Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
September 8, 2006 among uWink, Inc., a Utah corporation (the "COMPANY"), and the
purchasers identified on the signature pages hereto (each, a "PURCHASER" and
collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company,
securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agrees as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"ADVICE" has the meaning set forth in SECTION 6.5.
"AGREEMENT" has the meaning set forth in the preamble.
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act.
"BENEFIT PLANS" means (i) all "employee pension benefit
plans," as defined in section 3(2) of ERISA, established, maintained,
or contributed to by the Company or its Subsidiaries for the benefit
of any employees or agents of the Company or its Subsidiaries; (ii)
all "employee welfare benefit plans," as defined in section 3(1) of
ERISA, established, maintained, or contributed to by the Company or
its Subsidiaries for the benefit of any employees or agents of the
Company or its Subsidiaries; and (iii) to the knowledge of the
Company, all other material incentive, employment, supplemental
retirement, severance, deferred compensation and other employee
benefit plans, programs, agreements and arrangements established,
maintained, or contributed to by the Company or its Subsidiaries for
the benefit of any employees or agents of the Company or its
Subsidiaries, without regard to the coverage of any such plan,
program, agreement or arrangement by ERISA or any provision of the
Code.
"BOARD" means the board of directors of the Company.
"BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.
"CLOSING" means the closing of the purchase and sale of the
Shares and the Warrants pursuant to SECTION 2.1.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.001 per share.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and
Convertible Securities.
"COMPANY" has the meaning set forth in the preamble.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for
Common Stock.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"EFFECTIVENESS PERIOD" has the meaning set forth in SECTION
6.1(B).
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
the American Stock Exchange, the NASDAQ National Market or the NASDAQ
SmallCap Market.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EVENT" has the meaning set forth in Section 6.1(d)(i) through
(v).
"EVENT PAYMENTS" has the meaning set forth in Section 6.1(d).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" means Common Stock, Options, or any equity or
equity equivalent securities, including, without limitation, any debt,
preferred stock or other instrument or security that is, at any time
during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock
Equivalents and that is issued or issuable: (A) upon exercise or
conversion of any options or other securities described in SCHEDULE
3.1(f) (provided that such exercise or conversion occurs in accordance
with the terms thereof, without amendment or modification, and that the
applicable exercise or conversion price or ratio is described in such
schedule) or otherwise pursuant to any employee benefit plan described
in SCHEDULE 3.1(f) or hereafter adopted by the Company and approved by
its stockholders, (B) in connection with any issuance of shares or
grant of options to employees, officers, directors or consultants of
the Company pursuant to a stock option plan, employee stock purchase
plan or other incentive stock plan duly adopted by the Board or in
respect of the issuance of Common Stock upon exercise of any such
options, (C) pursuant to the Company's bona fide acquisition of another
corporation, or all or a portion of its assets, by merger, purchase of
assets or stock or other corporate reorganization in each case, as
approved by the Board and not for the principal purpose of raising
capital or (D) in connection with a bona fide joint venture or
development agreement or strategic partnership, in either case not for
the principal purpose of raising capital.
"FILING DATE" means the date that is 45 days after the Closing
Date, with respect to the initial Registration Statement required to be
filed hereunder, and, with respect to any additional Registration
Statements that may be required pursuant to SECTION 6.1, the 45th day
following the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement is
required under such Section.
"GAAP" has the meaning set forth in SECTION 3.1(g).
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"INDEMNIFIED PARTY" has the meaning set forth in Section
6.4(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section
6.4(c).
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
SECTION 3.1(t).
"LIEN" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"LOSSES" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including, without
limitation, costs of preparation and reasonable attorneys' fees.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in SECTION
3.1(b).
"MATERIAL PERMITS" has the meaning set forth in SECTION
3.1(u).
"NASD" has the meaning set forth in SECTION 3.1(i).
"OPTIONS" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"PERSON" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or any court or other federal, state,
local or other governmental authority or other entity of any kind.
"PRICE PER SHARE" means $0.30 per Share and Warrant to
purchase 0.5 Underlying Shares.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus
including post effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"PURCHASER" or "PURCHASERS" has the meaning set forth in the
preamble.
"PURCHASER COUNSEL" has the meaning set forth in SECTION
6.2(a).
"REGISTRABLE SECURITIES" means any Common Stock (including the
Shares and Underlying Shares) issued or issuable pursuant to the
Transaction Documents, together with any securities issued or issuable
upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.
"REGISTRATION STATEMENT" means each registration statement
required to be filed under Article VI, including (in each case) the
Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
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"REGULATORY ORDER" has the meaning set forth in SECTION
3.1(i).
"RELATED PERSON" has the meaning set forth in SECTION 4.7.
"REQUIRED EFFECTIVENESS DATE" means 180 days from the Closing
Date.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant
to the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"SCHEDULE" means the section numbers of the Disclosure
Schedule that correspond to the first, or principal, section of the
Agreement to which the disclosures relate.
"SEC REPORTS" has the meaning set forth in SECTION 3.1(g).
"SECURITIES" means the Shares, the Warrants and the Underlying
Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELF-REGULATORY ORGANIZATION" has the meaning set forth in
SECTION 3.1(i).
"SHARES" means an aggregate of up to 5,000,000 shares of
Common Stock, which are being issued and sold to the Purchasers at the
Closing.
"SHORT SALES" has the meaning set forth in SECTION 3.2(h).
"SUBSEQUENT PLACEMENT" has the meaning set forth in SECTION
4.5.
"SUBSIDIARY" means any Person in which the Company, directly
or indirectly, owns at least 20% of the capital stock or holds an
equity or similar interest.
"TAXES" means any federal, state, county, local, or foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental
fee of any kind whatsoever, imposes or required to be withheld by the
United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and
additions imposed thereon or with respect thereto.
"TAX RETURN" means any report, return, information return, or
other information required to be supplied to a governmental authority
in connection with Taxes, including any return of an affiliated or
combined or unitary group that includes the Company and any amendments
thereof.
"TRADING MARKET" means any Eligible Market, or any national
securities exchange, market or trading or quotation facility on which
the Common Stock is then listed or quoted.
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"TRANSACTION DOCUMENTS" means this Agreement, the Warrants and
any other documents or agreements executed in connection with the
transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
"WARRANTS" means, collectively, the warrants to purchase
Common Stock that are issued and sold pursuant to this Agreement, in
the form of EXHIBIT A, and any warrants or replacement warrants issued
upon exercise, transfer, exchange or partial exercise of such warrants.
ARTICLE II
PURCHASE AND SALE
2.1 CLOSING. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Shares and a Warrant to purchase such number of Underlying
Shares, each as indicated below such Purchaser's name on the signature page of
this Agreement, at the Price Per Share and for an aggregate purchase price for
such Purchaser as indicated below such Purchaser's name on the signature page of
this Agreement. The Closing shall take place at the offices of the Company,
immediately following the execution hereof, or at such other location or time as
the parties may agree.
2.2 CLOSING DELIVERIES.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) a copy of one or more stock certificates, free and
clear of all restrictive and other legends (except as expressly
provided in SECTION 4.1(b) hereof), evidencing such number of Shares
equal to the number of Shares indicated below such Purchaser's name on
the signature page of this Agreement, registered in the name of such
Purchaser; and
(ii) a copy of a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to
acquire such number of Underlying Shares indicated below such
Purchaser's name on the signature page of this Agreement, on the terms
set forth therein.
2.3 At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the purchase price indicated below such Purchaser's
name on the signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing to such Purchaser by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each of the Purchasers as follows:
(a) SUBSIDIARIES. Other than as set forth in the SEC Reports
(as defined in SECTION 3.1(g)) the Company has no Subsidiaries.
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(b) ORGANIZATION AND QUALIFICATION. Each of the Company and
the Subsidiaries is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, (i) adversely affect the legality,
validity or enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole on a consolidated basis, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company, its officers, Board and
stockholders and no further consent or action is required by the Company, its
officers, Board or its stockholders. Each of the Transaction Documents has been
(or upon delivery will be) duly executed by the Company and is, or when
delivered in accordance with the terms hereof, will constitute, the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as may be limited by (1) applicable
bankruptcy, insolvency, reorganization or others laws of general application
relating to or affecting the enforcement of creditors' rights generally and (2)
the effect of rules of law governing the availability of equitable remedies and
(ii) as rights to indemnity or contribution may be limited under federal or
state securities laws or by principles of public policy thereunder.
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any material agreement, credit
facility, debt or other instrument (whether evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any of its
Subsidiaries is a party or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations and the
rules and regulations of the principal market, system or exchange on which the
Common Stock is traded, quoted or listed), or by which any property or asset of
the Company or a Subsidiary is bound or affected.
(e) ISSUANCE OF THE SECURITIES. The Securities are duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens and shall not be subject to preemptive rights or similar
rights of stockholders. The Company has reserved from its duly authorized
capital stock the maximum number of Underlying Shares issuable upon exercise of
the Warrants.
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(f) CAPITALIZATION. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws, and none of such issuances were, and the
issuance of the Securities will not be, made in violation of any preemptive
rights or other rights. Except as disclosed in Schedule 3.1(f), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of Common
Stock. There are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing rights to
security holders) and the issue and sale of the Securities (including the
Underlying Shares) will not obligate the Company to issue 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. To the knowledge of
the Company and except as specifically disclosed in the SEC Reports or in any
Schedule 13D or Schedule 13G filed with the Commission, no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time. The
Shares and the Underlying Shares, when issued, will conform in all material
respects to the description of the Company's Common Stock contained in the
Company's SEC Reports and other filings with the SEC.
(g) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials (together with any materials filed by the
Company under the Exchange Act, whether or not required) being collectively
referred to herein as the "SEC REPORTS") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC Reports prior
to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(h) MATERIAL CHANGES. Since June 30, 2006, except as set forth
in the SEC Reports, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that would result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business and (B) liabilities not required to be reflected in
the Company's financial statements pursuant to GAAP or required to be disclosed
in filings made with the Commission, (iii) the Company has not altered its
method of accounting or the identity of its auditors, except as disclosed in its
SEC Reports or as required by changes in GAAP, (iv) the Company has not declared
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or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock (other than pursuant to written agreements with
employees to repurchase stock upon the termination of such employee's
employment) and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans or as disclosed in the SEC Reports.
(i) ABSENCE OF LITIGATION. Except as set forth in the SEC
Reports, (A) there are no actions, suits, claims, proceedings, inquiries or
investigations before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective assets that could (i) adversely affect or challenge
the legality, validity or enforceability of any of the Transaction Documents,
individually or in the aggregate, (ii) have a Material Adverse Effect or (iii)
if adversely decided, would have a Material Adverse Effect on, or delay the
issuance of, the Securities or the consummation of the transactions contemplated
by the Agreement, (B) no action, suit, proceeding, claim, investigation or
inquiry by the Company or any Subsidiary is currently pending nor does the
Company intend to initiate any action, suit, proceeding, claim, investigation or
inquiry, in each case, that if resolved in a manner adverse to the Company,
would have a Material Adverse Effect, (C) neither the Company nor any Subsidiary
(i) is subject to any order, decree, agreement, memorandum of understanding or
similar arrangement with, or commitment letter or similar submission to, or (ii)
has received any extraordinary supervisory letter from, or adopted any board
resolutions at the request of, any Self-Regulatory Organization or governmental
entity charged with the supervision or regulation of broker-dealers or the
supervision or regulation of its business (each such item referred to in clauses
"(i)" and "(ii)" of this SECTION 3.1(I), a "REGULATORY ORDER"), including any
such Regulatory Order that restricts materially the conduct of the business of
the Company or any Subsidiary, or in any manner relates to the capital adequacy,
credit policies or management of the Company or any Subsidiary, and (D) neither
the Company nor any Subsidiary has received written notice from any governmental
entity or Self-Regulatory Organization that such organization or authority is
contemplating issuing or requesting any such Regulatory Order. For purposes of
this Agreement, the term "SELF-REGULATORY ORGANIZATION" shall mean the National
Association of Securities Dealers, Inc. (or any successor entity thereto)
("NASD"), the American Stock Exchange, the National Futures Association, the
Chicago Board of Trade, the New York Stock Exchange, any national securities
exchange (as defined in the Exchange Act), any other securities exchange,
futures exchange, contract market, commodities market, any other such exchange,
clearinghouse or corporation or other similar federal, state or foreign
self-regulatory body or organization.
(j) COMPLIANCE. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body or (iii) to the Company's knowledge, 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 and employment and labor matters, except in each case as would not,
individually or in the aggregate, have or result in a Material Adverse Effect.
None of the Company or any Subsidiary is in default under, or in violation of
any of the listing or quotation requirements of any Eligible Market on which the
Common Stock is currently traded, listed or quoted as in effect on the date
hereof, and the Company is not aware of any facts which could reasonably lead to
de-listing or suspension of trading in the Common Stock by any Eligible Market
on which the Common Stock is then traded, listed or quoted in the foreseeable
future.
(k) TITLE TO ASSETS. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by them that
is material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
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(l) CERTAIN FEES. No brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement, and the Company
has not taken any action that would cause any Purchaser to be liable for any
such fees or commissions.
(m) PRIVATE PLACEMENT. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited any
offer to buy the Securities by means of any form of general solicitation or
advertising. Neither the Company nor any of its Affiliates nor any Person acting
on the Company's behalf has, directly or indirectly, at any time within the past
six 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 under the
Securities Act in connection with the offer and sale of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of any Trading
Market. The Company is not a United States real property holding corporation
within the meaning of the Foreign Investment in Real Property Tax Act of 1980.
(n) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not,
in the two years preceding the date hereof, received notice (written or oral)
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements. The approval of
the Company's stockholders is not required under the listing or maintenance
requirements of any Trading Market for the consummation of the transactions
contemplated herein.
(o) APPLICATION OF TAKEOVER PROTECTIONS. There is no control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's charter documents or the laws of its state of incorporation that is or
could become applicable to any of the Purchasers as a result of the Purchasers
and the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
(p) DISCLOSURE. The Company confirms that it has not provided
to the Purchasers any material non-public information other than information
related to the transactions contemplated by the Transaction Documents. The
Company understands and confirms that each of the Purchasers will rely on the
foregoing representations in effecting the transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No event
or circumstance has occurred or information exists with respect to the Company
or any of its 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 (i) any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in SECTION 3.2 or (ii) any statement, commitment or
promise to the Company or, to its knowledge, any of its representatives which is
or was an inducement to the Company to enter into this Agreement or otherwise.
9
(q) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF
SECURITIES. The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect to the
Company and to this Agreement and the transactions contemplated hereby.
(r) PATENTS AND TRADEMARKS. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to do so would have a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Except as disclosed in the SEC Reports, there
is no Proceeding that is pending, or to the Company's knowledge, is threatened
against, the Company regarding the infringement of any of the Intellectual
Property Rights. Neither the Company nor any Subsidiary has knowledge that, or
has received, a notice that the Intellectual Property Rights used by the Company
or any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, (i) all such Intellectual Property Rights are
enforceable and (ii) there is no existing infringement by another Person of any
of the Intellectual Property Rights.
(s) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company believes to be prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. The Company
has no reason to believe that it or any of the Subsidiaries will not be able to
renew their respective existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue their respective businesses without a significant increase in cost.
The Company has in full force and effect D&O insurance in amounts that are
commercially reasonable.
(t) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
(u) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(v) EMPLOYEE BENEFITS. Each of the Benefit Plans has been
administered in accordance with its terms and any federal, state or local
statute, law, ordinance, regulation, order, writ, injunction, directive,
judgment or decree applicable to the Company, the Subsidiaries, or any of their
respective properties, or assets, as the case may be (including, where
applicable, ERISA and the Code), except where the failure to so administer such
Benefit Plan would not have a Material Adverse Effect. Each of the Benefit Plans
intended to be "qualified" within the meaning of section 401(a) of the Code has
been determined by the United States Internal Revenue Service to be so
qualified, except where the failure to so qualify such Benefit Plan would not
have a Material Adverse Effect.
10
(w) TAXES. (i) The Company has filed (or joined in the filing
of) when due all Tax Returns required by applicable law to be filed with respect
to the Company and all Taxes shown to be due on such Tax Returns have been paid;
(ii) all such Tax Returns were true, correct and complete in all material
respects as of the time of such filing; or (iii) any liability of the Company
for Taxes not yet due and payable, or which are being contested in good faith,
in each case as of July 31, 2005, has been accrued or reserved for on the
financial statements of the Company in accordance with GAAP, in each case except
in the case that any such failure to file or pay Taxes would not result in a
Material Adverse Effect.
(x) NO MANIPULATION OF STOCK. The Company has not taken, in
violation of applicable law, any action designed to or that might cause or
result in stabilization or manipulation of the price of the Common Stock to
facilitate the transactions contemplated hereby or the sale or resale of the
shares of Common Stock.
(y) INTERNAL ACCOUNTING CONTROLS. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) REGISTRATIONS. None of the Company or the Subsidiaries is
subject to registration under the Investment Advisers Act of 1940, as amended,
or the Investment Company Act of 1940, as amended, or similar laws of any
governmental entity. Neither the Company nor any Subsidiary is required to
register as a broker-dealer with any governmental entity or any self-regulatory
organization. Except where so registered, none of the activities of the Company
or any Subsidiary require any of them to be registered as an exchange or
transfer agent, a clearing agency, a municipal securities dealer, a government
securities dealer, a futures commission merchant, a commodity trading advisory
or commodity pool operator.
3.2 REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
PURCHASERS. Each Purchaser hereby, as to itself only and for no other Purchaser,
represents and warrants to the Company and agrees that:
(a) ORGANIZATION; AUTHORITY. If such Purchaser is a legal
entity, such Purchaser is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The purchase by
such Purchaser of the Shares and the Warrants hereunder has been duly authorized
by all necessary action on the part of such Purchaser. This Agreement has been
duly executed and delivered by such Purchaser and constitutes the valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the
Securities for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time.
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(c) PURCHASER STATUS. At the time such Purchaser was offered
the Shares and the Warrants, it was, and at the date hereof it is, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) RELIANCE ON EXEMPTIONS. Such Purchaser understands that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire such securities.
(e) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its representatives has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(f) INFORMATION. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities that have been requested by such Purchaser. Such Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Such Purchaser understands that its investment in the Securities
involves a high degree of risk. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its advisors shall
modify, amend or affect such Purchaser's right to rely on the truth, accuracy
and completeness of the disclosure made to such Persons in respect of the
Company or this transaction and the Company's representations and warranties
contained in this Agreement. Each Purchaser acknowledges and agrees that the
Company has not made (i) any representations or warranties to such Purchaser
with respect to the transactions contemplated hereby other than those
specifically set forth in the Transaction Documents or (ii) any oral statement,
commitment or promise that is or was an inducement to such Purchaser to enter
into this Agreement or otherwise.
(g) SUBSCRIPTION AGREEMENT. Each Purchaser has completed or
caused to be completed the Subscription Agreement in the form as set forth on
EXHIBIT B, and the information provided by each Purchaser in such Subscription
Agreement is true and correct as of the date of this Agreement; PROVIDED, that
the Purchasers shall be entitled to update such information by providing written
notice thereof to the Company before the Effective Date.
(h) RESTRICTIONS ON SHORT SALES. Each Purchaser represents,
warrants and covenants that neither Purchaser nor any Affiliate of such
Purchaser that (i) had knowledge of the transactions contemplated hereby, (ii)
has or shares discretion relating to such Purchaser's investments or trading or
information concerning such Purchaser's investments, including in respect of the
Securities or (iii) is subject to such Purchaser's review or input concerning
such Affiliate's investments or trading, has or will, directly or indirectly,
during the period beginning on the date on which the Company or any
representative of the Company, first contacted such Purchaser regarding the
transactions contemplated by this Agreement and ending on the date that is 120
days after the Closing Date, engage in (x) any "short sales" (as such term is
defined in Rule 3b-3 promulgated under the Exchange Act) of the Common Stock,
including, without limitation, the maintaining of any short position with
respect to, establishing or maintaining a "put equivalent position" (within the
meaning of Rule 16a-1(h) under the Exchange Act) with respect to, entering into
any swap, derivative transaction or other arrangement (whether any such
transaction is to be settled by delivery of Common Stock, other securities, cash
or other consideration) that transfers to another, in whole or in part, any
economic consequences or ownership, or otherwise dispose of, any of the
Securities by the Purchaser or (y) any hedging transaction that establishes a
net short position with respect to the Securities (clauses "(x)" and "(y)"
together, a "SHORT SALE"); except for (1) Short Sales by the Purchaser or
Affiliate of such Purchaser which was, prior to the date on which such Purchaser
was first contacted by the Company or a representative of the Company regarding
the transactions contemplated by this Agreement, a market maker for the Common
Stock, provided that such Short Sales are in the ordinary course of business of
12
such Purchaser or Affiliate of such Purchaser and are in compliance with the
Securities Act, the rules and regulations of the Securities Act and such other
securities laws as may be applicable, (2) Short Sales by the Purchaser or an
Affiliate of such Purchaser which by virtue of the procedures of such Purchaser
are made without knowledge of the transactions contemplated by this Agreement,
(3) Short Sales by the Purchaser or an Affiliate of such Purchaser to the extent
that such Purchaser or Affiliate of such Purchaser is acting in the capacity of
a broker-dealer executing unsolicited third-party transactions or (4) Short
Sales OF THE UNDERLYING SHARES in connection with the Automatic Exercise as
defined in Section 4(c) of the Warrants.
(i) ACKNOWLEDGEMENT REGARDING PURCHASERS' PURCHASE OF
SECURITIES. Each Purchaser acknowledges and agrees that it is acting solely in
the capacity of an arm's length purchaser with respect to the Company and to
this Agreement and the transactions contemplated hereby.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities Act,
and in compliance with any applicable state securities laws. In connection with
any transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel from outside counsel to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited Investor" as defined in Rule 501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is
required by this SECTION 4.1(b), of substantially the following legend, revised
as applicable, on any certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
Certificates evidencing Securities shall not be required to contain such legend
(i) following any sale of such Securities pursuant to Rule 144, or (ii) if such
Securities are eligible for sale under Rule 144(k) or (iii) if such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). Until a Registration Statement covering the resale of the
Securities is effective under the Securities Act, the Company will not effect or
publicly announce its intention to effect any exchange, recapitalization or
other transaction that effectively requires or rewards physical delivery of
certificates evidencing the Common Stock.
13
4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act. As long
as any Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with paragraph (c) of Rule 144 such information
as is required for the Purchasers to sell the Securities under Rule 144. The
Company further covenants that it will take such further action as any holder of
Securities 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.
4.3 INTEGRATION. The Company shall not, and shall use commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Purchasers or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market.
4.4 RESERVATION OF SECURITIES. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 SUBSEQUENT PLACEMENTS.
(a) The Purchasers collectively shall have the right, subject
to other pre-existing shareholder rights, to participate as investors in up to
50% of any offering by the Company of any of its or the Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
Common Stock or Common Stock Equivalents, but not including any Excluded Stock
(any such offering being referred to as a "SUBSEQUENT PLACEMENT") for which a
definitive, binding agreement is entered into during the 12-month period
following the Closing Date. Each Purchaser's individual right of participation
shall be on a pro rata basis based on the 50% of number of shares of Common
Stock held by the Purchaser immediately prior to the effectiveness of such
Subsequent Placement as compared to the aggregate number of shares of Common
Stock outstanding immediately prior to the effectiveness of such Subsequent
Placement.
4.6 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall timely
file any filings and notices required by the Commission or applicable law with
respect to the transactions contemplated hereby.
4.7 REIMBURSEMENT. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a Purchaser
or any of its Affiliates (a "RELATED PERSON") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its actual and reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only expenses and
Losses that result directly from (i) such Purchaser's or Related Person's gross
14
negligence or willful misconduct or (ii) any breach by such Purchaser of any of
the representations, warranties or covenants made by such Purchaser in this
Agreement or any other Transaction Document. In addition, the Company shall
indemnify and hold harmless each Purchaser and Related Person and each Purchaser
shall indemnify and hold harmless the Company from and against any and all
Losses, as incurred, arising out of or relating to any breach by such party of
any of the representations, warranties or covenants made by such party in this
Agreement or any other Transaction Document. The conduct of any Proceedings for
which indemnification is available under this paragraph shall be governed by
SECTION 6.4(C) below. The indemnification obligations of any party under this
paragraph shall be in addition to any liability that such party may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company or the Purchasers and
any such Related Persons, as the case may be. The Company also agrees that
neither the Purchasers nor any Related Persons shall have any liability to the
Company or any Person asserting claims on behalf of or in right of the Company
in connection with or as a result of the transactions contemplated by the
Transaction Documents, except to the extent that any Losses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or Related Person in connection with such transactions or any breach
by such Purchaser of any of the representations, warranties or covenants made by
such Purchaser in this Agreement or any other Transaction Document. If the
Company or any Purchaser breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company or such
Purchaser may have under any Transaction Document or applicable law, the Company
or such Purchaser promptly shall pay or reimburse the Purchasers or the Company,
as the case may be, for all costs of collection and enforcement, including the
indemnification obligations under this paragraph and reasonable attorneys' fees
and expenses.
4.8 DELIVERY OF CERTIFICATES AND WARRANTS. Within three Business Days
following the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following: (a) one or more stock certificates, free and
clear of all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing the number of Shares indicated below such
Purchaser's name on the signature page of this Agreement, registered in the name
of such Purchaser; and (b) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire such number of
Underlying Shares indicated below such Purchaser's name on the signature page of
this Agreement, on the terms set forth therein.
ARTICLE V
CONDITIONS
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date;
(b) PERFORMANCE. The Company and each other Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing;
(c) SECURITIES EXEMPTIONS. The offer and sale of the
Securities to the Purchasers pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws;
15
(d) NO STATUTE OR RULE CHALLENGING TRANSACTION. No statute,
rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby which questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement;
(e) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in
the Common Stock shall not be restricted or suspended by the Commission or the
Trading Market (except for any restriction or suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company);
(f) LITIGATION. No Proceeding shall have been instituted or
threatened against the Company that would, individually or in the aggregate,
have a Material Adverse Effect;
(g) OTHER DOCUMENTS. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by this
Agreement as the Purchasers or their counsel may reasonably request.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to sell Shares and Warrants at the Closing is subject
to the satisfaction or waiver by the Company, at or before the Closing, of each
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date;
(b) PERFORMANCE. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing;
(c) SECURITIES EXEMPTIONS. The offer and sale of the
Securities to the Purchasers pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws;
(d) PAYMENT OF PURCHASE PRICE. Each Purchaser shall have
delivered to the Company by wire transfer of immediately available funds, full
payment of the purchase price for the Shares and Warrants as indicated below
each Purchaser's name on such Purchaser's signature page;
(e) RECEIPT OF SUBSCRIPTION AGREEMENT. Each Purchaser shall
have delivered to the Company a completed Subscription Agreement in the form
attached hereto as EXHIBIT B; (f) NO STATUTE OR RULE CHALLENGING TRANSACTION. No
statute, rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby which questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement; and
(g) OTHER DOCUMENTS. The Purchasers shall have delivered to
the Company such other documents relating to the transactions contemplated by
this Agreement as the Company or counsel may reasonably request.
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ARTICLE VI
REGISTRATION RIGHTS
6.1 REGISTRATION.
(a) As promptly as possible, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415.
(b) The Company shall use all commercially reasonable efforts
to cause the Registration Statement to be filed with the Commission by the
Filing Date, and declared effective on or before the Required Effectiveness
Date. The Company shall use all commercially reasonable efforts to keep the
Registration Statement continuously effective under the Securities Act from the
date such Registration Statement becomes effective until the later of (i) the
first anniversary of the Effective Date or such earlier date when all
Registrable Securities have been resold under such Registration Statement, and
(ii) the date on which all Registrable Securities may be resold without
restriction or limitation under the federal securities laws or may be sold
pursuant to paragraph (k) of Rule 144 (the "EFFECTIVENESS PERIOD").
(c) The Company shall notify each Purchaser in writing
promptly (and in any event within one Business Day) after receiving notification
from the Commission that the Registration Statement has been declared effective.
(d) On every monthly anniversary of any Event (as defined
below) until the applicable Event is cured, as partial relief for the damages
suffered therefrom by the Purchasers (which remedy shall not be exclusive of any
other remedies available under this Agreement, at law or in equity), the Company
shall pay to each Purchaser an amount in cash, as liquidated damages and not as
a penalty, equal to 1.5% of the aggregate purchase price paid by such Purchaser
hereunder for every month, prorated for any partial month. The payments to which
a Purchaser shall be entitled pursuant to this SECTION 6.1(D) are referred to
herein as "EVENT PAYMENTS". Any Event Payments payable pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to the
cure of an Event.
For such purposes, each of the following shall constitute an "EVENT":
(i) the Registration Statement is not declared effective
by the Required Effectiveness Date;
(ii) after the Effective Date, any Registrable
Securities covered by such Registration Statement are not listed on an
Eligible Market directly or indirectly due to an action or inaction of
the Company;
(iii) the Common Stock is not listed or quoted, or is
suspended from trading, on an Eligible Market for a period of ten
consecutive Trading Days; or
(iv) the Company fails to have available a sufficient
number of authorized but unissued and otherwise unreserved shares of
Common Stock available to issue Underlying Shares upon any exercise of
the Warrants.
(e) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement (other than a Registration Statement filed on a Form S-4 or S-8)
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities.
17
6.2 REGISTRATION PROCEDURES. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than three Business Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment, or not less
than one Business Day for any supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by reference), the
Company shall furnish to each Purchaser and any counsel designated by any
Purchaser (each, a "PURCHASER COUNSEL") copies of all such documents proposed to
be filed. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which Purchasers holding
a majority of the Registrable Securities shall reasonably object in writing.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten Business
Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and, at the request of any
Purchaser, as promptly as reasonably possible provide such Purchaser true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Purchasers thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) Notify the Purchasers of Registrable Securities to be sold
and each Purchaser Counsel as promptly as reasonably possible, and (if requested
by any such Person) confirm such notice in writing no later than one Business
Day thereafter, of any of the following events: (i) the initial filing of the
Registration Statement with the Commission; (ii) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (iii)
any Registration Statement or any post-effective amendment is declared
effective; (iv) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (v) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation of any Proceeding; or (vi) the
financial statements included in any Registration Statement become ineligible
for inclusion therein or any statement made in any Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(d) Use commercially reasonable efforts to avoid the issuance
of or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of any Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as possible.
(e) Promptly deliver to each Purchaser and Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
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(f) (i) In the time and manner required by each Trading
Market, prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; and (iii) maintain the
listing of such Registrable Securities on each such Trading Market.
(g) Use commercially reasonable efforts to register or qualify
or cooperate with the selling Purchasers and respective Purchaser Counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions within the United
States as any Purchaser reasonably requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; PROVIDED, HOWEVER, that the
Company shall not be required to qualify to do business or consent to service of
process in any jurisdiction in which it is not now so qualified or has not so
consented.
(h) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by law, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Purchasers may request.
(i) Upon the occurrence of any event described in SECTION
6.2(C)(VI), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(j) Cooperate with any due diligence investigation undertaken
by the Purchasers in connection with the sale of Registrable Securities,
including, without limitation, by making available any documents and
information; provided that the Company will not deliver or make available to any
Purchaser material, nonpublic information unless such Purchaser specifically
requests in advance to receive material, nonpublic information in writing.
(k) Comply with all applicable rules and regulations of the
Commission.
6.3 REGISTRATION EXPENSES. The Company shall pay (or reimburse the
Purchasers for) all actual and reasonable fees and expenses incident to the
performance of or compliance with this Agreement by the Company, including
without limitation (a) all registration and filing fees and expenses, including
without limitation those related to filings with the Commission, any Trading
Market and in connection with applicable state securities or blue sky laws, (b)
printing expenses (including without limitation expenses of printing
certificates for Registrable Securities and of printing prospectuses requested
by the Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 INDEMNIFICATION.
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(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, the officers, directors, partners and members and each Person
who controls any such Purchaser (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the fullest extent
permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in SECTION 6.2(c)(iv)-(vi), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in SECTION 6.5. The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY PURCHASERS. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act) to the fullest extent
permitted by applicable law, from and against all Losses (as determined by a
court of competent jurisdiction in a final judgment not subject to appeal or
review) arising primarily out of any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising primarily out
of any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that (i) such untrue
statements or omissions are based solely upon information regarding such
Purchaser furnished in writing to the Company by such Purchaser expressly for
use in such Registration Statement or such Prospectus, or to the extent that
such information relates to such Purchaser or such Purchaser's proposed method
of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (ii) in the case of an occurrence of an event of the type
specified in SECTION 6.2(c)(iv)-(vi), the use by such Purchaser of an outdated
or defective Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Purchaser of the Advice contemplated in SECTION 6.5. In no event shall the
liability of any selling Purchaser hereunder be greater in amount than the
dollar amount of the net proceeds received by such Purchaser upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, 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 Indemnifying Party.
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An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised in writing by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party). The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld or delayed. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding. Each Indemnified Party shall furnish such
information regarding itself or the claim that is the subject matter of such
Proceeding in question as an Indemnifying Party may reasonably request in
writing and as shall be reasonably required in connection with the investigation
and defense of such claim.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under SECTION
6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in SECTION 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this SECTION 6.4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this SECTION 6.4(d), no Purchaser
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that such Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The obligations of the
Purchasers under this SECTION 6.4(D) shall be several and not joint.
21
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.5 DISPOSITIONS. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement and, upon written request of the Company, will represent to the
Company that it has so complied. Each Purchaser further agrees that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in SECTIONS 6.2(c)(iv), (v) or (vi), such Purchaser will discontinue
disposition of such Registrable Securities under the Registration Statement
until such Purchaser's receipt of the copies of the supplemented Prospectus
and/or amended Registration Statement contemplated by SECTION 6.2(j), or until
it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
6.6 [Intentionally Omitted].
6.7 PIGGY-BACK REGISTRATIONS. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a Registration Statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
Registration Statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 TERMINATION. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 FEES AND EXPENSES. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of the Securities.
7.3 ENTIRE AGREEMENT. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
22
7.4 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile or email prior to 5:00
p.m. on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile or
email on a day that is not a Business Day or later than 5:00 p.m. on any
Business Day, (c) the Business Day following the date of deposit with a
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses and
facsimile numbers and email addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by any such Person.
7.5 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed by the Company and the holders
of a majority of the Shares. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
7.6 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers."
7.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of SECTION 4.7 and each Indemnified Party is an intended third party
beneficiary of SECTION 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE STATE OF CALIFORNIA FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE
COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
23
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
7.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.11 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.12 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.14 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to the Warrants, or any
Purchaser enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company by a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
7.15 ADJUSTMENTS IN SHARE NUMBERS AND PRICES. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
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7.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
UWINK, INC.
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: CEO
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
Signature Page to Securities Purchase Agreement
PURCHASER NAME:
-----------------------------------------------
By:
-------------------------------------------
Name:
-------------------------------------------
Title:
-------------------------------------------
Number of Shares:
Warrant: To purchase Underlying Shares
Total Value of Investment: $
With a copy to (Purchaser Counsel):
Full Address:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Facsimile #:
Telephone #:
Email address:
Attn:
Signature Page to Securities Purchase Agreement
EXHIBITS:
---------
A Form of Warrant
B Form of Subscription Agreement
SCHEDULES
References to schedule numbers below refer to the corresponding section numbers
in the Securities Purchase Agreement.
SCHEDULE 3.1(f)
Common Stock, $0.001 par value per share: 50,000,000 shares authorized;
18,958,001 shares issued and outstanding as of August 11, 2006.
Preferred Stock: 5,000,000 shares authorized; 0 shares issued and outstanding.
Options to purchase shares of Common Stock: Options outstanding to purchase
3,039,732 shares of Common Stock.
Warrants to purchase shares of Common Stock: Warrants outstanding to purchase
5,265,788 shares of Common Stock.
Debt Convertible into shares of Common Stock:
Convertible Note payable to Xx. Xxxxxxx Xxxxxx, a member of the Company's board
of directors. This note (the "2006 Xxxxxx Note") is due October 19, 2006,
accrues interest at 10%, and is convertible, at the option of Xx. Xxxxxx, into
the same securities issued by the Company in (and on the same terms and
conditions pari passu with the investors in) any offering of its securities that
results in gross proceeds to the Company of at least $3,000,000. Upon
conversion, Xx.Xxxxxx will receive as a conversion bonus additional securities
equal to 20% of the aggregate principal value plus accrued interest converted.
The 2006 Xxxxxx Note is mandatorily repayable immediately following the
consummation of any offering of securities that results in gross proceeds to the
Company of at least $3,000,000. Upon such repayment, or upon repayment at
maturity, Xx. Xxxxxx will receive warrants to purchase 100,000 shares of common
stock of the Company at an exercise price of $0.345.
$100,000 10% Note dated September 8, 2005 issued to Xxxxxxx Xxxxx due September
8, 2007. The principal and accrued and unpaid interest amount of this Note will
be subject to mandatory conversion into the same securities issued pursuant to
(and on the same terms and conditions pari passu with the investors in) any
offering of securities ("Follow-On Securities") by the Company resulting in
gross proceeds to the Company of at least $3,000,000 ("Follow-On Offering").
Contemporaneous with the consummation of the Follow-On Offering, the entire then
outstanding principal amount and accrued and unpaid interest of this Note shall
be automatically converted (the "Conversion") into Follow-On Securities. The pro
rata percentage of Follow-On Securities which shall be issued by the Company to
the holder upon the Conversion shall be equal to: the sum of (1) the original
principal amount plus the then current accrued and unpaid interest, plus (2)
twenty percent (20%) of such total amount (such sum, the "Conversion Amount"),
divided by (1) the total dollar amount received by the Company pursuant to the
Follow-On Offering, plus (2) the Conversion Amount. The Follow-On Securities
issued to the Holder upon the Conversion shall be of the same type and class,
and shall contain the identical rights and restrictions, as the securities
issued by the Company in the Follow-On Offering.
SCHEDULE 3.1(k)
$81,844 12% Note dated July 23, 2001, together with accrued interest of $81,596
at June 30, 2006, issued to Xxx Xxxxxxxx, a former employee, due February 15,
2007, secured by inventory and receivables.
$100,000 10% Note dated September 8, 2005 issued to Xxxxxxx Xxxxx due September
8, 2007 is secured by the assets of the Company, other than any assets of the
Company that secure any debt of the Company outstanding on the date the note.
