Exhibit 4.1
Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and schedules to this
agreement have been omitted. Axeda Systems Inc. agrees to supplementally furnish
such exhibits and schedules upon request from the Securities and Exchange
Commission.
AXEDA SYSTEMS INC.
SECURITIES PURCHASE AGREEMENT
October 5, 2004
Table of Contents
Page
1. Agreement to Sell and Purchase..........................................................................1
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2. Fees and Warrant........................................................................................1
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3. Closing, Delivery and Payment...........................................................................2
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3.1 Closing.......................................................................................2
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3.2 Delivery......................................................................................2
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4. Representations and Warranties of the Company...........................................................2
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4.1 Organization, Good Standing and Qualification.................................................3
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4.2 Subsidiaries..................................................................................3
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4.3 Capitalization; Voting Rights.................................................................4
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4.4 Authorization; Binding Obligations............................................................4
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4.5 Liabilities...................................................................................5
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4.6 Agreements; Action............................................................................5
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4.7 Obligations to Related Parties................................................................6
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4.8 Changes.......................................................................................6
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4.9 Title to Properties and Assets; Liens, Etc....................................................7
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4.10 Intellectual Property.........................................................................8
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4.11 Compliance with Other Instruments.............................................................8
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4.12 Litigation....................................................................................9
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4.13 Tax Returns and Payments......................................................................9
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4.14 Employees.....................................................................................9
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4.15 Registration Rights and Voting Rights........................................................10
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4.16 Compliance with Laws; Permits................................................................10
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4.17 Environmental and Safety Laws................................................................10
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4.18 Valid Offering...............................................................................11
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4.19 Full Disclosure..............................................................................11
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4.20 Insurance....................................................................................11
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4.21 SEC Reports..................................................................................11
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4.22 Listing......................................................................................11
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4.23 No Integrated Offering.......................................................................12
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4.24 Stop Transfer................................................................................12
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4.25 Dilution.....................................................................................12
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4.26 Patriot Act..................................................................................12
5. Representations and Warranties of the Purchaser........................................................13
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5.1 No Shorting..................................................................................13
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5.2 Requisite Power and Authority................................................................13
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5.3 Investment Representations...................................................................13
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5.4 Purchaser Bears Economic Risk................................................................13
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5.5 Acquisition for Own Account..................................................................14
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5.6 Purchaser Can Protect Its Interest...........................................................14
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5.7 Accredited Investor..........................................................................14
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5.8 Legends......................................................................................14
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6. Covenants of the Company...............................................................................15
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6.1 Stop-Orders..................................................................................16
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6.2 Listing......................................................................................16
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6.3 Market Regulations...........................................................................16
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6.4 Reporting Requirements.......................................................................16
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6.5 Use of Funds.................................................................................16
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6.6 Access to Facilities.........................................................................16
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6.7 Taxes........................................................................................17
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6.8 Insurance....................................................................................17
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6.9 Intellectual Property........................................................................18
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6.10 Properties...................................................................................18
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6.11 Confidentiality..............................................................................18
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6.12 Required Approvals...........................................................................18
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6.13 Reissuance of Securities.....................................................................20
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6.14 Opinion......................................................................................20
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6.15 Margin Stock................................................................................19
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6.16 Financing Right of First Refusal............................................................19
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7. Covenants of the Purchaser.............................................................................21
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7.1 Confidentiality..............................................................................21
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7.2 Non-Public Information.......................................................................21
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8. Covenants of the Company and Purchaser Regarding Indemnification.......................................22
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8.1 Company Indemnification......................................................................22
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8.2 Purchaser's Indemnification..................................................................22
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9. Conversion of Convertible Note.........................................................................23
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9.1 Mechanics of Conversion......................................................................23
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10. Registration Rights....................................................................................24
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10.1 Registration Rights Granted..................................................................24
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10.2 Offering Restrictions........................................................................24
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11. Miscellaneous..........................................................................................24
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11.1 Governing Law................................................................................24
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11.2 Survival.....................................................................................25
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11.3 Successors...................................................................................25
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11.4 Entire Agreement.............................................................................25
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11.5 Severability.................................................................................25
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11.6 Amendment and Waiver.........................................................................25
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11.7 Delays or Omissions..........................................................................26
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11.8 Notices......................................................................................26
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11.9 Attorneys' Fees..............................................................................27
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11.10 Titles and Subtitles.........................................................................27
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11.11 Facsimile Signatures; Counterparts...........................................................27
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11.12 Broker's Fees................................................................................27
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11.13 Construction.................................................................................27
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LIST OF EXHIBITS
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Form of Convertible Term Note....................................................................... Exhibit A
Form of Warrant..................................................................................... Exhibit B
Form of Opinion..................................................................................... Exhibit C
Form of Escrow Agreement............................................................................ Exhibit D
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 4, 2004, by and between AXEDA SYSTEMS INC., a Delaware
corporation (the "Company"), and Laurus Master Fund, Ltd., a Cayman Islands
company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of Four Million Five
Hundred Thousand Dollars ($4,500,000) (as amended, modified or supplemented from
time to time, the "Note"), which Note is convertible into shares of the
Company's common stock, $0.001 par value per share (the "Common Stock") at an
initial fixed conversion price of $0.48 per share of Common Stock ("Fixed
Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to purchase
up to 2,500,000 shares (the "Warrant Shares") of the Company's Common Stock
(subject to adjustment as set forth therein) in connection with Purchaser's
purchase of the Note (as amended, modified or supplemented from time to time,
the "Warrant");
WHEREAS, Purchaser desires to purchase the Note and the Warrant (as defined
in Section 2) on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, a Note in the aggregate principal amount of Four
Million Five Hundred Thousand Dollars ($4,500,000) convertible in accordance
with the terms thereof into shares of the Company's Common Stock in accordance
with the terms of the Note and this Agreement. The sale and issuance of the Note
and the Warrant on the Closing Date shall be known as the "Offering." A form of
the Note is annexed hereto as Exhibit A. The Note will mature on the Maturity
Date (as defined in the Note). Collectively, the Note and Warrant and Common
Stock issuable in payment of the Note, upon conversion of the Note and upon
exercise of the Warrant are referred to as the "Securities."
2. Fees and Warrant. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser the Warrant to
purchase up to 2,500,000 shares of Common Stock in connection with the
Offering pursuant to Section 1 hereof. The Warrant must be delivered on the
Closing Date. A form of Warrant is annexed hereto as Exhibit B All the
representations covenants, warranties, and indemnification and other rights
made or granted to or for the benefit of the Purchaser by the Company are
also made and granted in respect of the Warrant..
(b) Subject to the terms of Section 2(d) below, the Company shall pay
to Laurus Capital Management, LLC, the manager of the Purchaser, a closing
payment in an amount equal to three and six tenths percent (3.60%) of the
aggregate principal amount of the Note. The foregoing fee is referred to
herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable
expenses (including reasonable legal fees and reasonable expenses) incurred
in connection with the preparation and negotiation of this Agreement and
the Related Agreements (as hereinafter defined), and expenses incurred in
connection with the Purchaser's due diligence review of the Company and its
Subsidiaries (as defined in Section 4.2) and all related matters. Amounts
required to be paid under this Section 2(c) will be paid on the Closing
Date and shall be $39,500 for such expenses referred to in this Section
2(c) (net of deposits previously paid by the Company totaling $15,000).
(d) The Closing Payment and the expenses referred to in the preceding
clause (c) (net of deposits previously paid by the Company) shall be paid
at closing out of funds held pursuant to the Escrow Agreement (as defined
below) and a disbursement letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the closing
of the transactions contemplated hereby (the "Closing"), shall take place
on the date hereof, at such time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "Closing
Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on the
Closing Date, the Company will deliver to the Purchaser, among other
things, the Note and the Warrant and the Purchaser will deliver to the
Company, among other things, the amounts set forth in the Disbursement
Letter by wire transfer in same day funds to be sent to the account of the
Company as instructed by the Company and set forth in the Disbursement
Letter.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser that except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedule") or the
Company's filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
made prior to the date of this Agreement (the "SEC Filings") copies of which are
publicly available to the Purchaser:
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4.1 Organization, Good Standing and Qualification. Each of the Company
and each of its Subsidiaries is a corporation, partnership, limited
liability company or other form of business entity, as the case may be,
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Each of the Company and each of its
Subsidiaries has the corporate power and authority to own and operate its
properties and assets, to execute and deliver to the extent it is a party
thereto (i) this Agreement, (ii) the Note and the Warrant to be issued in
connection with this Agreement, (iii) the Master Security Agreement dated
as of the date hereof between the Company, certain Subsidiaries of the
Company and the Purchaser (as amended, modified or supplemented from time
to time, the "Master Security Agreement"), (iv) the Registration Rights
Agreement relating to the Securities dated as of the date hereof between
the Company and the Purchaser (as amended, modified or supplemented from
time to time, the "Registration Rights Agreement"), (v) the Subsidiary
Guaranty dated as of the date hereof made by certain Subsidiaries of the
Company (as amended, modified or supplemented from time to time, the
"Subsidiary Guaranty"), (vi) the Stock Pledge Agreement dated as of the
date hereof among the Company, certain Subsidiaries of the Company and the
Purchaser (as amended, modified or supplemented from time to time, the
"Stock Pledge Agreement"), (vii) the Funds Escrow Agreement dated as of the
date hereof among the Company, the Purchaser and the escrow agent referred
to therein, substantially in the form of Exhibit D hereto (as amended,
modified or supplemented from time to time, the "Escrow Agreement") and
(viii) all other agreements related to this Agreement and the Note and
referred to herein (the preceding clauses (ii) through (viii),
collectively, the "Related Agreements"), to issue and sell the Note and the
shares of Common Stock issuable upon conversion of the Note (the "Note
Shares"), to issue and sell the Warrant and the Warrant Shares, and to
carry out the provisions of this Agreement and the Related Agreements and
to carry on its business as presently conducted. Each of the Company and
each of its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation, partnership or limited
liability company or other form of business entity, as the case may be, in
all jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so has not, or would
not have, individually or in the aggregate, a material adverse effect on
the business, assets, liabilities, financial condition, properties or
operations of the Company and its Subsidiaries party to this Agreement or
any Related Agreement, taken as a whole (a "Material Adverse Effect").
Notwithstanding the foregoing, the following events, changes, conditions or
effects shall not be deemed to have a "Material Adverse Effect:" (i) any
event, change, condition or effect that occurred generally in the
industries in which the Company or its Subsidiaries operate; (ii) changes
in events, conditions or effects in connection with general economic,
political or regulatory conditions; (iii) the outbreak or escalation of
hostilities, diseases or terrorist activities; or (iv) a failure, absent
fraud or willful misconduct, to meet internal projections or forecasts.
4.2 Subsidiaries. Each direct and indirect Subsidiary of the Company
party to any Related Agreement, the direct owner of such Subsidiary and its
percentage ownership thereof, is set forth on Schedule 4.2. For the purpose
of this Agreement, a "Subsidiary" means a direct and indirect subsidiary of
the Company party to any Related Agreement whose shares of stock or other
ownership interests having ordinary voting power (other than stock or other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or
other persons or entities performing similar functions for such person or
entity, are owned, directly or indirectly, by the Company
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or an affiliate thereof or (ii) a corporation or other entity party to any
Related Agreement in which the Company or an affiliate thereof owns,
directly or indirectly, more than 50% of the equity interests at such time.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of September 29,
2004 consisted of 55,000,000 shares, of which 50,000,000 were shares of
Common Stock, par value $0.001 per share, 32,473,437 shares of which were
issued and outstanding , and 5,000,000 were shares of preferred stock, par
value $0.001 per share of which no shares of preferred stock were issued
and outstanding. The authorized capital stock of each Subsidiary of the
Company is set forth on Schedule 4.3.
(b) Except as disclosed on Schedule 4.3 or the SEC Filings, other
than: (i) the shares reserved for issuance under the Company's stock option
plans and stock purchase plan; and (ii) shares which may be granted
pursuant to this Agreement and the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements to
which the Company is a party, or arrangements or agreements of any kind for
the purchase or acquisition from the Company of any of its securities.
Except as disclosed on Schedule 4.3, neither the offer, issuance or sale of
any of the Note or the Warrant, or the issuance of any of the Note Shares
or Warrant Shares, nor the consummation of any transaction contemplated
hereby will result in a change in the price or number of any securities of
the Company outstanding, under anti-dilution or other similar provisions
contained in or affecting any such securities.
(c) All issued and outstanding shares of the Company's Common Stock:
(i) have been duly authorized and validly issued and are fully paid and
nonassessable; and (ii) were issued in compliance with all applicable state
and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the shares
of the Common Stock are as stated in the Company's Certificate of
Incorporation (the "Charter"). The Note Shares and Warrant Shares have been
duly and validly reserved for issuance. When issued in compliance with the
provisions of this Agreement and the Company's Charter, the Securities will
be validly issued, fully paid and nonassessable, and will be free of any
liens or encumbrances; provided, however, that the Securities may be
subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time
a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate, partnership or
limited liability company or other business form entity, as the case may
be, action on the part of the Company and each of its Subsidiaries
(including the respective officers and directors) necessary for the
authorization of this Agreement and the Related Agreements, the performance
of all obligations of the Company and its Subsidiaries hereunder and under
the other Related Agreements at the Closing and, the authorization, sale,
issuance and delivery of the Note and Warrant has been taken or will be
taken prior to the Closing. This Agreement and the Related
4
Agreements, when executed and delivered and to the extent it is a party
thereto, will be valid and binding obligations of each of the Company and
each of its Subsidiaries, enforceable against each such person in
accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
The sale of the Note is not and the subsequent conversion of the Note into Note
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with on the date
hereof. The issuance of the Warrant is not and the subsequent exercise of the
Warrant for Warrant Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.
4.5 Liabilities. Except as set forth on Schedule 4.5, neither the
Company nor any of its Subsidiaries has any material contingent
liabilities, except (i) current liabilities incurred in the ordinary course
of business, (ii) liabilities disclosed in any SEC Filings, (iii)
liabilities and obligations under agreements, contracts, leases or
commitments disclosed in SEC Filings, this Agreement or in a Schedule
hereto, (iv) those incurred in this Agreement and the Related Agreements,
and (v) those that would not reasonably be expected to have a Material
Adverse Effect. SEC Filings.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
disclosed in any SEC Filings and except as would not reasonably be expected
to have a Material Adverse Effect:
(a) there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the
Company or any of its Subsidiaries is a party or by which it is bound which
may involve: (i) obligations (contingent or otherwise) of, or payments to,
the Company in excess of $50,000 (other than obligations of, or payments
to, the Company arising from purchase or sale agreements entered into in
the ordinary course of business); or (ii) the transfer or license of any
patent, copyright, trade secret or other proprietary right to or from the
Company (other than licenses arising from the purchase of "off the shelf"
or other standard products); or (iii) provisions restricting the
development, manufacture or distribution of the Company's products or
services; or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(b) Since June 30, 2004 , neither the Company nor any of its
Subsidiaries has: (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock; (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than ordinary course obligations) individually in excess
of $100,000 or, in the case of indebtedness and/or liabilities individually
less than $100,000, in excess of $100,000 in the aggregate; (iii) made any
loans or advances to any
5
person not in excess, individually or in the aggregate, of $100,000, other
than ordinary course advances for travel expenses; or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than the sale
of its inventory in the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
4.7 Obligations to Related Parties. Except as set forth on Schedule
4.7, there are no obligations of the Company or any of its Subsidiaries to
officers, directors, stockholders or employees of the Company or any of its
Subsidiaries other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of the
Company and its Subsidiaries;
(c) for other standard employee benefits made generally available to
all employees (including stock option agreements outstanding under any
stock option plan approved by the Board of Directors of the Company); and
(d) obligations listed in the Company's financial statements or
disclosed in any of its SEC Filings.
Except as described above or set forth on Schedule 4.7 or in the SEC Filings,
none of the officers, directors or, to the best of the Company's knowledge, key
employees or stockholders of the Company or any members of their immediate
families, are indebted to the Company, individually or in the aggregate, in
excess of $50,000 or have any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship, or any firm or corporation which competes with the
Company, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete with
the Company. Except as described above, no officer, director or stockholder, or
any member of their immediate families, is, directly or indirectly, interested
in any material contract with the Company and no agreements, understandings or
proposed transactions are contemplated between the Company and any such person.
Except as set forth on Schedule 4.7 or in the SEC Filings, the Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
4.8 Changes. Since June 30, 2004, except as disclosed in any Exchange
Act Filing or in any Schedule to this Agreement or to any of the Related
Agreements, there has not been:
(a) any material change, except in the ordinary course of business, in
the contingent obligations of the Company or any of its Subsidiaries by way
of guaranty, endorsement, indemnity, warranty or otherwise;
6
(b) any damage, destruction or loss, whether or not covered by
insurance, has had, or would have, individually or in the aggregate, a
Material Adverse Effect;
(c) any waiver by the Company or any of its Subsidiaries not in the
ordinary course of business of a valuable right or of a material debt owed
to it;
(d) any direct or indirect loans made by the Company or any of its
Subsidiaries to any stockholder, employee, officer or director of the
Company or any of its Subsidiaries, other than advances made in the
ordinary course of business;
(e) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder of the Company or any
of its Subsidiaries;
(f) any declaration or payment of any dividend or other distribution
of the assets of the Company or any of its Subsidiaries;
(g) any labor organization activity related to the Company or any of
its Subsidiaries;
(h) any change in any material agreement to which the Company or any
of its Subsidiaries is a party or by which either the Company or any of its
Subsidiaries is bound which either individually or in the aggregate has
had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(i) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or
(j) any arrangement or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a) through (i)
above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 4.9 or as disclosed in SEC Filings, each of the Company and each
of its Subsidiaries has good and marketable title to its properties and
assets, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become delinquent;
(b) minor liens and encumbrances which do not materially detract from
the value of the property subject thereto or materially impair the
operations of the Company or any of its Subsidiaries; and
(c) those that have otherwise arisen in the ordinary course of
business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on
7
Schedule 4.9 or as disclosed in Sec Filings, the Company and its
Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) Each of the Company and each of its Subsidiaries owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now
conducted and to the Company's knowledge, as presently proposed to be
conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing proprietary rights, nor is
the Company or any of its Subsidiaries bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person
or entity other than such licenses or agreements arising from the purchase
of "off the shelf" or standard products other than those issued in the
ordinary course of business of the Company consistent with past practice
and those that would not reasonably be expected to have a Material Adverse
Effect.
(b) Since June 30, 2004, neither the Company nor any of its
Subsidiaries has received any communications alleging that the Company or
any of its Subsidiaries has violated any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity, nor is the Company or any
of its Subsidiaries aware of any basis therefor.
(c) The Company does not believe it is or will be necessary to utilize
any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company or any of its
Subsidiaries, except for inventions, trade secrets or proprietary
information that have been rightfully assigned to the Company or any of its
Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company nor any of
its Subsidiaries is in violation or default of (x) any term of its Charter
or Bylaws, or (y) of any provision of any indebtedness, mortgage,
indenture, contract, agreement or instrument to which it is party or by
which it is bound or of any judgment, decree, order or writ, which
violation or default, in the case of this clause (y), has had, or would
have, either individually or in the aggregate, a Material Adverse Effect.
The execution, delivery and performance of and compliance with this
Agreement and the Related Agreements to which it is a party, and the
issuance and sale of the Note by the Company and the other Securities by
the Company each pursuant hereto and thereto, will not, with or without the
passage of time or giving of notice, result in any such material violation,
or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
or any of its Subsidiaries or the suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company, its business or operations or any of its assets
or properties which has had or would have, individually or in the
aggregate, a Material Adverse Effect.
8
4.12 Litigation. Except as disclosed in SEC Filings or as set forth on
Schedule 4.12 hereto, there is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the
Company or any of its Subsidiaries that prevents the Company or any of its
Subsidiaries from entering into this Agreement or the other Related
Agreements, or from consummating the transactions contemplated hereby or
thereby, or which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect , nor is the
Company aware that there is any basis to assert any of the foregoing.
Neither the Company nor any of its Subsidiaries is a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.
4.13 Tax Returns and Payments. Each of the Company and each of its
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it except where failure to file has not and would
not have a Material Adverse Effect. All material taxes shown to be due and
payable on such returns, any assessments imposed, and all other material
taxes due and payable by the Company or any of its Subsidiaries on or
before the Closing, have been paid or will be paid prior to the time they
become delinquent. Except as set forth on Schedule 4.13, neither the
Company nor any of its Subsidiaries has been advised:
(a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. Except as set forth on Schedule 4.14 or the SEC
Filings, neither the Company nor any of its Subsidiaries has any collective
bargaining agreements with any of its employees. There is no labor union
organizing activity pending or, to the Company's knowledge, threatened with
respect to the Company or any of its Subsidiaries. Except as disclosed in
the SEC Filings or on Schedule 4.14, neither the Company nor any of its
Subsidiaries is a party to or bound by any currently effective material
employment contract (other than standard offer letters), deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement
(other than the Company's stock option plans and stock purchase plan). To
the Company's knowledge, no employee of the Company or any of its
Subsidiaries, nor any consultant with whom the Company or any of its
Subsidiaries has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating
to the right of any such individual to be employed by, or to contract with,
the Company or any of its Subsidiaries because of the nature of the
business to be conducted by the Company or any of its Subsidiaries; and to
the Company's knowledge the continued employment by the Company or any of
its Subsidiaries of its present employees, and the performance of the
Company's and its Subsidiaries' contracts with its independent contractors,
will not result in any such violation. Neither the Company nor any of its
Subsidiaries is aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any
9
nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with their duties
to the Company or any of its Subsidiaries in a material respect. Neither
the Company nor any of its Subsidiaries has received any notice alleging
that any such violation has occurred. Except for employees who have a
current effective employment agreement with the Company or any of its
Subsidiaries, no employee of the Company or any of its Subsidiaries has
been granted the right to continued employment by the Company or any of its
Subsidiaries or to any material compensation following termination of
employment with the Company or any of its Subsidiaries.
4.15 Registration Rights and Voting Rights. Except pursuant to this
Agreement or any Related Agreement, and except as set forth on Schedule
4.15 or except as disclosed in SEC Filings, neither the Company nor any of
its Subsidiaries is presently under any obligation, and neither the Company
nor any of its Subsidiaries has granted any rights, to register any of the
Company's or its Subsidiaries' presently outstanding securities or any of
its securities that may hereafter be issued. Except as set forth on
Schedule 4.15 or except as disclosed in SEC Filings, to the Company's
knowledge, no stockholder of the Company or any of its Subsidiaries has
entered into any agreement with respect to the voting of equity securities
of the Company or any of its Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, rule, regulation,
order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business
or the ownership of its properties which has had, or would have, either
individually or in the aggregate, a Material Adverse Effect. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required
to be filed in connection with the execution and delivery of this Agreement
or any other Related Agreement and the issuance of any of the Securities,
except such as has been duly and validly obtained or filed, or with respect
to any filings that must be made after the Closing, as will be filed in a
timely manner. Each of the Company and its Subsidiaries has all material
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which
would, either individually or in the aggregate, have a Material Adverse
Effect.
4.17 Environmental and Safety Laws. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety which has
had, or would have, either individually or in the aggregate, a Material
Adverse Effect, and to its knowledge, no material expenditures are or will
be required in order to comply with any such existing statute, law or
regulation. Except as set forth on Schedule 4.17 or as disclosed in SEC
Filings, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or any of its Subsidiaries or,
to the Company's knowledge, by any other person or entity on any property
owned, leased or used by the Company or any of its Subsidiaries. For the
purposes of the preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable local, state, federal and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the
10
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale
and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
4.19 Full Disclosure. Neither this Agreement, the Related Agreements
or the exhibits and schedules hereto and thereto contain any untrue
statement of a material fact nor omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading. Any financial
projections and other estimates provided to the Purchaser by the Company or
any of its Subsidiaries were based on the Company's and its Subsidiaries'
experience in the industry and on assumptions of fact and opinion as to
future events which the Company or any of its Subsidiaries, at the date of
the issuance of such projections or estimates, believed to be reasonable.
4.20 Insurance. Each of the Company and each of its Subsidiaries has
general commercial, product liability, fire and casualty insurance policies
with coverages which the Company believes are customary for companies
similarly situated to the Company and its Subsidiaries in the same or
similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company
has filed all proxy statements, reports and other documents required to be
filed by it under the Securities Xxxxxxxx Xxx 0000, as amended (the
"Exchange Act"). The Company has furnished or made available to the
Purchaser copies of: (i) its Annual Reports on Form 10-K for its fiscal
years ended December 31, 2003; and (ii) its Quarterly Reports on Form 10-Q
for its fiscal quarter ended June 30, 2004 , and the Form 8-K filings which
it has made during the fiscal year 2003 to date (collectively, the "SEC
Reports"). Except as set forth on Schedule 4.21, each SEC Report was, at
the time of its filing, in substantial compliance with the requirements of
its respective form and none of the SEC Reports, nor the financial
statements (and the notes thereto) included in the SEC Reports, as of their
respective filing dates, contained any untrue statement of a material fact
or omitted 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.
4.22 Listing. The Company's Common Stock is listed for trading on the
NASDAQ SmallCap Market ("NASDAQ SC") and satisfies, except as set forth on
Schedule 4.22 hereto or in SEC Filings, all requirements for the
continuation of such listing. The Company has not received any notice that
its Common Stock will be delisted from NASDAQ SC or that its Common Stock
does not meet all requirements for listing.
11
4.23 No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would
cause the offering of the Securities pursuant to this Agreement or any of
the Related Agreements to be integrated with prior offerings by the Company
for purposes of the Securities Act which would prevent the Company from
selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions, nor will
the Company or any of its affiliates or Subsidiaries take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.
4.24 Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. Neither the Company nor any of its Subsidiaries
will issue any stop transfer order or other order impeding the sale and
delivery of any of the Securities at such time as the Securities are
registered for public sale or an exemption from registration is available,
except as required by state and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note
and exercise of the Warrant is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
4.26 Patriot Act. The Company certifies that, to the best of Company's
knowledge, neither the Company nor any of its Subsidiaries has been
designated, and is not owned or controlled, by a "suspected terrorist" as
defined in Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money
laundering and related activities. In furtherance of those efforts, the
Company hereby represents, warrants and agrees that: (i) none of the cash
or property that the Company or any of its Subsidiaries will pay or will
contribute to the Purchaser has been or shall be derived from, or related
to, any activity that is deemed criminal under United States law; and (ii)
no contribution or payment by the Company or any of its Subsidiaries to the
Purchaser, to the extent that they are within the Company's and/or its
Subsidiaries' control shall cause the Purchaser to be in violation of the
United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company
shall promptly notify the Purchaser if any of these representations ceases
to be true and accurate regarding the Company or any of its Subsidiaries.
The Company agrees to provide the Purchaser any additional information
regarding the Company or any of its Subsidiaries that the Purchaser deems
necessary or convenient to ensure compliance with all applicable laws
concerning money laundering and similar activities. The Company understands
and agrees that if at any time it is discovered that any of the foregoing
representations are incorrect, or if otherwise required by applicable law
or regulation related to money laundering similar activities, the Purchaser
may undertake appropriate actions to ensure compliance with applicable law
or regulation, including but not limited to segregation and/or redemption
of the Purchaser's investment in the Company. The Company further
understands that the Purchaser may, as required by applicable law, release
confidential information about the Company and its Subsidiaries and, if
applicable, any underlying beneficial owners, to proper authorities if
required by applicable law. .
12
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and investment
partners has not, will not and will not cause any person or entity, to
directly engage in "short sales" of the Company's Common Stock as long as
any portion of the Note shall be outstanding.
5.2 Requisite Power and Authority. The Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on Purchaser's part required for the
lawful execution and delivery of this Agreement and the Related Agreements
have been or will be effectively taken prior to the Closing. Upon their
execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of Purchaser, enforceable in accordance with
their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement, including, without limitation,
that the Purchaser is an "accredited investor" within the meaning of
Regulation D under the Securities Act and further that any disposition of
the Securities made by it shall be made in accordance with applicable
securities law. The Purchaser confirms that it has received or has had full
access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the Note and the Warrant to
be purchased by it under this Agreement and the Note Shares and the Warrant
Shares acquired by it upon the conversion of the Note and the exercise of
the Warrant, respectively. The Purchaser further confirms that it has had
an opportunity to ask questions and receive answers from the Company
regarding the Company's and its Subsidiaries' business, management and
financial affairs and the terms and conditions of the Offering, the Note,
the Warrant and the Securities and to obtain additional information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information
furnished to the Purchaser or to which the Purchaser had access.
5.4 Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has
the capacity to protect its own interests. The Purchaser must bear the
economic risk of this investment until the Securities are sold pursuant to:
(i) an effective registration statement under the Securities Act; or (ii)
an exemption from registration is available with respect to such sale.
13
5.5 Acquisition for Own Account. The Purchaser is acquiring the Note
and Warrant and the Note Shares and the Warrant Shares for the Purchaser's
own account for investment only, and not as a nominee or agent and not with
a view towards or for resale in connection with their distribution.
5.6 Purchaser Can Protect Its Interest. The Purchaser represents that
by reason of its, or of its management's, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks
of its investment in the Note, the Warrant and the Securities and to
protect its own interests in connection with the transactions contemplated
in this Agreement and the Related Agreements. Further, Purchaser is aware
of no publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements.
5.7 Accredited Investor. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
5.8 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO AXEDA SYSTEMS INC. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered by an
effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO
14
AXEDA SYSTEMS INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AXEDA SYSTEMS
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
5.9 Organization and Existence. The Purchaser is a validly existing
corporation and has all requisite corporate power and authority to invest
in the Note and the Warrant pursuant to this Agreement.
5.10 Delivery into Escrow. Pursuant to the Escrow Agreement, the
Purchaser has, on or prior to the date hereof, delivered to the Escrow
Agent (as defined in the Escrow Agreement) the Escrowed Payment (as defined
in the Escrow Agreement) and copies of the Documents (as defined in the
Escrow Agreement) executed by the Purchaser to the extent it is a party
thereto and there are no contingencies on the Escrow Agent relating to the
release of the Escrowed Payment and the Documents other than as set forth
in the Escrow Agreement.
5.11 No General Solicitation. The Purchaser did not learn of the
investment in the Securities as a result of any public advertising or
general solicitation.
5.12 Previously-Acquired Shares of Common Stock. As of the date
hereof, the Purchaser does not beneficially own (within the meaning of Rule
13d-3 of the General Rules and Regulations under the Exchange Act) any
shares of the Common Stock of the Company, without giving effect to the
transactions contemplated hereby.
5.13 Representation of Counsel. The Purchaser has had the opportunity
to seek the advice of independent legal counsel with respect to the
negotiation, preparation and execution of this Agreement and the Related
Agreements; further, the Purchaser understands and acknowledges that
O'Melveny & Xxxxx LLP represents the Company and does not represent the
Purchaser in the transactions contemplated by this Agreement and the
Related Document.
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows (it being understood that section 6.4 through 6.12 shall
terminate and be of no further force or effect on the date upon which all
amounts due under the Note have been irrevocably paid in full or converted into
Common Stock):
15
6.1 Stop-Orders. The Company will advise the Purchaser, promptly after
it receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending any
offering of any securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering or sale in
any jurisdiction, or the initiation of any proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the NASDAQ Small Cap Market (the "Principal
Market") upon which shares of Common Stock are listed (subject to official
notice of issuance) and shall maintain such listing so long as any other
shares of Common Stock shall be so listed. The Company will use
commercially reasonable efforts to maintain the listing of its Common Stock
on the Principal Market, and to comply in all material respects with the
Company's reporting, filing and other obligations under the bylaws or rules
of the National Association of Securities Dealers ("NASD") and such
exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of
the Securities to the Purchaser and promptly provide copies thereof to the
Purchaser.
6.4 Reporting Requirements. The Company will use commercially
reasonable efforts to timely file with the SEC all reports required to be
filed pursuant to the Exchange Act and refrain from terminating its status
as an issuer required by the Exchange Act to file reports thereunder even
if the Exchange Act or the rules or regulations thereunder would permit
such termination.
6.5 Use of Funds. The Company agrees that it will use the proceeds of
the sale of the Note and the Warrant for general working capital and
general corporate purposes only.
6.6 Access to Facilities. Each of the Company and each of its
Subsidiaries will permit any representatives designated by the Purchaser
(or any successor of the Purchaser), upon reasonable notice and during
normal business hours, at such person's expense and accompanied by a
representative of the Company, to:
(a) visit and inspect any of the properties of the Company or any of
its Subsidiaries;
(b) examine the corporate and financial records of the Company or any
of its Subsidiaries (unless such examination is not permitted by federal,
state or local law or by contract) and make copies thereof or extracts
therefrom; and
(c) discuss the affairs, finances and accounts of the Company or any
of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries.
16
Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
6.7 Taxes. Each of the Company and each of its Subsidiaries will use
commercially reasonable efforts to promptly pay and discharge, or cause to
be paid and discharged, when due and payable, all lawful taxes, assessments
and governmental charges or levies imposed upon the income, profits,
property or business of the Company and its Subsidiaries; provided,
however, that any such tax, assessment, charge or levy need not be paid if
the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company and/or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Company and its Subsidiaries will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in similar business
similarly situated as the Company and its Subsidiaries; and the Company and
its Subsidiaries will maintain, with financially sound and reputable
insurers, insurance against other hazards and risks and liability to
persons and property to the extent and in the manner which the Company
reasonably believes is customary for companies in similar business
similarly situated as the Company and its Subsidiaries and to the extent
available on commercially reasonable terms. The Company, and each of its
Subsidiaries will jointly and severally bear the full risk of loss from any
loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for its obligations hereunder and under the Related
Agreements. At the Company's and each of its Subsidiaries' joint and
several cost and expense in amounts and with carriers reasonably acceptable
to Purchaser, the Company and each of its Subsidiaries shall (i) keep all
its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards
covered by extended coverage insurance and such other hazards, and for such
amounts, as is customary in the case of companies engaged in businesses
similar to the Company's or the respective Subsidiary's including business
interruption insurance; (ii) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to the
Company's or the respective Subsidiary's insuring against larceny,
embezzlement or other criminal misappropriation of insured's officers and
employees who may either singly or jointly with others at any time have
access to the assets or funds of the Company or any of its Subsidiaries
either directly or through governmental authority to draw upon such funds
or to direct generally the disposition of such assets; (iii) maintain
public and product liability insurance against claims for personal injury,
death or property damage suffered by others; (iv) maintain all such
worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which the Company or the respective
Subsidiary is engaged in business; and (v) furnish Purchaser with (x)
copies of all policies and evidence of the maintenance of such policies at
least five (5) days before any expiration date, (y) excepting the Company's
workers' compensation policy, endorsements to such policies naming
Purchaser as "co-insured" or "additional insured" and appropriate loss
payable endorsements in form and substance satisfactory to Purchaser,
naming Purchaser as loss payee, and (z) evidence that as to Purchaser the
insurance coverage shall not be impaired or invalidated by any act or
neglect of the
17
Company or any Subsidiary and the insurer will provide Purchaser with at
least five (5) business days notice prior to cancellation. In the event
that as of the date of receipt of each loss recovery upon any such
insurance, the Purchaser has not declared an event of default with respect
to this Agreement the Note or any other Related Agreement, then the Company
and/or such Subsidiary shall be permitted to direct the application of such
loss recovery proceeds toward investment in property, plant and equipment
that would comprise "Collateral" secured by Purchaser's security interest
pursuant to its security agreement or for its general corporate purposes,
with any surplus funds to be applied toward payment of the obligations of
the Company to Purchaser. In the event that Purchaser has properly declared
an event of default with respect to this Agreement or any of the Related
Agreements, then all loss recoveries received by Purchaser upon any such
insurance thereafter may be applied to the obligations of the Company
hereunder and under the Related Agreements, in such order as the Purchaser
may determine. Any surplus (following satisfaction of all Company
obligations to Purchaser) shall be paid by Purchaser to the Company or
applied as may be otherwise required by law. Any deficiency thereon shall
be paid by the Company or the Subsidiary, as applicable, to Purchaser, on
demand.
6.9 Intellectual Property. Each of the Company and each of its
Subsidiaries shall use commercially reasonable efforts to maintain in full
force and effect its existence, rights and franchises and all licenses and
other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business except to
the extent as could not reasonably be expected to cause a Material Adverse
Effect.
6.10 Properties. Each of the Company and each of its Subsidiaries will
keep its properties necessary to its business in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time
make all needful and proper repairs, renewals, replacements, additions and
improvements thereto in each case in all material respects; and each of the
Company and each of its Subsidiaries will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision would, either individually or in
the aggregate, have a Material Adverse Effect.
6.11 Confidentiality. The Company agrees that it will not disclose,
and will not include, the name of the Purchaser in any public announcement
or similar communication, unless expressly agreed to by the Purchaser or
unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
Notwithstanding the foregoing, the Company may disclose Purchaser's
identity and the terms of this Agreement to its current and prospective
debt and equity financing sources.
6.12 Required Approvals. For so long as twenty-five percent (25%) of
the principal amount of the Note is outstanding, the Company, without the
prior written consent of the Purchaser (which consent shall not be
unreasonably withheld, conditioned or delayed), shall not, and shall not
permit any of its Subsidiaries to:
(a) (i) directly or indirectly declare or pay any dividends, other
than dividends paid to the Company or any of its wholly-owned Subsidiaries,
(ii) issue any preferred stock that is manditorily redeemable prior to the
Maturity Date (as defined in the Note)or (iii) redeem any of its preferred
stock or other equity interests except that the Company and its
Subsidiaries may (x) declare and make dividend payments or other
distributions payable
18
solely in its equity securities or (y) make payments to redeem from
management, director and employee stockholders shares of the Company's
stock, warrants or options to acquire any such securities provided all of
the following conditions are satisfied:
(A) no Event of Default has occurred and is continuing; and
(B) the aggregate payments permitted under this clause ( y) during the
term of this Agreement shall not exceed $100,000;
(b) liquidate, dissolve or effect a material reorganization that is
not otherwise permitted hereunder or under the Master Securities Agreement
(it being understood that in no event shall the Company dissolve, liquidate
or merge with any other person or entity (unless the Company is the
surviving entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its
terms would (under any circumstances) prohibit the Company's or any of its
Subsidiaries right to perform the provisions of this Agreement, any Related
Agreement or any of the agreements contemplated hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole;
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess the greater of $100,000 per fiscal year or five
percent (5%) of the fair market value of the Company's and its
Subsidiaries' assets) whether secured or unsecured other than ( r) the
Company's indebtedness to the Purchaser, ( s) indebtedness set forth on
Schedule 6.12(e) attached hereto and made a part hereof and any
refinancings or replacements thereof on terms no less favorable to the
Purchaser than the indebtedness being refinanced or replaced, ( t) any debt
incurred in connection with the purchase of assets in the ordinary course
of business, or any refinancings or replacements thereof on terms no less
favorable to the Purchaser in any material respect than the indebtedness
being refinanced or replaced; (u) indebtedness that is subordinated to the
Note Obligations (as defined in the Master Security Agreement) in a manner
reasonably satisfactory to the Purchaser, (v) indebtedness consisting of
contingent obligations permitted pursuant to this clause (e)(iii), (w)
intercompany Indebtedness of Subsidiaries shall not exceed $100,000 in
excess of such Indebtedness outstanding on the date hereof, (x) customer
deposits made in the ordinary course of business, (y) unfunded pension fund
and other employee benefit plan obligations and liabilities to the extent
they are permitted to remain unfunded under applicable law, (z) other
unsecured indebtedness not exceeding in the aggregate at any time
outstanding $100,000; (ii) cancel any indebtedness for borrowed money owing
to it in excess of $50,000 in the aggregate during any 12 month period;
(iii) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except (v) the endorsement of negotiable instruments by the Company for
deposit or collection or similar transactions in the ordinary course of
business, (w) guarantees of indebtedness otherwise permitted to be
outstanding pursuant
19
to this clause (e); ( x) contingent obligations of Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule 6.11(e)
attached hereto, including extension and renewals thereof which do not
increase the amount of such guaranties as of the date of such extension or
renewal, (y) contingent obligations incurred in the ordinary course of
business with respect to surety and appeal bonds, performance bonds,
letters of credit and other similar obligations, and (z) other contingent
obligations not exceeding in the aggregate at any time $100,000 and
(f) make any sale, transfer or assignment of any Collateral (as
defined in the Master Security Agreement) (other than in the ordinary
course of business consistent with past practice or as otherwise permitted
in the Master Security Agreement) of any Subsidiary after the date hereof
or create or acquire any Subsidiary unless (i) such Subsidiary is a
wholly-owned Subsidiary of the Company (except for qualifying shares as
required by applicable law) and (ii) if such Subsidiary will be a material
subsidiary for purposes of Regulation S-X, such Subsidiary becomes party to
the Master Security Agreement, the Stock Pledge Agreement and the
Subsidiary Guaranty (either by executing a counterpart thereof or an
assumption or joinder agreement in respect thereof) and, to the extent
reasonably required by the Purchaser, satisfies each condition of this
Agreement and the Related Agreements as if such Subsidiary were a
Subsidiary on the Closing Date.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act upon request of such
holder; or
(b) upon request of such holder upon resale subject to an effective
registration statement after such Securities are registered under the
Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's
external legal counsel. The Company will provide, at the Company's expense,
such other legal opinions in the future as are deemed reasonably necessary
by the Purchaser (and reasonably acceptable to the Purchaser) in connection
with the conversion of the Note and exercise of the Warrant.
6.15 Margin Stock. The Company will not permit any of the proceeds of
the Note or the Warrant to be used directly or indirectly to "purchase" or
"carry" "margin stock" or to repay indebtedness incurred to "purchase" or
"carry" "margin stock" within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect.
20
6.16 Financing Right of First Refusal. (a) The Company hereby grants
to the Purchaser a right of first refusal exerciseable until October 3,
2005, to provide any Additional Financing (as defined below) to be issued
by the Company and/or any of its Subsidiaries, subject to the following
terms and conditions. From and after the date hereof, prior to the
incurrence of any additional indebtedness and/or the sale or issuance of
any equity interests of the Company or any of its Subsidiaries (except such
equity issuances as expressly set forth in Sections 3.4C(ii), (iii) and
(iv) of the Note) (an "Additional Financing"), the Company and/or any
Subsidiary of the Company, as the case may be, shall notify the Purchaser
of its intention to enter into such Additional Financing. In connection
therewith, the Company and/or the applicable Subsidiary thereof shall
submit a fully executed term sheet (a "Proposed Term Sheet") to the
Purchaser setting forth the terms, conditions and pricing of any such
Additional Financing (such financing to be negotiated on "arm's length"
terms and the terms thereof to be negotiated in good faith) proposed to be
entered into by the Company and/or such Subsidiary. The Purchaser shall
have the right, but not the obligation, within three (3) business days of
receipt of the Proposed Term Sheet, to deliver its own proposed term sheet
(the "Purchaser Term Sheet") setting forth the terms and conditions upon
which Purchaser would be willing to provide such Additional Financing to
the Company and/or such Subsidiary. The Purchaser Term Sheet shall contain
terms no less favorable to the Company and/or such Subsidiary than those
outlined in Proposed Term Sheet. The Purchaser shall deliver such Purchaser
Term Sheet within three (3) business days of receipt of each such Proposed
Term Sheet. If the provisions of the Purchaser Term Sheet are at least as
favorable to the Company and/or such Subsidiary, as the case may be, as the
provisions of the Proposed Term Sheet, the Company and/or such Subsidiary
shall enter into and consummate the Additional Financing transaction
outlined in the Purchaser Term Sheet (the "New Laurus Transaction").
Notwithstanding the immediately foregoing, if as a result of the New Laurus
Transaction, the Company would be required to obtain shareholder approval
of the New Laurus Transaction, Laurus shall not compel the Company to enter
into the New Laurus Transaction.
(b) Until the expiration of the right of first refusal granted to the
Purchaser in Section 6.16(a) hereof, the Company will not, and will not
permit its Subsidiaries to, agree, directly or indirectly, to any
restriction with any person or entity which limits the ability of the
Purchaser to consummate an Additional Financing with the Company or any of
its Subsidiaries
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not disclose,
and will not include in any public announcement, the name of the Company,
unless expressly agreed to by the Company or unless and until such
disclosure is required by law or applicable regulation, and then only to
the extent of such requirement.
7.2 Non-Public Information. The Purchaser agrees not to effect any
sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
21
7.3 No Shorting. Neither the Purchaser nor any of its affiliates or
investment partners will or will cause any person or entity, to directly
engage in "short sales" of the Company's Common Stock as long as any
portion of the Note shall be outstanding.
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend, on an after-tax and after insurance
recovery basis, the Purchaser, each of the Purchaser's officers, directors,
agents, affiliates, control persons, and principal shareholders, against
any claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature (collectively, "Losses"), incurred by
or imposed upon the Purchaser which results, arises out of or is based
upon: (i) any misrepresentation by the Company or any of its Subsidiaries
or breach of any warranty by the Company or any of its Subsidiaries in this
Agreement, any other Related Agreement or in any exhibits or schedules
attached hereto or thereto; or (ii) any breach or default in performance by
Company or any of its Subsidiaries of any covenant or undertaking to be
performed by Company or any of its Subsidiaries hereunder, under any other
Related Agreement or any other agreement entered into by the Company and/or
any of its Subsidiaries and Purchaser relating hereto or thereto. The
Company shall not be obligated to indemnify a person for any portion of a
Loss resulting from a breach of any representation or warranty made by the
Company under this Agreement and the Related Agreements if either (i) the
actual facts and circumstances which resulted in the relevant Loss were
expressly (and not by implication or inference) disclosed in SEC Filings
made prior to the date hereof or in the Schedules hereto or (ii) the
information and circumstances which resulted in the relevant Loss were
actually known (as opposed to implied or constructive knowledge) prior to
the date hereof by one or more of the general partners of the Purchaser.
8.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold
harmless, reimburse and defend, on an after tax and after insurance
recovery basis, the Company and each of the Company's officers, directors,
agents, affiliates, control persons and principal shareholders, at all
times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Company which results, arises out of or is based upon: (i)
any misrepresentation by Purchaser or breach of any warranty by Purchaser
in this Agreement or in any exhibits or schedules attached hereto or any
Related Agreement; or (ii) any breach or default in performance by
Purchaser of any covenant or undertaking to be performed by Purchaser
hereunder, or any other agreement entered into by the Company and Purchaser
relating hereto. The Purchaser shall not be obligated to indemnify any
person for any portion of a Loss resulting from a breach of any
representation or warranty made by the Purchaser under this Agreement or
the Related Agreements if either (i) the actual facts and circumstances
which resulted in the relevant Loss were expressly (and not by implication
or inference) disclosed to the Company in writing on or prior to the date
hereof or (ii) the information and circumstances which resulted in the
relevant Loss were actually known (as opposed to implied or constructive
knowledge) prior to the date hereof by one or more of the executive
officers of the Company.
22
9. Conversion of Convertible Note.
9.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the Purchaser's
intention to sell the Note Shares and the Note Shares are included in an
effective registration statement or are otherwise exempt from registration
when sold: (i) upon the conversion of the Note or part thereof, the Company
shall, at its own cost and expense, take all necessary action (including
the issuance of an opinion of counsel reasonably acceptable to the
Purchaser following a request by the Purchaser) to assure that the
Company's transfer agent shall issue shares of the Company's Common Stock
in the name of the Purchaser (or its nominee) or such other persons as
designated by the Purchaser in accordance with Section 9.1(b) hereof and in
such denominations to be specified representing the number of Note Shares
issuable upon such conversion; and (ii) the Company warrants that no
instructions other than these instructions have been or will be given to
the transfer agent of the Company's Common Stock and that after the
Effectiveness Date (as defined in the Registration Rights Agreement) the
Note Shares issued will be freely transferable subject to the prospectus
delivery requirements of the Securities Act and the provisions of this
Agreement, and will not contain a legend restricting the resale or
transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying or otherwise delivering
an executed and completed notice of the number of shares to be converted to
the Company (the "Notice of Conversion"). The Purchaser will not be
required to surrender the Note until the Purchaser receives a credit to the
account of the Purchaser's prime broker through the DWAC system (as defined
below), representing the Note Shares or until the Note has been fully
satisfied. Each date on which a Notice of Conversion is telecopied or
delivered to the Company in accordance with the provisions hereof shall be
deemed a "Conversion Date." Pursuant to the terms of the Notice of
Conversion, the Company will issue instructions to the transfer agent
accompanied by an opinion of counsel promptly following the date of the
delivery to the Company of the Notice of Conversion and shall cause the
transfer agent to transmit the certificates representing the Conversion
Shares to the Holder by crediting the account of the Purchaser's prime
broker with the Depository Trust Company ("DTC") through its Deposit
Withdrawal Agent Commission ("DWAC") system within three (3) business days
after receipt by the Company of the Notice of Conversion (the "Delivery
Date").
(c) The Company understands that a delay in the delivery of the Note
Shares in the form required pursuant to Section 9 hereof beyond the
Delivery Date could result in economic loss to the Purchaser. In the event
that the Company fails to direct its transfer agent to deliver the Note
Shares to the Purchaser via the DWAC system within the time frame set forth
in Section 9.1(b) above and the Note Shares are not delivered to the
Purchaser by the Delivery Date, as compensation to the Purchaser for such
loss, the Company agrees to pay late payments to the Purchaser for late
issuance of the Note Shares in the form required pursuant to Section 9
hereof upon conversion of the Note in the amount equal to the greater of:
(i) $500 per business day after the Delivery Date; or (
23
ii) the Purchaser's actual damages from such delayed delivery.
Notwithstanding the foregoing, the Company will not owe the Purchaser any
late payments if the delay in the delivery of the Note Shares beyond the
Delivery Date is solely out of the control of the Company and the Company
is actively trying to cure the cause of the delay. The Company shall pay
any payments incurred under this Section in immediately available funds
upon demand and, in the case of actual damages, accompanied by reasonable
documentation of the amount of such damages. Such documentation shall show
the number of shares of Common Stock the Purchaser is forced to purchase
(in an open market transaction) which the Purchaser anticipated receiving
upon such conversion, and shall be calculated as the amount by which (A)
the Purchaser's total purchase price (including customary brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds
(B) the aggregate principal and/or interest amount of the Note, for which
such Conversion Notice was not timely honored.
Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to a Purchaser and thus refunded to the Company.
10. Registration Rights.
10.1 Registration Rights Granted. The Company hereby grants
registration rights to the Purchaser pursuant to a Registration Rights
Agreement dated as of even date herewith between the Company and the
Purchaser.
10.2 Offering Restrictions. Except as previously disclosed in the SEC
Reports or in the SEC Filings, or stock or stock options granted to
employees or directors of the Company (these exceptions hereinafter
referred to as the "Excepted Issuances"), neither the Company nor any of
its Subsidiaries will issue any securities with a continuously
variable/floating conversion feature which are or could be (by conversion
or registration) free-trading securities (i.e. common stock subject to a
registration statement) prior to the full repayment or conversion of the
Note (together with all accrued and unpaid interest and fees related
thereto) without the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld.
11. Miscellaneous.
11.1 Governing Law. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT
BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY IN THE
STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE
24
RELATED AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY
PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT DELIVERED IN
CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE
STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO
THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO
CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY
PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY
OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT OR ANY RELATED
AGREEMENT.
11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby for a
period not to exceed the date upon which the obligations of the Company to
the Purchaser under the Note have been paid in full. . All statements as to
factual matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such
certificate or instrument.
11.3 Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and
shall inure to the benefit of and be enforceable by each person who shall
be a holder of the Securities from time to time, other than the holders of
Common Stock which has been sold by the Purchaser pursuant to Rule 144 or
an effective registration statement. Purchaser may not assign its rights
hereunder to a competitor of the Company.
11.4 Entire Agreement. This Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall
be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth
herein and therein.
11.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
11.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the written
consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written consent of the
Purchaser.
(c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written consent of the
Company.
25
11.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall
it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either under
this Agreement or the Related Agreements, by law or otherwise afforded to
any party, shall be cumulative and not alternative.
11.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile or by electronic mail if sent
during normal business hours of the recipient, if not, then on the next
business day;
(c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.
All communications shall be sent as follows:
If to the Company, to: Axeda Systems Inc.
00 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to:
O'Melveny & Xxxxx, LLP
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Purchaser, to: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx Xxxxx
Xxxxxx Xxxx
South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
26
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party
in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party
under or with respect to this Agreement, including, without limitation,
such reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
11.10 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
11.11 Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
11.12 Broker's Fees. Except as set forth on Schedule 11.12 hereof,
each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such
party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each
other party for any claims, losses or expenses incurred by such other party
as a result of the representation in this Section 11.12 being untrue.
11.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Agreement to favor any party against
the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY:
AXEDA SYSTEMS INC.
By: /s/ Xxxxxx X. Xxxxxxx Xx.
------------------------------------------
Name: Xxxxxx X. Xxxxxxx Xx.
------------------------------------------
Title: CEO/Chairman
------------------------------------------
PURCHASER:
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
-----------------------------------------------
Name: Xxxxx Grin
------------------------------------------
Title: Fund Manager
------------------------------------------
28
