense, promptly shall compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to the Holder a
certificate setting forth such adjustment or readjustment, showing in reasonable
detail the facts and calculations upon which such adjustment or readjustment is
based. The Company will forthwith send a copy of each such certificate to the
Holder in accordance with Section 10.4 below.
------------
5. Registration Rights. The Warrant Shares shall be entitled to
--------------------
registration rights and all other rights as applicable to such shares in
accordance with that certain Registration
5
Rights Agreement, dated as of the date hereof, by and among the Company and the
other parties thereto.
6. Notices of Record Date. Upon (a) any establishment by the Company of
----------------------
a record date of the holders of Common Stock for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
or right or option to acquire securities of the Company, or any other right, or
(b) any capital reorganization, reclassification, recapitalization, merger or
consolidation of the Company with or into any other corporation, any transfer of
all or substantially all the assets of the Company, or any voluntary or
involuntary dissolution, liquidation or winding up of the Company, or the sale,
in a single transaction, of more than fifty percent (50%) of the Company's
voting capital stock (whether newly issued, or from treasury, or previously
issued and then outstanding, or any combination thereof), the Company shall mail
to the Holder at least ten (10) Business Days, or such longer period as may be
required by law, prior to the applicable record date or effective date, a notice
specifying (i) the date established as the record date for the purpose of such
dividend, distribution, option or right and a description of such dividend,
distribution, option or right, (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up, or sale is expected to become effective and (iii) the date, if any,
fixed as to when the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
7. Exchange of Warrant. Subject to the provisions of Section 8 hereof
------------------- ---------
(if and to the extent applicable), this Warrant shall be exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for new
Warrants, each registered in the name of the Holder or in the name of such other
persons as the Holder may direct (upon payment by the Holder of any applicable
transfer taxes). Each of such new Warrants shall be exercisable for such number
of Warrant Shares as the Holder shall direct, provided that all of such new
Warrants shall represent, in the aggregate, the right to purchase the same
number of Warrant Shares and cash, securities or other property, if any, which
may be purchased by the Holder upon exercise of this Warrant at the time of its
surrender.
8. Transfer Provisions, etc.
------------------------
8.1 Legends. Subject to Section 6.2 of the Securities Purchase
------- ------------
Agreement, each certificate representing Warrant Shares issued upon exercise of
this Warrant shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED
OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, REGISTRATION UNDER SAID ACT."
6
8.2 Mechanics of Transfer.
---------------------
(a) Any transfer of all or any portion of this Warrant, or of any
interest herein, that is otherwise in compliance with applicable law and the
Securities Purchase Agreement shall be effected by surrendering this Warrant to
the Company at its principal office, together with a duly executed form of
assignment, in the form attached as Exhibit 2 hereto.
---------
(b) In the event of any transfer of all or any portion of this
Warrant in accordance with Section 8.2(a) above, the Company shall issue (i) a
--------------
new Warrant to the transferee, representing the right to purchase the number of
Warrant Shares, and cash, securities or other property, if any, which were
purchasable by the Holder of the transferred portion of this Warrant, and (ii) a
new Warrant to the Holder, representing the right to purchase the number of
Warrant Shares, and cash, securities or other property, if any, purchasable by
the Holder of the balance of this Warrant. Until this Warrant or any portion
thereof is transferred on the books of the Company, the Company may treat the
Holder as the absolute holder of this Warrant and all right, title and interest
therein for all purposes, notwithstanding any notice to the contrary.
8.3 No Restrictions on Transfer. Subject to compliance with
------------------------------
applicable securities laws and the Securities Purchase Agreement, this Warrant
and any portion hereof, the Warrant Shares and the rights hereunder may be
transferred by the Holder in its sole discretion at any time and to any Person
or Persons, including, without limitation, Affiliates and affiliated groups of
such Holder, without the consent of the Company.
8.4 Warrant Register. The Company shall keep at its principal office
----------------
a register for the registration, and registration of transfers, of the Warrants.
The name and address of each Holder of one or more of the Warrants, each
transfer thereof and the name and address of each transferee of one or more of
the Warrants shall be registered in such register. The Company shall give to any
Holder of a Warrant promptly upon request therefor, a complete and correct copy
of the names and addresses of all registered Holders of the Warrants.
9. Lost, Stolen or Destroyed Warrant. Upon receipt by the Company of
-----------------------------------
evidence satisfactory to the Company of loss, theft, destruction or mutilation
of this Warrant and, in the case of loss, theft or destruction, on delivery of a
customary affidavit of the Holder and indemnity agreement, or, in the case of
mutilation, upon surrender of this Warrant, the Company at its expense will
execute and deliver, or will instruct its transfer agent to execute and deliver,
a new Warrant and any such lost, stolen or destroyed Warrant thereupon shall
become void.
10. General.
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10.1 Authorized Shares, Reservation of Shares for Issuance. At all
------------------------------------------------------
times while this Warrant is outstanding, the Company shall maintain its
corporate authority to issue, and shall have authorized and reserved for
issuance upon exercise of this Warrant, such number of shares of Common Stock
and any other capital stock or other securities as shall is necessary to perform
its obligations under this Warrant, taking into account any and all adjustments
to the Warrant Shares under this Warrant.
7
10.2 No Dilution or Impairment. The Company will not, by amendment
--------------------------
of its Certificate of Incorporation or By-laws or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities, sale or other transfer of any of its assets or properties, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder
hereunder against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of Common Stock issuable upon the exercise of this Warrant above the amount
payable therefor on such exercise, and (b) will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock (and any other capital stock
or other securities) upon the exercise of this Warrant.
10.3 No Rights as Stockholder. The Holder shall not be entitled to
-------------------------
vote or to receive dividends or to be deemed the holder of the shares of Common
Stock that may at any time be issuable upon exercise of this Warrant for any
purpose whatsoever, nor shall anything contained herein be construed to confer
upon the Holder any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger or conveyance or otherwise), or to receive notice
of meetings (except to the extent otherwise provided in this Warrant), or to
receive dividends or subscription rights, until the Holder shall have exercised
this Warrant and been issued Warrant Shares or other securities in accordance
with the provisions hereof.
10.4 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
given if personally delivered or delivered by overnight courier or mailed by
first-class registered or certified mail, postage prepaid, return receipt
requested, or sent by fax machine, addressed as follows:
(a) if to the Company at:
BigString Corporation
0 Xxxxxxx Xxxx, Xxxxx X
Xxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
with copies to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx X.X. Xxx 00
Middletown, New Jersey 07748
8
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to the Holder, at the Holder's address appearing in the
books maintained by the Company.
11. Amendment and Waiver. No failure or delay of the Holder in
----------------------
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The terms of
this Warrant may be amended, modified or waived only with the written consent of
the Company and the Holder.
12. Governing Law. This Warrant shall be governed by and construed in
--------------
accordance with the laws of the State of New York, as such laws are applied to
contracts entered into and wholly to be performed within the State of New York
and without giving effect to any principles of conflicts or choice of law that
would result in the application of the laws of any other jurisdiction.
13. Covenants To Bind Successor and Assigns. All covenants,
---------------------------------------------
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
14. Severability. In case any one or more of the provisions contained
------------
in this Warrant shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
15. Construction. The definitions of this Warrant shall apply equally
------------
to both the singular and the plural forms of the terms defined. Wherever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The section and paragraph headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
16. Remedies. The Holder, in addition to being entitled to exercise all
--------
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Warrant or where any provision hereof is validly asserted as a defense,
the successful party to
9
such action or proceeding shall be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.
[Signature Page Follows]
10
IN WITNESS WHEREOF, the Company has executed this Common Stock Purchase
Warrant as of the date set forth above.
COMPANY:
BIGSTRING CORPORATION
By:
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
[SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT]
EXHIBIT 1
NOTICE AND
SUBSCRIPTION
To: BIGSTRING CORPORATION Date:
0 Xxxxxxx Xxxx, Xxxxx X -------------------
Xxx Xxxx, Xxx Xxxxxx 00000
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to exercise thereunder,
__________ shares of Common Stock of BIGSTRING CORPORATION, a Delaware
corporation, and tenders herewith payment of $__________, representing the
aggregate purchase price for such shares based on the price per share provided
for in such Warrant. Such payment is being made in accordance with [Section
3(i)] [Section 3(ii)] [Section 3(iii)] [Section 3(iv)] of the attached Warrant.
Please issue a certificate or certificates for such shares of Common Stock in
the following name or names and denominations and deliver such certificate or
certificates to the person or persons listed below at their respective addresses
set forth below:
If said number of shares of Common Stock shall not be all the shares of Common
Stock issuable upon exercise of the attached Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of such shares
of Common Stock less any fraction of a share of Common Stock paid in cash.
Dated: ,
------------ ---- ----------------------------------
Signature
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, __________________________________ hereby sells,
assigns and transfers unto __________________ the attached Warrant [a portion of
the attached Warrant representing the right to purchase _____, of the total____,
shares of Common Stock issuable upon exercise of this Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________ attorney to transfer said Warrant [said portion of
said Warrant] on the books of BIGSTRING CORPORATION, a Delaware corporation,
with full power of substitution in the premises.
If only a portion of the attached Warrant is to be so transferred, a new
Warrant is to be issued in the name of the undersigned for the balance of
said Warrant.
The undersigned hereby agrees that it will not sell, assign, or
transfer the right, title and interest in and to the Warrant unless applicable
federal and state securities laws have been complied with.
Dated: ,
------------ ---- ----------------------------------
Signature
Exhibit D
---------
Form of Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C. Legal Opinion
[Omitted]
