SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
December 22, 2006, by and among DigitalFX International, Inc., a Florida
corporation (the "Company"), and each purchaser identified on the signature
pages hereto (each, including its successors and assigns, a "Purchaser" and
collectively, the "Purchasers").
RECITALS
A. The Company and each Purchaser is executing and delivering this
agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission under the Securities Act.
B. Each Purchaser, severally and not jointly, wishes to purchase,
and the Company wishes to sell, upon the terms and conditions stated in this
Agreement, that aggregate number of shares of the Common Stock, par value $0.001
per share (the "Common Stock"), of the Company, set forth below such Purchaser's
name on the signature page of this Agreement (which aggregate amount for all
Purchasers together shall be 1,000,000 shares of Common Stock and shall be
collectively referred to herein as the "Shares"), at $4.75 per share (the
"Purchase Price").
C. The Company has engaged Xxxx Capital Partners, LLC as its
placement agent (the "Placement Agent") for the offering of the Shares on a
"best efforts" basis.
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit A (the "Registration Rights
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Agreement"), pursuant to which, among other things, the Company will agree to
provide certain registration rights with respect to the Shares under the
Securities Act and applicable state securities laws.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
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Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"Action" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or, to the Company's Knowledge, threatened in writing
against or affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or administrative
agency, regulatory authority (federal, state, county, local or foreign), stock
market, stock exchange or trading facility.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, Controls, is
controlled by or is under common control with such Person, as such terms are
used in and construed under Rule 144. With respect to a Purchaser, any
investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
"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.
"Buy-In" has the meaning set forth in Section 4.1(f).
"Buy-In Price" has the meaning set forth in Section 4.1(f).
"Cash Placement Agent Fee" has the meaning set forth in Section
3.1(w), and shall be paid subject to the engagement letter, dated October 3,
2006, between the Company, the Placement Agent and Xxxxx-Xxxxxx Capital Group.
"Closing" means the closing of the purchase and sale of the Shares
pursuant to this Agreement.
"Closing Date" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all of the conditions set forth in Sections 2.1 and 2.2 hereof are
satisfied, or such other date as the parties may agree.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" has the meaning set forth in the Recitals, and also
includes any securities into which the Common Stock may hereafter be
reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or any
Subsidiary 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 or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company Deliverables" has the meaning set forth in Section 2.2(a).
"Company's Knowledge" (or words of similar import, such as 'to the
Knowledge of the Company') means with respect to any statement made to the
knowledge of a party, that the statement is based upon the actual knowledge of
the officers of such party having responsibility for the matter or matters that
are the subject of the statement.
"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.
"Disclosure Materials" has the meaning set forth in Section 3.1(h).
"Effective Date" means the date on which the initial Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"Effectiveness Deadline" means the date on which the initial
Registration Statement is required to be declared effective by the Commission
under the terms of the Registration Rights Agreement.
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"Environmental Laws" has the meaning set forth in Section 3.1(l).
"Evaluation Date" has the meaning set forth in Section 3.1(v).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"Excluded Issuances" means each of the following: (i) the issuance of
securities upon the exercise or conversion of any Common Stock or Common Stock
Equivalents issued by the Company prior to the date hereof, (ii) the grant of
options, warrants or other Common Stock Equivalents under any duly authorized
Company stock option, restricted stock plan or stock purchase plan whether now
existing or hereafter approved by the Company and its stockholders in the
future, and the issuance of Common Stock in respect thereof; (iii) the issuance
of Common Stock pursuant to this Agreement; or (iv) the issuance of securities,
including, without limitation, Common Stock or Common Stock Equivalents, in
connection with bona fide, arms' length (a) bank financings, (b) corporate
partnering transactions, (c) equipment leases or (d) acquisitions of
intellectual property rights on terms approved by a majority of the Board of
Directors; provided that such transactions are primarily for purposes other than
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equity financing.
"Florida Counsel" means Xxxxxxx X. Xxxxxx, Esq.
"Full Ratchet Period" means the period of time beginning on the
Closing Date and ending on the first anniversary thereof.
"GAAP" means U.S. generally accepted accounting principles, as applied
by the Company.
"Indemnified Person" has the meaning set forth in Section 4.7(b).
"Intellectual Property" has the meaning set forth in Section 3.1(r).
"Irrevocable Transfer Agent Instructions" means, with respect to the
Company, the Irrevocable Transfer Agent Instructions, in the form of Exhibit E,
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executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.
"Lien" means any lien, charge, claim, encumbrance, security interest,
right of first refusal, preemptive right or other restrictions of any kind.
"Lock-Up Agreement" means, with respect to the members of management
of the Company (and any entities owned or Controlled by any of them), the
Lock-Up Letter Agreement, in the form of Exhibit F, executed by the members of
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management of the Company (and any entities owned or Controlled by any of them)
set forth on Schedule F annexed hereto and made a part hereof, and delivered to
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the Placement Agent.
"Losses" has the meaning set forth in Section 4.7(a).
"Material Adverse Effect" means any of (i) a material and adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material and adverse effect on the results of operations, assets,
prospects, business or financial condition of the Company and the Subsidiaries,
taken as a whole, or (iii) any material adverse impairment to the Company's
ability to perform in any material respect on a timely basis its obligations
under any Transaction Document.
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"Material Contract" means any contract of the Company that was filed
as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item 601(b)(10)
of Regulation S-K.
"Material Permits" has the meaning set forth in Section 3.1(p).
"Net Escrow Amount" means the Escrow Amount (as defined in Section
2.3) less the Cash Placement Agent Fee (as defined in Section 3.1(w)).
"New York Courts" means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
"Outside Date" means January 31, 2006.
"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.
"Placement Agent Counsel" has the meaning set forth in Section 2.1.
"Placement Agent Counsel Fees" has the meaning set forth in Section
6.1.
"Principal Trading Market" means the Trading Market on which the
Common Stock is primarily listed on and quoted for trading, which, as of the
Closing Date, shall be the OTC Bulletin Board.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Purchaser Deliverables" has the meaning set forth in Section 2.2(b).
"Purchaser Party" has the meaning set forth in Section 4.7(a).
"Registration Rights Agreement" has the meaning set forth in the
Recitals.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Registrable Securities (as defined in the
Registration Rights Agreement).
"Required Approvals" has the meaning set forth in Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" has the meaning set forth in Section 3.1(h).
"Secretary's Certificate" has the meaning set forth in Section
2.2(a)(vi).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Counsel" means Xxxxxx Xxxxxxxx & Markiles, LLP.
"Short Sales" include, without limitation, all "short sales" as
defined in Rule 200
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promulgated under Regulation SHO under the Exchange Act, whether or not against
the box, and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, short sales, swaps, "put equivalent positions"
(as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements
(including on a total return basis), and sales and other transactions through
non-US broker dealers or foreign regulated brokers.
"Subscription Amount" means with respect to each Purchaser, the
aggregate amount to be paid for the Shares purchased hereunder as indicated on
such Purchaser's signature page to this Agreement next to the heading "Aggregate
Purchase Price (Subscription Amount)".
"Subsidiary" means any "significant subsidiary" as defined in Rule
1-02(w) of Regulation S-X promulgated by the Commission under the Exchange Act
and any other entity required to be disclosed in the SEC Reports pursuant to
Item 601(b)(21) of Regulation S-K.
"Trading Affiliate" has the meaning set forth in Section 3.2(h).
"Trading Day" means (i) a day on which the Common Stock is listed or
quoted and traded on its primary Trading Market (other than the OTC Bulletin
Board), or (ii) if the Common Stock is not listed on a Trading Market (other
than the OTC Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices); provided, that in the event that the
Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.
"Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.
"Transaction Documents" means this Agreement, the schedules and
exhibits attached hereto, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions, the Lock-Up Agreements and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
"Transfer Agent" means Florida Atlantic Stock Transfer, Inc., or any
successor transfer agent for the Company.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
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Agreement, at the Closing, the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of shares of Common Stock, as indicated below such Purchaser's name
on the signature page of this Agreement, for an aggregate purchase price for
such Purchaser as indicated below such Purchaser's name on the signature page of
this Agreement. On or before the Closing Date, the Company shall deliver to
Xxxxxxxxxx Xxxxxxx PC ("Placement Agent Counsel"), in trust, a certificate or
certificates, registered in such name or names as the Purchasers may designate,
representing the Shares, to be held in escrow as contemplated under Section 2.3.
On the date (the "Closing Date") that all of the conditions set forth in
Sections 5.1 and 5.2 have been satisfied or duly waived, the Company and the
Placement Agent shall deliver written instructions to Placement Agent Counsel to
release the Escrow Amount as provided in Section 2.1, whereupon Placement Agent
Counsel shall release the certificates evidencing the Shares then it
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its possession to the Purchasers (the "Closing"). The Closing of the purchase
and sale of the Shares shall take place at the offices of Xxxxxxxxxx Xxxxxxx PC,
1251 Avenue of the Americas, New York, New York on the Closing Date or at such
other locations or remotely by facsimile transmission or other electronic means
as the parties may mutually agree.
2.2 Closing Deliveries. (a) On or prior to the Closing, the
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Company shall issue, deliver or cause to be delivered to each Purchaser the
following (the "Company Deliverables"):
(i) This Agreement, duly executed by the Company;
(ii) One or more stock certificates, free and clear of all
restrictive and other legends (except as provided in Section 4.1(b) hereof),
evidencing a number of Shares indicated below such Purchaser's name on the
signature page of this Agreement, registered in the name of such Purchaser;
(iii) a legal opinion of Florida Counsel, in the form
attached hereto as Exhibit D-1, executed by such counsel and addressed to the
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Purchasers and the Placement Agent;
(iv) a legal opinion of Securities Counsel, in the form
attached hereto as Exhibit D-2, executed by such counsel and addressed to the
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Purchasers and the Placement Agent;
(v) the Registration Rights Agreement, duly executed by the
Company;
(vi) duly executed Irrevocable Transfer Agent Instructions
acknowledged in writing by the Transfer Agent;
(vii) a duly executed Lock-Up Agreement by each member of
management of the Company set forth on Schedule F;
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(viii) a certificate of the Secretary of the Company (the
"Secretary's Certificate"), dated as of the Closing Date, certifying the
resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Shares, certifying the current versions of the
certificate or articles of incorporation, as amended 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; and
(ix) the Compliance Certificate referred to in Section
5.1(h).
(b) On or prior to the Closing, each Purchaser shall deliver or
cause to be delivered to the Company the following (the "Purchaser
Deliverables"):
(i) This Agreement, duly executed by such Purchaser;
(ii) Its Subscription Amount, in United States dollars and in
immediately available funds, in the amount set forth as the "Purchase Price"
indicated below such Purchaser's name on the applicable signature page hereto
pursuant to the escrow arrangements set forth in Section 2.3 below;
(iii) the Registration Rights Agreement, duly executed by
such Purchaser;
(iv) a fully completed and duly executed Selling Stockholder
Questionnaire in the form attached as Annex B to the Registration Rights
Agreement; and
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(v) a fully completed and duly executed Accredited Investor
Questionnaire in the form attached hereto as Exhibit C.
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2.3 Escrow of Purchase Price.
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(a) Simultaneously with the execution and delivery of a
counterpart to this Agreement by a Purchaser, such Purchaser shall promptly
cause a wire transfer of immediately available funds (U.S. dollars) in an amount
representing such Purchaser's Subscription Amount, as set forth on such
Purchaser's signature page, to be paid to the non-interest bearing escrow
account of Placement Agent Counsel, set forth on Exhibit G hereto (the
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aggregate amounts being held in escrow are referred to herein as the "Escrow
Amount"). Placement Agent Counsel shall hold the Escrow Amount in escrow until
(i) Placement Agent Counsel receives written instructions from the Company and
the Placement Agent authorizing the release of the Escrow Amount in accordance
with Section 2.1, (ii) the Outside Date if the Closing shall not have occurred,
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or (iii) Placement Agent Counsel's receipt of written instructions from the
Company and/or the Placement Agent that the Agreement has been terminated in
accordance with Section 6.18 (and, in the case of (ii) and (iii), Placement
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Agent Counsel shall return to each Purchaser or terminating Purchaser, as the
case may be, the portion of the Escrow Amount each such Purchaser delivered to
Placement Agent Counsel). The Company hereby authorizes the Placement Agent
Counsel to release from the Escrow Amount, at the Closing, without further
action or deed (other than receipt of the written instructions from the Company
and the Placement Agent authorizing the release of the Escrow Amount), the (i)
Cash Placement Agent Fee (as defined in Section 3.1(w)) to the Placement Agent,
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(ii) the Placement Agent Counsel Fee, and (iii) the Net Escrow Amount to the
Company.
(b) The Company and the Purchasers acknowledge and agree for the
benefit of Placement Agent Counsel (which shall be deemed to be a third party
beneficiary of this Section 2.3) as follows:
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(i) Placement Agent Counsel (i) is not responsible for the
performance by the Company or the Purchasers of this Agreement or any of the
Transaction Documents or for determining or compelling compliance therewith,
(ii) is only responsible for (A) holding the Escrow Amount in escrow pending
receipt of written instructions from the holders of a majority of the Shares
and/or the Company directing the release of the Escrow Amount in accordance with
Section 2.3 and (B) disbursing the Escrow Amount in accordance with the written
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instructions from the Company and/or the holders of a majority of the Shares in
accordance with Section 2.3, each of the responsibilities of Placement Agent
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Counsel in clause (A) and (B) is ministerial in nature, and no implied duties or
obligations of any kind shall be read into this Agreement against or on the part
of Placement Agent Counsel (collectively, the "Placement Agent Counsel Duties"),
(iii) shall not be obligated to take any legal or other action hereunder which
might in its judgment involve or cause it to incur any expense or liability
unless it shall have been furnished with indemnification acceptable to it, in
its sole discretion, (iv) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction (including, without
limitation, wire transfer instructions, whether incorporated herein or provided
in a separate written instruction), instrument, statement, certificate, request
or other document furnished to it hereunder and believed by it to be genuine and
to have been signed or presented by the proper Person, and shall have no
responsibility for making inquiry as to, or for determining, the genuineness,
accuracy or validity thereof, or of the authority of the Person signing or
presenting the same and (v) may consult counsel satisfactory to it, and the
written opinion or advice of such counsel in any instance shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the opinion or
advice of such counsel. Documents and written materials referred to in this
Section 2.3 include, without limitation, e-mail and other electronic
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transmissions capable of being printed, whether or not they are in fact printed;
and any such e-mail or other electronic transmission may be deemed and treated
by Placement Agent Counsel as having been signed or presented by a Person if it
bears, as sender, the Person's e-mail address.
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(ii) Placement Agent Counsel shall not be liable to anyone
for any action taken or omitted to be taken by it hereunder, except in the case
of Placement Agent Counsel's gross negligence, or willful misconduct in breach
of the Placement Agent Counsel Duties. IN NO EVENT SHALL PLACEMENT AGENT
COUNSEL BE LIABLE FOR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR
LOSS (INCLUDING BUT NOT LIMITED TO LOST PROFITS) WHATSOEVER, EVEN IF PLACEMENT
AGENT COUNSEL HAS BEEN INFORMED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND
REGARDLESS OF THE FORM OF ACTION.
(iii) The Company and the Purchasers hereby, jointly and
severally, indemnify and hold harmless Placement Agent Counsel from and against,
any and all loss, liability, cost, damage and expense, including, without
limitation, reasonable counsel fees and expenses, which Placement Agent Counsel
may suffer or incur by reason of any action, claim or proceeding brought against
Placement Agent Counsel arising out of or relating to the performance of the
Placement Agent Counsel Duties, unless such action, claim or proceeding is the
result of the willful misconduct, or gross negligence of Placement Agent
Counsel.
(iv) Placement Agent Counsel has acted as legal counsel to
the Placement Agent in connection with this Agreement and the other Transaction
Documents, is merely acting as a stakeholder under this Agreement and is,
therefore, hereby authorized to continue acting as legal counsel to Placement
Agent including, without limitation, with regard to any dispute arising out of
this Agreement, the other Transaction Documents, the Escrow Amount or any other
matter. Each of the Company and the Purchasers hereby expressly consents to
permit Placement Agent Counsel to represent the Placement Agent in connection
with all matters relating to this Agreement, including, without limitation, with
regard to any dispute arising out of this Agreement, the other Transaction
Documents, the Escrow Amount or any other matter, and hereby waives any conflict
of interest or appearance of conflict or impropriety with respect to such
representation. Each of the Company and the Purchasers has consulted with its
own counsel specifically about this Section 2.3 to the extent they deemed
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necessary, and has entered into this Agreement after being satisfied with such
advice.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Purchasers and to the Placement Agent that,
except as set forth in the Schedules delivered herewith:
(a) Subsidiaries. The Company has no direct or indirect
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Subsidiaries other than those listed in the SEC Reports. Except as disclosed in
the SEC Reports hereto, the Company owns, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary free and clear
of any and all Liens, and all the issued and outstanding shares of capital stock
or comparable equity interest of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization and Qualification. The Company and each
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Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own or lease and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
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qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to, have
individually or in the aggregate, resulted in a Material Adverse Effect, and no
Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.
(c) Authorization; Enforcement; Validity. The Company has the
--------------------------------------
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents to which it is a
party and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Shares) have been duly authorized by all necessary corporate action on the part
of the Company, and no further corporate action is required by the Company, its
Board of Directors or its shareholders in connection therewith other than in
connection with the Required Approvals. Each of the Transaction Documents to
which it is a party has been (or upon delivery will have been) duly executed by
the Company and is, or when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. Except as set forth on the SEC Reports, there are no shareholder
agreements, voting agreements, or other similar arrangements with respect to the
Company's capital stock to which the Company is a party or, to the Company's
Knowledge, between or among any of the Company's shareholders.
(d) No Conflicts. The execution, delivery and performance by the
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Company of the Transaction Documents to which it is a party and the consummation
by the Company of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Shares) do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound, or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations and the rules and regulations, assuming
the correctness of the representations and warranties made by the Purchasers
herein, of any self-regulatory organization to which the Company or its
securities are subject, including all applicable Trading Markets), or by which
any property or asset of the Company or a Subsidiary is bound or affected,
except in the case of clauses (ii) and (iii) such as would not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any
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Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents (including the issuance of the Shares), other than (i) the
filing with the Commission of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, (ii) filings
required by applicable state securities laws, (iii) the filing of a Notice of
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act, (iv) the filing of any requisite notices and/or
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application(s) to the Principal Trading Market for the issuance and sale of the
Common Stock and the listing of the Common Stock for trading or quotation, as
the case may be, thereon in the time and manner required thereby, (v) the
filings required in accordance with Section 4.6 of this Agreement and (vi) those
that have been made or obtained prior to the date of this Agreement
(collectively, the "Required Approvals").
(f) Issuance of the Shares. The Shares have been duly authorized
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and, when issued and paid for in accordance with the terms of the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens, other than restrictions on transfer provided for in the
Transaction Documents or imposed by applicable securities laws, and shall not be
subject to preemptive or similar rights of shareholders. Assuming the accuracy
of the representations and warranties of the Purchasers in this Agreement, the
Shares will be issued in compliance with all applicable federal and state
securities laws.
(g) Capitalization. The number of shares and type of all
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authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is specified in
Schedule 3.1(g) hereto. All of the outstanding shares of capital stock of the
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Company are duly authorized, validly issued, fully paid and non-assessable, have
been issued in compliance in all material respects with all applicable federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase any capital stock of the Company. Except as specified in Schedule
--------
3.1(g) hereto, there are no outstanding options, warrants or scrip rights to
-----
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of the
Company's capital stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of capital stock of the Company, or options, securities
or rights convertible or exchangeable into shares of capital stock of the
Company. Except for customary adjustments as a result of stock dividends, stock
splits, combinations of shares, reorganizations, recapitalizations,
reclassifications or other similar events, or as disclosed in Schedule 3.1(g)
---------------
hereto or in any Schedule 13D or Schedule 13G or Company report on file with the
Commission, there are no anti-dilution or price adjustment provisions contained
in any security issued by the Company (or in any agreement providing rights to
security holders), and the issuance and sale of the Shares will not, immediately
or with the passage of time, obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of securities to adjust the exercise,
conversion, exchange or reset price under such securities.
(h) SEC Reports. The Company has filed all reports, schedules,
------------
forms, statements and other documents required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the "SEC Reports" and together with
this Agreement and the Schedules to this Agreement (if any), the "Disclosure
Materials"), on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of the date hereof, the Company is not aware of any event
occurring on or prior to the Closing Date (other than the transactions
contemplated by the Transaction Documents) that requires the filing of a Form
8-K after the Closing. As of their respective dates, or to the extent corrected
by a subsequent restatement, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
10
(i) Financial Statements. The financial statements of the
---------------------
Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing (or to the
extent corrected by a subsequent restatement). Such financial statements have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries taken as a whole as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(j) Tax Matters. Each of the Company and its Subsidiaries (i) has
-----------
accurately and timely prepared and filed all foreign, federal and state income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith, with respect to which adequate reserves have been set aside on the
books of the Company and (iii) has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply, except, in the case of
clauses (i) and (ii) above, where the failure to so pay or file any such tax,
assessment, charge or return would not result in a Material Adverse Effect.
There are no unpaid taxes in any material amount claimed to be due by the
Company or any of its Subsidiaries by the taxing authority of any jurisdiction.
(k) Material Changes. Since the date of the latest audited
-----------------
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports or as set forth in Schedule 3.1(k) hereto, (i)
---------------
there have been no events, occurrences or developments that have had or that
could reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables, accrued expenses and
other liabilities incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the manner in which it keeps its accounting books and records,
(iv) the Company has not declared or made any dividend or distribution of cash
or other property to its shareholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (other than in
connection with repurchases of unvested stock issued to employees of the
Company) and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except Common Stock issued in the ordinary
course as dividends on outstanding preferred stock or pursuant to existing
Company stock option or stock purchase plans or executive and director corporate
arrangements disclosed in the SEC Reports and (vi) there has not been any
material change or amendment to, or any waiver of any material right under, any
contract under which the Company, any subsidiary thereof, or any of their assets
is bound or subject. Except for the issuance of the Shares contemplated by this
Agreement or as set forth in Schedule 3.1(k) hereto, no event, liability or
---------------
development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made that has not been
publicly disclosed at least one Trading Day prior to the date that this
representation is made.
(l) Environmental Matters. To the Company's Knowledge, neither
----------------------
the Company nor any Subsidiary (i) 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
11
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), (ii) owns or operates any real property contaminated with any substance
that is in violation of any Environmental Laws, (iii) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, and (iv) 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.
(m) Litigation. There is no Action which (i) adversely affects or
----------
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Shares or (ii) except as specifically disclosed in the SEC
Reports, could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor, to the Company's
Knowledge, any current director or officer thereof (in his or her capacity
thereof), is or has been during the five-year period prior to the Closing Date
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 Commission involving the Company or, to
the Company's Knowledge, any current or former director or officer of the
Company (in his or her capacity as such). The Commission 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 Exchange Act or the
Securities Act.
(n) Employment Matters. No material labor dispute exists or, to
-------------------
the Knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect. None of the Company's or its Subsidiaries' employees is a
member of a union that relates to such employee's relationship with the Company,
and neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to the
Knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters. The
Company and its Subsidiaries are in compliance with all U.S. federal, state,
local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where
the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(o) 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 having
jurisdiction over the Company or its properties or assets, or (iii) is or has
been in violation of, or in receipt of notice that it is in violation of, any
statute, rule or regulation of any governmental authority applicable to the
Company, except in each case as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(p) Regulatory Permits. The Company and the Subsidiaries possess
-------------------
all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits, individually or in the aggregate, has not and could not
reasonably be expected to result
12
in a Material Adverse Effect ("Material Permits"), and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any such Material Permits.
(q) Title to Assets. Except as set forth on Schedule 3.1(q) and
-----------------
for property that is specifically the subject of, and covered by, other
representations and warranties as to ownership or title contained herein, the
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them that is material to their respective businesses and
good and marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in material
compliance.
(r) Patents and Trademarks. The Company and its Subsidiaries own,
----------------------
possess, license or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service xxxx
registrations, trade names, copyrights, licenses, inventions, trade secrets,
technology, Internet domain names, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct of their
respective businesses as now conducted or as proposed to be conducted. Except
as set forth in the SEC Reports and except where such violations or
infringements would not reasonably be expected to result, either individually or
in the aggregate, in a Material Adverse Effect, (a) there are no rights of third
parties to any such Intellectual Property; (b) to the Company's Knowledge, there
is no infringement by third parties of any such Intellectual Property; (c) there
is no pending or, to the Company's Knowledge, threatened action, suit,
proceeding or claim by others challenging the Company's and its Subsidiaries'
rights in or to any such Intellectual Property, and the Company is unaware of
any facts which would form a reasonable basis for any such claim; (d) there is
no pending or, to the Company's Knowledge, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such Intellectual
Property; and (e) there is no pending or, to the Company's Knowledge, threatened
action, suit, proceeding or claim by others that the Company and/or any of its
Subsidiaries infringe or otherwise violate any patent, trademark, copyright,
trade secret or other proprietary rights of others, and the Company is unaware
of any other fact which would form a reasonable basis for any such claim.
(s) Insurance. The Company and the Subsidiaries are insured by
---------
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses and location
in which the Company and the Subsidiaries are engaged. Neither the Company nor
any Subsidiary has any Knowledge that it will be unable to renew its existing
insurance coverage for the Company and the Subsidiaries as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
(t) Transactions With Affiliates and Employees. Except as set
----------------------------------------------
forth in the SEC Reports made on or prior to the date hereof, 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 or to a presently contemplated transaction (other than
for services as employees, officers and directors) that would be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under the
Securities Act.
(u) Internal Accounting Controls. The Company and the
------------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability,
13
(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.
(v) Xxxxxxxx-Xxxxx; Disclosure Controls. The Company is in
-------------------------------------
compliance in all material respects with all of the provisions of the
Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it as of the Closing Date.
The Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's most recently
filed periodic report under the Exchange Act is being prepared. The Company's
certifying officers have evaluated the effectiveness of the Company's disclosure
controls and procedures as of the end of the most recent periodic reporting
period under the Exchange Act (such date, the "Evaluation Date"). The Company
presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company's internal controls over financial reporting (as such term is defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) or, to the Company's Knowledge, in
other factors that could reasonably be expected to materially affect the
Company's internal controls over financial reporting.
(w) Certain Fees. Except for the fees and commissions payable
-------------
from the Company to the Placement Agent (the "Cash Placement Agent Fee") and the
Placement Agent Counsel Fee, with respect to the offer and sale of the Shares,
no person or entity will have, as a result of the transactions contemplated by
this Agreement, any valid right, interest or claim against or upon the Company
or a Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company. The Company shall pay, and hold each Purchaser harmless against, any
liability, loss or expense (including, without limitation, attorneys' fees and
out-of-pocket expenses) arising in connection with any such right, interest or
claim.
(x) Private Placement. Assuming the accuracy of the
------------------
Purchasers' representations and warranties set forth in Section 3.2 of this
Agreement, no registration under the Securities Act is required for the offer
and sale of the Shares by the Company to the Purchasers under the Transaction
Documents. Other than each of the Purchasers or as set forth in Schedule
--------
3.1(x) hereto, no Person has any right to cause the Company to effect the
------
registration under the Securities Act of any securities of the Company other
than those securities which are currently registered on an effective
registration statement on file with the Commission.
(y) No Directed Selling Efforts or General Solicitation. Neither
----------------------------------------------------
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has conducted any "general solicitation" or "general advertising" (as
those terms are used in Regulation D) in connection with the offer or sale of
any of the Shares.
(z) No Integrated Offering. Assuming the accuracy of the
------------------------
Purchasers' representations and warranties set forth in Section 3.2, neither the
Company, its Subsidiaries nor any of their Affiliates, nor any Person acting on
its or their behalf has, directly or indirectly, at any time within the past six
months, made any offers or sales of any Company security or solicited any offers
to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the
Shares as contemplated hereby or (ii) cause the offering of the Shares pursuant
to the Transaction Documents to be integrated with prior offerings by the
Company for purposes of any applicable law, regulation or shareholder approval
14
provisions, including, without limitation, under the rules and regulations of
any Trading Market on which any of the securities of the Company are listed or
designated.
(aa) Listing and Maintenance Requirements. The Company's Common
--------------------------------------
Stock is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to terminate the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration. Except as
specified in the SEC Reports, the Company has not, in the two years preceding
the date hereof, received written 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 in all material respects with
the listing and maintenance requirements for continued trading of the Common
Stock on the Principal Trading Market.
(bb) Investment Company. Neither the Company nor any of its
-------------------
Subsidiaries is required to be registered as, and is not an Affiliate of, and
immediately following the Closing will not be required to register as, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(cc) Questionable Payments. Neither the Company nor any of its
----------------------
Subsidiaries, nor, to the Company's Knowledge, any directors, officers,
employees, agents or other Persons acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company: (a) directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
foreign or domestic political activity; (b) made any direct or indirect unlawful
payments to any foreign or domestic governmental officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds; (c)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (d) made any other unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
(dd) Application of Takeover Protections. The Company and its
--------------------------------------
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's charter documents or the laws of its
state of incorporation that is or could reasonably be expected to become
applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, the Company's issuance of
the Shares and the Purchasers' ownership of the Shares.
(ee) Disclosure. The Company confirms that neither it nor any of
----------
its officers or directors nor any other Person acting on its or their behalf has
provided, and it has not authorized the Placement Agent to provide, any
Purchaser with any information that it believes constitutes or could reasonably
be expected to constitute material, non-public information except insofar as the
existence, provisions and terms of the Transaction Documents and the proposed
transactions hereunder may constitute such information, all of which will be
disclosed by the Company in the Press Release as contemplated by Section 4.6
hereof. The Company understands and confirms that the Purchasers will rely on
the foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby furnished by the Company or
authorized by the Company and furnished by the Placement Agent on behalf of the
Company (including the Company's representations and warranties set forth in
this Agreement) 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 light of the
circumstances under which they were made, not misleading.
15
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,
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, except for the announcement of
this Agreement and related transactions.
(ff) Off Balance Sheet Arrangements. There is no transaction,
---------------------------------
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(gg) Consultation with Auditors. The Company has consulted its
----------------------------
independent auditors concerning the accounting treatment of the transactions
contemplated by the Transaction Documents and in connection therewith has
furnished such auditors complete copies of the Transaction Documents. The
Company intends to account for the gross proceeds raised from the financing
which is the subject of this Agreement as equity in its financial statements.
(hh) No Additional Agreements. The Company does not have any
--------------------------
agreement or understanding with any Purchaser with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
--------------------------------------------------
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company and the Placement Agent as
follows:
(a) Organization; Authority. Such Purchaser is an entity duly
------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or, if such Purchaser is
not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed by such Purchaser,
and when delivered by such Purchaser in accordance with terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(b) Investment Intent. Such Purchaser understands that the Shares
-----------------
are "restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Shares for its
own account and not with a view to, or for distributing or reselling such Shares
or any part thereof in violation of the Securities Act or any applicable state
securities laws, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such Shares
pursuant to an effective registration statement under the Securities Act or
under an exemption from such registration and in compliance with applicable
federal and state securities laws. Such Purchaser is acquiring the Shares
hereunder in the ordinary course of its business. Such Purchaser does not
presently have any agreement, plan or understanding, directly or indirectly,
with any Person to distribute or effect any distribution of any of the Shares
(or any securities which are derivatives thereof) to or through any person or
entity; provided, however, that by making the representations herein, such
Purchaser does not agree to hold any of the Shares for any minimum period of
time.
16
(c) Purchaser Status. At the time such Purchaser was offered the
-----------------
Shares, it was, and at the date hereof it is an "accredited investor" as defined
in Rule 501(a) under the Securities Act. Such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.
(d) General Solicitation. Such Purchaser is not purchasing the
--------------------
Shares as a result of any advertisement, article, notice or other communication
regarding the Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general advertisement.
(e) Experience of Such Purchaser. Such Purchaser, either alone or
----------------------------
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Shares and, at the present time,
is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it
-----------------------
has had the opportunity to review the Disclosure Materials and has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the merits and risks of investing
in the Shares; (ii) access to information (other than material non-public
information) about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties contained
in the Transaction Documents.
(g) Certain Trading Activities. Other than with respect to
----------------------------
the transactions contemplated herein, since the earlier to occur of (1) the time
that such Purchaser was first contacted by the Company, the Placement Agent or
any other Person regarding this investment in the Company and (2) the tenth
(10th) day prior to the date of this Agreement, neither the Purchaser nor any
Affiliate of such Purchaser which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Purchaser's
investments or trading or information concerning such Purchaser's investments,
including in respect of the Shares, and (z) is subject to such Purchaser's
review or input concerning such Affiliate's investments or trading
(collectively, "Trading Affiliates") has directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser
or Trading Affiliate, effected or agreed to effect any transactions in the
securities of the Company (including, without limitation, any Short Sales
involving the Company's securities). Notwithstanding the foregoing, in the case
of a Purchaser and/or Trading Affiliate that is, individually or collectively, a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser's or Trading Affiliate's assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser's or Trading
Affiliate's assets, the representation set forth above shall apply only with
respect to the portion of assets managed by the portfolio manager that have
knowledge about the financing transaction contemplated by this Agreement. Other
than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, no Purchaser 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 4.6.
17
(h) Brokers and Finders. No Person will have, as a result of the
--------------------
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or any Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Purchaser.
(i) Independent Investment Decision. Such Purchaser has
---------------------------------
independently evaluated the merits of its decision to purchase Shares pursuant
to the Transaction Documents, and such Purchaser confirms that it has not relied
on the advice of any other Purchaser's business and/or legal counsel in making
such decision. Such Purchaser understands that nothing in this Agreement or any
other materials presented by or on behalf of the Company to the Purchaser in
connection with the purchase of the Shares constitutes legal, tax or investment
advice. Such Purchaser has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Shares. Such Purchaser understands that the Placement
Agent has acted solely as the agent of the Company in this placement of the
Shares and such Purchaser has not relied on the business or legal advice of the
Placement Agent or any of its agents, counsel or Affiliates in making its
investment decision hereunder, and confirms that none of such Persons has made
any representations or warranties to such Purchaser in connection with the
transactions contemplated by the Transaction Documents. Such Purchaser
acknowledges and agrees that it has not asked for, and has not received, any
advice from Placement Agent Counsel with respect to this Agreement or the
transactions contemplated hereby.
(j) Reliance on Exemptions. Such Purchaser understands that the
------------------------
Shares being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgements and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Shares.
(k) No Governmental Review. Such Purchaser understands that no
------------------------
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Shares or
the fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.
The Company acknowledges and agrees that no Purchaser has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Compliance with Laws. Notwithstanding any other provision
---------------------
of this Article IV, each Purchaser covenants that the Shares may be disposed of
only pursuant to an effective registration statement under, and in compliance
with the requirements of, the Securities Act, or pursuant to an available
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable state
and federal securities laws. In connection with any transfer of the Shares
other than (i) pursuant to an effective registration statement, (ii) to the
Company, (iii) to an Affiliate of a Purchaser, (iv) pursuant to Rule 144
(provided that the Purchaser provides the Company with reasonable assurances (in
the form of seller and broker representation letters) that the Shares may be
sold pursuant to such rule, (v) pursuant to Rule 144(k) following the applicable
holding period or (vi) in connection with a bona fide pledge as contemplated in
Section 4.1(b), except as otherwise provided herein, the Company may
18
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the form
and substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred Shares under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) Legends. Certificates evidencing the Shares shall bear any
-------
legend as required by the "blue sky" laws of any state and a restrictive legend
in substantially the following form, until such time as they are not required
under Section 4.1(c):
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES
HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
OR BLUE SKY LAWS AS SATISFACTORY TO THE COMPANY.
The Company acknowledges and agrees that a Purchaser may from time to
time pledge, and/or grant a security interest in, some or all of the legended
Shares in connection with applicable securities laws, pursuant to a bona fide
margin agreement in compliance with a bona fide margin loan. Such a pledge
would not be subject to approval or consent of the Company and no legal opinion
of legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion shall be required in
connection with a subsequent transfer or foreclosure following default by the
Purchaser transferee of the pledge. No notice shall be required of such pledge,
but Purchaser's transferee shall promptly notify the Company of any such
subsequent transfer or foreclosure. Each Purchaser acknowledges that the
Company shall not be responsible for any pledges relating to, or the grant of
any security interest in, any of the Shares or for any agreement, understanding
or arrangement between any Purchaser and its pledgee or secured party. At the
applicable Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Shares may reasonably
request in connection with a pledge or transfer of the Shares, including the
preparation and filing of any required prospectus supplement under Rule
423(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of Selling Stockholders thereunder. Each
Purchaser acknowledges and agrees that, except as otherwise provided in Section
4.1(c), any Shares subject to a pledge or security interest as contemplated by
this Section 4.1(b) shall continue to bear the legend set forth in this Section
4.1(b) and be subject to the restrictions on transfer set forth in Section
4.1(a).
(c) Removal of Legends. The legend set forth in Section 4.1(b)
--------------------
above shall be removed and the Company shall issue a certificate without such
legend to the holder of the Shares upon which it is stamped or issue to such
holder by electronic delivery at the applicable balance account at The
Depository Trust Company ("DTC"), if (i) such Shares are registered for resale
under the Securities Act, (ii) such Shares are sold or transferred pursuant to
Rule 144 (assuming the transferor is not an Affiliate of the Company, or (iii)
such Shares are eligible for sale under Rule 144(k). The Company shall cause
its counsel to issue the legal opinion referred to in the Irrevocable Transfer
Agent Instructions to the Company's transfer agent on the Effective Date. Any
fees (with respect to the Transfer Agent, counsel to the Company or otherwise)
19
associated with the issuance of such opinion or the removal of such legend shall
be borne by the Company. The Company shall not make any notation on its records
or give instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section.
(d) Irrevocable Transfer Agent Instructions. The Company shall
------------------------------------------
issue irrevocable instructions to its transfer agent, and any subsequent
transfer agent, to issue certificates or credit shares to the applicable balance
accounts at DTC, registered in the name of each Purchaser or its respective
nominee(s), for the Shares in such amounts as specified from time to time by
each Purchaser to the Company in the form of Exhibit E attached hereto (the
---------
"Irrevocable Transfer Agent Instructions"). The Company warrants that no
------------------------------------------
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 4.1(d) will be given by the Company to its transfer agent in
connection with this Agreement, and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. The Company
acknowledges that a breach by it of its obligations under this Section 4.1(d)
will cause irreparable harm to a Purchaser. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 4.1(d) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 4.1(d), that
a Purchaser shall be entitled, in addition to all other available remedies, to
an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
(e) Acknowledgement. Each Purchaser hereunder acknowledges its
---------------
primary responsibilities under the Securities Act and accordingly will not sell
the Shares or any interest therein without complying with the requirements of
the Securities Act. While the above-referenced registration statement remains
effective, each Purchaser hereunder may sell the shares in accordance with the
plan of distribution contained in the registration statement and if it does so
it will comply therewith and with the related prospectus delivery requirements
unless an exemption therefrom is available. Each Purchaser, severally and not
jointly with the other Purchasers, agrees that if it is notified by the Company
at any time after the date any legend is removed pursuant to Section 4.1(c)
--------------
hereof that the registration statement registering the resale of the Shares is
not effective or that the prospectus included in such registration statement no
longer complies with the requirements of Section 10 of the Securities Act, the
Purchaser will refrain from selling such Shares and until such time as the
Purchaser is notified by the Company that such registration statement is
effective or such prospectus is compliant with Section 10 of the Exchange Act,
unless such Purchaser is able to, and does, sell such Shares pursuant to an
available exemption from the registration requirements of Section 5 of the
Securities Act. Both the Company and its transfer agent, and their respective
directors, officers, employees and agents, may rely on this subsection (e) and
each Purchaser hereunder will indemnify and hold harmless each of such persons
from any breaches or violations of this paragraph.
(f) Buy-In. If the Company shall fail for any reason or for no
------
reason to issue to the holder of the Shares within three (3) Trading Days after
the occurrence of any of (c)(i) through (c)(iii) above a certificate without
such legend to the holder or to issue such Shares to such holder by electronic
delivery at the applicable balance account at DTC, and if on or after such
Trading Date the Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Purchaser of shares of Common Stock that the Purchaser anticipated receiving
from the Company without any restrictive legend (a "Buy-In"), then the Company
shall, within three (3) Trading Days after the Purchaser's request and in the
Purchaser's sole discretion, either (i) pay cash to the Purchaser in an amount
equal to the Purchaser's total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased (the "Buy-In Price"), at
which point the Company's obligation to deliver such certificate shall terminate
and such shares shall be cancelled, or (ii) promptly honor its obligation to
deliver to the Purchaser a certificate or certificates representing such number
of shares of Common Stock that would have been issued if the Company timely
complied with its obligations hereunder and pay cash to
20
Purchaser in an amount equal to the excess (if any) of the Buy-In Price over the
product of (a) such number of shares of Common Stock that the Company was
required to deliver to the Purchaser on the Delivery Date, multiplied by (b) the
closing bid price of the Common Stock on the date of the event giving rise to
the Company's obligation to deliver such certificate, as the case may be.
4.2 Reservation of Common Stock. The Company shall maintain a reserve
----------------------------
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.3 Furnishing of Information. As long as any Purchaser owns the
---------------------------
Shares, 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 Exchange Act. As
long as any Purchaser owns Shares, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Shares under Rule 144. The Company
further covenants that it will take such further action as any holder of Shares
may reasonably request, all to the extent required from time to time to enable
such Person to sell the Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
4.4 No Integration. The Company shall not, and shall use its best
---------------
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that will be integrated with the
offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares to the Purchasers, or that
will be integrated with the offer or sale of the Shares for purposes of the
rules and regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.
4.5 Subsequent Registrations. Other than pursuant to the Registration
-------------------------
Statement, prior to the date occurring sixty (60) days after the Effective Date,
the Company shall not file any registration statement (other than on Form S-8)
or, in connection with an acquisition, on Form S-4) with the Commission with
respect to any securities of the Company.
4.6 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York
----------------------------------------
City time) on the Trading Day immediately following the execution of this
Agreement, the Company shall issue a press release (the "Press Release")
-------------
reasonably acceptable to the Placement Agent disclosing all material terms of
the transactions contemplated hereby. On or before 9:00 a.m. (New York City
time) on the Trading Day following the Closing Date, the Company will file a
Current Report on Form 8-K with the Commission describing the terms of the
Transaction Documents (and including as exhibits to such Current Report on Form
8-K the material Transaction Documents (including, without limitation, this
Agreement and the Registration Rights Agreement)). Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser or
an Affiliate of any Purchaser, or include the name of any Purchaser or an
Affiliate of any Purchaser in any press release or filing with the Commission
(other than the Registration Statement) or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure is required by law, request of the Staff of the
Commission or Trading Market regulations. From and after the issuance of the
Press Release, no Purchaser shall be in possession of any material, non-public
information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the Press Release. The Company shall not,
21
and shall cause each of its Subsidiaries and each of their respective officers,
directors, employees and agents, not to, provide any Purchaser with any
material, non-public information regarding the Company or any of its
Subsidiaries from and after the filing of the Press Release without the express
written consent of such Purchaser. In the event of a breach of the foregoing
covenant by the Company, and provided that the Company shall have failed
(following proper written request therefor) to make an appropriate public
disclosure promptly following such written request consistent with the
requirements of Regulation FD, any Subsidiary, or each of their respective
officers, directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, a Purchaser shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material non-public information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Purchaser shall have
any liability to the Company, its Subsidiaries, or any of their respective
officers, directors, employees or agents for any such disclosure. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.6, such Purchaser will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).
4.7 Indemnification.
----------------
(a) Indemnification of Purchasers. In addition to the indemnity
-------------------------------
provided in the Registration Rights Agreement, the Company will indemnify and
hold the Purchasers and their Affiliates and their respective directors,
officers, shareholders, partners, members, managers, employees and agents (each,
a "Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation (collectively, "Losses"), that any such Purchaser Party
may suffer or incur as a result of or relating to any misrepresentation, breach
or inaccuracy of any representation, warranty, covenant or agreement made by the
Company in any Transaction Document. In addition to the indemnity contained
herein, the Company will reimburse each Purchaser Party for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. If and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such losses permissible under applicable law.
(b) 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 4.7(a), 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, 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 actually and 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, delayed or
conditioned. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, delayed or conditioned, 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
22
Party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability arising out of such proceeding.
4.8 Listing of Shares. Promptly following the date hereof, the Company
-----------------
shall take all necessary action to cause the Shares to be listed upon the OTC
Bulletin Board. Further, if the Company applies to have its Common Stock or
other securities listed on any other Trading Market, it shall include in such
application the Shares and will take such other action as is necessary to cause
the Shares to be listed on such other Trading Market as promptly as practicable.
4.9 Use of Proceeds. The Company intends to use the net proceeds from
----------------
the sale of the Shares hereunder for working capital and general corporate
purposes and not to redeem any Common Stock or Common Stock Equivalents or to
settle any outstanding Action.
4.10 Short Sales and Confidentiality After The Date Hereof. Such
-----------------------------------------------------------
Purchaser shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in any transactions in the securities of the Company
(including, without limitation, any Short Sales) involving the Company's
securities during the period from the date hereof until one (1) Trading Day
after such time as (i) the transactions contemplated by this Agreement are first
publicly announced as described in Section 4.6 or (ii) this Agreement is
terminated in full pursuant to Section 6.18. Notwithstanding the foregoing, in
the case of a Purchaser that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such Purchaser's assets
and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser's
assets, the representation set forth above shall apply only with respect to the
portion of assets managed by the portfolio manager that have knowledge about the
financing transaction contemplated by this Agreement. Each Purchaser
understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that covering a
short position established prior to effectiveness of a resale registration
statement with shares included in such registration statement would be a
violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5
under Section A, of the Manual of Publicly Available Telephone Interpretations,
dated July 1997, compiled by the Office of Chief Counsel, Division of
Corporation Finance.
4.11 Certain Adjustments.
--------------------
(a) Except with respect to Excluded Issuances, if at any time
during the Full-Ratchet Period, the Company shall issue or sell or agree to
issue or sell any shares of Common Stock or Common Stock Equivalents to any
Person for a price per share (as determined in accordance with Section 4.11(b))
less than the Purchase Price (the "Lower Per Share Purchase Price"), then and in
each such case (a "Trigger Issuance"), the Company shall issue, in connection
with such Trigger Issuance, a number of additional shares of Common Stock to
each Purchaser equal to the difference of (A) the quotient of such Purchaser's
Subscription Amount divided by the Lower Per Share Price in such Trigger
Issuance, minus (B) the number of shares of Common Stock issued to such
-----
Purchaser on the Closing Date. The price per share at which the Company issues
or sells or agrees to issue or sell shares of Common Stock or Common Stock
Equivalents shall be determined in accordance with the provisions of Section
4.11(b). For the avoidance of doubt, the issuance of Common Stock Equivalents
(and not the actual conversion or exercise of such Common Stock Equivalent into
shares of Common Stock) is the event that gives rise to the issuance of shares
under this Section 4.11. Promptly after each Trigger Issuance (but in no event
more than two (2) Business Days thereafter), the Company shall issue irrevocable
instructions authorizing its transfer agent to issue the Common Stock required
by this Section 4.11.
(b) For purposes of this Section 4.11, the following subsections
(b)(l) to (b)(4) shall apply:
23
(b)(1) Issuance of Rights or Options. In case at any time the Company
shall in any manner grant (directly and not by assumption in a merger or
otherwise) any warrants or other rights to subscribe for or to purchase, or
any options for the purchase of, Common Stock or any stock or security
convertible into or exchangeable for Common Stock (such warrants, rights or
options being called "Options" and such convertible or exchangeable stock
or securities being called "Convertible Securities") whether or not such
Options or the right to convert or exchange any such Convertible Securities
are immediately exercisable, then the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion
or exchange of such Convertible Securities shall be determined by dividing
(i) the sum (which sum shall constitute the applicable consideration) of
(x) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus (y) the aggregate
amount of additional consideration payable to the Company upon the exercise
of all such Options, plus (z), in the case of such Options which relate to
Convertible Securities, the aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities and
upon the conversion or exchange thereof, by (ii) the total maximum number
of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options.
(b)(2) Issuance of Convertible Securities. In case the Company shall
in any manner issue (directly and not by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately
exercisable, then the price per share for which Common Stock is issuable
upon such conversion or exchange shall be determined by dividing (i) the
sum (which sum shall constitute the applicable consideration) of (x) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus (y) the aggregate amount
of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (ii) the total number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities).
(b)(3) Stock Dividends. In case the Company shall declare a dividend
or make any other distribution upon any stock of the Company (other than
the Common Stock) payable in Common Stock, Options or Convertible
Securities, then any Common Stock, Options or Convertible Securities, as
the case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold for $0.01 per share.
(b)(4) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the gross amount
received by the Company therefor, before deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of
Common Stock, Options or Convertible Securities shall be
24
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be
the fair value of such consideration as determined in good faith by the
Board of Directors of the Company, before deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In case any Options shall be issued in
connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such
Options shall be deemed to have been issued for such consideration as
determined in good faith by the Board of Directors of the Company. If
Common Stock, Options or Convertible Securities shall be issued or sold by
the Company and, in connection therewith, other Options or Convertible
Securities (the "Additional Rights") are issued, then the consideration
received or deemed to be received by the Company shall be reduced by the
fair market value of the Additional Rights (as determined using the
Black-Scholes option pricing model or another method mutually agreed to by
the Company and the Purchasers). The Board of Directors of the Company
shall respond promptly, in writing, to an inquiry by the Purchasers as to
the fair market value of the Additional Rights. In the event that the Board
of Directors of the Company and the Purchasers are unable to agree upon the
fair market value of the Additional Rights, the Company and the Purchasers
shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of
such appraiser shall be borne evenly by the Company and the Purchasers.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Obligations of the Purchasers to
-------------------------------------------------------------------
Purchase Shares. The obligation of each Purchaser to acquire Shares at the
----------------
Closing is subject to the fulfillment to such Purchase's satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by such Purchaser (as to itself only):
(a) Representations and Warranties. The representations and
--------------------------------
warranties of the Company contained herein shall be true and correct in all
material respects (except to the extent that any such representation or warranty
is already qualified by materiality, in which case it shall be true and correct
in all respects) as of the date when made and as of the Closing Date, as though
made on and as of such date;.
(b) Performance. The Company and each other Purchaser shall have
-----------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
-------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Consents. The Company shall have obtained in a timely fashion
--------
any and all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Shares, all of
which shall be and remain so long as necessary in full force and effect;
(e) Adverse Changes. Since the date of execution of this
----------------
Agreement, no event or series of events shall have occurred that reasonably
could have or result in a Material Adverse Effect;
(f) No Suspensions of Trading in Common Stock; Listing. Trading
----------------------------------------------------
in the Common Stock shall not have been suspended by the Commission or any
Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a Trading Market;
(g) Company Deliverables. The Company shall have delivered the
---------------------
Company Deliverables in accordance with Section 2.2(a);
25
(h) Compliance Certificate. The Company shall have delivered to
-----------------------
each Purchaser a certificate, dated as of the Closing Date and signed 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 Sections
5.1(a), (b), (c), (d) and (f);
(i) Lock-Up. Each of the Persons identified on Schedule F has
------- ----------
executed and delivered to the Placement Agent a Lock-Up Agreement;
(j) Termination. This Agreement shall not have been terminated as
-----------
to such Purchaser in accordance with Section 6.18 herein.
5.2 Conditions Precedent to the Obligations of the Company to sell
-------------------------------------------------------------------
Shares. The Company's obligation to sell and issue the Shares 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) Representations and Warranties. The representations and
--------------------------------
warranties made by the Purchasers in Section 3.2 hereof shall be true and
------------
correct in all material respects as of the date when made, and as of the Closing
Date as though made on and as of such date;
(b) Performance. The Purchasers shall have performed, satisfied
-----------
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Purchasers at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
-------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Purchasers Deliverables. Each Purchaser shall have delivered
------------------------
its Purchaser Deliverables in accordance with Section 2.2(b); and
(e) Termination. This Agreement shall not have been terminated as
-----------
to such Purchaser in accordance with Section 6.18 herein.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. At Closing, the Company shall reimburse the
-------------------
Placement Agent for the reasonable fees and expenses in connection with the
transactions contemplated by this Agreement, which the Company agrees shall
include the reasonable fees and expenses of the Placement Agent Counsel (which
fees shall include, without limitation, the fees and expenses associated with
the negotiation, preparation and execution and delivery of this Agreement and
the other Transaction Documents and any amendments, modifications or waivers
thereto) (the "Placement Agent Counsel Fees"), which reimbursable fees and
expenses shall not exceed, without the Company's prior written consent, the sum
of $50,000. The Company and the Purchasers shall each pay the fees and expenses
of their respective advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the sale and issuance of the Shares to the
Purchasers. Each party acknowledges that Xxxxxxxxxx Xxxxxxx PC has rendered
legal advice to
26
the Placement Agent and not to such party in connection with the transactions
contemplated hereby, and that such party has relied for such matters on the
advice of its own respective counsel.
6.2 Entire Agreement. The Transaction Documents, together with the
-----------------
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules. At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the
other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.
6.3 Notices. Any and all notices or other communications or deliveries
-------
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:00 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 5:00 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service with next day delivery specified, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: DigitalFX International, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxx 0
Xxx Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (702)
Attention:
With a copy to: Xxxxxx Xxxxxxxx & Markiles, LLP
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Xxxxxxx X. Xxxxxx, Esq.
0000 Xxxx Xxxxx X Xxxxxx
Xxxxx, Xxxxxxx 00000-0000
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
If to a Purchaser: To the address set forth under such Purchaser's name
on the signature page hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
27
6.4 Amendments; Waivers; No Additional Consideration. No provision of
-------------------------------------------------
this Agreement may be waived or amended except in a written instrument signed,
in the case of an amendment, by the Company and each of the Purchasers or, in
the case of a waiver, by the party against whom enforcement of any such waiver
is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right. No consideration shall be offered or paid to any Purchaser to amend or
consent to a waiver or modification of any provision of any Transaction Document
unless the same consideration is also offered to all Purchasers who then hold
Shares.
6.5 Construction. The headings herein are for convenience only, do not
------------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. This
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement or any of the
Transaction Documents.
6.6 Successors and Assigns. The provisions of this Agreement shall
------------------------
inure to the benefit of and be binding upon the parties and their successors and
permitted assigns. This Agreement, or any rights or obligations hereunder, may
not be assigned by the Company without the prior written consent of the
Purchasers. Any Purchaser may assign its rights hereunder in whole or in part
to any Person to whom such Purchaser assigns or transfers any Shares in
compliance with this agreement and applicable law, provided such transferee
shall agree in writing to be bound, with respect to the transferred Shares, by
the terms and conditions of this Agreement that apply to the "Purchasers".
6.7 No Third-Party Beneficiaries. This Agreement is intended for the
------------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except (i) each Purchaser Party is an intended third party
beneficiary of Section 4.7, (ii) Placement Agent Counsel is an intended third
party beneficiary of this Agreement, and (iii) Placement Agent is an intended
third party beneficiary of Article III hereof, and each Purchaser Party or the
Placement Agent, as the case may be, may enforce the provisions of such Sections
directly against the parties with obligations thereunder .
6.8 Governing Law. All questions concerning the construction,
--------------
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent
28
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its reasonable attorneys'
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such Proceeding.
6.9 Survival. Subject to applicable statute of limitations, the
--------
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Shares.
6.10 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, or by e-mail delivery of a "pdf" format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.
6.11 Severability. If any provision of this Agreement is held to be
------------
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.12 Rescission and Withdrawal Right. Notwithstanding anything to the
--------------------------------
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights
6.13 Replacement of Shares. If any certificate or instrument
-----------------------
evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company and the Transfer Agent of such loss, theft or destruction and the
execution by the holder thereof of a customary lost certificate affidavit of
that fact and an agreement to indemnify and hold harmless the Company and the
Transfer Agent for any losses in connection therewith or, if required by the
Transfer Agent, a bond in such form and amount as is reasonably required by the
Transfer Agent. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Shares. If a replacement certificate or
instrument evidencing any Shares is requested due to a mutilation thereof, the
Company may require delivery of such mutilated certificate or instrument as a
condition precedent to any issuance of a replacement.
6.14 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.
29
6.15 Payment Set Aside. To the extent that the Company makes a payment
-----------------
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.16 Adjustments in Share Numbers and Prices. In the event of any
--------------------------------------------
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
6.17 Independent Nature of Purchasers' Obligations and Rights. The
------------------------------------------------------------
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to the Transaction Documents has been made by such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary which may
have been made or given by any other Purchaser or by any agent or employee of
any other Purchaser, and no Purchaser and any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statement or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Shares or enforcing its rights
under the Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Purchasers has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Purchasers and
not because it was required or requested to do so by any Purchaser. The
Company's obligations to each Purchaser under this Agreement are identical to
its obligations to each other Purchaser other than such differences resulting
solely from the number of Shares purchased by such Purchaser, but regardless of
whether such obligations are memorialized herein or in another agreement between
the Company and a Purchaser.
6.18 Termination. This Agreement may be terminated and the sale and
-----------
purchase of the Shares abandoned at any time prior to the Closing by either the
Company or any Purchaser (with respect to itself only) upon written notice to
the other, if the Closing has not been consummated on or prior to 5:00 p.m. (New
York City time) on the Outside Date; provided, however, that the right to
terminate this Agreement under this Section 6.18 shall not be available to any
------------
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time. Nothing in this Section 6.18 shall be deemed to release any
------------
party from any liability for any
30
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. In the event of a termination pursuant to this
Section, the Company shall promptly notify all non-terminating Purchasers. Upon
a termination in accordance with this Section, the Company and the terminating
Purchaser(s) shall not have any further obligation or liability (including
arising from such termination) to the other, and no Purchaser will have any
liability to any other Purchaser under the Transaction Documents as a result
therefrom.
31
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
DigitalFX International, Inc.
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOR PURCHASERS FOLLOW]
32
NAME OF PURCHASER: Kingdon Associates
By: Kingdon Capital Management, LLC
By: /s/ Xxxx Xxxxxxx
------------------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Operating Officer of Kingdon Capital Management,
LLC, the Investment Advisor to Kingdon Associates
Aggregate Purchase Price (Subscription Amount): $1,277,750
Number of Shares to be acquired: 269,000
Tax ID No.:
-------------------------------
Address for Notice:
------------------------------------------
------------------------------------------
------------------------------------------
Telephone No.:
----------------------------
Facsimile No.:
----------------------------
Attention:
----------------------------
Delivery Instructions:
(if different than above)
c/o
-------------------------------------
Street:
---------------------------------
City/State/Zip:
-------------------------
Attention:
------------------------------
Telephone No.:
-------------------------
33
NAME OF PURCHASER: Kingdon Family Partnership, L.P.
By: Kingdon Capital Management, LLC
By: /s/ Xxxx Xxxxxxx
------------------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Operating Officer of Kingdon Capital Management,
LLC, the Investment Advisor to Kingdon Associates
Aggregate Purchase Price (Subscription Amount): $204,250
Number of Shares to be acquired: 43,000
Tax ID No.:
-------------------------------
Address for Notice:
------------------------------------------
------------------------------------------
------------------------------------------
Telephone No.:
----------------------------
Facsimile No.:
----------------------------
Attention:
----------------------------
Delivery Instructions:
(if different than above)
c/o
-------------------------------------
Street:
---------------------------------
City/State/Zip:
-------------------------
Attention:
------------------------------
Telephone No.:
-------------------------
34
NAME OF PURCHASER: X. Xxxxxxx Offshore Ltd.
By: Kingdon Capital Management, LLC
By: /s/ Xxxx Xxxxxxx
------------------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Operating Officer of Kingdon Capital Management,
LLC, the Investment Advisor to Kingdon Associates
Aggregate Purchase Price (Subscription Amount): $3,268,000
Number of Shares to be acquired: 688,000
Tax ID No.:
-------------------------------
Address for Notice:
------------------------------------------
------------------------------------------
------------------------------------------
Telephone No.:
----------------------------
Facsimile No.:
----------------------------
Attention:
----------------------------
Delivery Instructions:
(if different than above)
c/o
-------------------------------------
Street:
---------------------------------
City/State/Zip:
-------------------------
Attention:
------------------------------
Telephone No.:
-------------------------
35
EXHIBITS:
--------
A: Form of Registration Rights Agreement
B: Instruction Sheet for Purchasers
C: Accredited Investor Questionnaire
D-1: Opinion of Florida Counsel
D-2: Opinion of Securities Counsel
E: Irrevocable Transfer Agent Instructions
F: Form of Lock-Up Agreement
G: Escrow Wire Instructions
ANNEXES:
-------
I: Form of Notice of Effectiveness of Registration Statement
SCHEDULES:
---------
3.1(a) Subsidiaries
3.1(c) Authorization; Enforcement
3.1(g) Capitalization
3.1(k) Material Changes
3.1(q) Title to Assets
3.1(x) Registration Rights
36
