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NOTE PURCHASE AGREEMENT
DATED AS OF MARCH19, 2004
BY AND BETWEEN
DWANGO NORTH AMERICA CORP.
AND
ALEXANDRA GLOBAL MASTER FUND LTD.
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9 % SENIOR
CONVERTIBLE NOTES DUE 2007
AND
COMMON STOCK PURCHASE WARRANTS
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXXXXX XXXXX XXXXXXX CORP.
NOTE PURCHASE AGREEMENT
9% SENIOR
CONVERTIBLE NOTES DUE 2007
AND
COMMON STOCK PURCHASE WARRANTS
TABLE OF CONTENTS
PAGE
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1. DEFINITIONS...........................................................1
2. PURCHASE AND SALE; PURCHASE PRICE.....................................8
(a) Purchase............................................................8
(b) Form of Payment.....................................................9
(c) Closing.............................................................9
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER.............9
(a) Purchase for Investment.............................................9
(b) Accredited Investor.................................................9
(c) Reoffers and Resales................................................9
(d) Company Reliance...................................................10
(e) Information Provided...............................................10
(f) Absence of Approvals...............................................10
(g) Note Purchase Agreement............................................10
(h) Buyer Status.......................................................11
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY..........11
(a) Organization and Authority.........................................11
(b) Qualifications.....................................................11
(c) Capitalization.....................................................11
(d) Concerning the Shares and the Common Stock.........................12
(e) Corporate Authorization............................................13
(f) Non-contravention..................................................13
(g) Approvals, Filings, Etc............................................14
(h) Information Provided...............................................14
(i) Conduct of Business................................................14
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(j) SEC Filings........................................................15
(k) Absence of Certain Proceedings.....................................15
(l) Financial Statements; Liabilities..................................15
(m) Material Losses....................................................16
(n) Absence of Certain Changes.........................................16
(o) Intellectual Property..............................................16
(p) Internal Accounting Controls.......................................17
(q) Compliance with Law................................................17
(r) Properties.........................................................17
(s) Labor Relations....................................................18
(t) Insurance..........................................................18
(u) Tax Matters........................................................18
(v) Investment Company.................................................18
(w) Absence of Brokers, Finders, Etc...................................18
(x) No Solicitation....................................................18
(y) ERISA Compliance...................................................19
(z) Absence of Rights Agreement........................................19
5. CERTAIN COVENANTS....................................................19
(a) Transfer Restrictions..............................................19
(b) Restrictive Legends................................................20
(c) Reporting Status...................................................21
(d) Form D.............................................................21
(e) State Securities Laws..............................................21
(f) Limitation on Certain Actions......................................21
(g) Use of Proceeds....................................................22
(h) Best Efforts.......................................................22
(i) Debt Obligation....................................................22
(j) Certain Issuances of Securities....................................22
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.......................23
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.....................23
8. REGISTRATION RIGHTS..................................................24
(a) Mandatory Registration.............................................24
(b) Obligations of the Company.........................................25
(c) Obligations of the Buyer and other Investors.......................29
(d) Rule 144...........................................................31
9. INDEMNIFICATION AND CONTRIBUTION.....................................32
(a) Indemnification....................................................32
(b) Contribution.......................................................33
(c) Other Rights.......................................................34
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10. MISCELLANEOUS........................................................34
(a) Governing Law......................................................34
(b) Headings...........................................................34
(c) Severability.......................................................34
(d) Notices............................................................34
(e) Counterparts.......................................................35
(f) Entire Agreement; Benefit..........................................35
(g) Waiver.............................................................35
(h) Amendment..........................................................35
(i) Further Assurances.................................................36
(j) Assignment of Certain Rights and Obligations.......................36
(k) Expenses...........................................................36
(l) Termination........................................................37
(m) Survival...........................................................38
(n) Public Statements, Press Releases, Etc.............................38
(o) Construction.......................................................38
ANNEXES
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ANNEX I Form of 9% Senior Convertible Note due 2007
ANNEX II Form of Common Stock Purchase Warrant
ANNEX III-1 Form of Opinion of Xxxxxxxx & Xxxxx, LLP to Be Delivered on the
Closing Date
ANNEX III-2 Form of Opinion of Xxxx, Xxxxxxx & Xxxxxxx L.L.P.
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NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of March 19, 2004 (this
"Agreement"), by and between DWANGO NORTH AMERICA CORP., a Nevada corporation
(the "Company"), with headquarters located at 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxxxxx 00000, and ALEXANDRA GLOBAL MASTER FUND LTD., a British
Virgin Islands company (the "Buyer").
W I T N E S S E T H:
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WHEREAS, the Buyer wishes to purchase from the Company and the
Company wishes to sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, a promissory note of the Company having the
aggregate principal amount set forth on the signature page of this Agreement and
in connection with which the Company shall issue to the Buyer warrants to
purchase shares of Common Stock (such capitalized term and all other capitalized
terms used in this Agreement having the meanings provided in Section 1);
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS
(a) As used in this Agreement, the terms "Agreement",
"Buyer" and "Company" shall have the respective meanings assigned to such terms
in the introductory paragraph of this Agreement.
(b) All the agreements or instruments herein defined shall
mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Agreement.
(c) The following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"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 the subject Person.
For purposes of this definition, "control" (including, with correlative meaning,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Blackout Period" means the period of up to 20 Trading Days
(whether or not consecutive) during any period of 365 consecutive days after the
date the Company notifies the Investors that they are required, pursuant to
Section 8(c)(4), to suspend offers and sales of Registrable Securities as a
result of an event or circumstance described in Section 8(b)(5)(A), during which
period, by reason of Section 8(b)(5)(B), the Company is not required to amend
the Registration Statement or supplement the related Prospectus.
"Business Day" means any day other than a Saturday, Sunday or
a day on which commercial banks in The City of New York are authorized or
required by law or executive order to remain closed.
"Claims" means any losses, claims, damages, liabilities or
expenses, including, without limitation, reasonable fees and expenses of legal
counsel (joint or several), incurred by a Person.
"Closing Date" means 10:00 a.m., New York City time, on March
19, 2004 or such other mutually agreed to time.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder and published interpretations thereof.
"Common Stock" means the Common Stock, par value $.001 per
share, of the Company.
"Common Stock Equivalent" means any warrant, option,
subscription or purchase right with respect to shares of Common Stock, any
security convertible into, exchangeable for, or otherwise entitling the holder
thereof to acquire, shares of Common Stock or any warrant, option, subscription
or purchase right with respect to any such convertible, exchangeable or other
security.
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of the Note.
"Encumbrances" means all mortgages, deeds of trust, claims,
security interests, liens, pledges, leases, subleases, charges, escrows,
options, proxies, rights of occupancy, rights of first refusal, preemptive
rights, covenants, conditional limitations, hypothecations, prior assignments,
easements, title retention agreements, indentures, security agreements or any
other encumbrances of any kind.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder and published interpretations
thereof.
"Event of Default" shall have the meaning to be provided or
provided in the Note.
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"Indebtedness" shall have the meaning to be provided or
provided in the Note.
"Indemnified Party" means the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any Person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act.
"Indemnified Person" means the Buyer and each other Investor
who beneficially owns or holds Registrable Securities and each other Investor
who sells such Registrable Securities in the manner permitted under this
Agreement, the directors, if any, of such Investor, the officers or persons
performing similar functions, if any, of the Buyer and any such Investor, each
Person, if any, who controls the Buyer or any such Investor within the meaning
of the 1933 Act or the 1934 Act, any underwriter (as defined in the 0000 Xxx)
acting on behalf of an Investor who participates in the offering of Registrable
Securities of such Investor in accordance with the plan of distribution
contained in the Prospectus, the directors, if any, of such underwriter and the
officers, if any, of such underwriter, and each Person, if any, who controls any
such underwriter within the meaning of the 1933 Act or the 1934 Act.
"Initial Warrant Exercise Price" means the "Purchase Price,"
as defined in the Warrants, on the Closing Date.
"Inspector" means any attorney, accountant or other agent
retained by an Investor for the purposes provided in Section 8(b)(9).
"Interest Shares" means the shares of Common Stock issuable in
payment of interest on the Note.
"Intellectual Property" means all franchises, patents,
trademarks, service marks, tradenames (whether registered or unregistered),
copyrights, corporate names, licenses, trade secrets, proprietary software or
hardware, proprietary technology, technical information, discoveries, designs
and other proprietary rights, whether or not patentable, and confidential
information (including, without limitation, know-how, processes and technology)
used in the conduct of the business of the Company or any Subsidiary, or in
which the Company or any Subsidiary has an interest.
"Investor" means the Buyer and any transferee or assignee who
agrees to become bound by the provisions of Sections 5(a), 5(b), 8, 9, and 10 of
this Agreement.
"Letter Agreement" means the letter agreement, dated as of the
date of this Agreement, between the Company and the Buyer.
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"Margin Stock" shall have the meaning provided in Regulation U
of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221).
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"NASD" means the National Association of Securities Dealers,
Inc.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means the 9% Senior Convertible Note due 2007 of the
Company in the form attached as
ANNEX I.
"Other Note Purchase Agreement" means the Note Purchase
Agreement, dated January 8, 2004, by and between the Company and the Buyer.
"Other Notes" shall have the meaning to be provided or
provided in the Note.
"Permitted Indebtedness" shall have the meaning to be provided
or provided in the Note.
"Person" means any natural person, corporation, partnership,
limited liability company, trust, incorporated organization, unincorporated
association or similar entity or any government, governmental agency or
political subdivision.
"Placement Agent" means HCFP Xxxxxxx Securities and RG
Securities LLC.
"Products" shall have the meaning to be provided or provided
in the Note.
"Prospectus" means the prospectus forming part of the
Registration Statement at the time the Registration Statement is declared
effective and any amendment or supplement thereto (including any information or
documents incorporated therein by reference).
"Purchase Price" means the purchase price for the Note set
forth on the signature page of this Agreement.
"Questionnaire" means the Investor Questionnaire completed by
the Buyer and previously delivered to the Company.
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"Record" means all pertinent financial and other records,
pertinent corporate documents and properties of the Company subject to
inspection for the purposes provided in Section 8(b)(9).
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415, and the
declaration or ordering of effectiveness of such Registration Statement by the
SEC.
"Registrable Securities" means (1) the Shares, (2) if the
Common Stock is changed, converted or exchanged by the Company or its successor,
as the case may be, into any other stock or other securities on or after the
date hereof, such other stock or other securities which are issued or issuable
in respect of or in lieu of the Shares and (3) if any other securities are
issued to holders of the Common Stock (or such other shares or other securities
into which or for which the Common Stock is so changed, converted or exchanged
as described in the immediately preceding clause (2)) upon any reclassification,
share combination, share subdivision, share dividend, merger, consolidation or
similar transaction or event, such other securities which are issued or issuable
in respect of or in lieu of the Common Shares.
"Registration Default Date" means the date which is 150 days
following the Closing Date.
"Registration Default Period" means the period following the
Registration Default Date during which any Registration Event occurs and is
continuing.
"Registration Event" means the occurrence of any of the
following events:
(i) the Company fails to file with the SEC the Registration
Statement on or before the date by which the Company is required to
file the Registration Statement pursuant to Section 8(a)(1),
(ii) the Registration Statement covering Registrable
Securities is not declared effective by the SEC within 150 days
following the Closing Date,
(iii) after the SEC Effective Date, sales cannot be made
pursuant to the Registration Statement for any reason (including
without limitation by reason of a stop order of any untrue statement of
a material fact or omission of a material fact in the Registration
Statement, or the Company's failure to update the Registration
Statement) but except as excused pursuant to Section 8(b)(5),
(iv) after the date on which securities of the Company are
listed or included for quotation on a Trading Market, the Common Stock
generally or the Registrable Securities specifically are not listed or
included for quotation on a Trading Market,
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or trading of the Common Stock is suspended or halted for a period
exceeding 5 days on the Trading Market which at the time constitutes
the principal market for the Common Stock, or
(v) the Company fails, refuses or is otherwise unable timely
to issue Shares upon conversion of the Notes or Warrant Shares upon
exercise of the Warrant in accordance with the terms of the Notes and
the Warrant, or certificates therefor as required under the Transaction
Documents or the Company fails, refuses or is otherwise unable timely
to transfer any Shares as and when required by the Transaction
Documents.
"Registration Period" means the period from the SEC Effective
Date to the earlier of (A) the date which is three years after the Closing Date
(or if (x) the Note shall have been fully converted into shares of Common Stock
or (y) the Note shall no longer remain outstanding, such date after which each
Investor may sell all of its Registrable Securities without registration under
the 1933 Act pursuant to Rule 144, free of any limitation on the volume of such
securities which may be sold in any period) and (B) the date on which the
Investors no longer own any Registrable Securities.
"Registration Statement" means a registration statement on
Form S-1, Form SB-2, Form S-3 or such other form as may be available to the
Company to be filed with the SEC under the 1933 Act relating to the Registrable
Securities and which names the Investors as selling stockholders.
"Regulation D" means Regulation D under the 1933 Act.
"Repurchase Event" shall have the meaning to be provided or
provided in the Note.
"Required Information" means, with respect to each Investor,
all information regarding such Investor, the Registrable Securities held by such
Investor or which such Investor has the right to acquire and the intended method
of disposition of the Registrable Securities held by such Investor or which such
Investor has the right to acquire as shall be required by the 1933 Act to effect
the registration of the resale by such Investor of such Registrable Securities.
"Rule 144" means Rule 144 promulgated under the 1933 Act or
any other similar rule or regulation of the SEC that may at any time provide a
"safe harbor" exemption from registration under the 1933 Act so as to permit a
holder to sell securities of the Company to the public without registration
under the 1933 Act.
"Rule 144A" means Rule 144A under the 1933 Act or any
successor rule thereto.
"SEC" means the Securities and Exchange Commission.
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"SEC Effective Date" means the date the Registration Statement
is declared effective by the SEC.
"SEC Filing Date" means the date the Registration Statement is
first filed with the SEC pursuant to Section 8.
"SEC Reports" means the Company's (1) Quarterly Report on Form
10-QSB for the quarter ended September 30, 2003, (2) the Current Reports on Form
8-K filed on October 7, 2003, October 29, 2003, November 7, 2003, December 8,
2003, January 16, 2004, January 30, 2004, February 19, 2004 and March 10, 2004,
and (3) all other periodic and other reports filed by the Company with the SEC
pursuant to the 1934 Act subsequent to September 30, 2003, and prior to the date
hereof, in each case as filed with the SEC and including the information and
documents (other than exhibits) incorporated therein by reference.
"Securities" means, collectively, the Note, the Shares and the
Warrants.
"Shares" means the Conversion Shares, the Interest Shares and
the Warrant Shares.
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by the
Company.
"Trading Day" means at any time a day on which any of a
national securities exchange, Nasdaq, Nasdaq SmallCap or such other securities
market as at such time constitutes the principal securities market for the
Common Stock is open for general trading of securities.
"Trading Market" means the Over-The-Counter Bulletin Board,
the American Stock Exchange, Inc., the Nasdaq, the Nasdaq SmallCap or the New
York Stock Exchange, Inc.
"Transaction Documents" means, collectively, this Agreement,
the Securities, the Letter Agreement and the other agreements, instruments and
documents contemplated hereby and thereby.
"Transfer Agent" means Interwest Transfer Company, Inc.,
as transfer agent and registrar for the Common Stock, or its successor.
"Violation" means
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission
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or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation under
the 1933 Act, the 1934 Act or any state securities law, or
(iv) any breach or alleged breach by any Person other than
the Buyer of any representation, warranty, covenant, agreement or other term of
any of the Transaction Documents.
"Warrants" means the Common Stock Purchase Warrants in the
form attached hereto as ANNEX II.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
2. PURCHASE AND SALE; PURCHASE PRICE.
(A) PURCHASE. Upon the terms and subject to the conditions
of this Agreement, the Buyer hereby agrees to purchase from the Company, and
the Company hereby agrees to sell to the Buyer, on the Closing Date, the Note
in the principal amount set forth on the signature page of this Agreement and
having the terms and conditions as set forth in the form of the Note attached
hereto as ANNEX I for the Purchase Price. In connection with the purchase of
the Note by the Buyer, the Company shall issue to the Buyer at the closing on
the Closing Date Warrants initially entitling the holder to purchase a number
of shares of Common Stock equal to the quotient obtained by dividing $500 by
the Initial Warrant Exercise Price for each $1,000 principal amount of the
Note.
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(B) FORM OF PAYMENT. Payment by the Buyer of the Purchase
Price to the Company on the Closing Date shall be made by wire transfer of
immediately available funds to:
Regions Bank
0000 X. Xxxxxxxx
Xxxxxxx, Xxxxx 00000
ABA No. 06200 5690
For credit to account No. 8520039853
For credit to the account of Dwango North America
(C) CLOSING. The issuance and sale of the Note and the
issuance of the Warrants shall occur on the Closing Date at the Law Offices of
Xxxxx X Xxxxx, Penthouse Suite, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx. At the
closing, upon the terms and subject to the conditions of this Agreement, (1) the
Company shall issue and deliver to the Buyer the Note and the Warrants against
payment by the Buyer to the Company of an amount equal to the Purchase Price,
and (2) the Buyer shall pay to the Company an amount equal to the Purchase Price
against delivery by the Company to the Buyer of the Note and the Warrants.
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE
BUYER.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(A) PURCHASE FOR INVESTMENT. The Buyer is purchasing the
Note and acquiring the Warrants for its own account for investment and not with
a view towards the public sale or distribution thereof within the meaning of
the 1933 Act; and the Buyer will acquire any Shares issued to the Buyer prior
to the SEC Effective Date of a Registration Statement covering the resale of
such Shares by the Buyer for its own account for investment and not with a view
towards the public sale or distribution thereof within the meaning of the 1933
Act prior to the SEC Effective Date; and the Buyer has no intention of making
any distribution, within the meaning of the 1933 Act, of the Shares except in
compliance with the registration requirements of the 1933 Act or pursuant to an
exemption therefrom;
(B) ACCREDITED INVESTOR. The Buyer is an "accredited
investor" as that term is defined in Rule 501 of Regulation D under the 1933
Act by reason of Rule 501(a)(3) thereof;
(C) REOFFERS AND RESALES. The Buyer will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Securities unless registered under the 1933 Act, pursuant to an exemption from
registration under the 1933 Act or in a transaction not requiring registration
under the 1933 Act;
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(D) COMPANY RELIANCE. The Buyer understands that (1) the
Note is being offered and sold and the Warrants are being issued to the Buyer,
(2) the Shares are being offered to the Buyer, (3) the Interest Shares, if any,
will be issued to the Buyer and (4) upon exercise of the Warrants, the Warrant
Shares will be sold to the Buyer, in each such case in reliance on one or more
exemptions from the registration requirements of the 1933 Act, including,
without limitation, Regulation D, and exemptions from state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein and in the Questionnaire, a
true and accurate copy of which has been delivered by the Buyer to the Company,
in order to determine the availability of such exemptions and the eligibility
of the Buyer to acquire or receive an offer to acquire the Securities; and the
information with respect to the Buyer set forth in the Questionnaire is
accurate and complete in all material respects;
(E) INFORMATION PROVIDED. The Buyer and its advisors, if
any, have requested, received and considered all information relating to the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and information relating to the offer
and sale of the Note and the offer of the Interest Shares and the Warrant
Shares deemed relevant by them (assuming the accuracy and completeness of the
SEC Reports and of the Company's responses to the Buyer's requests); the Buyer
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company concerning the terms of the offering of the Securities and the
business, properties, operations, condition (financial or other), results of
operations and prospects of the Company and its Subsidiaries and have received
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
SEC Reports; in connection with its decision to purchase the Note and to
acquire the Warrants, the Buyer has relied solely upon the SEC Reports, the
representations, warranties, covenants and agreements of the Company set forth
in this Agreement and to be contained in the other Transaction Documents, as
well as any investigation of the Company completed by the Buyer or its
advisors; the Buyer understands that its investment in the Securities involves
a high degree of risk; and the Buyer understands that the offering of the Note
is being made to the Buyer as part of an offering without any minimum or
maximum amount of the offering (subject, however, to the right of the Company
at any time prior to execution and delivery of this Agreement by the Company,
in its sole discretion, to accept or reject an offer by the Buyer to purchase
the Note and to acquire the Warrants);
(F) ABSENCE OF APPROVALS. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities;
(G) NOTE PURCHASE AGREEMENT. The Buyer has all requisite
power and authority, corporate or otherwise, to execute, deliver and perform
its obligations under this Agreement and the other agreements executed by the
Buyer in connection herewith and to consummate the transactions contemplated
hereby and thereby; and this Agreement has been
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duly and validly authorized, duly executed and delivered by the Buyer and,
assuming due execution and delivery by the Company, is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law; and
(H) BUYER STATUS. The Buyer is not a "broker" or "dealer" as
those terms are defined in the 1934 Act which is required to be registered with
the SEC pursuant to Section 15 of the 1934 Act.
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE
COMPANY.
The Company represents and warrants to, and covenants and
agrees with, the Buyer as follows:
(A) ORGANIZATION AND AUTHORITY. The Company and each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and (i) each
of the Company and the Subsidiaries has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as described in the SEC Reports and as currently conducted, and (ii) the Company
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and the other Transaction Documents to be
executed and delivered by the Company in connection herewith, and to consummate
the transactions contemplated hereby and thereby; and the Company does not have
any equity investment in any other Person other than (x) the Subsidiaries listed
in Schedule 4(a) hereto and (y) Subsidiaries which do not, individually or in
the aggregate, have any material revenue, assets or liabilities.
(B) QUALIFICATIONS. The Company and each of the Subsidiaries
are duly qualified to do business as foreign corporations and are in good
standing in all jurisdictions where such qualification is necessary and where
failure so to qualify could have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company and the Subsidiaries, taken as a whole.
(C) CAPITALIZATION. (1) The authorized capital stock of the
Company consists of (A) 50,000,000 shares of Common Stock, of which 6,925,090
shares were outstanding at the close of business on March 18, 2004 and (B)
10,000,000 shares of Preferred Stock, $.001 par value, none of which is
outstanding; from March 18, 2004 to the Closing Date there will be (x) no
increase in the number of shares of Common Stock outstanding (except for shares
issued upon exercise of options and warrants outstanding on the date hereof or
options or similar rights granted to employees, directors or consultants
subsequent to the date of this Agreement pursuant
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to the Company's stock option plans in effect on the date of this Agreement)
and (y) no issuance of securities convertible into, exchangeable for, or
otherwise entitling the holder to acquire, shares of Common Stock (except for
securities issued pursuant to the Other Note Purchase Agreement). The current
report on Form 8-K filed with the SEC on October 7, 2003 discloses as of
October 7, 2003 all outstanding options or warrants for the purchase of, or
rights to purchase or subscribe for, or securities convertible into,
exchangeable for, or otherwise entitling the holder to acquire, Common Stock or
other capital stock of the Company, or any contracts or commitments to issue or
sell Common Stock or other capital stock of the Company or any such options,
warrants, rights or other securities; and, except as set forth on SCHEDULE 4(C)
attached hereto, from such date to the date hereof there has been, and to the
Closing Date there will be, no material change in the amount or terms of any of
the foregoing except for the grant or exercise of options to purchase shares of
Common Stock pursuant to the Company's stock option plans in effect on the date
of this Agreement.
(2) The Company has duly reserved from its authorized and
unissued shares of Common Stock the full number of shares required for (A) all
options, warrants, convertible securities, exchangeable securities, and other
rights to acquire shares of Common Stock which are outstanding and (B) all
shares of Common Stock and options and other rights to acquire shares of Common
Stock which may be issued or granted under the stock option and similar plans
which have been adopted by the Company or any Subsidiary; and, immediately
following the Closing Date, after giving effect to any antidilution or similar
adjustment arising by reason of issuance of the Note, the Other Notes, the
Warrants and the warrants issuable to the purchasers of the Other Notes, the
total number of shares of Common Stock reserved and required to be reserved from
the authorized and unissued shares of Common Stock for purposes of all such
options, warrants, convertible securities, other rights, and stock option and
similar plans (excluding the Note, the Other Notes, the Warrants and the
warrants issuable to the purchasers of the Other Notes) will be 11,603,068. Each
outstanding class or series of securities of the Company for which any such
antidilution adjustment will occur is identified on SCHEDULE 4(C) attached
hereto, together with the amount of such antidilution adjustment for each such
class or series. The outstanding shares of Common Stock of the Company and
outstanding options, warrants, rights, and other securities entitling the
holders to purchase or otherwise acquire Common Stock have been duly and validly
authorized and issued. None of the outstanding shares of Common Stock or
options, warrants, rights, or other such securities has been issued in violation
of the preemptive rights of any securityholder of the Company. The offers and
sales of the outstanding shares of Common Stock of the Company and options,
warrants, rights, and other securities were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. Except for as set forth on SCHEDULE 4(C) attached
hereto, no holder of any of the Company's securities has any rights, "demand,"
"piggy-back" or otherwise, to have such securities registered by reason of the
intention to file, filing or effectiveness of the Registration Statement.
(D) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares
have been duly authorized and the Conversion Shares when issued upon conversion
of the Note, the Interest
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Shares, when issued in payment of interest on the Note, and the Warrant Shares,
when issued upon exercise of the Warrants, will be duly and validly issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. Other than the rights of
Buyer, there are no preemptive or similar rights of any stockholder of the
Company or any other Person to acquire any of the Shares or the Warrants. The
Company has duly reserved 2,875,000 shares of Common Stock for issuance upon
conversion of the Note and upon exercise of the Warrants, and such shares shall
remain so reserved, and the Company shall from time to time reserve such
additional shares of Common Stock as shall be required to be reserved pursuant
to the Notes and the Warrants, so long as the Notes or the Warrants are
outstanding. The Common Stock is traded on the Over-The-Counter Bulletin Board.
The Company knows of no reason that the Shares will be ineligible for quotation
on the Over-The-Counter Bulletin Board.
(E) CORPORATE AUTHORIZATION. This Agreement and the other
Transaction Documents to which the Company is or will be a party have been duly
and validly authorized by the Company; this Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery by the Buyer,
this Agreement is, and the Note, and the Warrants will be, when executed and
delivered by the Company, valid and binding obligations of the Company
enforceable in accordance with their respective terms, except as the
enforceability hereof or thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and general principles of
equity, regardless of whether enforcement is considered in a proceeding in
equity or at law.
(F) NON-CONTRAVENTION. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the
issuance of the Securities as contemplated by this Agreement and consummation by
the Company of the other transactions contemplated by the Transaction Documents
do not and will not, with or without the giving of notice or the lapse of time,
or both, (i) result in any violation of any term or provision of the certificate
of incorporation or bylaws of the Company or any Subsidiary, (ii) conflict with
or result in a breach by the Company or any Subsidiary of any of the terms or
provisions of, or constitute a default under, or result in the modification of,
or result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company or any
Subsidiary pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of their respective properties or
assets are bound or affected, in any such case which would be reasonably likely
to have a material adverse effect on the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company and the Subsidiaries, taken as a whole, or the validity or
enforceability of, or the ability of the Company to perform its obligations
under, the Transaction Documents, (iii) violate or contravene any applicable
law, rule or regulation or any applicable decree, judgment or order of any
court, United States federal or state regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or any Subsidiary
or any of their
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respective properties or assets, in any such case which would be reasonably
likely to have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries, taken as a whole, or the validity or
enforceability of, or the ability of the Company to perform its obligations
under, the Transaction Documents, or (iv) have any material adverse effect on
any permit, certification, registration, approval, consent, license or
franchise necessary for the Company or any Subsidiary to own or lease and
operate any of its properties and to conduct any of its business or the ability
of the Company or any Subsidiary to make use thereof.
(G) APPROVALS, FILINGS, ETC. No authorization, approval or
consent of, or filing with, any United States or foreign court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company is required to be obtained or made by
the Company or any Subsidiary for (x) the execution, delivery and performance by
the Company of the Transaction Documents, (y) the issuance and sale of the
Securities as contemplated by this Agreement and the terms of the Note and the
Warrants and (z) the performance by the Company of its obligations under the
Transaction Documents, other than (1) registration of the resale of the Shares
under the 1933 Act as contemplated by Section 8, (2) as may be required under
applicable state securities or "blue sky" laws, and (3) filing of one or more
Forms D with respect to the Securities as required under Regulation D.
(H) INFORMATION PROVIDED. The SEC Reports, the Transaction
Documents and the instruments delivered by the Company to the Buyer in
connection with the closing on the Closing Date do not and will not on the date
of execution and delivery of this Agreement, the date of delivery thereof to the
Buyer and on the Closing Date contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, it being understood that for purposes of this Section 4(h), any
statement contained in such information shall be deemed to be modified or
superseded for purposes of this Section 4(h) to the extent that a statement in
any document included in such information which was prepared and furnished to
the Buyer on a later date or filed with the SEC on a later date modifies or
replaces such statement, whether or not such later prepared or filed statement
so states.
(I) CONDUCT OF BUSINESS. Except as set forth in the SEC
Reports, since December 31, 2002, neither the Company nor any Subsidiary has (i)
incurred any material obligation or liability (absolute or contingent) other
than in the ordinary course of business; (ii) canceled, without payment in full,
any material notes, loans or other obligations receivable or other debts or
claims held by it other than in the ordinary course of business; (iii) sold,
assigned, transferred, abandoned, mortgaged, pledged or subjected to lien any of
its material properties, tangible or intangible, or rights under any material
contract, permit, license, franchise or other agreement; (iv) conducted its
business in a manner materially different from its business as conducted on such
date; (v) declared, made or paid or set aside for payment any cash or non-cash
distribution on any shares of its capital stock; or (vi) consummated, or entered
into any
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agreement with respect to, any transaction or event which would constitute a
Repurchase Event. Except as disclosed in the SEC Reports, the Company and each
Subsidiary owns, possesses or has obtained all governmental, administrative and
third party licenses, permits, certificates, registrations, approvals, consents
and other authorizations necessary to own or lease (as the case may be) and
operate its properties, whether tangible or intangible, and to conduct its
business or operations as currently conducted, except such licenses, permits,
certificates, registrations, approvals, consents and authorizations the failure
of which to obtain would not have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations
or prospects of the Company and the Subsidiaries, taken as a whole.
(J) SEC FILINGS. The Company has timely filed all reports
required to be filed under the 1934 Act and any other material reports or
documents required to be filed with the SEC since January 1, 2002. All of such
reports and documents complied, when filed, in all material respects, with all
applicable requirements of the 1933 Act and the 0000 Xxx. The Company has not
filed any reports with the SEC under the 1934 Act since September 30, 2003 other
than the SEC Reports.
(K) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in
the SEC Reports, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body or governmental agency pending or,
to the knowledge of the Company or any Subsidiary, threatened against or
affecting the Company or any Subsidiary, in any such case wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the business, properties, operations, condition (financial or other), results
of operations or prospects of the Company and the Subsidiaries, taken as a
whole, or the transactions contemplated by the Transaction Documents or which
could adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, the Transaction
Documents; the Company does not have pending before the SEC any request for
confidential treatment of information and, to the best of the Company's
knowledge, except as set forth on SCHEDULE 4(K), no such request will be made
by the Company prior to the SEC Effective Date; and to the best of the
Company's knowledge there is not pending or contemplated any, and there has
been no, investigation by the SEC involving the Company or any current or
former director or officer of the Company.
(L) FINANCIAL STATEMENTS; LIABILITIES. The financial
statements included in the SEC Reports present fairly the financial position,
results of operations and cash flows of the Company and the Subsidiaries, at the
dates and for the periods covered thereby, have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby, and include all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows of the Company and the
Subsidiaries at the dates and for the periods covered thereby. Except as and to
the extent disclosed, reflected or reserved against in the financial statements
of the Company and the notes thereto included in the SEC Reports, or as
otherwise disclosed on SCHEDULE 4(L) neither the Company nor any Subsidiary has
any liability,
-15-
debt or obligation, whether accrued, absolute, contingent or otherwise, and
whether due or to become due which, individually or in the aggregate, are
material to the Company and the Subsidiaries, taken as a whole. Subsequent to
September 30, 2003, neither the Company nor any Subsidiary has incurred any
liability, debt or obligation of any nature whatsoever which, individually or
in the aggregate are material to the Company and the Subsidiaries, taken as a
whole, other than those incurred in the ordinary course of their respective
businesses or as disclosed on SCHEDULE 4(L). A description and the amount of
the Indebtedness of the Company and Subsidiaries that will be outstanding on
the Closing Date and that will constitute Permitted Indebtedness for purposes
of clause (1) of the definition of the term Permitted Indebtedness appear on
SCHEDULE 4(L) attached hereto.
(M) MATERIAL LOSSES. Since December 31, 2002, neither the
Company nor any Subsidiary has sustained any loss or interference with its
business or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, which loss or interference could be
material to the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the Subsidiaries,
taken as a whole.
(N) ABSENCE OF CERTAIN CHANGES. Since December 31, 2002,
there has been no material adverse change and no material adverse development
in the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and the Subsidiaries, taken
as a whole, except for operating losses incurred since such date at a rate
consistent with the rate disclosed in the Company Form 10-QSB for the three
months ended September 30, 2003 and except as set forth on Schedule 4(n)
attached hereto.
(O) INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE
4(O): (1) the Company holds all Intellectual Property, free and clear of all
Encumbrances and restrictions on use or transfer, whether or not recorded, and
has sole title to and ownership of or has the full, exclusive right to use, for
the life of the proprietary right all Intellectual Property; (2) the use of the
Intellectual Property by the Company or any Subsidiary does not, to the
knowledge of the Company after due inquiry, violate or infringe on the rights of
any other Person; (3) neither the Company nor any Subsidiary has received any
notice of any conflict between the asserted rights of others and the Company or
any Subsidiary with respect to any Intellectual Property; (4) all filings and
other actions necessary to acquire, maintain, register, renew and perfect the
rights of the Company and the Subsidiaries to all Intellectual Property used by
the Company or any Subsidiary in its business or in which it has an interest
have been duly made in all jurisdictions where such rights are used by it; (5)
the Company and the Subsidiaries are in compliance with all terms and conditions
of their agreements relating to the Intellectual Property; (6) neither the
Company nor any Subsidiary is or has been a defendant in any action, suit,
investigation or proceeding relating to infringement or misappropriation by the
Company or any Subsidiary of any Intellectual Property; (7) neither the Company
nor any Subsidiary has been notified of any alleged claim of infringement or
-16-
misappropriation by the Company or any Subsidiary of any Intellectual Property;
(8) the Company has no knowledge of any claim of infringement or
misappropriation by the Company or any Subsidiary of any Intellectual Property;
(9) to the knowledge (after due inquiry) of the Company, none of the products
the Company and the Subsidiaries are researching, developing, propose to
research and develop, make, have made, use, or sell, infringes or
misappropriates any Intellectual Property right of any third party; (10) none of
the trademarks and service marks used by the Company or any Subsidiary, to the
knowledge of the Company after due inquiry, infringes the trademark or service
xxxx rights of any third party; (11) neither the Company nor any Subsidiary has
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property; (12) none of the research and
development results and other know-how relating to the Company's or the
Subsidiaries' respective businesses, the value of which to the Company or the
Subsidiaries is contingent upon maintenance of the confidentiality thereof, has
been disclosed to any Person other than Persons bound by written confidentiality
agreements; and (13) the Company owns directly, or possesses adequate rights to
use, all Intellectual Property used in or relating to the development, use,
distribution or marketing of the Products, and none of such Intellectual
Property is owned, claimed or used by, or subject to any Encumbrance of or by,
any Subsidiary.
(P) INTERNAL ACCOUNTING CONTROLS. The Company maintains a
system of internal accounting controls for the Company and the Subsidiaries
which meets the requirements of the 1934 Act in all material respects.
(Q) COMPLIANCE WITH LAW. Except as set forth on Schedule 4
(q) attached hereto, neither the Company nor any Subsidiary is in violation of
or has any liability under any statute, law, rule, regulation, ordinance,
decision or order of any governmental agency or body or any court, domestic or
foreign, except where such violation or liability would not individually or in
the aggregate have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries, taken as a whole; and neither the Company
nor any Subsidiary is aware of any pending investigation which would reasonably
be expected to lead to such a claim.
(R) PROPERTIES. Each of the Company and the Subsidiaries has
good title to all property, real and personal (tangible and intangible), and
other assets owned by it, free and clear of all security interests, pledges,
charges, mortgages, liens or other encumbrances, except such as are described in
the SEC Reports or such as do not materially interfere with the use of such
property made, or proposed to be made, by the Company or any Subsidiary. The
leases, licenses or other contracts or instruments under which the Company and
each Subsidiary leases, holds or is entitled to use any property, real or
personal, which individually or in the aggregate are material to the Company and
the Subsidiaries, taken as a whole, are valid, subsisting and enforceable with
only such exceptions as do not materially interfere with the use of such
property made, or proposed to be made, by the Company or such Subsidiary or have
expired or terminated in accordance with their terms or have been superseded by
other classes, contracts or agreements. Neither the Company nor any Subsidiary
has received notice of any material violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased properties.
Neither the Company nor any Subsidiary has any mortgage, lien, pledge,
-17-
security interest or other charge or encumbrance on any of its assets or
properties except as listed in SCHEDULE 4(R) attached hereto.
(S) LABOR RELATIONS. No material labor problem exists or,
to the knowledge of the Company or any Subsidiary, is imminent with respect to
any of the employees of the Company or any Subsidiary.
(T) INSURANCE. The Company and the Subsidiaries maintain
insurance against loss or damage by fire or other casualty and such other
insurance, including but not limited to, product liability insurance, in such
amounts and covering such risks as the Company believes are commercially
reasonable.
(U) TAX MATTERS. Each of the Company and the Subsidiaries
has filed all federal, state and local income and franchise tax returns
required to be filed and has paid all material taxes shown by such returns to
be due, and no tax deficiency has been determined adversely to the Company or
any Subsidiary which has had (nor does the Company or any Subsidiary have any
knowledge of any tax deficiency which, if determined adversely to the Company
or any Subsidiary, might have) a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations,
or prospects of the Company and the Subsidiaries, taken as a whole.
(V) INVESTMENT COMPANY. Neither the Company nor any
Subsidiary is an "investment company" within the meaning of such term under the
Investment Company Act of 1940, as amended, and the rules and regulations of
the SEC thereunder.
(W) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or
similar Person other than the Placement Agent is entitled to any commission, fee
or other compensation by reason of action taken by or on behalf of the Company
in connection with the transactions contemplated by this Agreement, and the
Company shall pay, and indemnify and hold harmless the Buyer from, any claim
made against the Buyer by any Person for any such commission, fee or other
compensation.
(X) NO SOLICITATION. No form of general solicitation or
general advertising was used by the Company or, to the best of its knowledge,
any other Person acting on behalf of the Company, in respect of the Securities
or in connection with the offer and sale of the Securities. Neither the Company
nor, to its knowledge, any Person acting on behalf of the Company has, either
directly or indirectly, sold or offered for sale to any Person any of the
Securities (other than the Placement Agent) or, within the six months prior to
the date hereof, any other similar security of the Company except as
contemplated by this Agreement and the Other Note Purchase Agreements; and
neither the Company nor any Person authorized to act on its behalf will sell or
offer for sale any promissory notes, warrants, shares of Common Stock or other
securities to, or solicit any offers to buy any such security from, any Person
so as thereby to
-18-
cause the issuance or sale of any of the Securities to be in violation of any
of the provisions of Section 5 of the 1933 Act.
(Y) ERISA COMPLIANCE. Each of the Company and the
Subsidiaries is in compliance in all material respects with all presently
applicable provisions of ERISA; no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in ERISA) for which the
Company or any Subsidiary would have any liability; neither the Company nor any
Subsidiary has incurred or expects to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Code; and each "pension plan" for which the
Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
(Z) ABSENCE OF RIGHTS AGREEMENT. The Company has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
5. CERTAIN COVENANTS.
(A) TRANSFER RESTRICTIONS. The Buyer acknowledges and agrees
that (1) the Note and the Warrants have not been and are not being registered
under the provisions of the 1933 Act or any state securities laws and, except as
provided in Section 8, the Shares have not been and are not being registered
under the 1933 Act or any state securities laws, and that the Note and the
Warrants may not be transferred unless the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Note or the Warrants to be
transferred may be transferred without such registration or unless transferred
in accordance with Rule 144A to a QIB; (2) no sale, assignment or other transfer
of the Note or the Warrants or any interest therein may be made except in
accordance with the terms hereof and thereof; (3) the Shares may not be resold
by the Buyer unless the resale has been registered under the 1933 Act or is made
pursuant to an applicable exemption from such registration and the Company shall
have received the opinion of counsel provided for in the second to last sentence
of this Section 5(a); (4) any sale of Shares under a Registration Statement
shall be made only in compliance with the terms of this Section 5(a) and Section
8 (including, without limitation, Section 8(c)(5)); (5) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if the exemption provided by Rule 144 is not
available, any resale of the Securities under circumstances in which the seller,
or the Person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (6) the Company is under no obligation to register the Securities (other
than registration of the resale of the Shares in accordance with Section 8)
under the 1933 Act or, except as provided in Section 5(d) and Section 8, to
comply with the terms and conditions of any exemption thereunder. Prior
-19-
to the time particular Shares are eligible for resale under Rule 144(k), the
Buyer may not transfer the Shares in a transaction which does not constitute a
transfer thereof pursuant to the applicable Registration Statement in
accordance with the plan of distribution set forth therein or in any supplement
to the related Prospectus unless the Buyer shall have delivered to the Company
an opinion of counsel, reasonably satisfactory in form, scope and substance to
the Company, that such Shares may be so transferred without registration under
the 1933 Act. Nothing in any of the Transaction Documents shall limit the right
of a holder of the Securities to make a bona fide pledge thereof to an
institutional lender and the Company agrees to cooperate with any Investor who
seeks to effect any such pledge by providing such information and making such
confirmations as reasonably requested.
(B) RESTRICTIVE LEGENDS. (1) The Buyer acknowledges and
agrees that the Note shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
Note):
This Note has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"), or any state securities laws. The issuance to
the holder of this Note of the shares of Common Stock issuable of this
Note and in payment of interest on this Note are not covered by a
registration statement under the 1933 Act or registration under state
securities laws. This Note has been acquired, and such shares must be
acquired, for investment only and may not be sold, transferred or
assigned unless (1) their resale is registered under the Act, (2) the
Company has received an opinion of counsel reasonably satisfactory in
form, scope and substance to the Company that such registration is not
required or (3) sold, transferred or assigned to a QIB pursuant to Rule
144A.
(2) The Buyer further acknowledges and agrees that the
Warrants shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the Warrants):
This Warrant has not been registered under the Securities Act of 1933,
as amended (the "Act"), and may not be sold, transferred or assigned
unless (1) the resale hereof is registered under the Act, (2) the
Company has received an opinion of counsel reasonably satisfactory in
form, scope and substance to the Company that such registration is not
required or (3) sold, transferred or assigned to a QIB pursuant to Rule
144A.
(3) The Buyer further acknowledges and agrees that until
such time as the Shares have been registered for resale under the 1933 Act as
contemplated by Section 8 or are eligible for resale under Rule 144(k) under
the 1933 Act, the certificates for the Shares, may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"). The
securities have been acquired for
-20-
investment and may not be resold, transferred or assigned in the
absence of an effective registration statement for the securities under
the 1933 Act or an opinion of counsel that registration is not required
under the 0000 Xxx.
(4) Once the Registration Statement required to be filed by
the Company pursuant to Section 8 has been declared effective or particular
Shares are eligible for resale pursuant to Rule 144(k) under the 1933 Act,
thereafter (1) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any such Shares
issued prior to the SEC Effective Date or prior to the time of such eligibility,
as the case may be, which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three days after surrender of such certificates by the Buyer and (2) the Company
shall not place any restrictive legend on certificates for Conversion Shares
issued on conversion of the Note or Interest Shares issued in payment of
interest on the Note or on any Warrant Shares issued upon exercise of the
Warrants or impose any stop-transfer restriction thereon.
(C) REPORTING STATUS. During the Registration Period, the
Company shall timely file all reports required to be filed with the SEC pursuant
to Section 13 or 15(d) of the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.
(D) FORM D. The Company agrees to file one or more Forms D
with respect to the Securities as required under Regulation D to claim the
exemption provided by Rule 506 of Regulation D and to provide a copy thereof to
the Buyer promptly after such filing.
(E) STATE SECURITIES LAWS. On or before the Closing Date,
the Company shall take such action as shall be necessary to qualify, or to
obtain an exemption for, the offer and sale of the Securities to the Buyer as
contemplated by the Transaction Documents under such of the securities laws of
jurisdictions in the United States as shall be applicable thereto.
Notwithstanding the foregoing obligations of the Company in this Section 5(e),
the Company shall not be required (1) to qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 5(e), (2) to subject itself to general taxation in any such
jurisdiction, (3) to file a general consent to service of process in any such
jurisdiction, (4) to provide any undertakings that cause more than nominal
expense or burden to the Company or (5) to make any change in its charter or
by-laws which the Company determines to be contrary to the best interests of
the Company and its stockholders. The Company shall furnish the Buyer with
copies of all filings, applications, orders and grants or confirmations of
exemptions relating to such securities laws on or before the Closing Date.
(F) LIMITATION ON CERTAIN ACTIONS. From the date of
execution and delivery of this Agreement by the parties hereto to the date of
issuance of the Note, the Company (1) shall comply with Article II of the Note
as if the Note were outstanding, (2) shall not take any action
-21-
which, if the Note were outstanding, (A) would constitute an Event of Default
or, with the giving of notice or the passage of time or both, would constitute
an Event of Default or (B) would constitute a Repurchase Event or, with the
giving of notice or the passage of time or both, would constitute a Repurchase
Event.
(G) USE OF PROCEEDS. The Company represents and agrees that:
(1) it does not own or have any present intention of acquiring any Margin Stock;
(2) the proceeds of sale of the Note and the Warrant Shares will be used for
general working capital purposes and in the operation of the Company's business;
(3) none of such proceeds will be used, directly or indirectly (A) except as
disclosed on Schedule 5(g), to pay any existing debt obligations (B) to make any
loan to or investment in any other Person or (C) for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any margin stock or
for the purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently a Margin
Stock or for any other purpose which might constitute the transactions
contemplated by this Agreement a "purpose credit" within the meaning of such
Regulation U of the Board of Governors of the Federal Reserve System; and (4)
neither the Company nor any agent acting on its behalf has taken or will take
any action which might cause this Agreement or the transactions contemplated
hereby to violate Regulation T, Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the 1934 Act, in
each case as in effect now or as the same may hereafter be in effect.
(H) BEST EFFORTS. Each of the parties shall use its best
efforts timely to satisfy each of the conditions to the other party's
obligations to sell and purchase the Note set forth in Section 6 or 7, as the
case may be, of this Agreement on or before the Closing Date.
(I) DEBT OBLIGATION. So long as any portion of the Note is
outstanding, the Company shall cause its books and records to reflect the Note
as a debt of the Company in its unpaid principal amount, shall cause its
financial statements to reflect the Note as a debt of the Company in such amount
as shall be the greatest amount permitted in accordance with generally accepted
accounting principles and, whenever appropriate, as a valid senior debt
obligation of the Company for money borrowed.
(J) CERTAIN ISSUANCES OF SECURITIES. If the Company shall
make an offering permitted by clause (y) of the first proviso of Section 2.8 of
the Note the Buyer shall be provided rights of first refusal in the manner set
forth in this Section 5(j) and in accordance with the second proviso of Section
2.8 of the Note. In order to permit the Buyer to exercise its rights of first
refusal, prior to selling any such securities to any Person other than the
Buyer, the Company shall give notice to the Buyer of the detailed terms of the
proposed offering and terms of the securities proposed to be issued and,
promptly after being requested by the Buyer, such other information as
requested by the Buyer. The Buyer may, by notice to the Company, exercise such
right of first refusal at any time until the later of (x) ten Business Days
after such notice from the Company to the Buyer and (y) five Business Days
after the Company provides such additional information as shall have been
requested by the Buyer. The Buyer shall be entitled to purchase
-22-
all or any portion of such offering specified by the Buyer at the time it
notifies the Company of the Buyer's exercise of its right of first refusal.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Note and issue the Warrants to the Buyer pursuant to this Agreement is
conditioned upon satisfaction of the following conditions precedent on or before
the Closing Date (any or all of which may be waived by the Company in its sole
discretion):
(a) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement; and
(b) The representations and warranties of the Buyer
contained in this Agreement and in the Questionnaire shall have been true and
correct on the date of this Agreement and on the Closing Date as if made on the
Closing Date and on or before the Closing Date the Buyer shall have performed
all covenants and agreements of the Buyer required to be performed by the Buyer
on or before the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Note and acquire the Warrants is conditioned upon satisfaction of
the following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Buyer in its sole discretion):
(a) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
(b) The representations and warranties of the Company
contained in this Agreement shall have been true and correct on the
date of this Agreement and shall be true and correct on the Closing
Date as if given on and as of the Closing Date (except for
representations given as of a specific date, which representations
shall be true and correct as of such date and, except for the approvals
and filings referred to in clause (2) of Section 4(g), which shall have
been obtained or made, on or before the Closing Date), and on or before
the Closing Date the Company shall have performed all covenants and
agreements of the Company contained herein or in any of the other
Transaction Documents required to be performed by the Company on or
before the Closing Date;
(c) No event which, if the Note were outstanding, (1)
would
-23-
constitute an Event of Default or which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or (2) would constitute a Repurchase Event or which,
with the giving of notice or the passage of time, or both, would constitute a
Repurchase Event shall have occurred and be continuing;
(d) The Company shall have delivered to the Buyer a
certificate, dated the Closing Date, duly executed by its Chief
Executive Officer or Chief Financial Officer, to the effect set forth
in subparagraphs (a), (b), and (c) of this Section 7;
(e) The Company shall have delivered to the Buyer a
certificate, dated the Closing Date, of the Secretary of the Company
certifying (1) the Certificate of Incorporation and By-Laws of the
Company as in effect on the Closing Date, (2) all resolutions of the
Board of Directors (and committees thereof) of the Company relating to
this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby and (3) such other matters as
reasonably requested by the Buyer;
(f) On the Closing Date, the Buyer shall have received an
opinion of Xxxxxxxx & Xxxxx, LLP, counsel for the Company, dated the
Closing Date, addressed to the Buyer, in form, scope and substance
reasonably satisfactory to the Buyer, substantially in the form
attached as ANNEX III-1; and
(g) On the Closing Date, the Buyer shall have received an
opinion of Xxxx, Xxxxxxx & Xxxxxxx, L.L.P., counsel for the Company,
dated the Closing Date, addressed to the Buyer, in form, scope and
substance reasonably satisfactory to the Buyer, substantially in the
form attached as ANNEX III-2; and
(h) On the Closing Date, (i) trading in securities on the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq
shall not have been suspended or materially limited and (ii) a general
moratorium on commercial banking activities in the State of New York or the
State of Texas shall not have been declared by either federal or state
authorities.
8. REGISTRATION RIGHTS.
(A) MANDATORY REGISTRATION. (1) The Company shall prepare
and, as expeditiously as possible, but in no event later than the date which is
90 days after the Closing Date, file with the SEC a Registration Statement
which covers the resale by the Buyer of (A) a number of shares of Common Stock
equal to at least the number of Conversion Shares issuable to the Buyer under
the Note, determined as if the Note, together with at least 90 days accrued and
unpaid interest thereon, were converted in full at the Conversion Price in
effect on the SEC Filing Date, (B) a number of shares of Common Stock equal to
the number of Warrant Shares issuable upon exercise of the Warrant, and (C)
such additional number of shares of Common Stock as the Company shall in its
discretion determine to register in connection with the issuance of the
Interest Shares, in each such case as Registrable Securities, and which
Registration
-24-
Statement shall state that, in accordance with Rule 416 under the 1933 Act, the
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Note or
exercise of the Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(2) Prior to the SEC Effective Date, and during any time
subsequent to the SEC Effective Date when the Registration Statement for any
reason is not available for use by any Investor for the resale of any
Registrable Securities, the Company shall not file any other registration
statement or any amendment thereto with the SEC under the 1933 Act or request
the acceleration of the effectiveness of any other registration statement
previously filed with the SEC, other than (A) any registration statement on
Form S-8 and (B) any registration statement or amendment which the Company is
required to file, or as to which the Company is required to request
acceleration, pursuant to any obligation in effect on the date of execution and
delivery of this Agreement.
(3) If a Registration Event occurs, then the Company will
make payments to the Buyer as partial liquidated damages for the minimum amount
of damages to the Buyer by reason thereof, and not as a penalty, at the rate of
2% per month of the Purchase Price paid by the Buyer pursuant to this Agreement
(excluding the Purchase Price with respect to Shares already sold or which may
be sold pursuant to Rule 144(k), for each calendar month of the Registration
Default Period (pro rated for any period less than 30 days). Each such payment
shall be due and payable within five (5) days after the end of each calendar
month of the Registration Default Period until the termination of the
Registration Default Period and within five (5) days after such termination.
Such payments shall be in partial compensation to the Buyer, and shall not
constitute the Buyer's exclusive remedy for such events. The Registration
Default Period shall terminate upon (u) the filing of the Registration
Statement in the case of clause (i) of the definition of "Registration Event";
(v) the SEC Effective Date in the case of clause (ii) of the definition of
"Registration Event"; (w) the ability of the Buyer to effect sales pursuant to
the Registration Statement in the case of clause (iii) of the definition of
"Registration Event"; (x) the listing or inclusion and/or trading of the Common
Stock on a Trading Market, as the case may be, in the case of clause (iv) of
the definition of "Registration Event"; (y) the delivery of such shares or
certificates in the case of clause (v) of the definition of "Registration
Event"; and (z) in the case of the events described in clauses (ii) and (iii)
of the definition of "Registration Event", the earlier termination of the
Registration Period and in each such case any Registration Default Period that
commenced by reason of the occurrence of such event shall terminate if at the
time no other Registration Event is continuing. The amounts payable as partial
liquidated damages pursuant to this paragraph shall be payable in lawful money
of the United States. Amounts payable as partial liquidated damages hereunder
shall cease when the Buyer no longer holds the Notes, the Warrant or
Registrable Securities.
(B) OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
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(1) use its best efforts to cause the Registration
Statement to become effective as promptly as possible after the Closing Date
and to keep the Registration Statement effective at all times during the
Registration Period. The Company shall submit to the SEC, within three Business
Days after the Company learns that no review of the Registration Statement will
be made by the staff of the SEC or that the staff of the SEC has no further
comments on the Registration Statement, as the case may be, a request for
acceleration of effectiveness of the Registration Statement to a time and date
not later than 48 hours after the submission of such request. The Company
represents and warrants to the Investors that (a) the Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered
effective by the SEC and at all times during which it is required to be
effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading and (b) the Prospectus, at the time the Registration Statement
is declared effective by the SEC and at all times that the Prospectus is
required by this Agreement to be available for use by any Investor and, in
accordance with Section 8(c)(4), any Investor is entitled to sell Registrable
Securities pursuant to the Prospectus, shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(2) subject to Section 8(b)(5), prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to
the Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective, and the Prospectus current, at all times
during the Registration Period, and, during the Registration Period (other than
during any Blackout Period during which the provision of Section 8(b)(5)(B) as
applicable), comply with the provisions of the 1933 Act applicable to the
Company in order to permit the disposition by the Investors of all Registrable
Securities covered by the Registration Statement;
(3) furnish to Investors whose Registrable Securities are
included in the Registration Statement and such Investors' respective legal
counsel, promptly after the same is prepared and publicly distributed, filed
with the SEC or received by the Company, (1) five copies of the Registration
Statement and any amendment thereto and the Prospectus and each amendment or
supplement thereto, (2) one copy of each letter written by or on behalf of the
Company to the SEC or the staff of the SEC and each item of correspondence from
the SEC or the staff of the SEC relating to the Registration Statement (other
than any portion of any thereof which contains information for which the
Company has sought confidential treatment), each of which the Company hereby
determines to be confidential information and which each investor hereby agrees
to keep confidential as a confidential Record in accordance with Section
8(b)(9) and (3) such number of copies of the Prospectus and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
-26-
(4) subject to Section 8(b)(5), use its best efforts (i) to
register and qualify the Registrable Securities covered by the Registration
Statement under the securities or blue sky laws of such jurisdictions as any
Investor who owns or holds any Registrable Securities reasonably requests, (ii)
to prepare and to file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period and (iii) to take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for
sale by the Investors in such jurisdictions; PROVIDED, HOWEVER, that the
Company shall not be required in connection therewith or as a condition thereto
(I) to qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 8(b)(4), (II) to subject itself to
general taxation in any such jurisdiction, (III) to file a general consent to
service of process in any such jurisdiction, (IV) to provide any undertakings
that cause more than nominal expense or burden to the Company or (V) to make
any change in its charter or by-laws which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(5) (A) as promptly as practicable after becoming aware of
such event or circumstance, notify each Investor of the occurrence of any event
or circumstance of which the Company has knowledge (x) as a result of which the
Prospectus, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading or (y) which requires the Company to amend or
supplement the Registration Statement due to the receipt from an Investor or
any other selling stockholder named in the Prospectus of new or additional
information about such Investor or selling stockholder or its intended plan of
distribution of its Registrable Securities or other securities covered by such
Registration Statement, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement and Prospectus to correct
such untrue statement or omission or to add any new or additional information,
and deliver a number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request;
(B) notwithstanding Section 8(b)(5)(A) above, if at any time
the Company notifies the Investors as contemplated by Section 8(b)(5)(A) the
Company also notifies the Investors that the event giving rise to such notice
relates to a development involving the Company which occurred subsequent to the
later of (x) the SEC Effective Date and (y) the latest date prior to such
notice on which the Company has amended or supplemented the Registration
Statement, then the Company shall not be required to use best efforts to make
such amendment during a Blackout Period; PROVIDED, HOWEVER, that in any period
of 365 consecutive days the Company shall not be entitled to avail itself of
its rights under this Section 8(b)(5)(B) with respect to more than two Blackout
Periods; and PROVIDED FURTHER, HOWEVER, that no Blackout Period may commence
sooner than 90 days after the end of an earlier Blackout Period;
-27-
(6) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being offered or
sold pursuant to the Registration Statement of the issuance by the SEC of any
stop order or other suspension of effectiveness of the Registration Statement
at the earliest possible time;
(7) permit the Investors who hold Registrable Securities
being included in the Registration Statement, (or their designee) and their
counsel at such Investors' sole expense to review and have a reasonable
opportunity to comment on the Registration Statement and all amendments and
supplements thereto at least two Business Days (or such shorter period as may
reasonably be specified by the Company) prior to their filing with the SEC.
(8) make generally available to its security holders as
soon as practical, but not later than 90 days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 under the 0000 Xxx) covering a 12-month period beginning not later
than the first day of the Company's fiscal quarter next following the SEC
Effective Date of the Registration Statement;
(9) make available for inspection by any Investor and any
Inspector retained by such Investor, at such Investor's sole expense, all
Records as shall be reasonably necessary to enable such Investor to exercise
its due diligence responsibility and cause the Company's and the Subsidiaries
officers, directors and employees to supply all information which such Investor
or Inspector may reasonably request for purposes of such due diligence;
PROVIDED, HOWEVER, that such Investor shall hold in confidence and shall not
make any disclosure of any Record or other information which the Company
determines in good faith to be confidential, and of which determination such
Investor is so notified, unless (i) the disclosure of such Record is necessary
to avoid or correct a misstatement or omission in the Registration Statement
and a reasonable time prior to such disclosure the Investor shall have informed
the Company of the need to so correct such misstatement or omission and the
Company shall have failed to correct such misstatement or omission, (ii) the
release of such Record is ordered pursuant to a subpoena or other order from a
court or governmental body of competent jurisdiction or (iii) the information
in such Record has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not
be required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into a
confidentiality agreement with the Company with respect thereto, substantially
in the form of this Section 8(b)(9), which agreement shall permit such
Inspector to disclose Records to the Investor who has retained such Inspector.
Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to this Agreement unless (i) the disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary
-28-
to avoid or correct a misstatement or omission in the Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other order from a court or governmental body of competent jurisdiction, or
(iv) such information has been made generally available to the public other
than by disclosure in violation of this or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at such Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
(10) use its best efforts to cause all the Registrable
Securities covered by the Registration Statement as of the SEC Effective Date
to be listed or quoted on the principal securities market on which securities
of the same class or series issued by the Company are then listed or traded;
(11) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities at all times;
(12) cooperate with the Investors who hold Registrable
Securities being offered pursuant to the Registration Statement to facilitate
the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates to be in such
denominations or amounts as the Investors may reasonably request and registered
in such names as the Investors may request; and, not later than the SEC
Effective Date, the Company shall cause legal counsel selected by the Company
to deliver to the Investors whose Registrable Securities are included in the
Registration Statement opinions of counsel in form and substance as is
customarily given to underwriters in an underwritten public offering;
(13) during the Registration Period, the Company shall not
bid for or purchase any Common Stock or any right to purchase Common Stock or
attempt to induce any Person to purchase any such security or right if such
bid, purchase or attempt would in any way limit the right of the Investors to
sell Registrable Securities by reason of the limitations set forth in
Regulation M under the 1934 Act; and
(14) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of the Registrable Securities
pursuant to the Registration Statement relating thereto.
(C) OBLIGATIONS OF THE BUYER AND OTHER INVESTORS. In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
(1) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company the Required Information
-29-
and shall execute such documents in connection with such registration as the
Company may reasonably request.
(2) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(3) Each Investor agrees that it will not effect any
disposition of the Registrable Securities except as contemplated in the
Registration Statement or as otherwise is in compliance with applicable
securities laws and that it will promptly notify the Company of any material
changes in the information set forth in the Registration Statement regarding
such Investor or its plan of distribution; each Investor agrees (a) to notify
the Company in writing in the event that such Investor enters into any material
agreement with a broker or a dealer for the sale of the Registrable Securities
through a block trade, special offering, exchange distribution or a purchase by
a broker or dealer and (b) in connection with such agreement, to provide to the
Company in writing the information necessary to prepare any supplemental
prospectus pursuant to Rule 424(c) under the 1933 Act which is required with
respect to such transaction;
(4) Each Investor acknowledges that there may occasionally
be times as specified in Section 8(b)(5) or 8(b)(6) when the Company must
suspend the use of the Prospectus until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the SEC, the Company has prepared a supplement to the Prospectus or the Company
has filed an appropriate report with the SEC pursuant to the 1934 Act. Each
Investor hereby covenants that it will not sell any Registrable Securities
pursuant to the Prospectus during the period commencing at the time at which
the Company gives such Investor notice of the suspension of the use of the
Prospectus in accordance with Section 8(b)(5) or 8(b)(6) and ending at the time
the Company gives such Investor notice that such Investor may thereafter effect
sales pursuant to the Prospectus, or until the Company delivers to such
Investor or files with the SEC an amended or supplemented Prospectus; and
(5) In connection with any sale of Registrable Securities
which is made by an Investor pursuant to the Registration Statement (A) if such
sale is made through a broker, such Investor shall instruct such broker to
deliver the Prospectus to the purchaser or purchasers (or the broker or brokers
therefor) in connection with such sale, shall supply copies of the Prospectus
to such broker or brokers and shall instruct such broker or brokers to deliver
such Prospectus to the purchaser in such sale or such purchaser's broker; (B)
if such sale is made in a transaction directly with a purchaser and not through
the facilities of any securities exchange or market, such Investor shall
deliver, or cause to be delivered, the Prospectus to such purchaser; and (C) if
such sale is made by any means other than those described in the immediately
preceding clauses (A) and (B), such Investor shall otherwise use its reasonable
best efforts to comply with the prospectus delivery requirements of the 1933
Act applicable to such sale.
-30-
(D) RULE 144. With a view to making available to each
Investor the benefits of Rule 144, the Company agrees:
(1) so long as any Investor owns Registrable Securities,
promptly upon request of such Investor, to furnish to such Investor such
information as may be necessary to permit such Investor to sell Registrable
Securities pursuant to Rule 144 without registration and otherwise reasonably
to cooperate with such Investor and
(2) if at any time the Company is not required to file
reports with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, to use
its best efforts, upon the request of an Investor, to make publicly available
other information so long as is necessary to permit publication by brokers and
dealers of quotations for the Common Stock and sales of the Registrable
Securities in accordance with Rule 15c2-11 under the 1934 Act.
(E) PIGGY-BACK REGISTRATIONS. If at any time the Company
shall determine to prepare and file with the SEC a Registration Statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Investor who is entitled to registration
rights under this Section 8(e) written notice of such determination and, if
within ten (10) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement
all or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment, such
limitation is necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; PROVIDED, HOWEVER, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are not entitled by
right to inclusion of securities in such Registration Statement; and PROVIDED
FURTHER, HOWEVER, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement, based on the number of securities for which
registration is requested except to the extent such pro rata exclusion of such
other securities is prohibited under any written agreement entered into by the
Company with the holder of such other securities prior to the date of this
Agreement, in which case such other securities shall be excluded, if at all, in
accordance with the terms of such agreement. No right to registration of
Registrable Securities under this Section 8(e) shall be
-31-
construed to limit any registration required under Section 8(a) hereof.
Notwithstanding any other provision of this Agreement, if the Registration
Statement required to be filed pursuant to Section 8(a) of this Agreement shall
have been ordered effective by the SEC and the Company shall have maintained
the effectiveness of such Registration Statement as required by this Agreement
and if the Company shall otherwise have complied in all material respects with
its obligations under this Agreement, then the Company shall not be obligated
to register any Registrable Securities on such Registration Statement referred
to in this Section 8(e).
9. INDEMNIFICATION AND CONTRIBUTION.
(A) INDEMNIFICATION. (1) To the extent not prohibited by
applicable law, the Company will indemnify and hold harmless each Indemnified
Person against any Claims to which any of them may become subject under the
1933 Act, the 1934 Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any Violation or any of the transactions contemplated by this
Agreement. Subject to the restrictions set forth in Section 9(a)(3) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such controlling Person, promptly as such expenses are
incurred and are due and payable, for any documented reasonable legal fees or
other documented and reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 9(a)(1) shall not apply to: (I) a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
relating to an Indemnified Person furnished in writing to the Company by such
Indemnified Person or an underwriter for such Indemnified Person expressly for
use in connection with the preparation of any Registration Statement or any
such amendment thereof or supplement thereto; (II) any Claim arising out of or
based on any statement or omission in any Prospectus, which statement or
omission was corrected in any subsequent Prospectus that was delivered to the
Indemnified Person prior to the pertinent sale or sales of Registrable
Securities by such Indemnified Person; and (III) amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Company. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors.
(2) In connection with the Registration Statement, each
Investor agrees to indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 9(a)(1), each Indemnified Party against any
Claim to which any of them may become subject, under the 1933 Act, the 1934 Act
or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement or any amendment thereof or supplement thereto; and
such Investor will reimburse any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Claim;
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PROVIDED, HOWEVER, that the indemnity agreement contained in this Section
9(a)(2) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor;
PROVIDED, FURTHER, HOWEVER, that the Investor shall be liable under this
Section 9(a)(2) for only that amount of all Claims in the aggregate as does not
exceed the amount by which the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement exceeds
the amount paid by such Investor for such Registrable Securities. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 9(a)(2) with respect to any preliminary prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in such preliminary prospectus was corrected on a
timely basis in the related Prospectus, as then amended or supplemented.
(3) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 9(a) of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 9(a), deliver to the indemnifying
party a notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; PROVIDED,
HOWEVER, that an Indemnified Person or Indemnified Party shall have the right
to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding, in which case the indemnifying party shall not be responsible for
more than one such separate counsel, and one local counsel in each jurisdiction
in which an Action is pending, for all Indemnified Persons or Indemnified
Parties, as the case may be. The failure to deliver notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 9(a), except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 9(a) shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
(B) CONTRIBUTION. To the extent any indemnification by an
indemnifying party as set forth in Section 9(a) above is applicable by its
terms but is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 9(a) to the fullest extent permitted by law.
In determining the amount of contribution to which the respective parties are
entitled,
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there shall be considered the relative fault of each party, the parties'
relative knowledge of and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and prevent
any statement or omission and any other equitable considerations appropriate
under the circumstances; PROVIDED, HOWEVER, that (a) no contribution shall be
made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 9(a), (b) no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) shall be entitled to contribution from any other Person
who was not guilty of such fraudulent misrepresentation and (c) the aggregate
contribution by any seller of Registrable Securities shall be limited to the
amount by which the proceeds received by such seller from the sale of such
Registrable Securities exceeds the amount paid by such Investor for such
Registrable Securities.
(C) OTHER RIGHTS. The indemnification and contribution
provided in this Section shall be in addition to any other rights and remedies
available at law or in equity.
10. MISCELLANEOUS.
(A) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(B) HEADINGS. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.
(C) SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(D) NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be in writing and shall be sent by
mail, personal delivery, telephone line facsimile transmission or courier and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt, if delivered personally, by telephone line facsimile transmission or
by courier, in each case addressed to a party at such party's address (or
telephone line facsimile transmission number) shown in the introductory
paragraph or on the signature page of this Agreement or such other address (or
telephone line facsimile transmission number) as a party shall have provided by
notice to the other party in accordance with this provision. In the case of any
notice to the Company, such notice shall be addressed to the Company at its
address shown in the introductory paragraph of this Agreement, Attention: Chief
Executive Officer (telephone line facsimile number (000) 000-0000), and a copy
shall also be given to: Xxxxxxxx & Xxxxx, LLP, 000 Xxxxx Xxxxxxxx, Xxxxx 000,
Xxxxxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxxxxx, Esq. (telephone line
facsimile transmission number (000) 000-0000), and in the case of any
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notice to the Buyer, a copy shall be given to: Law Offices of Xxxxx X Xxxxx,
Penthouse Suite, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (telephone line
facsimile transmission number (000) 000-0000).
(E) COUNTERPARTS. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, each of which
shall be deemed to be an original and all of which together shall constitute
one and the same instrument. A telephone line facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party. Although this Agreement is dated as of the date first
set forth above, the actual date of execution and delivery of this Agreement by
each party is the date set forth below such party's signature on the signature
page hereof. Any reference in this Agreement or in any of the documents
executed and delivered by the parties hereto in connection herewith to (1) the
date of execution and delivery of this Agreement by the Buyer shall be deemed a
reference to the date set forth below the Buyer's signature on the signature
page hereof, (2) the date of execution and delivery of this Agreement by the
Company shall be deemed a reference to the date set forth below the Company's
signature on the signature page hereof and (3) the date of execution and
delivery of this Agreement, or the date of execution and delivery of this
Agreement by the Buyer and the Company, shall be deemed a reference to the
later of the dates set forth below the signatures of the parties on the
signature page hereof.
(F) ENTIRE AGREEMENT; BENEFIT. This Agreement, including the
Annexes and Schedules hereto, and the Letter Agreement, constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties, or undertakings, other than
those set forth or referred to herein. This Agreement, including the Annexes,
supersedes all prior agreements and understandings, whether written or oral,
between the parties hereto with respect to the subject matter hereof. This
Agreement and the terms and provisions hereof are for the sole benefit of only
the Company, the Buyer and their respective successors and permitted assigns.
(G) WAIVER. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, or any course of dealing between the parties, shall not
operate as a waiver thereof or an amendment hereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or exercise of any other right or power.
(H) AMENDMENT. (1) No amendment, modification, waiver,
discharge or termination of any provision of this Agreement on or prior to the
Closing Date nor consent to any departure by the Buyer or the Company therefrom
on or prior to the Closing Date shall in any event be effective unless the same
shall be in writing and signed by the party to be charged with enforcement, and
in any such case shall be effective only in the specific instance and for the
purpose for which given.
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(2) No amendment, modification, waiver, discharge or
termination of any provision of this Agreement after the Closing Date nor
consent to any departure by the Company therefrom after the Closing Date shall
in any event be effective unless the same shall be in writing and signed (x) by
the Company if the Company is to be charged with enforcement or (y) by the
Buyer, if the Buyer is to be charged with enforcement, and in any such case
shall be effective only in the specific instance and for the purpose for which
given.
(3) No course of dealing between the parties hereto shall
operate as an amendment of this Agreement.
(I) FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(J) ASSIGNMENT OF CERTAIN RIGHTS AND OBLIGATIONS. The rights
of an Investor under Sections 5(a), 5(b), 8, 9, and 10 of this Agreement shall
be automatically assigned by such Investor to any transferee of all or any
portion of such Investor's Registrable Securities (or all or any portion of the
Note or the Warrants) only if: (1) such Investor agrees in writing with such
transferee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (2) the Company is,
within a reasonable time after such transfer, furnished with notice of (A) the
name and address of such transferee and (B) the securities with respect to
which such rights and obligations are being transferred, (3) immediately
following such transfer or assignment the further disposition of Registrable
Securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, and (4) at or before the time the Company
received the notice contemplated by clause (2) of this sentence the transferee
agrees in writing with the Company to be bound by all of the provisions
contained in Sections 5(a), 5(b), 8, 9, and 10 hereof. Upon any such transfer,
the Company shall be obligated to such transferee to perform all of its
covenants under Sections 5(a), 5(b), 8, 9, and 10 of this Agreement as if such
transferee were the Buyer. In connection with any such transfer the Company
shall, at its sole cost and expense, promptly after such transfer take such
actions as shall be reasonably acceptable to the transferring Investor and such
transferee to assure that the Registration Statement and related Prospectus for
which the transferring Investor is a selling stockholder are available for use
by such transferee for sales of the Registrable Securities in respect of which
such rights and obligations have been so transferred. The Buyer shall have the
right to assign its rights under Section 5(j) in full or a proportionate amount
of such rights to a purchaser of the Notes or a portion thereof. Transfer of
the Note shall be limited as provided therein and transfer of the Warrants
shall be limited as provided therein.
(K) EXPENSES. The Company shall be responsible for its
expenses (including, without limitation, the legal fees and expenses of its
counsel), incurred by it in connection with the negotiation and execution of,
and closing under, and performance of, this Agreement.
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Whether or not the closing occurs, the Company shall be obligated to pay or
reimburse the legal fees and expenses and out-of-pocket due diligence expenses
of Alexandra Investment Management, LLC, not in excess of $10,000.00 in
connection with the negotiation and execution of, and closing under, this
Agreement. All reasonable expenses incurred in connection with registrations,
filings or qualifications pursuant to Sections 5(d), 5(e), 5(g) and 8 of this
Agreement shall be paid by the Company, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company and the Investors but
excluding (a) fees and expenses of investment bankers retained by any Investor
and (b) brokerage commissions incurred by any Investor. The Company shall pay
on demand all expenses incurred by the Buyer after the Closing Date, including
reasonable attorneys' fees and expenses, as a consequence of, or in connection
with (1) the negotiation, preparation or execution of any amendment,
modification or waiver of any of the Transaction Documents, (2) any default or
breach of any of the Company's obligations set forth in any of the Transaction
Documents, and (3) the enforcement or restructuring of any right of, including
the collection of any payments due, the Buyer under any of the Transaction
Documents, including any action or proceeding relating to such enforcement or
any order, injunction or other process seeking to restrain the Company from
paying any amount due the Buyer. Except as otherwise provided in this Section
10(k), each of the Company and the Buyer shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby.
(L) TERMINATION. (1) The Buyer shall have the right to
terminate this Agreement by giving notice to the Company at any time at or
prior to the Closing Date if:
(A) the Company shall have failed, refused, or been unable
at or prior to the date of such termination of this Agreement to
perform any of its obligations hereunder required to be performed prior
to the time of such termination;
(B) any condition to the Buyer's obligations hereunder is
not fulfilled at or prior to the time such condition is required to be
satisfied; or
(C) the closing shall not have occurred on a Closing Date on
or before March 31, 2004, other than solely by reason of a breach of
this Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(2) The Company shall have the right to terminate this
Agreement by giving notice to the Buyer at any times at or prior to the Closing
Date if the closing shall not have occurred on a Closing Date on or before March
31, 2004, other than solely by reason of a breach of this Agreement by the
Company, so long as the Company is not in breach of this Agreement
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at the time it gives such notice. Any such termination shall be effective upon
the giving of notice thereof by the Company. Upon such termination, neither the
Company nor the Buyer shall have any further obligation to one another
hereunder, except for the Company's liability for the Buyers expenses as
provided in Section 10(k).
(M) SURVIVAL. The respective representations, warranties,
covenants and agreements of the Company and the Buyer contained in this
Agreement and the documents delivered in connection with this Agreement shall
survive the execution and delivery of this Agreement and the other Transaction
Documents and the closing hereunder and delivery of and payment for the Note and
issuance of the Warrants, and shall remain in full force and effect regardless
of any investigation made by or on behalf of the Buyer or any Person controlling
or acting on behalf of the Buyer or by the Company or any Person controlling or
acting on behalf of the Company for a period ending on the later of (x) the date
which is six years after the Closing Date and (y) the date which is two years
after the Company shall have paid in full all amounts due from the Company under
the Transaction Documents and performed in full all of its obligations under the
Transaction Documents.
(N) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and
the Buyer shall have the right to approve before issuance any press releases or
any other public statements with respect to the transactions contemplated
hereby; PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law or applicable
requirements of any stock market on which securities of the Company are listed
for trading (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(O) CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers or other
representatives thereunto duly authorized on the respective dates set forth
below their signatures hereto.
Principal Amount: $ 2,300,000.00
Purchase Price: $ 2,300,000.00
DWANGO NORTH AMERICA CORP.
By: /s/ Xxxx X. Xxxxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: CEO
Date: March 19, 2004
ALEXANDRA GLOBAL MASTER
FUND LTD.
BY: ALEXANDRA INVESTMENT
MANAGEMENT, LLC,
As Investment Advisor
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title:Chairman and Chief Executive Officer
Date: March 19, 2004
Address:
c/o Alexandra Investment
Management, LLC
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
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