SECURITIES PURCHASE AGREEMENT
This
SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of March __,
2019, is entered into by and among Bridgeline Digital, Inc., a
Delaware corporation, with headquarters located at 000 Xxxxxx
Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx 00000 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (individually, a
“Buyer “and
collectively, the “Buyers”).
RECITALS
A. The
Company and each Buyer is executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as
amended (the “1933
Act”), and Rule 506(b) of Regulation D
(“Regulation D”)
as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the 1933
Act.
B. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate
number of shares of the Company’s Series C Convertible
Preferred Stock, par value $0.001 per share (the
“Preferred
Stock”), having the rights, preferences and privileges
as set forth on Exhibit
A attached hereto (the “COD”), set forth opposite such
Buyer’s name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers together shall be [____________]
shares of Preferred Stock and shall collectively be referred to
herein as the “Preferred
Shares”), which Preferred Shares shall be convertible
into that number of shares of the Company’s common stock, par
value $0.001 per share (the “Common Stock”) in accordance with
its terms and conditions (as converted, collectively, the
“Conversion
Shares”); (ii) warrants, in substantially the form
attached hereto as Exhibit
B (the “Series A
Warrants”), representing the right to acquire
initially that number of shares of Common Stock set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (as
exercised, collectively, the “Series A Warrant Shares”), (iii)
warrants, in substantially the form attached hereto as Exhibit C (the "Series B Warrants") representing the
right to acquire initially that number of shares of Common Stock
set forth opposite such Buyer’s name in column (5) on the
Schedule of Buyers (as exercised, collectively, the
“Series B Warrant
Shares”), and (iv) warrants, in substantially the form
attached hereto as Exhibit
D (the "Series C
Warrants" and collectively with the Series A Warrants and
the Series B Warrants, the "Warrants") representing the right to
acquire initially that number of shares of Common Stock set forth
opposite such Buyer’s name in column (6) on the Schedule of
Buyers (as exercised, collectively, the “Series C Warrant Shares” and
collectively with the Series A Warrant Shares and the Series B
Warrant Shares, the “Warrant
Shares”).
C.
Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in substantially the form attached
hereto as Exhibit E
(the “Registration Rights
Agreement”), pursuant to which the Company has agreed
to provide certain registration rights with respect to the
Registrable Securities (as defined in the Registration Rights
Agreement) under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities
laws.
D. The
Preferred Shares, the Warrants and the Warrant Shares collectively
are referred to herein as the “Securities.”
NOW, THEREFORE, the Company and each
Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF PREFERRED SHARES AND WARRANTS.
(a)
Purchase of Preferred
Shares and Warrants. Subject to the satisfaction (or waiver)
of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but
not jointly, agrees to purchase from the Company on the Closing
Date (as defined below), the number of Preferred Shares as is set
forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers, along with (x) Series A Warrants to acquire up
to that number of Series A Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers,
(y) Series B Warrants to acquire up to that number of Series B
Warrant Shares as is set forth opposite such Buyer’s name in
column (5) on the Schedule of Buyers, and (z) Series C Warrants to
acquire up to that number of Series C Warrant Shares as is set
forth opposite such Buyer’s name in column (6) on the
Schedule of Buyers (the “Closing”).
-1-
(b)
Closing. The date
and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York City time, on the date hereof (or such other date
and time as is mutually agreed to by the Company and each Buyer)
after notification of satisfaction (or waiver) of the conditions to
the Closing set forth in Sections 6 and 7 below, at the offices of
Gracin & Xxxxxx, LLP, The Chrysler Building, 000 Xxxxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000. The Closing may also be undertaken remotely by
electronic transfer of Closing documentation.
(c)
Purchase Price. The
purchase price for the Preferred Shares and the related Warrants to
be purchased by each Buyer at the Closing shall be the amount set
forth opposite such Buyer’s name in column (7) of the
Schedule of Buyers (the “Purchase Price”), which shall be
equal to the amount of $1,000 per Preferred Share and related
Warrants.
(d)
Form of Payment. On
the Closing Date, (i) each Buyer shall pay its respective Purchase
Price (less, in the case of Empery Asset Master, Ltd. (the
“Lead
Investor”), any amounts withheld pursuant to Section
4(g)) to the Company for the Preferred Shares and the Warrants to
be issued and sold to such Buyer at the Closing by wire transfer of
immediately available funds in accordance with the Company’s
written wire instructions, after deducting certain fees and
expenses due to the Buyers and the Placement Agent; and (ii) the
Company shall deliver to each Buyer (w) one or more stock
certificates, evidencing the number of Preferred Shares such Buyer
is purchasing as is set forth opposite such Buyer’s name in
column (3) of the Schedule of Buyers, (x) a Series A Warrant
pursuant to which such Buyer shall have the right to acquire such
number of Series A Warrant Shares as is set forth opposite such
Buyer’s name in column (4) of the Schedule of Buyers, (y) a
Series B Warrant pursuant to which such Buyer shall have the right
to acquire such number of Series B Warrant Shares as is set forth
opposite such Buyer’s name in column (5) of the Schedule of
Buyers, and (z) a Series C Warrant pursuant to which such Buyer
shall have the right to acquire such number of Series C Warrant
Shares as is set forth opposite such Buyer’s name in column
(6) of the Schedule of Buyers, in each case duly executed on behalf
of the Company and registered in the name of such Buyer or its
designee.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES. Each Buyer, severally and
not jointly, represents and warrants with respect to only itself to
the Company that:
(a)
No Public Sale or
Distribution. Such Buyer is (i) acquiring the Preferred
Shares and the Warrants and (ii) upon exercise of the Warrants
(other than pursuant to a Cashless Exercise (as defined in the
Warrants)) will acquire the Warrant Shares issuable upon exercise
of the Warrants, for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the
1933 Act; provided,
however, that by
making the representations herein, such Buyer does not agree to
hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an
exemption under the 1933 Act. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such
Buyer does not presently have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the
Securities. As used herein, “Person “means an individual, a
limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other
entity and any governmental entity or any department or agency
thereof.
(b)
Accredited Investor
Status. Such Buyer is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation
D.
(c)
Reliance on
Exemptions. Such Buyer 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 Buyer’s compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such
Buyer to acquire the Securities.
-2-
(d)
Information. Such
Buyer 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 Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations
and warranties contained herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such
Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.
(e)
No Governmental
Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the
merits of the offering of the Securities.
(f)
Transfer or Resale.
Such Buyer understands that except as provided in the Registration
Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor
rule thereto) (collectively, “Rule 144”); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in
which the seller (or the Person through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of
any exemption thereunder. Notwithstanding the foregoing, the
Securities may be pledged in connection with a bona fide margin
account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be
a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide
the Company with any notice thereof or otherwise make any delivery
to the Company pursuant to this Agreement or any other Transaction
Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
(g)
Legends. Such Buyer
understands that the certificates or other instruments representing
the Preferred Shares and the Warrants and, until such time as the
resale of the Preferred Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Warrant
Shares, except as set forth below, shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may
be placed against transfer of such stock
certificates):
[NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE]
[CONVERTIBLE] HAVE BEEN] [THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE HOLDER, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.]
-3-
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities
upon which it is stamped or issue to such holder by electronic
delivery at the applicable balance account at The Depository Trust
Company (“DTC”),
if (i) such Securities are registered for resale under the 1933
Act, (ii) in connection with a sale, assignment or other transfer,
such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that such sale, assignment
or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) the
Securities can be sold, assigned or transferred pursuant to Rule
144 or Rule 144A. The Company shall be responsible for the fees of
its transfer agent and all DTC fees associated with such issuance.
If the Company shall fail for any reason or for no reason to issue
to the holder of the Securities within two (2) Trading Days (as
defined in the Warrants) after the occurrence of any of (i) through
(iii) above (the initial date of such occurrence, the
“Legend Removal
Date”), a certificate without such legend to such
holder or to issue such Securities to such holder by electronic
delivery at the applicable balance account at DTC, and if on or
after such Trading Day the holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by the holder of such Securities that the holder
anticipated receiving without legend from the Company (a
“Buy-In”), then
the Company shall, within two (2) Trading Days after the
holder’s request and in the holder’s discretion, either
(i) pay cash to the holder in an amount equal to the holder’s
total purchase price (including brokerage commissions, if any) for
the Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such unlegended Securities
shall terminate, or (ii) promptly honor its obligation to deliver
to the holder such unlegended Securities as provided above and pay
cash to the holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) any trading price of the Common Stock
selected by the Holder in writing as in effect at any time during
the period beginning on the applicable Legend Removal Date and the
date the Company makes the applicable cash payment. In
addition to such Buyer’s other available remedies, the
Company shall pay to a Buyer, in cash, (i) as partial liquidated
damages and not as a penalty, for each $1,000 of Preferred Shares
or Warrant Shares (based on the VWAP of the Common Stock on the
date such Preferred Shares or Warrant Shares are submitted to the
transfer agent) delivered for removal of the restrictive legend and
subject to Section 2(g), $10 per Trading Day (increasing to $20 per
Trading Day five (5) Trading Days after such damages have begun to
accrue) for each Trading Day after the Legend Removal Date until
such certificate is delivered without a legend. The Company shall
be responsible for the fees of its transfer agent and all DTC fees
associated with such issuance. As used in this Section 2(g),
“VWAP” means, for any date, the price determined
by the first of the following clauses that applies: (a) if the
Common Stock is then listed or quoted on a Trading Market, the
daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which
the Common Stock is then listed or quoted as reported by Bloomberg
L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a
Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on OTCQB or
OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common
Stock are then reported in the “Pink Sheets” published
by OTC Markets Group, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent
bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company. As used in this
Section 2(g), “Trading
Market” means any of the
following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: the NYSE American,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
(h)
Validity;
Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and
delivered on behalf of such Buyer and shall constitute the legal,
valid and binding obligations of such Buyer enforceable against
such Buyer in accordance with their respective terms, except as
such enforceability may be limited by general principles of equity
or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’
rights and remedies.
-4-
(i)
No Conflicts. The
execution, delivery and performance by such Buyer of this Agreement
and the Registration Rights Agreement and the consummation by such
Buyer of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of such
Buyer or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such
Buyer, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of such Buyer to perform its
obligations hereunder.
(j)
Stockholder
Approval. Buyer
agrees and acknowledges that the Preferred Shares may not be
converted into Conversion Shares, and the Warrants cannot be
exercised for Warrant Shares unless and until such time as (i)
stockholders have approved an amendment to the Company’s
Certificate of Incorporation to increase the number of shares of
authorized Common Stock (or effect a reverse split of the Common
Stock) to permit the issuance of Conversion Shares and Warrant
Shares upon conversion of the Preferred Shares and exercise of the
Warrants, respectively (the “Authorized Share Approval”), and
(ii) the Company (A) obtains the approval of its stockholders, as
may be required by the applicable rules of the Nasdaq Stock Market
LLC (or any successor entity), for the issuances of Common Stock as
contemplated by the Transaction Documents, including, without
limitation, the issuance of all of the Conversion Shares and
Warrant Shares in accordance with Rule 5635(d) (the
“Stockholder
Approval”), or (B) obtains a waiver from the Nasdaq
Stock Market LLC (or any successor entity) of all applicable
listing rules requiring such Stockholder Approval. Buyer further
agrees and acknowledges that Buyer shall bear the economic risk of
loss associated with holding the Preferred Shares and Warrants
pending the satisfaction of the conditions set forth in this
Section 2(j).
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to each of the Buyers that, as of the date hereof and as
of the Closing Date:
(a)
Organization and
Qualification. Each of the Company and each of its
“Subsidiaries
“(which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns any of the capital
stock or holds an equity or similar interest) are entities duly
organized and validly existing and in good standing under the laws
of the jurisdiction in which they are formed, and have the
requisite power and authorization to own their properties and to
carry on their business as now being conducted and as presently
proposed to be conducted. Each of the Company and each of its
Subsidiaries is duly qualified as a foreign entity to do business
and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect. As used
in this Agreement, “Material
Adverse Effect “means any material adverse effect on
the business, properties, assets, liabilities, operations, results
of operations, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries, individually or taken as a whole,
or on the transactions contemplated hereby or on the other
Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform any of its
obligations under any of the Transaction Documents (as defined
below). The Company has no Subsidiaries except as set forth in
Schedule 3(a). The
outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company or another Subsidiary
free and clear of all liens, encumbrances and equities and claims;
and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in
the Subsidiaries are outstanding.
(b)
Authorization;
Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its
obligations under this Agreement, the COD, the Warrants, the
Registration Rights Agreement, the Lock-Up Agreements (as defined
in Section 7(x)), the Irrevocable Transfer Agent Instructions (as
defined in Section 5(b)), and each of the other agreements entered
into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the
“Transaction
Documents”) and to issue the Securities in accordance
with the terms hereof and thereof. The execution and delivery of
this Agreement and the other Transaction Documents by the Company
and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the
issuance of the Preferred Shares and the Warrants and the
reservation for issuance and the issuance of the Conversion Shares
issuable upon conversion of the Preferred Shares pursuant to the
terms of the COD and the Warrant Shares issuable upon exercise of
the Warrants have been duly authorized by the Company’s Board
of Directors and (other than the filing with the SEC of one or more
Registration Statements (as defined in the Registration Rights
Agreement) in accordance with the requirements of the Registration
Rights Agreement, a Form D with the SEC and any other filings as
may be required by any state securities agencies) no further
filing, consent or authorization is required by the Company, its
Board of Directors or its stockholders. This Agreement and the
other Transaction Documents have been duly executed and delivered
by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and
remedies.
-5-
(c)
Issuance of
Securities. The issuance of the Preferred Shares and the
Warrants are duly authorized and, upon issuance in accordance with
the terms of the Transaction Documents, the Preferred Shares and
the Warrants shall be validly issued and free from all preemptive
or similar rights (except for those which have been validly waived
prior to the date hereof), taxes, liens and charges and other
encumbrances with respect to the issue thereof and the Preferred
Shares shall be fully paid and nonassessable with the holders being
entitled to all rights accorded to a holder of Preferred Stock. As
of the Closing Date, a number of shares of Common Stock shall have
been duly authorized and reserved for issuance which equals at
least the sum of (i) the maximum number of
shares of Common Stock issuable upon conversion of the Preferred
Shares, (ii) the maximum number of shares of Common Stock issuable
upon exercise of the Series A Warrants, (iii) the maximum number of
shares of Common Stock issuable upon exercise of the Series B
Warrants and (iv) the maximum number of shares of Common Stock
issuable upon exercise of the Series C Warrants, in each case,
without giving effect to any limitation on exercise set forth
therein and, with respect to the Series A Warrants and Series B
Warrants, assuming that the Maximum Eligibility Number (as defined
in the Series C Warrant) is determined based on a Reset Price (as
defined in the Series C Warrants) equal to $0.08 (as adjusted for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events occurring after the date hereof). Upon conversion of
the Preferred Shares in accordance with the COD, the Conversion
Shares when issued will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the
issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Upon exercise of the Warrants
in accordance with the Warrants, the Warrant Shares when issued
will be validly issued, fully paid and nonassessable and free from
all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock.
Assuming the accuracy of each of the representations and warranties
set forth in Section 2 of this Agreement, the offer and issuance by
the Company of the Securities is exempt from registration under the
1933 Act.
(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 (including, without limitation, the
issuance of the Preferred Shares and the Warrants and reservation
for issuance and issuance of the Warrant Shares) will not (i)
result in a violation of the Certificate of Incorporation (as
defined below) or Bylaws (as defined below) or other organizational
documents of the Company or any of its Subsidiaries, any capital
stock of the Company or any of its Subsidiaries or the articles of
association or bylaws of the Company or any of its Subsidiaries or
(ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) in any
respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including foreign,
federal and state securities laws and regulations and the rules and
regulations of the NASDAQ Capital Market (the “Principal Market”) and including
all applicable foreign, federal, state laws, rules and regulations)
applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is
bound or affected.
(e)
Consents. The
Company is not required to obtain any consent from, authorization
or order of, or make any filing or registration with (other than
the filing with the SEC of one or more Registration Statements in
accordance with the requirements of the Registration Rights
Agreement, a Form D with the SEC, a Notification of Additional
Listing of Securities with Nasdaq and any other filings as may be
required by any state securities agencies), any court, governmental
agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in
each case, in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing
Date (or in the case of filings detailed above, will be made timely
after the Closing Date), and the Company is unaware of any facts or
circumstances which might prevent the Company from obtaining or
effecting any of the registration, application or filings
contemplated by the Transaction Documents. Except as set forth on
Schedule 3.1(e),
the Company is not in violation of the listing requirements of the
Principal Market and has no knowledge of any facts or circumstances
which would reasonably lead to delisting or suspension of the
Common Stock in the foreseeable future. The issuance by the Company
of the Securities shall not have the effect of delisting or
suspending the Common Stock from the Principal Market.
-6-
(f)
Acknowledgment Regarding
Buyer’s Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby and that no Buyer is (i) an officer or director of the
Company or any of its Subsidiaries, (ii) an “affiliate”
of the Company or any of its Subsidiaries (as defined in Rule 144)
or (iii) to the knowledge of the Company, a “beneficial
owner” of more than 10% of the Common Stock (as defined for
purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the “1934
Act”)). The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company or any
of its Subsidiaries (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer’s purchase of the Securities.
The Company further represents to each Buyer that the
Company’s decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company
and its representatives.
(g)
No General Solicitation;
Placement Agent’s Fees. Neither the Company, nor any
of its Subsidiaries or affiliates, nor any Person acting on its or
their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities. The Company
shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by any Buyer or its investment advisor)
relating to or arising out of the transactions contemplated hereby,
including, without limitation, placement agent fees payable to
ThinkEquity, a Division of Fordham Financial Management Inc. and
Taglich Brothers Inc.(the “Placement Agents”) in connection
with the sale of the Securities. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney’s fees
and out-of-pocket expenses) arising in connection with any such
claim. The Company acknowledges that it has engaged the Placement
Agents in connection with the sale of the Securities. Other than
the Placement Agents, neither the Company nor any of its
Subsidiaries has engaged any placement agent or other agent in
connection with the offer or sale of the Securities.
(h)
No Integrated
Offering. None of the Company, its Subsidiaries or any of
their affiliates, nor any Person acting on their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the issuance of any of the Securities
under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to
require approval of stockholders of the Company for purposes of the
1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the
securities of the Company are listed or designated for quotation.
None of the Company, its Subsidiaries, their affiliates nor any
Person acting on their behalf will take any action or steps that
would require registration of the issuance of any of the Securities
under the 1933 Act or cause the offering of any of the Securities
to be integrated with other offerings for purposes of any such
applicable stockholder approval provisions.
(i)
Application of Takeover
Protections; Rights Agreement. The Company and its Board of
Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including, without
limitation, any distribution under a rights agreement) or other
similar anti-takeover provision under the Articles of
Incorporation, Bylaws or other organizational documents or the laws
of the jurisdiction of its formation which is or could become
applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and any Buyer’s
ownership of the Securities. The Company and its Board of Directors
have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock
or a change in control of the Company or any of its
Subsidiaries.
-7-
(j)
SEC Documents; Financial
Statements. Except as disclosed in Schedule 3(j) , during the two
(2) years prior to the date hereof, the Company has timely filed
all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to
the date hereof or prior to the Closing Date, and all exhibits
included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). The Company has
delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on
the XXXXX system. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements
of the 1934 Act applicable to the Company and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. As of their respective filing dates, the financial
statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared
in accordance with U.S. generally accepted accounting principles
(“GAAP”),
consistently applied during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the
financial position of the Company and its Subsidiaries as of the
dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which will not be
material, either individually or in the aggregate). No other
information provided by or on behalf of the Company to any of the
Buyers which is not included in the SEC Documents (including,
without limitation, information referred to in Section 2(d) of this
Agreement or in the disclosure schedules to this Agreement)
contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or
were made, not misleading.
(k)
Absence of Certain
Changes. Except as disclosed in Schedule 3(k)(i), since
September 30, 2018, there has been no material adverse change and
no material adverse development in the business, assets,
liabilities, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Company or
any of its Subsidiaries. Except as disclosed in Schedule 3(k)(ii), since
September 30, 2018, neither the Company nor any of its Subsidiaries
has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of
the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $100,000. Neither
the Company nor any of its Subsidiaries has taken any steps to seek
protection pursuant to any law or statute relating to bankruptcy,
insolvency, reorganization, receivership, liquidation or winding
up, nor does the Company or any Subsidiary have any knowledge or
reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge
of any fact which would reasonably lead a creditor to do so. The
Company and its Subsidiaries, individually and on a consolidated
basis, are not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the Closing, will
not be Insolvent (as defined below). For purposes of this Section
3(k), “Insolvent” means, with respect to
any Person, (i) the present fair saleable value of such
Person’s assets is less than the amount required to pay such
Person’s total Indebtedness (as defined in Section 3(r)),
(ii) such Person is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends
to incur or believes that it will incur debts that would be beyond
its ability to pay as such debts mature or (iv) such Person has
unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is
proposed to be conducted.
(l)
No Undisclosed Events,
Liabilities, Developments or Circumstances. Except as set
forth on Schedule
3(l), no event, liability, development or circumstance has
occurred or exists, or is contemplated to occur with respect to the
Company, its Subsidiaries or their respective business, properties,
prospects, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities
laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced.
-8-
(m)
Conduct of Business;
Regulatory Permits. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any certificate of designations,
preferences or rights of any other outstanding series of preferred
stock of the Company or any of its Subsidiaries or Bylaws or their
organizational charter, certificate of formation or certificate of
incorporation or bylaws, respectively. Neither the Company nor any
of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to
the Company or any of its Subsidiaries, and neither the Company nor
any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except in all cases for possible violations
which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company and each of
its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate foreign, federal or state
regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor
any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate,
authorization or permit. Without limiting the generality of the
foregoing, the Company is not in violation of any of the rules,
regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that would reasonably lead
to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. During the two (2) years prior to
the date hereof, (i) the Common Stock have been listed or
designated for quotation on the Principal Market, (ii) trading in
the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written
or oral, from the SEC or the Principal Market regarding the
suspension or delisting of the Common Stock from the Principal
Market.
(n)
Foreign Corrupt
Practices. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company or any of
its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(o)
Xxxxxxxx-Xxxxx Act.
The Company is in compliance with any and all applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, that
are effective as of the date hereof, and any and all applicable
rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.
(p)
Transactions With
Affiliates. Except as set forth in Schedule 3(p), none of the
officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or 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 such officer, director or employee or, to the knowledge of
the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer,
director, or employee has a substantial interest or is an employee,
officer, director, trustee or partner.
-9-
(q)
Equity
Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of
Common Stock, of which as of the date hereof, 16,241,259 are issued
and outstanding, 662,902 shares are reserved for issuance pursuant
to the Company’s stock option and purchase plans and
11,443,073 shares are reserved for issuance pursuant to securities
(other than the aforementioned options and Warrants) exercisable or
exchangeable for, or convertible into, Common Stock; and (ii)
1,000,000 shares of preferred stock, par value $0.001 per share, of
which 264,000 shares are designated as Series A convertible
preferred stock, of which 262,310 are currently issued and
outstanding, 5,000 shares are designated as Series B convertible
preferred stock, none which are currently issued and outstanding,
and 11,000 shares are designated as Series C convertible preferred
stock, none of which are currently issued and outstanding. No
Common Stock are held in treasury. All of such outstanding shares
are duly authorized and have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. 1,059,173
shares of the Company’s issued and outstanding Common Stock
on the date hereof are as of the date hereof owned by Persons who
are “affiliates” (as defined in Rule 405 of the 0000
Xxx) of the Company or any of its Subsidiaries. (i) Except as
disclosed in Schedule
3(q)(i), hereto, none of the Company’s or any
Subsidiary’s capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by the Company or any Subsidiary; (ii) except as
disclosed in Schedule
3(q)(ii), there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital
stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital
stock of the Company or any of its Subsidiaries; (iii) except as
disclosed in Schedule
3(q)(iii), there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents
or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is
or may become bound; (iv) except as disclosed in Schedule 3(q)(iv), there are no
financing statements securing obligations in any amounts filed in
connection with the Company or any of its Subsidiaries; (v), except
as disclosed in Schedule
3(q)(v), there are no agreements or arrangements (other than
pursuant to the Registration Rights Agreement) under which the
Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act; (vi) except as
disclosed in Schedule
3(q)(vi), there are no outstanding securities or instruments
of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vii) except as
disclosed in Schedule
3(q)(vii) , there are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) except as
disclosed in Schedule
3(q)(viii), neither the Company nor any Subsidiary has any
stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) neither the
Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are
not so disclosed in the SEC Documents, other than those incurred in
the ordinary course of the Company’s or its
Subsidiaries’ respective businesses and which, individually
or in the aggregate, do not or could not have a Material Adverse
Effect. True, correct and complete copies of the Company’s
certificate of incorporation, as amended and as in effect on the
date hereof (the “Certificate
of Incorporation”), and the Company’s bylaws, as
amended and as in effect on the date hereof (the
“Bylaws”), and
the terms of all securities convertible into, or exercisable or
exchangeable for, Common Stock and the material rights of the
holders thereof in respect thereto have heretofore been filed as
part of the SEC Documents.
-10-
(r)
Indebtedness and Other
Contracts. Neither the Company nor any of its Subsidiaries,
(i) except as disclosed in Schedule 3(r)(i), has any
outstanding Indebtedness (as defined below), (ii) except as
disclosed in Schedule
3(r)(ii), is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument would
reasonably be expected to result in a Material Adverse Effect,
(iii) except as disclosed in Schedule 3(r)(iii), is in
violation of any term of, or in default under, any contract,
agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in
the aggregate, in a Material Adverse Effect, or (iv) except as
disclosed in Schedule
3(r)(iv), is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company’s officers, has or is expected
to have a Material Adverse Effect. Schedule 3(r) provides a
detailed description of the material terms of such outstanding
Indebtedness. For purposes of this Agreement: (x)
“Indebtedness”
of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with
GAAP, consistently applied during the periods involved) (other than
trade payables entered into in the ordinary course of business
consistent with past practice), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property,
assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or
sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, claim, lien, tax, right of first refusal,
pledge, charge, security interest or other encumbrance upon or in
any property or assets (including accounts and contract rights)
owned by any Person, even though the Person which owns such assets
or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; and (y) “Contingent Obligation “means, as
to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, capital
lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect
thereto.
(s)
Absence of
Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, 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, the Common Stock
or any of the Company’s Subsidiaries or any of the
Company’s or its Subsidiaries’ officers or directors,
whether of a civil or criminal nature or otherwise, in their
capacities as such, except as set forth in Schedule 3(s). The matters set
forth in Schedule
3(s) would not reasonably be expected to have a Material
Adverse Effect.
(t)
Insurance. The
Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such Subsidiary has any
reason to believe that it will be unable to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material
Adverse Effect.
-11-
(u)
Employee Relations.
Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a union.
The Company believes that its and its Subsidiaries’ relations
with their respective employees are good. No executive officer (as
defined in Rule 501(f) promulgated under the 0000 Xxx) or other key
employee of the Company or any of its Subsidiaries has notified the
Company or any such Subsidiary that such officer intends to leave
the Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary.
No executive officer or other key employee of the Company or any of
its Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject
the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse
Effect.
(v)
Title. The Company
and its Subsidiaries have good and marketable title in fee simple
to all real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as do not materially
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and
any of its Subsidiaries. Any real property and facilities held
under lease by the Company or any of its Subsidiaries are held by
them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the
Company or any of its Subsidiaries.
(w)
Intellectual Property
Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, original works of authorship,
inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights and all applications
and registrations therefor (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted
and as presently proposed to be conducted. Each of patents owned by
the Company or any of its Subsidiaries is listed on Schedule 3(w)(i). Except as set
forth in Schedule
3(w)(ii), none of the Company’s or its
Subsidiaries’ Intellectual Property Rights have expired,
terminated or been abandoned, or are expected to expire, terminate
or be abandoned, within three years from the date of this
Agreement. The Company has no knowledge of any infringement by the
Company or any of its Subsidiaries of Intellectual Property Rights
of others. There is no claim, action or proceeding being made or
brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its
Subsidiaries regarding their Intellectual Property Rights. The
Company is not aware of any facts or circumstances which might give
rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property
Rights.
(x)
Environmental Laws.
The Company and its Subsidiaries (A) are in compliance with all
Environmental Laws (as defined below), (B) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (C) are in compliance with all terms and conditions
of any such permit, license or approval where, in each of the
foregoing clauses (A), (B) and (C), the failure to so comply could
be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved
thereunder.
-12-
(y)
Subsidiary Rights.
The Company or one of its Subsidiaries has the unrestricted right
to vote, and (subject to limitations imposed by applicable law) to
receive dividends and distributions on, all capital securities of
its Subsidiaries as owned by the Company or such
Subsidiary.
(z)
Tax Status. The
Company and each of its Subsidiaries (i) has timely made or filed
all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it
is subject, (ii) has timely paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company and its Subsidiaries
know of no basis for any such claim.
(aa)
Internal Accounting and
Disclosure Controls. The Company and each of its
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, consistently applied during the periods
involved and applicable law, and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities
is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and
liabilities at reasonable intervals and appropriate action is taken
with respect to any difference. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15
under the 0000 Xxx) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls
and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits
under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive
officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding
required disclosure. Except as set forth in Schedule 3(aa), during the
twelve months prior to the date hereof neither the Company nor any
of its Subsidiaries has received any notice or correspondence from
any accountant relating to any material weakness in any part of the
system of internal accounting controls of the Company or any of its
Subsidiaries.
(bb)
Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required
to be disclosed by the Company in its 1934 Act filings and is not
so disclosed or that otherwise would be reasonably likely to have a
Material Adverse Effect.
(cc)
Investment Company
Status. Neither the Company nor any of its Subsidiaries is,
and upon consummation of the sale of the Securities, and for so
long as any Buyer holds any Securities, will not be, an
“investment company,” an affiliate of an
“investment company,” a company controlled by an
“investment company” or an “affiliated
person” of, or “promoter” or “principal
underwriter” for, an “investment company” as such
terms are defined in the Investment Company Act of 1940, as
amended.
(dd)
Acknowledgement Regarding
Buyers’ Trading Activity. The Company acknowledges and
agrees that (i) none of the Buyers has been asked to agree, nor has
any Buyer agreed, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) any Buyer, and
counter-parties in “derivative” transactions to which
any such Buyer is a party, directly or indirectly, presently may
have a “short” position in the Common Stock and (iii)
each Buyer shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that one or more Buyers may engage in
hedging and/or trading activities at various times during the
period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Warrant Shares
are being determined and (b) such hedging and/or trading
activities, if any, can reduce the value of the existing
stockholders’ equity interest in the Company both at and
after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned
hedging and/or trading activities do not constitute a breach of
this Agreement, the Warrants or any of the documents executed in
connection herewith.
-13-
(ee)
Manipulation of
Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) other than the Placement
Agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than
the Placement Agent, paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(ff)
U.S. Real Property Holding
Corporation. Neither the Company nor any of its Subsidiaries
is, or has ever been, and so long as any of the Securities are held
by any of the Buyers, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company and each
Subsidiary shall so certify upon any Buyer’s
request.
(gg)
Eligibility for
Registration. The Company is eligible to register the
Conversion Shares and the Warrant Shares for resale by the Buyers
using Form S-1 promulgated under the 1933 Act.
(hh)
Transfer Taxes. On
the Closing Date, all stock transfer or other taxes (other than
income or similar taxes) which are required to be paid in
connection with the issuance, sale and transfer of the Securities
to be sold to each Buyer hereunder will be, or will have been,
fully paid or provided for by the Company, and all laws imposing
such taxes will be or will have been complied with.
(ii)
Bank Holding Company
Act. Neither the Company nor any of its Subsidiaries or
affiliates is subject to the Bank Holding Company Act of 1956, as
amended (the “BHCA”) and to regulation by the
Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent (25%) or more
of the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(jj)
Shell Company
Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i)(1) of the 1933
Act.
(kk)
Compliance with Anti-Money
Laundering Laws. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial recordkeeping and reporting requirements
and all other applicable U.S. and non-U.S. anti-money laundering
laws, rules and regulations, including, but not limited to, those
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the United States Bank Secrecy Act, as amended by the USA
PATRIOT Act of 2001, and the United States Money Laundering Control
Act of 1986 (18 U.S.C. §§1956 and 1957), as amended, as
well as the implementing rules and regulations promulgated
thereunder, and the applicable money laundering statutes of all
applicable jurisdictions, the rules and regulations thereunder and
any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency or
self-regulatory body (collectively, the “Anti-Money Laundering Laws”), and
no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any of its Subsidiaries with respect to the
Anti-Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.
-14-
(ll)
No Conflicts with
Sanctions Laws. Neither the Company nor any of its
Subsidiaries, nor any director, officer, employee, agent, affiliate
or other person associated with or acting on behalf of the Company
or any of its Subsidiaries or affiliates is, or is directly or
indirectly owned or controlled by, a Person that is currently the
subject or the target of any sanctions administered or enforced by
the U.S. government (including, without limitation, the Office of
Foreign Assets Control of the U.S. Department of the Treasury
(“OFAC”) or the
U.S. Departments of State or Commerce and including, without
limitation, the designation as a “Specially Designated
National” or on the “Sectoral Sanctions Identifications
List”, collectively “Blocked Persons”), the
United Nations Security Council (“UNSC”), the European Union, Her
Majesty’s Treasury (“HMT”) or any other relevant
sanctions authority (collectively, “Sanctions Laws”); neither the
Company, any of its Subsidiaries, nor any director, officer,
employee, agent, affiliate or other person associated with or
acting on behalf of the Company or any of its Subsidiaries or
affiliates, is located, organized or resident in a country or
territory that is the subject or target of a comprehensive embargo
or Sanctions Laws prohibiting trade with the country or territory,
including, without limitation, Crimea, Cuba, Iran, North Korea,
Sudan and Syria (each, a “Sanctioned Country”); the Company
maintains in effect and enforces policies and procedures designed
to ensure compliance by the Company and its Subsidiaries with
applicable Sanctions Laws; neither the Company, any of its
Subsidiaries, nor any director, officer, employee, agent, affiliate
or other person associated with or acting on behalf of the Company
or any of its Subsidiaries or affiliates, acting in any capacity in
connection with the operations of the Company, conducts any
business with or for the benefit of any Blocked Person or engages
in making or receiving any contribution of funds, goods or services
to, from or for the benefit of any Blocked Person, or deals in, or
otherwise engages in any transaction relating to, any property or
interests in property blocked or subject to blocking pursuant to
any applicable Sanctions Laws; no action of the Company or any of
its Subsidiaries in connection with (i) the execution, delivery and
performance of this Agreement and the other Transaction Documents,
(ii) the issuance and sale of the Securities, or (iii) the direct
or indirect use of proceeds from the Securities or the consummation
of any other transaction contemplated hereby or by the other
Transaction Documents or the fulfillment of the terms hereof or
thereof, will result in the proceeds of the transactions
contemplated hereby and by the other Transaction Documents being
used, or loaned, contributed or otherwise made available, directly
or indirectly, to any Subsidiary, joint venture partner or other
person or entity, for the purpose of (i) unlawfully funding or
facilitating any activities of or business with any person that, at
the time of such funding or facilitation, is the subject or target
of Sanctions Laws, (ii) unlawfully funding or facilitating any
activities of or business in any Sanctioned Country or (iii) in any
other manner that will result in a violation by any Person
(including any Person participating in the transaction, whether as
underwriter, advisor, investor or otherwise) of Sanctions Laws. For
the past five (5) years, the Company and its Subsidiaries have not
knowingly engaged in and are not now knowingly engaged in any
dealings or transactions with any person that at the time of the
dealing or transaction is or was the subject or the target of
Sanctions Laws or with any Sanctioned Country.
(mm)
Anti-Bribery.
Neither the Company nor any of the Subsidiaries has made any
contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law which
violation is required to be disclosed in the Prospectus. Neither
the Company, nor any of its Subsidiaries or affiliates, nor any
director, officer, agent, employee or other person associated with
or acting on behalf of the Company, or any of its Subsidiaries or
affiliates, has (i) used any funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political
activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee, to any
employee or agent of a private entity with which the Company does
or seeks to do business (a “Private Sector Counterparty”) or
to foreign or domestic political parties or campaigns, (iii)
violated or is in violation of any provision of any applicable law
or regulation implementing the OECD Convention on Combating Bribery
of Foreign Public Officials in International Business Transactions
or any applicable provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended (the “FCPA”), the U.K. Xxxxxxx Xxx 0000,
or any other similar law of any other jurisdiction in which the
Company operates its business, including, in each case, the rules
and regulations thereunder (the “Anti-Bribery Laws”), (iv) taken,
is currently taking or will take any action in furtherance of an
offer, payment, gift or anything else of value, directly or
indirectly, to any person while knowing that all or some portion of
the money or value will be offered, given or promised to anyone to
improperly influence official action, to obtain or retain business
or otherwise to secure any improper advantage or (v) otherwise made
any offer, bribe, rebate, payoff, influence payment, unlawful
kickback or other unlawful payment; the Company and each of its
respective Subsidiaries has instituted and has maintained, and will
continue to maintain, policies and procedures reasonably designed
to promote and achieve compliance with the laws referred to in
(iii) above and with this representation and warranty; none of the
Company, nor any of its Subsidiaries or affiliates will directly or
indirectly use the proceeds of the convertible securities or lend,
contribute or otherwise make available such proceeds to any
subsidiary, affiliate, joint venture partner or other person or
entity for the purpose of financing or facilitating any activity
that would violate the laws and regulations referred to in (iii)
above; there are, and have been, no allegations, investigations or
inquiries with regard to a potential violation of any Anti-Bribery
Laws by the Company, its Subsidiaries or affiliates, or any of
their respective current or former directors, officers, employees,
stockholders, representatives or agents, or other persons acting or
purporting to act on their behalf.
-15-
(nn)
No Additional
Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions
contemplated by the Transaction Documents other than as specified
in the Transaction Documents.
(oo)
Disclosure. Except
for discussions specifically regarding the offer and sale of the
Securities, the Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their
agents or counsel with any information that constitutes or could
reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries,
other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company
understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities
of the Company. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions
contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries
is true and correct and does 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. All of
the written information furnished after the date hereof by or on
behalf of the Company or any of its Subsidiaries to you pursuant to
or in connection with this Agreement and the other Transaction
Documents, taken as a whole, will be true and correct in all
material respects as of the date on which such information is so
provided and will 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 are made, not misleading. Each press release
issued by the Company or any of its Subsidiaries during the twelve
(12) months preceding the date of this Agreement did not at the
time of release contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in 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, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which,
under applicable law, rule or regulation, requires public
disclosure at or before the date hereof or announcement by the
Company but which has not been so publicly disclosed. The Company
acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in
Section 2.
(pp)
Stock Option Plans.
Each stock option granted by the Company was granted (i) in
accordance with the terms of the applicable Company stock option
plan and (ii) with an exercise price at least equal to the fair
market value of the Common Stock on the date such stock option
would be considered granted under GAAP, consistently applied during
the periods involved and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(qq)
No Disagreements with
Accountants and Lawyers. There are no material disagreements
of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and
lawyers formerly or presently employed by the Company and the
Company is current with respect to any fees owed to its accountants
and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction
Documents.
(rr)
No Disqualification
Events. With respect to Securities to be offered and sold
hereunder in reliance on Rule 506(b) under the 1933 Act
(“Regulation D
Securities”), none of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the 0000 Xxx) connected with the Company
in any capacity at the time of sale (each, an “Issuer Covered Person “and,
together, “Issuer Covered
Persons”) is subject to any of the “Bad
Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 Act (a ”Disqualification Event”), except
for a Disqualification Event covered by Rule 506(d)(2) or (d)(3).
The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Buyers a
copy of any disclosures provided thereunder.
-16-
(ss)
Other Covered
Persons. The Company is not aware of any Person (other than
the Placement Agent) that has been or will be paid (directly or
indirectly) remuneration for solicitation of Buyers or potential
purchasers in connection with the sale of any Regulation D
Securities.
(tt)
Dilutive Effect.
The Company understands and acknowledges that the number of Warrant
Shares issuable pursuant to terms of the Warrants will increase in
certain circumstances. The Company further acknowledges that its
obligation to issue Warrant Shares pursuant to the terms of the
Warrants in accordance with this Agreement and the Warrants is
absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other
stockholders of the Company.
(uu)
Related Party
Loans. All loans payable by the Company and/or its
Subsidiaries to any of its directors, officers and/or any of their
Affiliates (the “Related
Party Loans”), including, without limitation, all
loans set forth on under the caption “Related Party Notes
Payable” on Schedule
3(r)(i) , have been amended such that no payments under any
of such Related Party Loans will be due prior to December 31,
2019.
4. COVENANTS.
(a)
Best Efforts. Each
party shall use its best efforts timely to satisfy each of the
covenants and the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b)
Form D and Blue
Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the
Company shall reasonably determine is necessary in order to obtain
an exemption for or to qualify the Securities for sale to the
Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the
United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following the
Closing Date.
(c)
Reporting Status.
Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all of the Preferred
Shares and Warrant Shares and none of the Preferred Shares or
Warrants are outstanding (the “Reporting Period”), the Company
shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would
no longer require or otherwise permit such termination, and the
Company shall take all actions necessary to maintain its
eligibility to register the Conversion Shares and Warrant Shares
for resale by the Investors on Form S-3, or any other form for
which the Company then qualifies or which counsel for the Company
shall deem appropriate and which form shall be available for the
resale by the Buyers of all Registrable Securities.
(d)
Use of Proceeds.
The Company will use the proceeds from the sale of the Securities
for its acquisition of the assets of Stantive Technologies Group
Inc. pursuant to the terms of the proposed Asset Purchase Agreement
the Company submitted to the Ontario Superior Court of Justice in
Bankruptcy and Solvency, to pay $2.7 million of Indebtedness, and
for working capital purposes.
(e)
Financial
Information. The Company agrees to send the following to
each Investor (as defined in the Registration Rights Agreement)
during the Reporting Period (i) unless the following are filed with
the SEC through XXXXX and are available to the public through the
XXXXX system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, any
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K (or
any analogous reports under the 0000 Xxx) and any registration
statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, (ii) on the same day as the release thereof,
facsimile or e-mailed copies of all press releases issued by the
Company or any of its Subsidiaries and (iii) copies of any notices
and other information made available or given to the stockholders
of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders. As used herein,
“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.
-17-
(f)
Listing. The
Company shall promptly secure the listing of all of the Registrable
Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system,
if any, upon which the Common Stock are then listed (subject to
official notice of issuance) and shall maintain such listing of all
Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall maintain the
authorization for quotation of the Common Stock on the Principal
Market or any other Eligible Market (as defined in the COD and
Warrants). Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal
Market. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section
4(f).
(g)
Fees. The Company
shall reimburse the Lead Investor (a Buyer) or its designee(s) (in
addition to any other expense amounts paid to any Buyer or its
counsel prior to the date of this Agreement) for all costs and
expenses incurred in connection with the transactions contemplated
by the Transaction Documents (including all reasonable legal fees
and disbursements in connection therewith, documentation and
implementation of the transactions contemplated by the Transaction
Documents and due diligence in connection therewith), which amount
may be withheld by such Buyer from its Purchase Price at the
Closing to the extent not previously reimbursed by the Company.
Notwithstanding the foregoing, in no event will the fees of counsel
of the Lead Investor reimbursed by the Company pursuant to this
Section 4(g) (in addition to any other expense amounts paid to any
Buyer or its counsel prior to the date of this Agreement) exceed
$15,000 without the prior approval from the Company. The Company
shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, or broker’s commissions (other
than for Persons engaged by any Buyer) relating to or arising out
of the transactions contemplated hereby, including, without
limitation, any fees or commissions payable to the Placement Agent,
including any reasonable legal fees and expenses of the Placement
Agent. The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment.
Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection
with the sale of the Securities to the Buyers.
(h)
Pledge of
Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona
fide margin agreement or other loan or financing arrangement that
is secured by the Securities. The pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Investor effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document, including, without
limitation, Section 2(f) hereof; provided that an Investor and
its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees
to execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of
the Securities to such pledgee by an Investor.
-18-
(i)
Disclosure of Transactions
and Other Material Information. On or before 9:00 AM on
March ___, 20191, the Company shall (A) issue a press
release (the “Press
Release”) reasonably acceptable to the Buyers
disclosing all material terms of the transactions contemplated
hereby and (B) file a Current Report on Form 8-K describing the
terms of the transactions contemplated by the Transaction Documents
in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this
Agreement (and all schedules and exhibits to this Agreement), the
COD, the form of the Warrants, the form of Exchange Agreement, the
form of Lock-Up Agreement and the form of the Registration Rights
Agreement as exhibits to such filing (including all attachments),
the “8-K
Filing”). From and after the filing of the 8-K Filing,
no Buyer shall be in possession of any material, non-public
information received from the Company, any of its Subsidiaries or
any of their respective officers, directors, employees, affiliates
or agents, that is not disclosed in the 8-K Filing. In addition,
effective upon the filing of the 8-K Filing, the Company
acknowledges and agrees that any and all confidentiality or similar
obligations under any agreement, whether written or oral, between
the Company, any of its Subsidiaries or any of their respective
officers, directors, affiliates, employees or agents, on the one
hand, and any of the Buyers or any of their affiliates, on the
other hand, shall terminate. The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective
officers, directors, employees, affiliates and agents, not to,
provide any Buyer with any material, non-public information
regarding the Company or any of its Subsidiaries from and after the
date hereof without the express prior written consent of such
Buyer. If a Buyer has, or believes it has, received any such
material, non-public information regarding the Company or any of
its Subsidiaries from the Company, any of its Subsidiaries or any
of their respective officers, directors, employees, affiliates or
agents, it may provide the Company with written notice thereof. The
Company shall, within two (2) Trading Days of receipt of such
notice, make public disclosure of such material, non-public
information. In the event of a breach of the foregoing covenant by
the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees, affiliates and agents,
in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a
public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public
information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers,
directors, employees, affiliates or agents. No Buyer shall have any
liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, affiliates or agents for
any such disclosure. To the extent that the Company delivers any
material, non-public information to a Buyer without such
Buyer’s consent, the Company hereby covenants and agrees that
such Buyer shall not have any duty of confidentiality to the
Company, any of its Subsidiaries or any of their respective
officers, directors, employees, affiliates or agents with respect
to, or a duty to the Company, any of its Subsidiaries or any of
their respective officers, directors, employees, affiliates or
agents not to trade on the basis of, such material, non-public
information. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any
other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable
law and regulations (provided that in the case of clause (i) each
Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release).
Except for the Registration Statement required to be filed pursuant
to the Registration Rights Agreement, without the prior written
consent of any applicable Buyer, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of such Buyer in
any filing, announcement, release or otherwise.
(j)
Corporate
Existence. So long as any Buyer beneficially owns any
Securities, the Company shall maintain its corporate existence and
shall not be party to any Fundamental Transaction (as defined in
the Warrants) unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth
in the Warrants.
-19-
(k)
Reservation of
Shares. So long as any Buyer owns any Preferred Shares or
Warrants, the Company shall take all action necessary to at all
times after the date hereof have authorized, and reserved for the
purpose of issuance, no less than the number of shares of Common
Stock issuable upon conversion of the Preferred Shares (without
taking into account any limitations on the conversion of the
Preferred Shares set forth in the COD) and upon exercise of the
Warrants then outstanding (without taking into account any
limitations on the exercise of the Warrants set forth in the
Warrants) (herein, the “Required Reserve Amount”). If at
any time the number of shares of Common Stock authorized and
reserved for issuance is not sufficient to meet the Required
Reserved Amount, the Company will promptly take all corporate
action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of
stockholders to authorize additional shares to meet the
Company’s obligations under Section 3(c), in the case of an
insufficient number of authorized shares, obtain stockholder
approval of an increase in such authorized number of shares (or
effecting a reverse stock split of the Common Stock), and voting
the management shares of the Company in favor of an increase in the
authorized shares (or effecting a reverse stock split of the Common
Stock) of the Company to ensure that the number of authorized
shares is sufficient to meet the Required Reserved
Amount.
As soon
as practicable following the Closing Date, the Company shall hold a
special meeting of stockholders for the purpose of
obtaining Authorized Share Approval and Stockholder Approval (the
“Special
Meeting”). The Special Meeting shall be held no later
than May 1, 2019. The Company shall use its reasonable best efforts
to obtain Authorized Share Approval and Stockholder Approval of
such items and shall cause the Board of Directors of the Company to
recommend to the stockholder that they approve such items. If,
despite the Company’s reasonable best efforts the Authorized
Share Approval and Stockholder Approval is not obtained on or prior
to the May 1, 2019, the Company shall cause an additional
stockholder meeting to be held every three months thereafter until
such Authorized Share Approval and Stockholder Approval is
obtained.
(l)
Conduct of
Business. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, including, without
limitation, FCPA and other applicable Anti-Bribery Laws, OFAC
regulations and other applicable Sanctions Laws, and Anti-Money
Laundering Laws.
(i)
Neither the Company, nor any of its Subsidiaries or affiliates,
directors, officers, employees, representatives or agents
shall:
(a)
conduct any business or engage in any transaction or dealing with
or for the benefit of any Blocked Person, including the making or
receiving of any contribution of funds, goods or services to, from
or for the benefit of any Blocked Person;
(b)
deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked or subject to blocking
pursuant to the applicable Sanctions Laws;
(c) use
any of the proceeds of the transactions contemplated by this
Agreement to finance, promote or otherwise support in any manner
any illegal activity, including, without limitation, any Anti-Money
Laundering Laws, Sanctions Laws, or Anti-Bribery Laws;
or
(d)
violate, attempt to violate, or engage in or conspire to engage in
any transaction that evades or avoids, or has the purpose of
evading or avoiding, any of the Anti-Money Laundering Laws,
Sanctions Laws, or Anti-Bribery Laws.
(ii)
The Company shall maintain in effect and enforce policies and
procedures designed to ensure compliance by the Company and its
Subsidiaries and their directors, officers, employees, agents
representatives and affiliates with the Sanctions Laws and
Anti-Bribery Laws.
-20-
(iii)
The Company will promptly notify the Buyers in writing if any of
the Company, or any of its Subsidiaries or affiliates, directors,
officers, employees, representatives or agents, shall become a
Blocked Person, or become directly or indirectly owned or
controlled by a Blocked Person.
(iv)
The Company shall provide such information and documentation as the
Buyers or any of their affiliates may require to satisfy compliance
with the Anti-Money Laundering Laws, Sanctions Laws, or
Anti-Bribery Laws.
(v) The
covenants set forth above shall be ongoing. The Company shall
promptly notify the Buyers in writing should it become aware (a) of
any changes to these covenants, or (b) if it cannot comply with the
covenants set forth herein. The Company shall also promptly notify
the Buyers in writing should they become aware of an investigation,
litigation or regulatory action relating to an alleged or potential
violation of the Anti-Money Laundering Laws, Sanctions Laws, and
Anti-Bribery Laws.
(m)
Additional Issuances of
Securities.
(i) For
purposes of this Section 4(m), the following definitions shall
apply.
(1)
“Convertible
Securities “means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common
Stock.
(2)
“Options “means
any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
(3)
“Common Stock
Equivalents “means, collectively, Options and
Convertible Securities.
(ii)
From the date hereof until the Trigger Date, the Company shall not,
directly or indirectly, file any registration statement with the
SEC, or file any amendment or supplement thereto or cause any
registration statement or amendment thereto to be declared
effective by the SEC, or grant any registration rights to any
Person that can be exercised prior to such time as set forth above,
other than pursuant to the Registration Rights Agreement. From the
date hereof until the date that is ninety (90) calendar days after
the Trigger Date, the Company shall not, (1) directly or
indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or its
Subsidiaries’ debt, 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,
including, without limitation, any rights, warrants or options to
subscribe for or purchase Common Stock or directly or indirectly
convertible into or exchangeable or exercisable for Common Stock at
a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed
price (any such offer, sale, grant, disposition or announcement
being referred to as a “Subsequent Placement”), (2) enter
into, or effect a transaction under, any agreement, including, but
not limited to, an equity line of credit or
“at-the-market” offering, whereby the Company may issue
securities at a future determined price or (3) be party to any
solicitations, negotiations or discussions with regard to the
foregoing. As used herein, “Trigger Date “means the latest of
(I) the date of Stockholder Approval, (II) the date of Authorized
Share Approval and (III) the earlier of (x) such time as one or
more Registration Statement(s) covering the resale of all
Registrable Securities has been effective and available for the
re-sale of all such Registrable Securities and (y) such time as all
of the Registrable Securities may be sold without restriction or
limitation pursuant to Rule 144 and without the requirement to be
in compliance with Rule 144(c)(1). At any time prior to the date
that is ninety (90) calendar days after the Trigger Date, the
Company and each Subsidiary shall be prohibited from effecting or
entering into an agreement to effect any Subsequent Placement
involving a Variable Rate Transaction. “Variable Rate Transaction “means a
transaction in which the Company or any Subsidiary (i) issues or
sells any Convertible Securities either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the Ordinary
Shares at any time after the initial issuance of such Convertible
Securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the
initial issuance of such Convertible Securities or upon the
occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the
Ordinary Shares, other than pursuant to a customary “weighted
average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit
or an “at-the-market” offering) whereby the Company or
any Subsidiary may sell securities at a future determined price
(other than standard and customary “preemptive” or
“participation” rights). Each Buyer shall be entitled
to obtain injunctive relief against the Company and its
Subsidiaries to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.
-21-
(iii)
From 90 days following the Trigger Date until the two year
anniversary of the Closing Date (the “Participation Period”), the
Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this
Section 4(m)(iii).
(1) The
Company shall deliver to each Buyer an irrevocable written notice
(the “Offer
Notice”) of any proposed or intended issuance or sale
or exchange (the “Offer”) of the securities being
offered (the “Offered
Securities”) in a Subsequent Placement, which Offer
Notice shall (A) identify and describe the Offered Securities, (B)
describe the price and other terms upon which they are to be
issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (C) identify the
Persons (if known) to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (D) offer to issue
and sell to or exchange with such Buyers at least 35% of the
Offered Securities, allocated among such Buyers (I) based on such
Buyer’s pro rata portion of the aggregate number of Preferred
Shares purchased hereunder (the “Basic Amount”), and (II) with
respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the
Basic Amounts of other Buyers as such Buyer shall indicate it will
purchase or acquire should the other Buyers subscribe for less than
their Basic Amounts (the “Undersubscription
Amount”).
(2) To
accept an Offer, in whole or in part, such Buyer must deliver a
written notice to the Company prior to the end of the third
(3rd)
Business Day after such Buyer’s receipt of the Offer Notice
(the “Offer
Period”), setting forth the portion of such
Buyer’s Basic Amount that such Buyer elects to purchase and,
if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to
purchase (in either case, the “Notice of Acceptance”). If the
Basic Amounts subscribed for by all Buyers are less than the total
of all of the Basic Amounts, then each Buyer who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed
for, the Undersubscription Amount it has subscribed for;
provided ,
however, that if
the Undersubscription Amounts subscribed for exceed the difference
between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available Undersubscription
Amount”), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that
portion of the Available Undersubscription Amount as the Basic
Amount of such Buyer bears to the total Basic Amounts of all Buyers
that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent its deems reasonably
necessary. Notwithstanding anything to the contrary contained
herein, if the Company desires to modify or amend the terms and
conditions of the Offer prior to the expiration of the Offer
Period, the Company may deliver to the Buyers a new Offer Notice
and the Offer Period shall expire on the third (3 rd) Business Day after
such Buyer’s receipt of such new Offer Notice.
(3) The
Company shall have five (5) Business Days from the expiration of
the Offer Period above (A) to offer, issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the
“Refused
Securities”) pursuant to a definitive agreement (the
“Subsequent Placement
Agreement”) but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest
rates) that are not more favorable to the acquiring Person or
Persons or less favorable to the Company than those set forth in
the Offer Notice and (B) to publicly announce (I) the execution of
such Subsequent Placement Agreement, and (II) either (x) the
consummation of the transactions contemplated by such Subsequent
Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, in each case, which shall be filed with the
SEC on a Current Report on Form 8-K with such Subsequent Placement
Agreement and any documents contemplated therein filed as exhibits
thereto.
(4) In
the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4(m)(iii)(3) above), then each Buyer
may, at its sole option and in its sole discretion, reduce the
number or amount of the Offered Securities specified in its Notice
of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to
purchase pursuant to Section 4(m)(iii)(2) above multiplied by a
fraction, (A) the numerator of which shall be the number or amount
of Offered Securities the Company actually proposes to issue, sell
or exchange (including Offered Securities to be issued or sold to
Buyers pursuant to Section 4(m)(iii)(3) above prior to such
reduction) and (B) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Buyer so
elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue,
sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(m)(iii)(1)
above.
-22-
(5)
Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, the Buyers shall acquire from
the Company, and the Company shall issue to the Buyers, the number
or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(m)(iii)(3) above if
the Buyers have so elected, upon the terms and conditions specified
in the Offer. The purchase by the Buyers of any Offered Securities
is subject in all cases to the preparation, execution and delivery
by the Company and the Buyers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and
substance to the Buyers and their respective counsel.
(6) Any
Offered Securities not acquired by the Buyers or other persons in
accordance with Section 4(m)(iii)(3) above may not be issued, sold
or exchanged until they are again offered to the Buyers under the
procedures specified in this Agreement.
(7) The
Company and the Buyers agree that if any Buyer elects to
participate in the Offer, (A) neither the Subsequent Placement
Agreement with respect to such Offer nor any other transaction
documents related thereto (collectively, the “Subsequent Placement Documents”)
shall include any term or provisions whereby any Buyer shall be
required to agree to any restrictions in trading as to any
securities of the Company owned by such Buyer prior to such
Subsequent Placement, and (B) any registration rights set forth in
such Subsequent Placement Documents shall be similar in all
material respects to the registration rights contained in the
Registration Rights Agreement.
(8)
Notwithstanding anything to the contrary in this Section 4(m) and
unless otherwise agreed to by the Buyers, the Company shall either
confirm in writing to the Buyers that the transaction with respect
to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either
case in such a manner such that the Buyers will not be in
possession of material non-public information, by the tenth (10
th)
Business Day following delivery of the Offer Notice. If by the
tenth (10th) Business Day
following delivery of the Offer Notice no public disclosure
regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such
transaction has been received by the Buyers, such transaction shall
be deemed to have been abandoned and the Buyers shall not be deemed
to be in possession of any material, non-public information with
respect to the Company. Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company
shall provide each Buyer with another Offer Notice and each Buyer
will again have the right of participation set forth in this
Section 4(m)(iii). The Company shall not be permitted to deliver
more than one such Offer Notice to the Buyers in any 60 day
period.
(iv)
The restrictions contained in subsection (iii) of this Section 4(m)
shall not apply in connection with (x) the issuance of any Excluded
Securities (as defined in the COD and the Warrants).
(v)
Notwithstanding anything to the contrary in Section 4(m)(iii), if,
during the Participation Period, the Company becomes eligible to
register its securities on a Registration Statement on Form S-3
with the SEC, the Company will not, directly or indirectly, effect
any Subsequent Placement by means of a sale (i.e. “shelf
take-down”) of securities registered on such Form S-3 (a
“Subsequent Overnight
Placement”) unless the Company shall have first
complied with this Section 4(m)(v).
(1)
Between the time period of 4:00 pm (New York City time) and 6:00 pm
(New York City time) on the Trading Day immediately prior to the
Trading Day of the expected announcement of the Subsequent
Overnight Placement (or, if the Trading Day of the expected
announcement of the Subsequent Overnight Placement is the first
Trading Day following a holiday or a weekend (including a holiday
weekend), between the time period of 4:00 p.m. (New York City time)
on the Trading Day immediately prior to such holiday or weekend and
2:00 p.m. (New York City time) on the day immediately prior to the
Trading Day of the expected announcement of the Subsequent
Overnight Placement), the Company shall deliver to each Buyer a
written notice of the Company’s intention to effect a
Subsequent Overnight Placement (a “Subsequent Overnight Placement
Notice”), which notice shall describe in reasonable
detail the proposed terms of such Subsequent Overnight Placement,
the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Subsequent Overnight
Placement is proposed to be effected and shall include a term sheet
and transaction documents relating thereto as an
attachment.
-23-
(2) Any
Buyer desiring to participate in such Subsequent Overnight
Placement must provide written notice to the Company by 6:30 am
(New York City time) on the Trading Day following the date on which
the Subsequent Overnight Placement Notice is delivered to such
Buyer (the “Overnight Notice
Termination Time”) that such Buyer is willing to
participate in the Subsequent Overnight Placement, the amount of
such Buyer’s participation (subject to the amounts provided
for in Section 4(m)(iii)(1), and representing and warranting that
such Buyer has such funds ready, willing, and available for
investment on the terms set forth in the Subsequent Overnight
Placement Notice. If the Company receives no such notice from a
Buyer as of such Overnight Notice Termination Time, such Buyer
shall be deemed to have notified the Company that it does not elect
to participate in such Subsequent Overnight Placement.
(3) If,
by the Overnight Notice Termination Time, notifications by the
Buyer of their willingness to participate in the Subsequent
Overnight Placement (or to cause their designees to participate)
is, in the aggregate, less than the total amount of the Subsequent
Overnight Placement, then the Company may effect the remaining
portion of such Subsequent Overnight Placement on the terms and
with the Persons set forth in the Subsequent Overnight Placement
Notice.
(4) The
Company must provide the Buyers with a second Subsequent Overnight
Placement Notice, and the Buyers will again have the right of
participation set forth above in this Section 4(m)(v), if the
definitive agreement related to the initial Subsequent Overnight
Placement Notice is not entered into for any reason on the terms
set forth in such Subsequent Overnight Placement Notice within two
(2) Trading Days after the date of delivery of the initial
Subsequent Overnight Placement Notice.
(5) The
Company and each Buyer agree that, if any Buyer elects to
participate in the Subsequent Overnight Placement, the transaction
documents related to the Subsequent Overnight Placement shall not
include any term or provision whereby such Buyer shall be required
to agree to any restrictions on trading as to any of the Securities
purchased hereunder or be required to consent to any amendment to
or termination of, or grant any waiver, release or the like under
or in connection with, this Agreement, without the prior written
consent of such Buyer. In addition, the Company and each Buyer
agree that, in connection with a Subsequent Overnight Placement,
the transaction documents related to the Subsequent Overnight
Placement shall include a requirement for the Company to issue a
widely disseminated press release by 9:30 a.m. (New York City time)
on the Trading Day of execution of the transaction documents in
such Subsequent Overnight Placement (or, if the date of execution
is not a Trading Day, on the immediately following Trading Day)
that discloses the material terms of the transactions contemplated
by the transaction documents in such Subsequent Overnight
Placement.
(6)
Notwithstanding anything to the contrary in this 4(m)(v) and unless
otherwise agreed to by such Buyer, the Company shall either confirm
in writing to such Buyer that the transaction with respect to the
Subsequent Overnight Placement has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent
Overnight Placement, in either case, in such a manner such that
such Buyer will not be in possession of any material, non-public
information, by 9:30 a.m. (New York City time) on the second (2nd)
Trading Day following date of delivery of the Subsequent Overnight
Placement Notice. If by 9:30 a.m. (New York City time) on such
second (2 nd) Trading Day, no
public disclosure regarding a transaction with respect to the
Subsequent Overnight Placement has been made, and no notice
regarding the abandonment of such transaction has been received by
such Buyer, such transaction shall be deemed to have been abandoned
and such Buyer shall not be deemed to be in possession of any
material, non-public information with respect to the Company or any
of its Subsidiaries.
(n)
Public Information.
At any time during the period commencing from the six (6) month
anniversary of the Closing Date and ending at such time that all of
the Securities, if a registration statement is not available for
the resale of all of the Securities, may be sold without
restriction or limitation pursuant to Rule 144 and without the
requirement to be in compliance with Rule 144(c)(1), if the Company
shall (i) fail for any reason to satisfy the requirements of Rule
144(c)(1), including, without limitation, the failure to satisfy
the current public information requirements under Rule 144(c) or
(ii) if the Company has ever been an issuer described in Rule
144(i)(1)(i) or becomes such an issuer in the future, and the
Company shall fail to satisfy any condition set forth in Rule
144(i)(2) (each, a “Public
Information Failure”) then, as partial relief for the
damages to any holder of Securities by reason of any such delay in
or reduction of its ability to sell the Securities (which remedy
shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each such holder an amount in
cash equal to one percent (1.0%) of the aggregate Purchase Price of
such holder’s Securities on the day of a Public Information
Failure and on every thirtieth day (pro-rated for periods totaling
less than thirty days) thereafter until the earlier of (i) the date
such Public Information Failure is cured and (ii) such time that
such Public Information Failure no longer prevents a holder of
Securities from selling such Securities pursuant to Rule 144
without any restrictions or limitations. The payments to which a
holder shall be entitled pursuant to this Section 4(p) are referred
to herein as “Public
Information Failure Payments.”
-24-
Notwithstanding
anything to the contrary contained herein, the aggregate amount of
all Public Information Failure Payments shall not exceed 8% of the
aggregate Purchase Price of such holder’s Securities. Public
Information Failure Payments shall be paid on the earlier of (I)
the last day of the calendar month during which such Public
Information Failure Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Public
Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely
manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial
months) until paid in full.
(o)
Lock-Up. The
Company shall not amend, modify, waive or terminate any provision
of any of the Lock-Up Agreements except to extend the term of the
lock-up period and shall enforce the provisions of each Lock-Up
Agreement in accordance with its terms. If any officer or director
that is a party to a Lock-Up Agreement breaches any provision of a
Lock-Up Agreement, the Company shall promptly use its best efforts
to seek specific performance of the terms of such Lock-Up
Agreement.
(p)
Voting Agreements.
Until the Stockholder Approval and the Authorized Share Approval
have each been obtained, the Company shall not amend, modify, waive
or terminate any provision of any of the Voting Agreements and
shall enforce the provisions of each Voting Agreement in accordance
with its terms. If any party to a Voting Agreement breaches any
provision of a Voting Agreement, the Company shall promptly use its
best efforts to seek specific performance of the terms of such
Voting Agreement.
(q)
Notice of Disqualification
Events. The Company will notify the Buyers in writing, prior
to the Closing Date of (i) any Disqualification Event relating to
any Issuer Covered Person and (ii) any event that would, with the
passage of time, become a Disqualification Event relating to any
Issuer Covered Person.
(r)
FAST Compliance.
While any Warrants are outstanding, the Company shall maintain a
transfer agent that participates in the DTC Fast Automated
Securities Transfer Program.
(s)
Closing Documents.
On or prior to fourteen (14) calendar days after the Closing Date,
the Company agrees to deliver, or cause to be delivered, to each
Buyer and Gracin &Marlow, LLP a complete closing set of the
executed Transaction Documents, Securities and any other documents
required to be delivered to any party pursuant to Section 7 hereof
or otherwise.
(t)
Related Party
Loans. While any Securities remain outstanding, without the
prior written consent of the Required Holders, the Company hereby
covenants and agrees that it will not, and will cause its
Subsidiaries not to, (i) change the date on which any payments are
due under any of the Related Party Loans to a date prior to
December 31, 2019, (ii) make any payments under any of the Related
Party Loans prior to December 31, 2019.
(u)
2018 Public
Warrants. The Company shall (i) enter into an exchange
agreement (each, an "Exchange
Agreement" and collectively, the "Exchange Agreements") with each Buyer
that acquired warrants that were registered pursuant to the
Company’s registration statement (the “2018 Registration Statement”) on
Form S-1 (File No. 333-227430)
declared effective by the Securities and Exchange Commission on
October 16, 2018 (the “2018
Warrants”), pursuant to which the Company shall, at
the Buyer’s option, exchange each 0000 Xxxxxxx for a new
warrant (the, "Exchange
Warrants") with identical terms to such 2018 Warrant other
than the exercise price which shall be equal to the exercise price
of the Series A Warrants (subject to further adjustment as set
forth in the Series A Warrants), and (ii) file a prospectus
supplement to the 2018 Registration Statement within five (5)
Business Days of the Closing Date and take all other steps
necessary, at the Company’s expense and Buyer’s option,
to maintain the registration of the shares of Common Stock
underlying the Exchange Warrants.
-25-
5. REGISTER;
TRANSFER AGENT INSTRUCTIONS.
(a)
Register. The
Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice
to each holder of Securities), a register for the Warrants in which
the Company shall record the name and address of the Person in
whose name the Warrants have been issued (including the name and
address of each transferee) and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person. The
Company shall keep the register open and available at all times
during business hours for inspection of any Buyer or its legal
representatives.
(b)
Transfer Agent
Instructions. Subject to the terms and conditions of the COD
and the Warrants, the Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, in the
form of Exhibit I
attached hereto (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares
to the applicable balance accounts at DTC, registered in the name
of each Buyer or its respective nominee(s), for the Conversion
Shares issuable upon conversion of the Preferred Shares and the
Warrant Shares issuable upon exercise of the Warrants in such
amounts as specified from time to time by each Buyer to the Company
upon exercise of the Warrants. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(f) hereof, will be given by the Company to
its transfer agent, and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the other Transaction
Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent
to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or
transfer involves the Conversion Shares or the Warrant Shares sold,
assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend. The Company acknowledges
that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of
this Section 5(b), that a Buyer shall be entitled, in addition to
all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and
without any bond or other security being required.
6.
CONDITIONS TO THE
COMPANY’S OBLIGATION TO SELL. The obligation of the
Company hereunder to issue and sell the Preferred Shares and the
related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at
any time in its sole discretion by providing each Buyer with prior
written notice thereof:
(i)
Such Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the
Company.
(ii)
Such Buyer shall have delivered to the Company the Purchase Price
(less, in the case of the Lead Investor, the amounts withheld
pursuant to Section 4(g)), for the Preferred Shares and the related
Warrants being purchased by such Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii)
The representations and warranties of such Buyer shall be true and
correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date which shall be true and correct as
of such specified date), and such Buyer shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to
the Closing Date.
-26-
7.
CONDITIONS TO EACH
BUYER’S OBLIGATION TO PURCHASE. The obligation of each
Buyer hereunder to purchase the Preferred Shares and the related
Warrants at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions,
provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice
thereof:
(i) The
Company shall have duly executed and delivered to such Buyer (A)
each of the Transaction Documents, (B) the Preferred Shares
(allocated in such amounts as such Buyer shall request), being
purchased by such Buyer at the Closing pursuant to this Agreement
and (C) the related Warrants (allocated in such amounts as such
Buyer shall request) being purchased by such Buyer at the Closing
pursuant to this Agreement.
(ii)
Such Buyer and the Placement Agent shall have received the opinion
of Disclosure Law Group, the Company’s outside counsel, dated
as of the Closing Date, in substantially the form of Exhibit F attached
hereto.
(iii)
The Company shall have delivered to such Buyer a copy of the
Irrevocable Transfer Agent Instructions, which instructions shall
have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(iv)
The Company shall have delivered to such Buyer a certificate
evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity’s jurisdiction of
formation issued by the Secretary of State (or comparable office)
of such jurisdiction, as of a date within ten (10) calendar days of
the Closing Date.
(v) The
Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State
(or comparable office) of the Company’s jurisdiction of
formation within ten (10) calendar days of the Closing
Date.
(vi)
The Company shall have delivered to such Buyer a certificate,
executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section
3(b) as adopted by the Company’s Board of Directors, (ii) the
Certificate of Incorporation, and (iii) the Bylaws, each as in
effect at the Closing, in the form attached hereto as Exhibit H.
(vii)
The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date which shall be true and correct as
of such specified date) and the Company shall have performed,
satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to
be performed, satisfied or complied with by the Company at or prior
to the Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer in the form
attached hereto as Exhibit
G.
(viii)
The Company shall have delivered to such Buyer a letter from the
Company’s transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five (5) calendar days
of the Closing Date.
(ix)
The Company shall have delivered to each Buyer a lock-up agreement
in the form attached hereto as Exhibit J executed and
delivered by each of the Persons listed on Schedule 7(ix) (collectively,
the “Lock-Up
Agreements”).
(x) The
Company shall have delivered to each Buyer a voting agreement in
the form attached hereto as Exhibit K executed and
delivered by each of the Persons listed on Schedule 7(x)
(collectively, the "Voting
Agreements").
-27-
(x) The
Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on
the Principal Market.
(xi)
The Company shall have filed the COD with the Secretary of State of
Delaware and shall have delivered to each Buyer evidence of the
filing, and acceptance of the COD;
(xii)
The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the sale
of the Securities.
(xiii)
The Company shall have entered into the Placement Agency Agreement
with the Placement Agent.
(ix)
The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.
8.
TERMINATION. In the
event that the Closing shall not have occurred with respect to a
Buyer on or before five (5) Business Days from the date hereof due
to the Company’s or such Buyer’s failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the
nonbreaching party’s failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at
the close of business on such date by delivering a written notice
to that effect to each other party to this Agreement and without
liability of any party to any other party; provided , however , that if this
Agreement is terminated pursuant to this Section 8, the Company
shall remain obligated to reimburse the Lead Investor or its
designee(s), as applicable, for the expenses described in Section
4(g) above.
9.
MISCELLANEOUS.
(a)
Governing Law;
Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of
New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough
of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or
that the venue of such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address
for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by
law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY. If any Buyer shall commence a suit,
action or proceeding to enforce any provisions of the Transaction
Documents, then, in addition to the obligations of the Company
under Section 9(k) below, such Buyer shall be reimbursed by the
Company for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and
prosecution of such suit, action or proceeding.
(b)
Counterparts. This
Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile
or.pdf signature shall be considered due execution and shall be
binding upon the signatory thereto with the same force and effect
as if the signature were an original, not a facsimile or.pdf
signature.
(c)
Headings. The
headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.
-28-
(d)
Severability. If
any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).
(e)
Entire Agreement;
Amendments. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons
acting on their behalf with respect to the matters discussed
herein, and this Agreement, the other Transaction Documents and the
instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the
holders of at least a majority of the aggregate amount of
Securities issued and issuable hereunder and under the Warrants
(without regard to any restriction or limitation on the exercise of
the Warrants contained therein) and shall include the Lead Investor
so long as the Lead Investor or any of its Affiliates holds any
Securities, Xxxxxx Bay Capital Management LP so long as Xxxxxx Bay
Capital Management LP or any of its Affiliates holds any
Securities, and Sabby Management, LLC so long as Sabby Management,
LLC or any of its Affiliates holds any Securities (the
“Required
Holders”), and any amendment to this Agreement made in
conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Securities and the Company. No
provisions hereto may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to
less than all of the Buyers or holders of the applicable Securities
then outstanding. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same
consideration (other than the reimbursement of legal fees) also is
offered to all of the parties to the Transaction Documents, holders
of Preferred Shares or holders of the Warrants, as the case may be.
The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as
set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any
other obligation to provide any financing to the Company or
otherwise.
(f)
Notices. Any
notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement or any of
the other Transaction Documents must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon delivery, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party) or by electronic
mail; (iii) upon delivery, when sent by electronic mail (provided
that the sending party does not receive an automated rejection
notice); or (iv) one (1) Business Day after deposit with an
overnight courier service, in each case properly addressed to the
party to receive the same. The addresses, facsimile numbers and
e-mail addresses for such communications shall be:
-29-
If to
the Company:
000
Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX
00000
Telephone: (000)
000-0000
Attention: Xxxxx
Xxxx, President and Chief Executive Officer
E-mail:
xxxxx@xxxxxxxxx.xxx
With a
copy (for informational purposes only) to:
Disclosure Law
Group, a Professional Corporation
000
Xxxx Xxxxxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxx
X. Xxxxxx, Esq.
Email:
xxxxxxx@xxxxxxxxxxxxxxxxxx.xxx
If to
the Transfer Agent:
American Stock
Transfer Company
0000
00xx Xxxxxx
Xxxxxxxx, XX
00000
Telephone:
(000)
000-0000
Facsimile:
Attention:
Email:
If to a
Buyer, to its address, facsimile number and e-mail address set
forth on the Schedule of Buyers, with copies to such Buyer’s
representatives as set forth on the Schedule of
Buyers,
With a
copy (for informational purposes only) to:
Gracin
& Xxxxxx, LLP
The
Chrysler Building
000
Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Attention: Xxxxxx
Xxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
or to
such other address, facsimile number and/or e-mail address and/or
to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5)
calendar days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine or
e-mail containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g)
Successors and
Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares or the
Warrants. The Company shall not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
Required Holders, including by way of a Fundamental Transaction
(unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants). A
Buyer may assign some or all of its rights hereunder without the
consent of the Company, in which event such assignee shall be
deemed to be a Buyer hereunder with respect to such assigned
rights.
-30-
(h)
No Third Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person, except that each
Indemnitee shall have the right to enforce the obligations of the
Company with respect to Section 9(k).
(i)
Survival. Unless
this Agreement is terminated under Section 8, the representations
and warranties of the Company and the Buyers contained in Sections
2 and 3, and the agreements and covenants set forth in Sections 4,
5 and 9 shall survive the Closing. Each Buyer shall be responsible
only for its own representations, warranties, agreements and
covenants hereunder.
(j)
Further Assurances.
Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(k)
Indemnification. In
consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and
in addition to all of the Company’s other obligations under
the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and
any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with
the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”)
from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or
claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities, (iii) any disclosure
made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the
Transaction Documents. To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities that is permissible under
applicable law. Except as otherwise set forth herein, the mechanics
and procedures with respect to the rights and obligations under
this Section 9(k) shall be the same as those set forth in Section 6
of the Registration Rights Agreement.
(l)
No Strict
Construction. 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.
(m)
Remedies. Each
Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails
to perform, observe, or discharge any or all of its obligations
under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that
the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other
security.
-31-
(n)
Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand
or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein
provided, then such Buyer may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company,
any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
(o)
Payment Set Aside.
To the extent that the Company makes a payment or payments to the
Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any
other Person under any law (including, without limitation, any
bankruptcy law, foreign, 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.
(p)
Independent Nature of
Buyers’ Obligations and Rights. The obligations of
each Buyer under any Transaction Document are several and not joint
with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of
any other Buyer under any Transaction Document. Nothing contained
herein or in any other Transaction Document, and no action taken by
any Buyer pursuant hereto or thereto, shall be deemed to constitute
the Buyers as, and the Company acknowledges that the Buyers do not
so constitute, a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Buyers
are in any way acting in concert or as a group, and the Company
shall not assert any such claim with respect to such obligations or
the transactions contemplated by the Transaction Documents and the
Company acknowledges that the Buyers are not acting in concert or
as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. The Company acknowledges
and each Buyer confirms that it has independently participated in
the negotiation of the transaction contemplated hereby with the
advice of its own counsel and advisors. Each Buyer shall be
entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this
Agreement or out of any other Transaction Documents, and it shall
not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.
(q)
Equal Treatment. No
consideration (including any modification of any Transaction
Document) shall be offered or paid to any Buyer to amend or consent
to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration (other than the
reimbursement of legal fees) also is offered to all of the parties
to the Transaction Documents, holders of Preferred Shares or
holders of the Warrants, as the case may be. The Company has not,
directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement, no
Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.
For clarification purposes, this provision constitutes a separate
right granted to each Buyer by the Company and negotiated
separately by each Buyer, and is intended for the Company to treat
the Buyers as a class and shall not in any way be construed as the
Buyers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or
otherwise.
[Signature
Page Follows]
-32-
IN WITNESS WHEREOF, each Buyer and the
Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date
first written above.
|
|
COMPANY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
Xxxxx Xxxx
|
|
|
|
Title:
Chief Executive Officer
|
[Signature Page to Securities Purchase Agreement]
-33-
IN WITNESS WHEREOF, each Buyer and the
Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date
first written above.
Name of
Purchaser:
__________________________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________________________________
Joint Signature of Authorized Signatory of
Purchaser, if applicable: __________________________________________________________
Name(s)
of Authorized Signatory: __________________________________________________________
Title of Authorized
Signatory: __________________________________________________________
Email
Address of Authorized Signatory: __________________________________________________________
Address
for Notice to Purchaser: __________________________________________________________
Social
Security/EIN Number(s): __________________________________________________________
Election for
book-entry Preferred Shares: _____[check
for book-entry shares]
Election for
physical delivery of a Preferred Stock certificate:
_____[check
for physical stock certificate]
Address
for Delivery of Warrants (and Preferred Stock certificate, if
applicable), to Purchaser (if not same as address for
notice):
______________________________________________________________________________
In
accordance with Section 1(f) of the Warrants, the applicable
Beneficial Ownership Limitation of the Purchaser shall be:
____4.99%
____ 9.99%
[check one]
In
accordance with Section 4(d) of the Certificate of Designation, the
applicable Beneficial Ownership Limitation of the Purchaser
relating to conversions of the Series C Convertible Preferred Stock
shall be:
____4.99%
____ 9.99%
[check one]
Affiliate of the
Issuer: __________[Check if an affiliate of the
Company]
Subscription
Amount: $ ______________________
[Signature Page to Securities Purchase Agreement]
-34-
SCHEDULE OF BUYERS
|
(1)
|
|
(2)
|
|
|
(3)
|
|
|
(4)
|
|
(5)
|
|
(6)
|
(7)
|
(8)
|
|
|||||||||
|
Buyer
|
|
Address, Facsimile Number and E-mail
|
|
|
Number of Preferred Shares
|
|
|
|
Number of Series A Warrant Shares
|
|
|
Number of Series B Warrants Shares
|
|
|
Number of Series C Warrant Shares
|
|
Purchase Price
|
Legal Representative’s Address, Facsimile Number
andE-mail
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
-35-
EXHIBITS
|
Exhibit
A
|
Certificate
of Designations for Series C Preferred Stock
|
|
Exhibit
B
|
Form of
Series A Warrant
|
|
Exhibit
C
|
Form of
Series B Warrant
|
|
Exhibit
D
|
Form of
Series C Warrant
|
|
Exhibit
E
|
Form of
Registration Rights Agreement
|
|
Exhibit
F
|
Company
Opinion
|
|
Exhibit
G
|
Form of
Officer’s Certificate
|
|
Exhibit
H
|
Form of
Secretary’s Certificate
|
|
Exhibit
I
|
Irrevocable
Transfer Agent Instructions
|
|
Exhibit
J
Exhibit
K
|
Form of
Lock-Up Agreement
Form of
Voting Agreement
|
SCHEDULES
|
Schedule
3(a)
|
Subsidiaries
|
|
Schedule
3(j)
|
SEC
Documents
|
|
Schedule
3(k)
|
Absence
of Certain Changes
|
|
Schedule
3(p)
|
Transactions
with Affiliates
|
|
Schedule
3(q)
|
Equity
Capitalization
|
|
Schedule
3(r)
|
Indebtedness
and Other Contracts
|
|
Schedule
3(s)
|
Absence
of Litigation
|
|
Schedule
3(w)
|
Intellectual
Property Rights
|
|
Schedule
3(aa)
|
Internal
Accounting and Disclosure Controls
|
-36-
