PURCHASE AGREEMENT
EXHIBIT 10.1
THIS
PURCHASE AGREEMENT (“Agreement”)
is
made as of the 14th
day of
February, 2006, by and among Caprius, Inc., a Delaware corporation (the
“Company”),
and
the Investors set forth on the signature pages affixed hereto (each an
“Investor”
and
collectively the “Investors”).
Recitals
A. The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation
D”),
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended; and
B. The
Investors wish to purchase from the Company, and the Company wishes to sell
and
issue to the Investors, upon the terms and conditions stated in this Agreement,
(i) shares of Series D Convertible Preferred Stock, stated value $12.40 per
share (the “Preferred
Stock”),
such
Preferred Stock to have the relative rights, preferences and designations set
forth in the Certificate of Designations set forth in Exhibit
A
hereto
(the “Certificate
of Designations”),
at a
purchase price of $12.40 per share, (ii) 2006 Series A warrants to purchase
shares of common stock, par value $0.01 per share, of the Company (together
with
any securities into which the common stock may be reclassified, the
“Common
Stock”)
at an
exercise price of $1.50 per share (subject to adjustment) in the form attached
hereto as Exhibit
B
(the
“2006
Series A Warrants”),
and
(iii) 2006 Series B warrants to purchase shares of Common Stock at an exercise
price of $2.00 per share in the form attached hereto as Exhibit
C
(the
“2006
Series B Warrants”
and
together with the 2006 Series A Warrants, the “Warrants”);
and
C. Contemporaneous
with the sale of the Common Stock and Warrants, the parties hereto will execute
and deliver a Registration Rights Agreement, in the form attached hereto as
Exhibit
D
(the
“Registration
Rights Agreement”),
pursuant to which the Company will agree to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1. Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate”
means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person, as such terms are used in and construed under
Rule 144 under the 1933 Act.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Company’s
Knowledge”
means,
with respect to the executive officers (as defined in Rule 405 under the 1933
Act), (i) the actual knowledge, awareness or belief possessed by such executive
officers or (ii) the knowledge, awareness or belief that such executive officers
would have possessed by using reasonable care and diligence under the
circumstances.
“Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).
“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“Conversion
Shares”
means
the shares of Common Stock issuable upon conversion of the Preferred
Stock.
“Effective
Date”
means
the date on which the initial Registration Statement is declared effective
by
the SEC.
“Effectiveness
Deadline”
means
the date on which the initial Registration Statement is required to be declared
effective by the SEC under the terms of the Registration Rights
Agreement.
“Escrow
Agent”
shall
have the meaning ascribed to such term in the Escrow Agreement.
“Escrow
Agreement”
means
Escrow Agreement, dated as of January 23, 2006 among the Company, the Placement
Agent provided for therein and the Escrow Agent.
“Excluded
Stock”
means
(i) capital stock or options issued to employees, officers, directors or
consultants (provided that in no event shall such issuance to consultants exceed
100,000 shares (subject to adjustment for stock splits, stock dividends and
recapitalizations) in any 12 month period) of the Company pursuant to any stock
or option plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee
of
non-employee directors established for such purpose subsequent to the date
hereof, (ii) shares of Common Stock issued upon the conversion or
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exercise
of options or other Common Stock Equivalents issued prior to the date hereof,
provided that such securities have not been amended since the date hereof to
increase the number of shares of Common Stock issuable thereunder or to lower
the exercise or conversion price thereof, (iii) securities issued pursuant
to
this Agreement, and securities issued upon the exercise of those securities,
and
(iv) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors, provided that any such
issuance shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the Company
and shall provide to the Company additional benefits in addition to the
investment of funds, but shall not include a transaction in which the Company
is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
“Intellectual
Property”
means
all of the following: (i) patents, patent applications, patent disclosures
and
inventions (whether or not patentable and whether or not reduced to practice);
(ii) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations, applications and renewals for any of the foregoing; and (v)
proprietary computer software (including but not limited to data, data bases
and
documentation).
“Material
Adverse Effect”
means
a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), business, or prospects of the Company and
its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
its obligations under the Transaction Documents.
“Minimum
Amount”
means
the sale of a minimum of 120,968 shares of Preferred Stock for gross proceeds
of
$1.5 million, together with 111,941 2006 Series A Warrants and 223,882 2006
Series B Warrants.
“Maximum
Amount”
means
the sale of up to 241,935 shares of Preferred Stock for total gross proceeds
of
$3 million, together with 223,882 2006 Series A Warrants and 447,764 2006 Series
B Warrants.
“Nasdaq”
means
The NASDAQ Capital Market.
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
“Purchase
Price”
means,
as to each Investor, the aggregate amount to be paid for Shares and Warrants
purchased hereunder as specified below such Investor’s name on the signature
page of this Agreement.
“Registration
Statement”
has
the
meaning set forth in the Registration Rights Agreement.
“SEC”
means
the Securities and Exchange Commission.
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“Securities”
means
the Shares, the Warrants, the Conversion Shares and the Warrant
Shares.
“Series
B Preferred Stock”
means
the Company’s Series B Convertible Redeemable Preferred Stock, par value $0.01
per share.
“Shares”
means
the shares of Preferred Stock being purchased by the Investors
hereunder.
“Short
Sales”
shall
include all “short sales” as defined in Rule 200 of Regulation SHO under the
1934 Act (but shall not be deemed to include the location and/or reservation
of
borrowable shares of Common Stock).
“Subsidiary”
of
any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if
there
are no such voting interests, 50% or more of the equity interests of which)
is
owned directly or indirectly by such first Person.
“Trading
Day”
means
a
day on which the Common Stock is traded or quoted on the OTC Bulletin Board,
or
any other Trading Market.
“Trading
Market”
means
the following exchanges or markets on which the Common Stock is listed or quoted
for trading on the date in question: The American Stock Exchange; The Nasdaq
Capital Market; The Nasdaq National Market; The New York Stock Exchange; or
the
OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the Certificate of Designations, the Warrants, the Registration
Rights Agreement and the Escrow Agreement.
“Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
“1933
Act”
means
the Securities Act of 1933, as amended, or any successor statute, and the rules
and regulations promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute,
and
the rules and regulations promulgated thereunder.
2. Purchase
and Sale of the Shares and Warrants.
Subject
to the terms and conditions of this Agreement, on the Closing Date, each of
the
Investors shall severally, and not jointly, purchase, and the Company shall
sell
and issue to the Investors, the Shares and Warrants in the respective amounts
set forth opposite the Investors’ names on the signature pages attached hereto
in exchange for the Purchase Price as specified in Section 3 below.
3. Closing.
Upon
confirmation that the other conditions to closing specified herein have been
satisfied or duly waived by the Investors, the Company shall file the
Certificate of Designations with the Secretary of State of Delaware. Each
Investor shall deliver to the Escrow
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Agent
via
wire transfer or a certified check immediately available funds equal to its
Purchase Price to be held pursuant to the terms of the Escrow Agreement. On
the
date (the “Closing
Date”),
which
shall be not more than one (1) Business Day after the Certificate of
Designations has been filed, the Company shall receive the aggregate Purchase
Price and the certificates evidencing the Shares and Warrants shall be delivered
to the Investors (the “Closing”).
The
initial Closing of the purchase and sale of the Shares and Warrants shall take
place at the offices of Xxxxxx Xxxx & Priest LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or at such other location and on such other date as the
Company and the Investors shall mutually agree (the
date
of the Initial Closing is hereinafter referred to as the “Initial
Closing Date”).
The
subsequent closing(s) of the purchase and sale of up to the Maximum Amount
under
this Agreement (the “Subsequent Closings”)
shall
take place at a time agreed upon by the Company and the Investors participating
therein (the
date(s) of the Subsequent Closing(s) is hereinafter referred to as the
“Subsequent
Closing Date(s)”),
all
of which shall occur in any event no later than February 28, 2006. The Investors
agree that any additional persons or entities that acquire Shares and and
Warrants at any “Subsequent
Closing”
shall
become “Investors”
under
this Agreement with all the rights and obligations attendant thereto, upon
their
execution of this Agreement without further action by any other Investor.
For
purposes of this Agreement, the terms “Closing”
and
“Closing
Date”,
unless
otherwise indicated, refer to the applicable closing and closing date of the
Initial Closing or the Subsequent Closing(s), as the case may be.
4. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Investors as of the date hereof
and as of the Closing Date that, except as set forth in the schedules delivered
herewith (collectively, the “Disclosure
Schedules”):
4.1 Organization,
Good Standing and Qualification.
Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry
on
its business as now conducted and to own its properties. Each of the Company
and
its Subsidiaries is duly qualified to do business as a foreign corporation
and
is in good standing in each jurisdiction in which the conduct of its business
or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not and could not reasonably
be
expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed on Schedule
4.1
hereto.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.
4.2 Authorization.
The
Company has full power and authority and has taken all requisite action on
the
part of the Company, its officers, directors and stockholders necessary for
(i)
the authorization, execution and delivery of the Transaction Documents, (ii)
the
authorization of the performance of all obligations of the Company hereunder
or
thereunder, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Securities. The Transaction Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally.
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4.3 Capitalization.
Schedule
4.3
sets
forth (a) the authorized capital stock of the Company on the date hereof; (b)
the number of shares of capital stock issued and outstanding; (c) the number
of
shares of capital stock issuable pursuant to the Company’s outstanding stock
awards; (d) the number of shares of capital stock issuable pursuant to future
grants of awards eligible to be made under the Company’s stock plans; (e) the
number of shares of Common Stock issuable upon conversion of the outstanding
Series B Preferred Stock; and (f) the number of shares of capital stock issuable
and reserved for issuance pursuant to securities (other than the Series B
Preferred Stock, the Shares and the Warrants) exercisable for, or convertible
into or exchangeable for any shares of capital stock of the Company. All of
the
issued and outstanding shares of the Company’s capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights and were issued in full compliance with applicable state
and
federal securities law and any rights of third parties. Except as described
on
Schedule
4.3,
all of
the issued and outstanding shares of capital stock of each Subsidiary have
been
duly authorized and validly issued and are fully paid, nonassessable and free
of
pre-emptive rights, were issued in full compliance with applicable state and
federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim. Except as described on Schedule
4.3,
no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on
Schedule
4.3,
there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any
of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor
any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule
4.3
and
except for the Registration Rights Agreement, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among the Company and any of the securityholders of
the
Company relating to the securities of the Company held by them. Except as
described on Schedule
4.3
and
except as provided in the Registration Rights Agreement, no Person has the
right
to require the Company to register any securities of the Company under the
1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.
Except
as
described on Schedule
4.3,
the
issuance and sale of the Securities hereunder will not obligate the Company
to
issue shares of Common Stock or other securities to any other Person (other
than
the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.
The
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
any
equity interest in the Company upon the occurrence of certain
events.
4.4 Valid
Issuance.
The
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all encumbrances and restrictions
(other than those created by the Investors), except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities
laws
and will be entitled to the relative rights, powers and preferences set forth
in
the Certificate of Designations. The Warrants have been
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duly
and
validly authorized. Upon the due conversion of the Shares in accordance with
the
Certificate of Designations, the Conversion Shares will be validly issued,
fully
paid and nonassessable, and shall be free and clear of all encumbrances and
restrictions (other than those created by the Investors), except for
restrictions on transfer set forth in the Transaction Documents or imposed
by
applicable securities laws. Upon the due exercise of the Warrants, the Warrant
Shares will be validly issued, fully paid and non-assessable free and clear
of
all encumbrances and restrictions, except for restrictions on transfer set
forth
in the Transaction Documents or imposed by applicable securities laws and except
for those created by the Investors.
4.5 Consents.
The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent of, action
by or in respect of, or filing with, any Person, governmental body, agency,
or
official other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable
time
periods. Subject to the accuracy of the representations and warranties of each
Investor set forth in Section 5 hereof, the Company has taken all action
necessary to exempt (i) the issuance and sale of the Securities, (ii) the
issuance of the Conversion Shares upon the due exercise of the Shares, (iii)
the
issuance of the Warrant Shares upon due exercise of the Warrants, and (iv)
the
other transactions contemplated by the Transaction Documents from the provisions
of any anti-takeover, business combination or control share law or statute
binding on the Company or to which the Company or any of its assets and
properties may be subject and any provision of the Company’s Certificate of
Incorporation or By-laws that is or could reasonably be expected to become
applicable to the Investors as a result of the transactions contemplated hereby,
including without limitation, the issuance of the Securities and the ownership,
disposition or voting of the Securities by the Investors or the exercise of
any
right granted to the Investors pursuant to this Agreement or the other
Transaction Documents.
4.6 Delivery
of SEC Filings; Business.
The
Company has made available to the Investors through the XXXXX system, true
and
complete copies of the Company’s most recent Annual Report on Form 10-KSB for
the fiscal year ended September 30, 2005 (the “2005
10-KSB”),
and
all other reports filed by the Company pursuant to the 1934 Act since the filing
of the 2005 10-KSB and prior to the date hereof (collectively, the “SEC
Filings”).
The
SEC Filings are the only filings required of the Company pursuant to the 1934
Act for such period and have been made on a timely basis or the Company has
received a valid extension of such time of filing and has filed any such SEC
Filings prior to the expiration of such extension. The Company and its
Subsidiaries are engaged in all material respects only in the business described
in the SEC Filings, and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.
4.7 No
Material Adverse Change.
Since
September 30, 2005, except as described on Schedule
4.9,
there
has not been:
(i) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the 2005 10-KSB, except for changes in the ordinary course of business which
have
-7-
not
had
and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
(ii) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital stock of the Company, or any redemption
or
repurchase of any securities of the Company;
(iii) any
material damage, destruction or loss, whether or not covered by insurance to
any
assets or properties of the Company or its Subsidiaries;
(iv) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;
(v) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);
(vi) any
change or amendment to the Company’s Certificate of Incorporation or by-laws, or
material change to any material contract or arrangement by which the Company
or
any Subsidiary is bound or to which any of their respective assets or properties
is subject;
(vii) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or any Subsidiary;
(viii) any
material transaction entered into by the Company or a Subsidiary other than
in
the ordinary course of business;
(ix) the
loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or any Subsidiary;
(x) the
loss
or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(xi) any
other
event or condition of any character that has had or could reasonably be expected
to have a Material Adverse Effect.
4.8 Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; and (ii) the Company has sufficient assets to
carry
on its business as now conducted and as proposed to be conducted including
its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof. The Company does not intend to incur debts beyond
its ability to pay such debts as they mature
-8-
(taking
into account the timing and amounts of cash to be payable on or in respect
of
its debt). The Company has no knowledge of any facts or circumstances which
lead
it to believe that it will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one year of the
Closing Date. The SEC Reports set forth as of the dates thereof all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments
in excess of $50,000 due under leases required to be capitalized in accordance
with GAAP (excluding leases for office premises). Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
4.9 SEC
Filings.
(a) At
the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each
registration statement and any amendment thereto filed by the Company since
October 1, 2002 pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading; and each prospectus filed pursuant to Rule 424(b)
under the 1933 Act, as of its issue date and as of the closing of any sale
of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
4.10 No
Conflict, Breach, Violation or Default.
The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result
in
a breach or violation of any of the terms and provisions of, or constitute
a
default under (i) the Company’s Certificate of Incorporation or the Company’s
Bylaws, both as in effect on the date hereof (true and complete copies of which
have been made available to the Investors through the XXXXX system), or (ii)(a)
any statute, rule, regulation or order of any governmental agency or body or
any
court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
or any of their respective assets or properties, or (b) any agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or a Subsidiary is bound or to which any of their respective assets
or
properties is subject.
-9-
4.11 Tax
Matters.
The
Company and each Subsidiary has prepared and filed all tax returns required
to
have been filed by the Company or such Subsidiary with all appropriate
governmental agencies and timely paid all taxes shown thereon or otherwise
owed
by it, except for the tax returns for the year ended September 30, 2005 for
which extensions have been sought. The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate
in
all material respects, and there are no material unpaid assessments against
the
Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken
as a
whole. All taxes and other assessments and levies that the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third
party
when due. There are no tax liens or claims pending or, to the Company’s
Knowledge, threatened against the Company or any Subsidiary or any of their
respective assets or property. Except as described on Schedule
4.11,
there
are no outstanding tax payment or tax sharing agreements or other such
arrangements between the Company and any Subsidiary or other corporation or
entity.
4.12 Title
to Properties.
Except
as disclosed in the SEC Filings or as described on Schedule
4.12,
the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with
the
use made or currently planned to be made thereof by them.
4.13 Certificates,
Authorities and Permits.
Except
as disclosed in the 2005 10-KSB or as described on Schedule
4.13,
the
Company and each Subsidiary possess adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.
4.14 Labor
Matters.
(a) Except
as
set forth on Schedule
4.14,
the
Company is not a party to or bound by any collective bargaining agreements
or
other agreements with labor organizations. The Company has not violated in
any
material respect any laws, regulations, orders or contract terms, affecting
the
collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and hours.
(b) (i)
There
are no labor disputes existing, or to the Company’s Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts
or any other disruptions of or by the Company’s employees, (ii) there are no
unfair
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labor
practices or petitions for election pending or, to the Company’s Knowledge,
threatened before the National Labor Relations Board or any other federal,
state
or local labor commission relating to the Company’s employees, (iii) no demand
for recognition or certification heretofore made by any labor organization
or
group of employees is pending with respect to the Company and (iv) to the
Company’s Knowledge, the Company enjoys good labor and employee relations with
its employees and labor organizations.
(c) The
Company is, and at all times has been, in compliance in all material respects
with all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment
practices, terms and conditions of employment, wages and hours, and immigration
and naturalization. There no claims are pending against the Company before
the
Equal Employment Opportunity Commission or any other administrative body or
in
any court asserting any violation of Title VII of the Civil Rights Act of 1964,
the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other
federal, state or local Law, statute or ordinance barring discrimination in
employment.
(d) The
Company is not a party to, or bound by, any employment or other contract or
agreement that contains any severance, termination pay or change of control
liability or obligation, including, without limitation, any “excess parachute
payment,” as defined in Section 2806(b) of the Internal Revenue
Code.
(e) Except
as
specified in Schedule
4.14,
each of
the Company’s employees is a Person who is either a United States citizen or a
permanent resident entitled to work in the United States. To the Company’s
Knowledge, the Company has no liability for the improper classification by
the
Company of such employees as independent contractors or leased employees prior
to the Closing.
4.15 Intellectual
Property.
(a) All
Intellectual Property of the Company and its Subsidiaries is currently in
compliance with all legal requirements (including timely filings, proofs and
payments of fees) and, to the Company’s Knowledge, is valid and enforceable. No
Intellectual Property of the Company or its Subsidiaries which is necessary
for
the conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has been or is
now
involved in any cancellation, dispute or litigation, and, to the Company’s
Knowledge, no such action is threatened. No patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue,
re-examination or opposition proceeding.
(b) All
of
the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is
a
party or by which any of their assets are bound (other than generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, “License
Agreements”)
are
valid and binding obligations of the Company or its Subsidiaries that are
parties thereto and, to the Company’s Knowledge, the other
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parties
thereto, enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and there exists no event or
condition which will result in a material violation or breach of or constitute
(with or without due notice or lapse of time or both) a default by the Company
or any of its Subsidiaries under any such License Agreement.
(c) The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license
all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company
and
its Subsidiaries.
(d) To
the
Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’
businesses as currently conducted does not infringe or otherwise impair or
conflict with (collectively, “Infringe”)
any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company’s Knowledge, the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There
is no
litigation or order pending or outstanding or, to the Company’s Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Confidential Information of the Company and its Subsidiaries and the Company’s
and its Subsidiaries’ use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company’s Knowledge, there is no
valid basis for the same.
(e) The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of
or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Intellectual Property or Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be
conducted.
(f) The
Company and its Subsidiaries have taken reasonable steps to protect the
Company’s and its Subsidiaries’ rights in their Intellectual Property and
Confidential Information. Each employee, consultant and contractor who has
had
access to Confidential Information which is necessary for the conduct of
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement
to
maintain the confidentiality of such Confidential Information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard
-12-
forms
thereof. Except under confidentiality obligations, there has been no material
disclosure of any of the Company’s or its Subsidiaries’ Confidential Information
to any third party.
4.16 Environmental
Matters.
Neither
the Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic
or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment
or
human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”),
owns
or operates any real property contaminated with any substance that is subject
to
any Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is subject to any claim relating to
any
Environmental Laws, which violation, contamination, liability or claim has
had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s Knowledge,
threatened investigation that might lead to such a claim.
4.17 Litigation.
Except
as described on Schedule
4.17,
there
are no pending actions, suits or proceedings against or affecting the Company,
its Subsidiaries or any of its or their properties; and to the Company’s
Knowledge, no such actions, suits or proceedings are threatened or contemplated.
Neither the Company nor any Subsidiary, nor any director or officer thereof,
is
or since October 1, 2000 has been the subject of any action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty. There has not been, and to the Company’s Knowledge,
there is not pending or contemplated, any investigation by the SEC involving
the
Company or any current or former director or officer of the Company. The SEC
has
not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the 1933
Act
or the 1934 Act.
4.18 Financial
Statements.
The
financial statements included in each SEC Filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and, in the case
of
quarterly financial statements, as permitted by Form 10-QSB under the 1934
Act).
Except as set forth in the financial statements of the Company included in
the
2005 10-KSB or as described on Schedule
4.18,
neither
the Company nor any of its Subsidiaries has incurred any liabilities, contingent
or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of
such
financial statements, none of which, individually or in the aggregate, have
had
or could reasonably be expected to have a Material Adverse Effect.
4.19 Insurance
Coverage.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Purchase Price. To the Company’s
Knowledge, its current insurance carriers have not notified the Company that
any
of them will not be able or willing to renew its existing insurance coverage
as
and when such coverage expires.
-13-
4.20 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than as described in Schedule
4.20.
4.21 No
Directed Selling Efforts or General Solicitation.
Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation
D) in
connection with the offer or sale of any of the Securities.
4.22 No
Integrated Offering.
Neither
the Company nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Company
security or solicited any offers to buy any security, under circumstances that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.
4.23 Private
Placement.
Subject
to the accuracy of the Investors’ representations in Section 5 of this
Agreement, the offer and sale of the Securities to the Investors as contemplated
hereby is exempt from the registration requirements of the 1933
Act.
4.24 Questionable
Payments. Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary,
has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary;
or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
4.25 Transactions
with Affiliates.
Except
as disclosed on Schedule
4.25,
none of
the officers or directors of the Company and, to the Company’s Knowledge, none
of the employees of the Company is presently a party to any transaction with
the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and for services as employees, officers and directors), including
any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
4.26 Internal
Controls.
The
Company is in material compliance with the provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 currently applicable to the Company. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to
-14-
provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets
at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures
(as
defined in 1934 Act Rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including the Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s most recently filed period report under the 1934 Act, as the
case may be, is being prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s controls and procedures as of the end of the
period covered by the most recently filed periodic report under the 1934 Act
(such date, the “Evaluation
Date”).
The
Company presented in the 2005 10-KSB the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on
their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company’s internal controls (as such term is
defined in Item 307(b) of Regulation S-K) or, to the Company’s Knowledge, in
other factors that could significantly affect the Company’s internal controls.
The Company maintains and will continue to maintain a standard system of
accounting established and administered in accordance with GAAP and the
applicable requirements of the 1934 Act.
4.27 Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
1934 Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of
the
Common Stock under the 1934 Act nor has the Company received any notification
that the SEC is contemplating terminating such registration. The Company has
not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to
the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
4.28 Compliance.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as does not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect.
-15-
4.29 Accountants.
The
Company’s accountants are set forth on Schedule
4.29
of the
Disclosure Schedule. To the Knowledge of the Company, such accountants, who
the
Company expects will express their opinion with respect to the financial
statements to be included in the Company’s Annual Report on Form 10-KSB for the
year ending September 30, 2006 are a registered public accounting firm as
required by the 0000 Xxx.
4.30 Seniority.
As of
the Closing Date, no Indebtedness or other equity of the Company is senior
to
the Preferred Stock in right of payment, whether with respect to interest or
upon liquidation or dissolution, or otherwise, other than indebtedness secured
by purchase money security interests (which is senior only as to underlying
assets covered thereby) and capital lease obligations (which is senior only
as
to the property covered thereby), other than Series B Preferred
Stock.
4.31 No
Disagreements with Accountants and Lawyers.
There
are no 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 billed within the past ninety (90) days from its accountants
and lawyers.
4.32 Acknowledgment
Regarding Investors’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Investors is acting solely
in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Investor is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by
any
Investor or any of their respective representatives or agents in connection
with
the Transaction Documents and the transactions contemplated thereby is merely
incidental to the Investors’ purchase of the Securities.
4.33 Acknowledgement
Regarding Investors’ Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Section 5.11 and 7.15), it is understood and acknowledged by the
Company (i) that none of the Investors have been asked to agree, nor has any
Investor 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) that
past
or future open market or other transactions by any Investor, including Short
Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Investor, and counter-parties in
“derivative” transactions to which any such Investor is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and (iv)
that each Investor 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 (a) one or more Investors may engage
in hedging activities at various times during the period that the Securities
are
outstanding, including, without limitation, during the periods that the value
of
the Conversion Shares deliverable with respect to the Preferred Stock are being
determined and (b) such hedging activities (if any) could reduce the value
of
the existing stockholders' equity interests in the
-16-
Company
at and after the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.
4.34 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 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) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company, other than,
in the case of each of clauses (ii) and (iii), compensation paid to the
Company’s placement agent in connection with the placement of the
Securities.
4.35 Disclosures.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Investors or their agents or counsel with any information
that constitutes or might constitute material, nonpublic information. The
Company understands and confirms that each of the Investors will rely on the
foregoing representations in effecting transactions in securities of the
Company. All disclosure materials provided to the Investors regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company are true
and correct in all material respects and do not contain any untrue statement
of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which
they
were made, not misleading; it being understood that the Company has not provided
the Investors, and the Investors are not relying on, any information
constituting a forecast or projection. No event or circumstance has occurred
or
information exists with respect to the Company or any of its Subsidiaries or
its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure
or
announcement by the Company but which has not been so publicly announced or
disclosed.
5. Representations
and Warranties of the Investors.
Each of
the Investors hereby severally, and not jointly, represents and warrants to
the
Company as of the date hereof and as of the Closing Date, that:
5.1 Organization
and Existence.
In the
event such Investor is a corporation, limited partnership or limited liability
company, it is validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate, partnership
or
limited liability company power and authority to invest in the Securities
pursuant to this Agreement, and was not formed solely for the purpose of
investing in the Securities.
5.2 Authorization.
The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and will
each constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.
-17-
5.3 Purchase
Entirely for Own Account.
The
Securities to be received by such Investor hereunder will be acquired for such
Investor’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of the 1933 Act without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed
a
representation or warranty by such Investor to hold the Securities for any
period of time. Neither such Investor nor any Affiliate of such Investor is
a
broker-dealer registered with the SEC under the 1934 Act or an entity engaged
in
a business that would require it to be so registered.
5.4 Investment
Experience.
Such
Investor acknowledges that it can bear the economic risk and complete loss
of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby.
5.5 Disclosure
of Information.
Such
Investor has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from the
Company regarding the Company, its business, the terms and conditions of the
offering of the Securities, and the risk factors included in the Company’s SEC
Filings. Such Investor acknowledges receipt of and has reviewed copies of the
SEC Filings. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, amend or affect such Investor’s right
to rely on the Company’s representations and warranties contained in this
Agreement.
5.6 Restricted
Securities.
Such
Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
or
otherwise transferred without registration under the 1933 Act only in certain
limited circumstances.
5.7 Legends.
It is
understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:
(a) “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii)
the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the Securities
Act
of 1933 or qualification under applicable state securities laws.”
(b) If
required by the authorities of any state in connection with the issuance of
sale
of the Securities, the legend required by such state authority.
5.8 Accredited
Investor.
Such
Investor is an accredited investor as defined in Rule 501(a) of Regulation
D, as
amended, under the 1933 Act.
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5.9 No
General Solicitation.
Such
Investor did not learn of the investment in the Securities as a result of any
public advertising or general solicitation.
5.10 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor with respect to the transactions
contemplated by this Agreement, other than as described on Schedule
5.10.
5.11 Short
Sales and Confidentiality Prior To The Date Hereof.
Other
than the transaction contemplated hereunder, such Investor has not directly
or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, executed any disposition, including Short
Sales, in the securities of the Company during the period commencing from the
time that such Investor first received a term sheet (written or oral) from
the
Company or any other Person setting forth the material terms of the transactions
contemplated hereunder until the date hereof (“Discussion
Time”).
Notwithstanding the foregoing, in the case of a Investor that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions
of such Investor's assets and the portfolio managers have no direct knowledge
of
the investment decisions made by the portfolio managers managing other portions
of such Investor's assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that
made
the investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement, such Investor has
maintained the confidentiality of all disclosures made to it in connection
with
this transaction (including the existence and terms of this
transaction).
5.12 No
Implied Representations and Warranties.
Each
Investor makes only the representations and warranties contained in this
Agreement and no additional representations or warranties are implied by, or
applicable to, the Investors.
6. Conditions
to Closing.
6.1 Conditions
to the Investors’ Obligations.
The
obligation of each Investor to purchase the Shares and the Warrants at the
Closing is subject to the fulfillment to such Investor’s satisfaction, on or
prior to the Closing Date, of the following conditions, any of which may be
waived by such Investor (as to itself only):
(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date, and, the representations
and
warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all
-19-
material
respects at all times prior to and on the Closing Date, except to the extent
any
such representation or warranty expressly speaks as of an earlier date, in
which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.
(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Securities and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall
be in
full force and effect.
(c) The
Company shall have delivered a certificate evidencing a number of shares of
Preferred Stock equal to such Investor’s Purchase Price divided by $12.40,
registered in the name of such Investor.
(d) The
Company shall have delivered a 2006 Series A Warrant registered in the name
of
such Investor to purchase shares of Common Stock in an amount equal to the
product of (I) 223,882 multiplied by (II) a fraction, the numerator of which
shall be the dollar amount invested by such Investor and the denominator of
which shall be $3,000,000.
(e) The
Company shall have delivered a 2006 Series B Warrant registered in the name
of
such Investor to purchase shares of Common Stock in an amount equal to the
product of (I) 447,764 multiplied by (II) a fraction, the numerator of which
shall be the dollar amount invested by such Investor and the denominator of
which shall be $3,000,000.
(f) The
Company shall have executed and delivered this Agreement.
(g) The
Company shall have executed and delivered the Registration Rights
Agreement.
(h) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in
the
other Transaction Documents.
(i) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (g) and (h) of this Section 6.1.
(j) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the Certificate of Incorporation
and By-laws of the Company and certifying as to the signatures and authority
of
persons signing the Transaction Documents and related documents on behalf of
the
Company.
(k) The
Investors shall have received an opinion from Xxxxxx
Xxxx & Priest LLP,
the
Company’s counsel, dated as of the Closing Date, in form and
substance
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reasonably
acceptable to the Investors and addressing such legal matters as the Investors
may reasonably request.
(l) From
the
date hereof to the Closing Date, there shall have been no Material Adverse
Effect with respect to the Company.
(m) No
stop
order or suspension of trading shall have been imposed by Nasdaq, the SEC or
any
other governmental or regulatory body with respect to public trading in the
Common Stock.
6.2 Conditions
to Obligations of the Company.
The
Company’s obligation to sell and issue the Shares and the Warrants at the
Closing is subject to the fulfillment to the satisfaction of the Company on
or
prior to the Closing Date of the following conditions, any of which may be
waived by the Company:
(a) The
representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment
Representations”),
shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Investment
Representations shall be true and correct in all respects when made, and shall
be true and correct in all respects on the Closing Date with the same force
and
effect as if they had been made on and as of said date. The Investors shall
have
performed in all material respects all obligations and conditions herein
required to be performed or observed by them on or prior to the Closing
Date.
(b) The
Investors shall have executed and delivered the Registration Rights
Agreement.
(c) The
Investors shall have delivered or caused to be delivered Purchase Prices to
the
Escrow Agent in an aggregate amount of not less than the Minimum
Amount.
6.3 Termination
of Obligations to Effect Closing; Effects.
(a) The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing shall terminate as follows:
(i)
Upon
the
mutual written consent of the Company and the Investors;
(ii) By
the
Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By
an
Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have
been
waived by the Investor; or
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(iv) By
either
the Company or any Investor (with respect to itself only) if the Closing has
not
occurred on or prior to February 28, 2006;
provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach
of
any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents if such breach has resulted
in
the circumstances giving rise to such party’s seeking to terminate its
obligation to effect the Closing.
(b) In
the
event of termination by the Company or any Investor of its obligations to effect
the Closing pursuant to this Section 6.3, written notice thereof shall forthwith
be given to the other Investors and the other Investors shall have the right
to
terminate their obligations to effect the Closing upon written notice to the
Company and the other Investors. Nothing in this Section 6.3 shall be deemed
to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of
its
obligations under this Agreement or the other Transaction
Documents.
7. Covenants
and Agreements of the Company.
7.1 Reports.
As long
as any Investor owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all
reports required to be filed by the Company after the date hereof pursuant
to
the 1934 Act. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to the 1934 Act, it will prepare and furnish
to the Investors and make publicly available in accordance with Rule 144(c)
such
information as is required for the Investors to sell the Securities under Rule
144. The Company further covenants that it will take such further action as
any
holder of Securities may reasonably request, to the extent required from time
to
time to enable such Person to sell such Securities without registration under
the 1933 Act within the requirements of the exemption provided by Rule
144.
7.2 Non-Public
Information.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company covenants and agrees
that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use
of
such information. The Company understands and confirms that each Investor shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
7.3 No
Conflicting Agreements.
The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction
Documents.
7.4 Insurance.
The
Company shall not materially reduce the insurance coverages described in Section
4.19.
-22-
7.5 Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including without limitation its
obligation to issue the Conversion Shares and Warrant Shares pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect
of
any such dilution or any claim the Company may have against any Investor and
regardless of the dilutive effect that such issuance may have on the ownership
of the other stockholders of the Company.
7.6 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the 0000 Xxx)
that would be integrated with the offer or sale of the Securities in a manner
that would require the registration under the 1933 Act of the sale of the
Securities to the Investors or that would be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of the Trading
Market.
7.7 Compliance
with Laws.
The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities.
7.8 Reservation
and Listing of Underlying Shares and Related Matters.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction Documents.
If,
on any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than 90% of the amount that may be required
to be
issued to fulfill the Company’s obligations under the Transaction Documents,
minus the number of shares of Common Stock previously issued pursuant to the
Transaction Documents, then the Board of Directors of the Company shall use
commercially reasonable efforts to amend as soon as possible, but in any event
no later than 75 days from such date, the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the amount that may be required to be issued pursuant to
the
Transaction Documents.
(b) As
promptly as practicable following the Closing, upon meeting the applicable
eligibility requirements, the Company shall use its best efforts to cause its
Common Stock, including the Conversion Shares and the Warrant Shares, to be
listed on the Nasdaq Capital Market. Further, if the Company applies to have
its
Common Stock or other securities traded on any other principal stock exchange
or
market, it shall include in such application the Conversion Shares and the
Warrant Shares and will take such other action as is necessary to cause such
Common Stock to be so listed. The Company will best efforts to effect and
continue the listing and trading of its Common Stock on the Nasdaq Capital
Market or another principal stock exchange or market, and, in accordance,
therewith, will use best efforts to comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of such market
or exchange, as applicable.
-23-
7.9 Termination
of Covenants.
The
provisions of Sections 7.1 through 7.8 shall terminate and be of no further
force and effect on the date on which the Company’s obligations under the
Registration Rights Agreement to register or maintain the effectiveness of
any
registration covering the Registrable Securities (as such term is defined in
the
Registration Rights Agreement) shall terminate, subject to earlier termination
in accordance with the terms of the respective Sections.
7.10 Use
of
Proceeds.
The net
proceeds of the sale of the Securities hereunder shall be used by the Company
as
set forth on Schedule 7.10 for working capital and general corporate purposes,
and not for the satisfaction of any portion of the Company’s debt (other than
payment of trade payables in the ordinary course of the Company’s business and
prior practices), to redeem Common Stock or Common Stock Equivalents or to
settle any outstanding litigation.
7.11 Removal
of Legends.
Upon
the earlier of (i) registration for resale pursuant to the Registration Rights
Agreement and receipt by the Company of the Investor’s written confirmation that
such Securities will not be disposed of except in compliance with the prospectus
delivery requirements of the 1933 Act or (ii) Rule 144(k) becoming available
the
Company shall, upon an Investor’s written request, promptly cause certificates
evidencing the Investor’s Securities to be replaced with certificates which do
not bear such restrictive legends, and Warrant Shares subsequently issued upon
due exercise of the Warrants shall not bear such restrictive legends provided
the provisions of either clause (i) or clause (ii) above, as applicable, are
satisfied with respect to such Warrant Shares. When the Company is required
to
cause unlegended certificates to replace previously issued legended
certificates, if unlegended certificates are not delivered to an Investor within
three (3) Business Days of proper submission by that Investor of legended
certificate(s) to the Company’s transfer agent (together with a representation
letter and other documentation in customary form in connection with transfers
other than as part of a sale pursuant to a prospectus under the Registration
Rights Agreement), the Company shall be liable to the Investor for liquidated
damages in an amount equal to 1.0% of the aggregate purchase price of the
Securities evidenced by such certificate(s) for each Business Day beyond such
three (3) Business Days that the unlegended certificates have not been so
delivered.
7.12 Participation
in Future Financing.
(a) From
the
date hereof until the date that is the one year anniversary of the Effective
Date, upon any issuance by the Company or any of its Subsidiaries of Common
Stock or Common Stock Equivalents (a “Subsequent
Financing”),
each
Investor shall have the right to participate in a Subsequent Financing up to
an
amount of the Subsequent Financing equal to 100% of the Subsequent Financing
(the “Participation
Maximum”),
on
the same terms, conditions and price provided for in the Subsequent Financing.
For purposes of this Section 7.12, the Investors shall be Special Situations
Fund III, QP, L.P., Special Situations Fund III, L.P. and Special Situations
Private Equity Fund, L.P. (collectively, “SSF”),
and
Bonanza Master Fund LTD (“Bonanza”).
(b) At
least
five (5) Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Investor a written notice of its intention to
effect a Subsequent Financing (“Pre-Notice”),
which
Pre-Notice shall ask such
-24-
Investor
if it wants to review the details of such financing (such additional notice,
a
“Subsequent
Financing Notice”).
Upon
the request of a Investor, and only upon a request by such Investor, for a
Subsequent Financing Notice, the Company shall promptly, but no later than
one
(1) Trading Day after such request, deliver a Subsequent Financing Notice to
such Investor. The Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of proceeds
intended to be raised thereunder, the Person or Persons through or with whom
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto.
(c) Any
Investor desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the fifth (5th)
Trading
Day after all of the Investors have received the Pre-Notice that the Investor
is
willing to participate in the Subsequent Financing, the amount of the Investor’s
participation, and that the Investor has such funds ready, willing, and
available for investment on the terms set forth in the Subsequent Financing
Notice. If the Company receives no notice from an Investor as of such fifth
(5th)
Trading
Day, such Investor shall be deemed to have notified the Company that it does
not
elect to participate.
(d) If
by
5:30 p.m. (New York City time) on the fifth (5th)
Trading
Day after all of the Investors have received the Pre-Notice, notifications
by
the Investors of their willingness to participate in the Subsequent Financing
(or to cause their designees to participate) is, in the aggregate, less than
the
total amount of the Subsequent Financing, then the Company may effect the
remaining portion of such Subsequent Financing on the terms and with the Persons
set forth in the Subsequent Financing Notice.
(e) If
by
5:30 p.m. (New York City time) on the fifth (5th)
Trading
Day after all of the Investors have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Investors seeking
to
purchase more than the aggregate amount of the Participation Maximum of the
Investors, each such Investor shall have the right to purchase the greater
of
(i) its Pro Rata Percentage (as set forth below) of such Participation Maximum
and (ii) the difference between the Participation Maximum and the aggregate
amount of participation by the other Investor. For purposes of this provision,
the Pro Rata Percentage for SSF and its respective affiliates is 66 2/3 %,
and
the Pro Rata Percentage for Bonanza and its affiliates is 33 1/3 %.
(f) The
Company must provide the Investors with a second Subsequent Financing Notice,
and the Investors will again have the right of participation set forth above
in
this Section 7.12, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within sixty (60) Trading Days after the date
of the initial Subsequent Financing Notice. The Company, in its sole discretion,
may terminate a Subsequent Financing at any time prior to the execution of
binding agreements without any liability from Investors who gave notice to
participate therein.
(g) Notwithstanding
the foregoing, this Section shall not apply in respect of an Excluded
Stock.
-25-
7.13 Subsequent
Equity Sales.
(a) From
the
date hereof until ninety (90) days after the Effective Date, without the consent
of the Required Investors, neither the Company nor any Subsidiary shall issue
shares of Common Stock or Common Stock Equivalents; provided,
however,
the
ninety (90) day period set forth in this Section shall be extended for the
number of Trading Days during such period in which (i) trading in the Common
Stock is suspended by the Trading Market, or (ii) following the Effective Date,
the Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Investors for the resale of the
Conversion Shares or Warrant Shares.
(b) From
the
date hereof until such time as no Investor holds any of the Securities, the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a “Variable Rate Transaction”. The
term “Variable
Rate Transaction”
shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at
a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or
(B)
with a conversion, exercise or exchange price that is subject to being reset
at
some future date after the initial issuance of such debt or equity security
or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock or
(ii) enters into any agreement, including, but not limited to, an equity line
of
credit, whereby the Company may sell securities at a future determined price.
(c) Notwithstanding
the foregoing, this Section shall not apply in respect of an Excluded Stock,
except that no Variable Rate Transaction shall be an Excluded
Stock.
7.14 Equal
Treatment of Investors.
No
consideration shall be offered or paid to any Person to amend or consent to
a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents. For clarification purposes, this provision constitutes
a
separate right granted to each Investor by the Company and negotiated separately
by each Investor, and is intended for the Company to treat the Investors as
a
class and shall not in any way be construed as the Investors acting in concert
or as a group with respect to the purchase, disposition or voting of Securities
or otherwise.
7.15 Short
Sales and Confidentiality After The Date Hereof.
Each
Investor severally and not jointly with the other Investors covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this Agreement are first publicly announced as described in Section 9.7.
Each
Investor, severally and not jointly with the other Investors, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 9.7, such Investor will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction).
-26-
Each
Investor understands and acknowledges, severally and not jointly with any other
Investor, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock “against the box” prior to the
Effective Date of the Registration Statement with the Conversion Shares and
Warrant Shares is a violation of Section 5 of the 1933 Act, as set forth in
Item
65, Section A, of the Manual of Publicly Available Telephone Interpretations,
dated July 1997, compiled by the Office of Chief Counsel, Division of
Corporation Finance. Notwithstanding the foregoing, no Investor makes any
representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced as described in
Section 9.7. Notwithstanding the foregoing, in the case of a Investor that
is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Investor's assets and the portfolio managers have
no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor's assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered
by
this Agreement.
7.16 Capital
Change.
Until
the one year anniversary of the Effective Date, the Company shall not undertake
a reverse or forward stock split or reclassification of the Common Stock without
the prior written consent of the Investors holding a majority in interest of
the
then outstanding shares of Preferred Stock.
8. Survival
and Indemnification.
8.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement; provided, however, that the representations and warranties contained
in this Agreement shall expire eighteen (18) months after the
Closing.
8.2 Indemnification.
Subject
to the provisions of Section 8.1, the Company agrees to indemnify and hold
harmless each Investor and its Affiliates and their respective directors,
officers, employees and agents from and against any and all losses, claims,
damages, liabilities and expenses (including without limitation reasonable
attorney fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened and the costs of enforcement thereof) (collectively, “Losses”)
to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed
on
the part of the Company under the Transaction Documents, and will reimburse
any
such Person for all such amounts as they are incurred by such
Person.
8.3 Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”)
of
notice of any demand, claim or circumstances which would or might give rise
to a
claim or the commencement of any action, proceeding or investigation in respect
of which indemnity may be sought pursuant to Section 8.2, such Indemnified
Person shall promptly notify the Company in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided,
however,
-27-
that
the
failure of any Indemnified Person so to notify the Company shall not relieve
the
Company of its obligations hereunder except to the extent that the Company
is
materially prejudiced by such failure to notify. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the
fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed
to
the retention of such counsel; or (ii) in the reasonable judgment of counsel
to
such Indemnified Person representation of both parties by the same counsel
would
be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
from and against any loss or liability (to the extent stated above) by reason
of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
9. Miscellaneous.
9.1 Successors
and Assigns.
This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable, provided, however,
that
an Investor may assign its rights and delegate its duties hereunder in whole
or
in part to an Affiliate or to a third party acquiring some or all of its
Securities in a private transaction without the prior written consent of the
Company or the other Investors, after notice duly given by such Investor to
the
Company provided, that no such assignment or obligation shall affect the
obligations of such Investor hereunder. The provisions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties. Nothing in this Agreement, express or implied,
is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.2 Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
9.3 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
9.4 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given
-28-
upon
such
delivery, (ii) if given by telex or telecopier, then such notice shall be deemed
given upon receipt of confirmation of complete transmittal, (iii) if given
by
mail, then such notice shall be deemed given upon the earlier of (A) receipt
of
such notice by the recipient or (B) three days after such notice is deposited
in
first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one
Business Day after delivery to such carrier. All notices shall be addressed
to
the party to be notified at the address as follows, or at such other address
as
such party may designate by ten days’ advance written notice to the other
party:
If
to the
Company:
Caprius,
Inc.
Xxx
Xxxxxxxxxx Xxxxx
Xxxxxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxx, President
Fax:
(000) 000-0000
With
a
copy to:
Xxxxxx
Xxxx & Priest LLP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxx X. Xxxx, Esq.
Fax:
(000) 000-0000
If
to the
Investors:
to
the
addresses set forth on the signature pages hereto.
9.5 Expenses.
The
parties hereto shall pay their own costs and expenses in connection herewith,
except the Company shall pay the reasonable fees and expenses of Xxxxxx
Securities, LLC equal to two (2%) percent of the aggregate Purchase Price,
but
not to exceed $35,000. The Company shall reimburse the Investors for all
reasonable out-of-pocket expenses incurred by the Investors, including without
limitation reimbursement of attorneys’ fees and disbursements, in connection
with the preparation of the Transaction Documents, but not to exceed $5,000,
to
be paid by Xxxxxx Securities, LLC, any amendment, modification or waiver of
this
Agreement or the other Transaction Documents upon demand accompanied by
documentation of such expenses. In the event that legal proceedings are
commenced by any party to this Agreement against another party to this Agreement
in connection with this Agreement or the other Transaction Documents, the party
or parties which do not prevail in such proceedings shall severally, but not
jointly, pay their pro rata share of the reasonable attorneys’ fees and other
reasonable out-of-pocket costs and expenses incurred by the prevailing party
in
such proceedings.
9.6 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors who purchased at least 66% of the Securities. Any amendment
or
waiver effected in accordance with this section shall be binding upon each
holder of any
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Securities
purchased under this Agreement at the time outstanding, each future holder
of
all such Securities, and the Company.
9.7 Publicity.
The
Company shall, by 8:30 a.m. New York City time on the Trading Day immediately
following the date hereof, issue a Current Report on Form 8-K, disclosing the
material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Investor who purchased
at
least $1,000,000 of Securities hereunder (a “Principal
Investor”)
shall
consult with each other in issuing any other press releases with respect to
the
transactions contemplated hereby, and neither the Company nor any Principal
Investor shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Investor, or without the prior consent of each Principal
Investor, with respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure is required
by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name
of any Investor, or include the name of any Investor in any filing with the
SEC
or any regulatory agency or the Trading Market, without the prior written
consent of such Investor, except (i) as required by federal securities law
in
connection with (A) any Registration Statement contemplated by the Registration
Rights Agreement and (B) the filing of final Transaction Documents (including
signature pages thereto) with the SEC and (ii) to the extent such disclosure
is
required by law or regulations of the Trading Market, in which case the Company
shall provide the Investors with prior notice of such disclosure permitted
under
this subclause (ii).
9.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
9.9 Entire
Agreement.
This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof, other than any written
confidentiality agreement between the Company and an Investor, which shall
continue in full force and effect.
9.10 Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
9.11 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State
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of
New
York without regard to the choice of law principles thereof. Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of the courts of the
State of New York located in New York County and the United States District
Court for the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any
such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under
this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying
of
venue in such court. Each party hereto irrevocably waives any objection to
the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12 Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by
such
Investor independently of any other Investor. Nothing contained herein or in
any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
[signature
page follows]
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IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
|
The
Company:
|
CAPRIUS,
INC.
|
|
|
By:
|
/s/ Xxxxxx Xxxxx | |
|
Name:
Xxxxxx Xxxxx
|
||
|
Title:
President and Chief Executive
Officer
|
||
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INVESTOR
SIGNATURE PAGE TO
CAPRIUS,
INC. PURCHASE AGREEMENT
IN
WITNESS WHEREOF, the undersigned have caused this Purchase Agreement to be
duly
executed by their respective authorized signatories as of the date first
indicated above.
Name
of
Investor: ____________________________________________________
Signature
of Authorized Signatory of Investor:
______________________________
Name
of
Authorized Signatory: __________________________________________
Title
of
Authorized Signatory: ___________________________________________
Email
Address of Investor: _____________________________________________
Address
for Notice of Investor:
Address
for Delivery of Securities for Investor (if not same as above):
Subscription
Amount: $________________
Shares:
____________________________
Series
A
Warrants: ___________________
Series
B
Warrants: ___________________
SS
or EIN
Number: [PROVIDE
THIS UNDER SEPARATE COVER]
-33-
