EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of April 22, 2005, is
entered into by and between AMEDIA NETWORKS, INC., a Delaware corporation with
headquarters located at 000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000
(the "Company"), and each individual or entity named on an executed counterpart
of signature page hereto (each such signatory is referred to as the "Buyer" or a
"Buyer") (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer [each, an
"Other Buyer"] under such agreement and the Transaction Agreements, as defined
below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, INTER ALIA, by Rule 506 under
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Company desires to sell and the Buyer wishes to purchase
from the Company, subject to and upon the terms and conditions set forth in this
Agreement and acceptance of this Agreement by the Company, shares of the Series
B 8% Convertible Preferred Stock, par value $.001 per share and having a Stated
Value of $100 per share (the "Stated Value"), of the Company (the "Designated
Preferred Stock") which will be convertible into shares of Common Stock, $.001
par value per share, of the Company (the "Common Stock"), upon the terms and
subject to the conditions of such Designated Preferred Stock, together with the
Warrants (as defined below) exercisable for the purchase of shares of Common
Stock;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE.
(i) Subject to the terms and conditions set forth in this Agreement
and the other Transaction Agreements, the undersigned hereby agrees to purchase
from the Company the number of shares of Designated Preferred Stock specified on
the Buyer's signature page of this Agreement (the "Purchased Shares") and the
Warrants (the Purchased Shares and the Warrants, collectively, the "Purchased
Securities") for the purchase price set forth on the Buyer's signature page of
this Agreement (the "Purchase Price"), which Purchase Price is not less than
$250,000. The total Purchase Price of all Buyers (including Other Buyers) shall
be $6,000,000 (the "Aggregate Purchase Price").
(ii) Each share of Designated Preferred Stock shall be convertible
into Common Stock at a conversion price (the "Conversion Price"), which shall
initially be the Fixed Conversion Price (as defined below), which price may be
adjusted from time to as provided in the Certificate of Designations (as defined
below) or in the other Transaction Agreements. The Designated Preferred Stock
shall otherwise have the terms and conditions set forth in the Certificate of
Designations of Rights and Preferences of the Series B 8% Convertible Preferred
Stock of the Company attached hereto as ANNEX I (the "Certificate of
Designations").
B. CERTAIN DEFINITIONS. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:
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"Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
"Authorized Share Increase" means the approval of an amendment to the
Company's Certificate of Incorporation, as amended to date, to be presented to
at the Company's 2005 annual stockholders meeting, increasing the authorized
shares of the Common Stock to, 75,000,000 shares (but not more than such number
of shares).
"Automatic Conversion Date" has the meaning ascribed to in the
Certificate of Designations.
"Buyer Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Buyer pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).
"Certificates" means the (x) the original stock certificates
representing the Purchased Shares and (y) the original ink-signed Warrants, each
duly executed by the Company and issued in the name of the Buyer on the Closing
Date.
"Closing Date" means the date of the closing of the purchase and sale of
the Purchased Securities, as provided herein.
"Company Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
"Company Principal's Agreement" has the meaning ascribed to in Section
4(h).
"Company's SEC Documents" means the Company's filings on the SEC's XXXXX
system which are listed on ANNEX VI annexed hereto, to the extent available on
XXXXX or otherwise provided to the Buyer as indicated on said Annex VI.
"Conversion Certificates" means certificates representing the Conversion
Shares.
"Conversion Date" means the date a Holder submits a Notice of
Conversion, as provided in the Certificate of Designations.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Purchased Shares and/or in payment of accrued dividends, as
contemplated by the Certificate of Designations.
"Converting Holder" means the Holder of Designated Preferred Stock who
or which has submitted a Notice of Conversion (as contemplated by the
Certificate of Designations).
"Disclosure Letter" means a letter and any modifications thereof, the
latest of which is dated at least two Trading Days prior to the Closing Date,
from the Company to the Buyers; provided, however, that the Disclosure Letter
shall be arranged in sections corresponding to the identified Sections of this
Agreement, but the disclosure in any such section of the Disclosure Letter shall
qualify other provisions in this Agreement to the extent that it would be
readily apparent to an informed reader from a reading of such section of the
Disclosure Letter that it is also relevant to other provisions of this
Agreement.
"Effective Date" means the date the Registration Statement covering the
Registrable Securities is declared effective by the SEC.
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"Escrow Agent" means the escrow agent identified in the Joint Escrow
Instructions attached hereto as ANNEX II (the "Joint Escrow Instructions").
"Escrow Funds" means the Purchase Price delivered to the Escrow Agent as
contemplated by Sections 1(c) and (d) hereof.
"Escrow Property" means the Escrow Funds and the Certificates delivered
to the Escrow Agent as contemplated by Section 1(c) hereof.
"Exercise Price" means the per share exercise price of the relevant
Warrant.
"Fixed Conversion Price" means $1.01 (as that amount may be adjusted as
provided in the Certificate of Designations or herein).
"Holder" means the Person holding the relevant Securities at the
relevant time.
"Issue Date Conversion Shares" means the number of shares of Common
Stock equal to (x) the Stated Value of the Purchased Shares, divided by (y) the
Conversion Price in effect on the Closing Date.
"Last Audited Date" means December 31, 2004.
"Majority in Interest of the Holders" means, with respect to the
relevant date, one or more Holders who hold more than fifty percent (50%) of the
outstanding shares of Designated Preferred Stock as of that date.
"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (x) adversely
affect the legality, validity or enforceability of the Purchased Securities or
any of the Transaction Agreements, (y) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its material obligations
under any of the Transaction Agreements or the transactions contemplated
thereby.
"New Common Stock" means shares of Common Stock and/or securities
convertible into, and/or other rights exercisable for, Common Stock, which are
offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or lender
(howsoever denominated) in a New Transaction.
"New Transaction" means, unless consented to by a Majority in Interest
of the Buyers, the sale of New Common Stock by or on behalf of the Company to a
New Investor in a transaction offered or consummated after the date hereof;
provided, however, that it is specifically understood that the term "New
Transaction" (1) unless consented to otherwise by a Majority in Interest of the
Buyers, includes, but is not limited to, a sale of Common Stock or of a security
convertible into Common Stock or an equity or credit line transaction, but (2)
does not include (a) the sale of the Purchased Securities to the Buyer and the
Other Buyers, (b) the issuance of Common Stock upon the exercise or conversion
of options, warrants or convertible securities outstanding on the date hereof,
or in respect of any other financing agreements as in effect on the date hereof
and identified in the Disclosure Letter (provided the same is not amended after
the date of the Disclosure Letter) or in the Company's SEC Documents (provided
the same is not amended after the date hereof), (c) the issuance of Common Stock
pursuant to an Employee Stock Option Plan (an "ESOP") of the Company, such ESOP
having been properly approved by the shareholders of the Company, (d) the
issuance of Common Stock pursuant to a non-employee director stock option plan
of the Company, (e) the issuance of Common Stock pursuant to a consultants'
stock option plan of the Company, as in effect on the Closing Date, (f) the
issuance of Common Stock upon the exercise of any options or warrants referred
to in the preceding clauses of this paragraph (provided the same is not amended
after the date hereof), (g) the issuance of stock options or warrants to
employees, officers or directors of the Company, provided that all such shares
are subject to a Company Principal's Agreement, or (h) to a Strategic Partner.
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"Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
"Placement Agent" means Pond Equities, a registered broker-dealer.
"Principal Trading Market" means the Over the Counter Bulletin Board or
such other market on which the Common Stock is principally traded at the
relevant time, but shall not include the "pink sheets."
"Registrable Securities" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form annexed hereto as ANNEX IV as executed by the Buyer and the Company
simultaneously with the execution of this Agreement.
"Registration Statement" means an effective registration statement
covering the Registrable Securities.
"Securities" means the Purchased Securities and the Shares.
"Shares" means the shares of Common Stock representing any or all of the
Conversion Shares, the Warrant Shares and the Payment Shares (as defined in the
Registration Rights Agreement).
"State of Incorporation" means Delaware.
"Strategic Partner" means a third party, whether or not affiliated with
the Company as of the date hereof, which party (i) is engaged in a business
which is the business in which the Company is engaged or a similar, related or
complementary business, and (ii) subsequently purchases equity securities of the
Company (or securities convertible into equity securities of the Company), where
such purchase is accompanied or followed by one or more of the following: the
licensing by the Company of all or any portion of its technology to such third
party, the licensing by such third party of all or any portion of its technology
to the Company, or any other coordination of all or a portion of their
respective business activities or operations by the Company and such third
party.
"Trading Day" means any day during which the Principal Trading Market
shall be open for business.
"Transaction Agreements" means this Agreement, the Certificate of
Designations, the Joint Escrow Instructions, the Registration Rights Agreement,
the Disclosure Letter and the Warrants, and includes all ancillary documents
referred to in those agreements.
"Transfer Agent" means, at any time, the transfer agent for the
Company's Common Stock.
"Warrants" means the warrants referred to in Section 4 hereof and (ii)
the Additional Warrants (as defined below), if any.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Warrants.
C. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars to the Escrow Agent no later than
the date prior to the Closing Date.
(ii) Within three (3) Trading Days after the Escrow Agent notifies
the Company that the Escrow Agent has on deposit cleared funds from or on behalf
of one or more Buyers an aggregate amount equal to the Aggregate Purchase Price
and the Company shall have accepted the Buyer's subscription hereunder, but in
no
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event later than the Closing Date, the Company will deliver the Certificates to
the Escrow Agent. Such Certificates shall be held in escrow as provided in the
Joint Escrow Instructions.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
D. METHOD OF PAYMENT. Payment into escrow of the Purchase Price
shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Buyer by
Xxxxxxx & Prager LLP]
Re: Amedia 05 Convertible Preferred Transaction/[NAME OF BUYER]
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
A. Without limiting Buyer's right to sell the Securities pursuant
to an effective registration statement or otherwise in compliance with the 1933
Act, the Buyer is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
B. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act,
(ii) experienced in making investments of the kind described in this Agreement
and the other Transaction Agreements, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement and the other Transaction
Agreements, and to evaluate the merits and risks of an investment in the
Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
C. All subsequent offers and sales of the Securities by the Buyer
shall be made pursuant to registration of the relevant Securities under the 1933
Act or pursuant to an exemption from such registration.
D. The Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of the 1933 Act and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
E. The Buyer and its advisors, if any, have been furnished with or
have been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Purchased Securities which have been requested by the Buyer, including those set
forth on in any annex attached hereto. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Buyer has also had the
opportunity to obtain and to review the Company's SEC Documents.
F. The Buyer understands that its investment in the Securities
involves a high degree of risk.
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G. In connection with its purchase of the Securities, the Buyer has
not relied on any statement or representation by the Company or the Placement
Agent or any of their respective officers, directors and employees or any of
their respective attorneys or agents or the Placement Agent, except as
specifically set forth herein. The Placement Agent is a third party beneficiary
of this provision.
H. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
I. This Agreement and the other Transaction Agreements to which the
Buyer is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Buyer and are valid
and binding agreements of the Buyer enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer as of the date hereof and as of the Closing Date that,
except as otherwise provided in the Disclosure Letter or in the Company's SEC
Documents:
A. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Purchased Securities or the Shares. No other party has a currently exercisable
right of first refusal which would be applicable to any or all of the
transactions contemplated by the Transaction Agreements.
B. STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.
C. AUTHORIZED SHARES.
(i) The authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock, $.001 par value per share, of which
approximately 20,590,586 are outstanding as of April 11, 2005, and (ii)
5,000,000 shares of Preferred Stock, $.001 par value, of which 52,500 shares of
the Series A 7% Convertible Preferred Stock, par value $.001 per share and
having a Stated Value of $100 per share, are authorized and not more than
approximately 22,500 shares are outstanding as of April 11, 2005.
(ii) There are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future. If any such securities are listed on the Disclosure Letter but not in
the Company's SEC Documents, the number or amount of each such outstanding
convertible security and the conversion terms are set forth in said Disclosure
Letter.
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Shares on the Closing Date.
(iv) The Shares shall have been duly authorized by all necessary
corporate action on the part of the Company, and, when issued on conversion of,
or in payment of dividends on, the Purchased Shares in accordance
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with the provisions of the Certificate of Designations or upon exercise of the
Warrants in accordance with their terms, will have been duly and validly issued,
fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.
(v) Notwithstanding any other representation made herein or in any
of the other Transaction Agreements, as of the date hereof and as of the Closing
Date, the Company does not have sufficient authorized by unissued and unreserved
shares to be able to honor all Notices of Conversion of Designated Preferred
Stock and all Notices of Exercise of Warrants. The Company represents that the
Board of Directors (x) has voted to recommend to the shareholders that the
Company's Certificate of Incorporation, as currently in effect, be amended to
reflect the Authorized Share Increase, and (ii) the Company will file with the
SEC and send out to the Company's shareholders a notice of and proxy statement
for the annual stockholders meeting on or about June 15, 2005 (or as soon
thereafter as is practicable). All representations and covenants contained in
this Agreement or the other Transaction Agreements are made subject to the
provisions of this paragraph (v).
D. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Company, this Agreement
has been duly executed and delivered by the Company and this Agreement is, and
the Certificate of Designations, the Warrants and each of the other Transaction
Agreements, when executed and delivered by the Company, will be, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
E. NON-CONTRAVENTION. The execution and delivery of this Agreement
and each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Certificate of Designations, the Warrants
and the other Transaction Agreements do not and will not conflict with or result
in a breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the certificate of incorporation or by-laws of the Company,
each as currently in effect, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound, including any listing
agreement for the Common Stock except as herein set forth, or (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.
F. APPROVALS.
(i) No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the shareholders of the Company is required to be obtained by the
Company for the issuance and sale of the Securities to the Buyer as contemplated
by this Agreement, except such authorizations, approvals and consents that have
been obtained.
(ii) As contemplated by Sections 7 and 8 below, it is a condition to
the closing for the purchase and sale of the Purchased Securities contemplated
by this Agreement that the requisite consent of the 2004 Investors (as defined
below) be obtained. The Company has undertaken no responsibility for seeking
such consents from the 2004 Investors, but will accept all such consents which
are submitted to it. The term "2004 Investors" means the holders of the Series A
Convertible Preferred Stock issued by the Company pursuant to the terms of a
Securities Purchase Agreement, dated as of July 30, 2004 (the "2004 Purchase
Agreement"). The 2004 Purchase Agreement and the Transaction Agreements (as
defined in the 2004 Purchase Agreement) are referred to as the 2004 Transaction
Agreements.
G. FILINGS. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
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Since April 1, 2004, the Company has filed all requisite forms, reports and
exhibits thereto required to be filed by the Company with the SEC.
H. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there
has been no Material Adverse Effect, except as disclosed in the Company's SEC
Documents. Since the Last Audited Date, except as provided in the Company's SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to shareholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other material tangible assets, or canceled any material debts
owed to the Company by any third party or material claims of the Company against
any third party, except in the ordinary course of business consistent with past
practices; (v) waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any increases in employee compensation, except in
the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with
the terms and conditions of their employment.
I. FULL DISCLOSURE. To the Company's knowledge, there is no fact
known to the Company (other than facts known to the public generally or as
disclosed in the Company's SEC Documents) that has not been disclosed in writing
to the Buyer that would reasonably be expected to have or result in a Material
Adverse Effect.
J. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company, threatened against or affecting the Company
before or by any governmental authority or non-governmental department,
commission, board, bureau, agency or instrumentality or any other person,
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, any of the
Transaction Agreements. The Company is not aware of any valid basis for any such
claim that (either individually or in the aggregate with all other such events
and circumstances) could reasonably be expected to have a Material Adverse
Effect. There are no outstanding or unsatisfied judgments, orders, decrees,
writs, injunctions or stipulations to which the Company is a party or by which
it or any of its properties is bound, that involve the transaction contemplated
herein or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.
K. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section
3(e) and 3(f)(ii) hereof, no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company or its subsidiary is a
party, and no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (or its equivalent term) (as so defined
in such agreement), has occurred and is continuing, which would have a Material
Adverse Effect.
L. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR EVENTS. To
the Company's knowledge, none of the following has occurred during the past five
(5) years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such Company
Control Person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years before
the time of such filing;
(2) Such Company Control Person was convicted in a criminal
proceeding or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
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(3) Such Company Control Person was the subject of any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining him from,
or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or dealer
in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, as
a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other Person regulated by the
Commodity Futures Trading Commission ("CFTC") or engaging in or continuing any
conduct or practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation of federal or
state securities laws or federal commodities laws;
(4) Such Company Control Person was the subject of any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting for more
than 60 days the right of such Company Control Person to engage in any activity
described in paragraph (3) of this item, or to be associated with Persons
engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the CFTC or SEC has not been subsequently reversed, suspended, or
vacated.
M. NO UNDISCLOSED LIABILITIES OR EVENTS. No event or circumstances
has occurred or exists with respect to the Company or its properties, business,
operations, condition (financial or otherwise), or results of operations, which,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed. There are no proposals currently under
consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company which proposal would (x)
change the articles or certificate of incorporation or other charter document or
by-laws of the Company, each as currently in effect, with or without shareholder
approval, which change would reduce or otherwise adversely affect the rights and
powers of the shareholders of the Common Stock or (y) materially or
substantially change the business, assets or capital of the Company, including
its interests in subsidiaries.
N. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since October 1, 2004, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
O. DILUTION. The number of shares issuable on conversion of the
Purchased Shares and upon exercise of the Warrants or pursuant to the other
terms of the Transaction Agreements may have a dilutive effect on the ownership
interests of the other shareholders (and Persons having the right to become
shareholders) of the Company. The Company's executive officers and directors
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they have such a potential dilutive effect. The board of
directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Conversion Shares
upon conversion of the Purchased Shares and the Warrant Shares upon exercise of
the Warrants or the Payment Shares as provided in the Registration Rights
Agreement 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, and the Company
9
will honor such obligations, including honoring every Notice of Conversion (as
contemplated by the Certificate of Designations) and every Notice of Exercise
(as contemplated by the Warrants) and every demand for Payment Shares (as
contemplated by the Registration Rights Agreement), unless the Company is
subject to an injunction (which injunction was not sought by the Company)
prohibiting the Company from doing so.
P. FEES TO BROKERS, PLACEMENT AGENTS AND OTHERS. Except for payment
of the fees to the Placement Agent's Compensation (as defined below) to the
Placement Agent, payment of which is the sole responsibility of the Company, the
Company has taken no action which would give rise to any claim by any Person for
brokerage commission, finder's fees or similar payments by Buyer relating to
this Agreement or the transactions contemplated hereby. Buyer shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of Buyer, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred. The term "Placement Agent's Compensation"
means, in connection with the consummation of the transactions contemplated by
this Agreement, the consideration contemplated by the Joint Escrow Instructions.
Q. DISCLOSURE. All information relating to or concerning the
Company set forth in the Transaction Agreements or in the Company's public
filings with the SEC is true and correct in all material respects and have not
omitted to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
No event or circumstance has occurred or exists with respect to the Company or
its business, properties, prospects, operations or financial conditions, which
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company.
R. CONFIRMATION. The Company confirms that all statements of the
Company contained herein shall survive acceptance of this Agreement by the Buyer
for a period of three (3) years from the Closing Date. The Company agrees that,
if, to the knowledge of the Company, any events occur or circumstances exist
prior to the Closing Date which would make any of the Company's representations,
warranties, agreements or other information set forth herein materially untrue
or materially inaccurate as of such date, the Company shall immediately notify
the Buyer (directly or through its counsel, if any) and the Escrow Agent in
writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS.
(i) The Buyer acknowledges that (1) the Securities have not been and
are not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement or otherwise included in an
effective registration statement, the Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
(ii) In addition to the foregoing, and not in lieu thereof, the Buyer
agrees that, without the express written consent of the Company in each
instance, it will not transfer any of the Purchased Securities to any
10
Person which is known to the Buyer to be in substantially the same business as
the Company or which is known to be a subsidiary or affiliate of such a Person.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that,
until such time as the relevant Shares have been registered under the 1933 Act,
as contemplated by the Registration Rights Agreement, and may be sold in
accordance with an effective Registration Statement or otherwise in accordance
with another effective registration statement, or until such Shares can
otherwise be sold without restriction, whichever is earlier, the certificates
and other instruments representing any of the Securities shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
C. FILINGS. The Company undertakes and agrees to make all filings
it deems necessary (based on the advice of Company counsel) in connection with
the sale of the Securities to the Buyer under any United States laws and
regulations applicable to the Company, or by any domestic securities exchange or
trading market, and to provide a copy thereof to the Buyer promptly after such
filing. Reference is made to the Section titled "Publicity, Filings, Releases,
Etc." below.
D. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Purchased Securities and for at least twenty (20) Trading Days thereafter,
the Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its
control to ensure that adequate current public information with respect to the
Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company will take all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it at least through the date which is sixty (60) days after the
later of the date on which (x) all of the Designated Preferred Stock have been
converted or (y) all of the Warrants have been exercised or have expired.
E. USE OF PROCEEDS. The Company will use the net proceeds received
hereunder (excluding amounts paid as contemplated by the Joint Escrow
Instructions) (i) first, to satisfy the Company's obligations to pay the
balance, if any, of its 7% Convertible Secured Promissory Note Due April 8,
2006, issued on or about April 8, 2005 (the "April 2005 Note") (except that such
payment may, with the consent of the holder of such note, be made subject to the
Authorized Share Increase), (ii) then, to the application of the Security
Deposit (as defined below), and (iii) the balance, for general corporate
purposes.
F. WARRANTS.
(i) The Company agrees to issue to the Buyer on the Closing Date a
transferable warrant (the "Warrants") for the purchase of the number of shares
of Common Stock equal, in the aggregate, to fifty percent (50%) of the Issue
Date Conversion Shares. The Warrants will be issued in two Certificates,
designated as Class A and Class B, as contemplated by Section 4(o)(iii) hereof.
The Warrants shall have a per share exercise price (the "Exercise Price") of
$1.50 (subject to adjustment as provided in the Warrants). The Warrants shall be
exercisable initially on the earlier of (x) six (6) months after the Effective
Date or (y) the first annual anniversary of the Closing Date, and shall expire
on the date which is on the last day of the calendar month in which the fifth
annual
11
anniversary of the Effective Date occurs. The Warrants shall have cashless
exercise rights as provided in the Warrants. Except as specified above, each
Warrant shall generally be in the form annexed hereto as ANNEX V.
(ii) The Warrant Shares shall be subject to the provisions of the
Registration Rights Agreement.
G. CERTAIN AGREEMENTS.
(i) (A) The term "Lower Price Transaction" means a New Transaction
offered or consummated during the period (the "New Transaction Period") from the
Closing Date and continuing through and including the Final Lock-up Date (as
defined below), without the prior written consent of a Majority in Interest of
the Holders in each instance (which consent is in the sole discretion of the
Holders and may be withheld for any reason or for no reason whatsoever), where
either (1) the New Transaction Price (as defined below) is below the then
effective Conversion Price, or (2) the New Transaction Exercise Price of any New
Transaction Warrants (as those terms are defined below) is lower than the then
effective Exercise Price (the "Exercise Threshold Price").
(B) The Company covenants and agrees that, if there is a
Lower Price Transaction during the New Transaction Period, then, in addition to
any other rights provided to the Holder in the Transaction Agreements,
(1) the then applicable Conversion Price for any outstanding
Purchased Share shall be adjusted to an amount (the "Adjusted Conversion Price")
equal to the New Transaction Price; but in no event shall the Adjusted
Conversion Price be higher than the Conversion Price in effect immediately
before the relevant New Transaction; and
(2) if the New Transaction Exercise Price is lower than the Exercise
Threshold Price, then the Exercise Price of the then outstanding Warrants shall
be adjusted to equal the New Transaction Exercise Price; but in no event shall
the Exercise Price of any Warrant be adjusted to an Exercise Price higher than
the Exercise Price for such Warrant in effect immediately before the relevant
New Transaction.
(C) For purposes of this Agreement, the following terms
shall have meanings indicated:
(1) The term "Final Lock-up Date" means the date which is the first
annual anniversary of the Effective Date.
(2) "New Transaction Price" means the Basic New Transaction Price
(as defined below) except that if the New Transaction Exercise Price is lower
than the Basic New Transaction Price, it means the New Transaction Exercise
Price.
(3) "Basic New Transaction Price" means, as may be applicable, on a
per share basis, the lower of (1) the lowest fixed purchase price of any shares
of the New Common Stock contemplated in the New Transaction or (2) the lowest
conversion price or put or call price which would be applicable under the terms
of the New Transaction; in each such case, whether such purchase or conversion
price or put or call price is stated or could result from adjustments or
revisions contemplated in the relevant agreements for the New Transaction and
whenever such adjustment or revision would be applicable (and if no minimum
purchase price, conversion price or put or call price, as the case may be, is
set, it shall be assumed that such minimum purchase price or conversion price is
$.01); and provided, further, that, if the securities
12
issued in the New Transaction are issued at a Face Value Discount (as defined
below), the New Transaction Price shall be adjusted to reflect such discount.1
(4) "New Transaction Exercise Price" means the lowest exercise price
per share applicable to the warrants, option or similar instrument (howsoever
denominated; collectively, "New Transaction Warrants") included in such New
Transaction, whether such exercise price is stated or could result from
adjustments or revisions contemplated in the relevant agreements for the New
Transaction and whenever such exercise price would be applicable (and, if no
minimum exercise price is set, it shall be assumed that such minimum exercise
price is $.01).
(5) "Alternative Warrant Percentage" means (x) the number of shares
which are eligible to be purchased under the New Transaction Warrants issued in
the New Transaction Warrants, divided by (y) the aggregate of the shares of New
Common Stock issued or issuable in such transaction (excluding the shares
issuable on exercise of the New Transaction Warrants).
(6) "Outstanding Warrant Shares" means, for each class of Warrants
or for any previously issued Additional Warrants (as defined below), the then
outstanding number of Warrant Shares which would then be issuable upon the
exercise in full of such class of Warrants (without regard to any limitations
which may then restrict the Holder's full exercise of such Warrant at any time)
or such Additional Warrants, if any, as in effect immediately prior to the
relevant New Transaction.
(7) "Original Warrant Shares" means, for each class of Warrants or
for any previously issued Additional Warrants, the original number of Warrant
Shares issuable on exercise of such class of Warrants on the Closing Date or as
Additional Warrants, as the case may be (in each case without regard to any
limitations which may then restrict the Holder's full exercise of such Warrant
at any time), but excluding any Warrant canceled pursuant to the provisions of
Section 4(o)(iii) hereof.
(8) "Face Value Discount" means consideration less than, as the case
may be, (x) the number of shares being issued multiplied by the stated purchase
price, (y) the stated principal amount of a debenture, note or similar
instrument or (z) the stated value of the shares of convertible stock
(ii) Anything in the foregoing provisions of this Section 4(g) to the
contrary notwithstanding, if, without the prior written consent of a Majority in
Interest of the Holders in each instance (which consent is in the sole
discretion of the Holders and may be withheld for any reason or for no reason
whatsoever), during the New Transaction Period, the Company enters into a New
Transaction, the following provisions shall apply whether or not such New
Transaction is a Lower Price Transaction:
(A) if the provisions applicable to the convertible preferred stock,
convertible debenture or similar instrument (howsoever denominated), if any, of
the New Transaction are more beneficial to the holder of such instrument than
the corresponding terms applicable to the Designated Preferred Stock (in the
Certificate of Designations or otherwise) or in or to the Warrant, as the case
may be, or if the terms which are beneficial to the Company in the relevant
Transaction Agreements are not included in the corresponding instrument in the
New Transaction, then, unless waived by the Holder, the terms of the Transaction
Agreements applying to the then outstanding Purchased Shares or the Warrant, as
the case may be, shall be modified to reflect similar terms (based, for the
outstanding Purchased Shares, on the original issue date of the Purchased Shares
issued on the Closing Date, and for the Warrants, on the relevant Closing Date,
as the case may
--------------------------------
1 By way of illustration, if convertible preferred shares having a stated value
of $1 million and a fixed conversion price of $0.05 were sold for a purchase
price of $800,000, the effective New Transaction Price would be $0.04.
13
be); provided, however, that nothing in this provision shall be read to mean
that the Purchased Securities shall be changed to any other form of security;
(B) if the Alternative Warrant Percentage is greater than fifty
percent (50%), the Company shall issue to the Holder additional warrants
("Additional Warrants") for the purchase of the number of shares equal to the
excess, if any, of
(1) (x) the Alternative Warrant Percentage, multiplied by (y) (I)
the Purchase Price, divided by (II) the lower of the Conversion Price or the
Adjusted Conversion Price, if any, multiplied by (y) a fraction, of which the
numerator is the Outstanding Warrant Shares for all classes of Warrants
(including previously issued Additional Warrants) and the denominator is
Original Warrant Shares for all relevant classes of Warrants (including
previously issued Additional Warrants); over
(2) the aggregate Outstanding Warrant Shares for all classes of
Warrants Classes (including previously issued Additional Warrants).
and the terms of such Additional Warrants (including, but not limited,
to term of exercisability, exercise price, manner and limitations, if
any, on exercise, registration rights) shall be the same as the
applicable New Transaction Warrants issued in such New Transaction.
(iii) Nothing in the foregoing provisions reflects either an
obligation on the part of any Buyer to participate in any New Transaction or a
limitation on any Buyer from participating in any New Transaction.
(iv) Any of the foregoing provisions of this Section 4(g) or any
other provision of this Agreement or any of the other Transaction Agreements to
the contrary notwithstanding, the Company shall not engage in any offers, sales
or other transactions of its securities which would adversely affect the
exemption from registration available for the transactions contemplated by the
Transaction Agreements.
(v) The Company agrees that, prior to the Effective Date, the
Company will not file any registration statement for the sale of shares by the
Company or any other shareholder other than the Registration Statement
contemplated by the Registration Rights Agreement.
H. COMPANY PRINCIPAL AGREEMENTS. The Company hereby agrees that,
prior to the Closing Date, the Company will cause each director or principal
officer of the Company (each, a "Company Principal") and certain persons who are
related to or controlled by such Company Principal, to execute and deliver an
agreement (each, a "Company Principal's Agreement") regarding limitations on the
sale or other disposition of such Company Principal's and any other Principal's
(as those terms are defined in the Company Principal's Agreement) shares of the
Company's Common Stock (or instruments convertible into or exercisable for such
shares), except that, notwithstanding its terms, the Company Principal's
Agreement will be deemed not apply to the sale of shares of Common Stock bought
by a Principal in open market transactions. Subject to the foregoing, each
Company Principal's Agreement shall be substantially in the form set forth in
ANNEX VII attached hereto.
I. AVAILABLE SHARES.
(i) The provisions of clause (ii) of this Section 4(i) shall be
applicable to fifty percent (50%) of all of the then outstanding shares of
Designate Preferred Stock and all of the then outstanding Warrants until the
earlier of the approval by the Company's shareholders of the Authorized Share
Increase or the Filing Evidence Date (as defined below). Thereafter, the
provisions of clause (ii) of this Section 4(i) shall be applicable to one
hundred percent (100%) of all of the then outstanding shares of Designate
Preferred Stock and all the then outstanding Warrants.
14
(ii) The Company shall have at all times authorized and reserved for
issuance, free from preemptive rights, a number of shares (the "Reserved
Amount") at least equal to the aggregate number of shares upon conversion of
contemplated by both the Certificate of Designations and all of the then
outstanding Warrants (in each case, whether any of the outstanding shares of
Designated Preferred Stock or outstanding Warrants were originally issued to the
Holder, the Buyer or to any other party). For the purposes of such calculations,
the Company should assume that all outstanding shares of Designated Preferred
Stock and all Warrants were then exercisable, in each case without regard to any
restrictions which might limit any Holder's right to convert any of the
Purchased Shares or to exercise any of the Warrants held by any Holder.
J. SUBSEQUENT ISSUANCES OF PREFERRED STOCK. The Company agrees
that, except for the Purchased Shares issued to the Buyer and the Other Buyers
pursuant to this Agreement, (i) the Company will not issue any other shares of
the Designated Preferred Stock to any Person, (ii) any other series of Preferred
Stock issued by the Company at any time after the date hereof shall be Junior
Securities (as that term is defined in the Certificate of Designations)2, and
(iii) will not issue any other securities of the Company having a liquidation
preference senior to or pari passu with the liquidation preference of the
Designated Convertible Stock.
K. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties agrees
that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects. In furtherance of the foregoing, the
Company will provide to the Buyer drafts of the applicable text of any filing
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least three
(3) business days before such filing will be made) and will not include in such
filing any statement or statements or other material to which the other party
reasonably objects. Notwithstanding the foregoing, each of the parties hereby
consents to the inclusion of the text of the Transaction Agreements in filings
made with the SEC (but any descriptive text accompanying or part of such filing
shall be subject to the other provisions of this paragraph). Notwithstanding,
but subject to, the foregoing provisions of this Section 4(k), the Company will,
after the Closing Date, promptly issue a press release and file a Current Report
on Form 8-K or, if appropriate, a quarterly or annual report on the appropriate
form, referring to the transactions contemplated by the Transaction Agreements.
L. INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under the Transaction Agreements are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any Other Buyer under any
one or more of the Transaction Agreements. The decision of each Buyer or Other
Buyer to purchase Purchased Securities pursuant to the Transaction Agreements
has been made by such Buyer independently of any Other Buyer. Nothing contained
herein or in any Transaction Agreement, and no action taken by any Buyer
pursuant thereto, shall be deemed to constitute any two or more Buyers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Agreements. Each Buyer acknowledges that no Other Buyer has acted as
agent for such Buyer in connection with making its investment hereunder and that
no Buyer will be acting as agent of such Other Buyer in connection with
monitoring its investment in the Purchased Securities or enforcing its rights
under the Transaction Agreements. Each Buyer shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Agreements, and it shall
not be necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Buyers
has been provided with the same Transaction Agreements for the purpose of
closing a transaction with multiple Buyers and not because it was required or
requested to do so by any Buyer.
--------------------------------
2 It is understood that the Series A 7% Convertible Preferred Stock is a Senior
Security (as that term is defined in the Certificate of Designations).
15
M. EQUAL TREATMENT OF BUYERS. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Agreements unless the same consideration is
also offered to all of the parties to the Transaction Agreements.
N. INDEPENDENT INVESTMENT DECISION. No Buyer has agreed to act with
any Other Buyer for the purpose of acquiring, holding, voting or disposing of
the Securities purchased hereunder for purposes of Section 13(d) under the
Exchange Act, and each Buyer is acting independently with respect to its
investment in the Securities. The decision of each Buyer to purchase Purchased
Securities pursuant to this Agreement has been made by such Buyer independently
of any other purchase and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or its subsidiaries which may have made
or given by any Other Buyer or by any agent or employee of any Other Buyer, and
no Buyer or any of its agents or employees shall have any liability to any Other
Buyer (or any other person) relating to or arising from any such information,
materials, statements or opinions.
O. AUTHORIZED SHARE INCREASE.
(i) The Company will take all commercially reasonable steps
necessary to effectuate the filing of an amendment to its Certificate of
Incorporation, as currently in effect, to reflect the Authorized Share Increase.
In furtherance of the foregoing, it will take all reasonable steps necessary to
have the shareholders meeting held and to obtain the requisite shareholder
approval, including, but not necessarily limited to, filing with the SEC and
distributing to the Company's shareholders a notice of and a proxy statement for
the annual stockholders meeting expected to be held by no later than July 15,
2005, and the Board of Directors' recommending approval of the Authorized Share
Increase. Upon the requisite authorization for the Authorize Share Increase, the
Company will file an amendment to the Certificate of Incorporation of the
Company, as currently in effect, to reflect the Authorized Share Increase, such
filing to be made no later than July 25, 2005. Nothing contained herein shall be
deemed to prohibit or otherwise limit the Company or its stockholders from
considering and/or approving an amendment to the Company's certificate of
incorporation increasing the authorized shares of Common Stock of the Company to
a number above 75,000,000 at a meeting of stockholders (or, if permitted by the
corporate law of the State of Incorporation, by way of written consent in lieu
of a meeting) to be held subsequent to the close of the 2005 annual stockholders
meeting.
(ii) The Company agrees that on the Closing Date it will deposit with
Xxxxxxx & Xxxxxx LLP (the "Security Agent"), out of the Aggregate Purchase Price
otherwise distributable to the Company out of the Escrow Funds, an amount (the
"Security Deposit") equal to fifty percent (50%) of the Aggregate Purchase
Price. The Company hereby grants the Buyer a security interest in a portion of
the Security Deposit equal to fifty percent (50%) of the Buyer's Purchase Price
to secure the Company's obligations to the Buyer under this Section 4(o). The
Security Deposit shall be held by the Security Agent in an escrow account
maintained by the Security Agent in the name of the Company, but acting as agent
for the Buyer and the Other Buyers. The Security Agent's holding of the Security
Deposit shall represent the holding of such security interest in favor of the
Buyer and the Other Buyers for the Company's filing of an amendment to the
Company's Certificate of Incorporation, as currently in effect, to reflect the
Authorized Share Increase by July 15, 2005. Evidence of such filing (the "Filing
Evidence") shall be made by the Company providing a letter from Company Counsel
to the Security Agent within three (3) Trading Days after the filing of the
amendment, but in no event later than the Filing Evidence Date) confirming (1)
the Authorized Share Increase was duly approved by the Company's shareholders on
or before July 15, 2005 and (2) confirming the filing of the amendment to the
certificate of incorporation, specifying the date of such filing and providing a
copy of the amendment which is either (x) an original or a photocopy of the
amendment certified or stamped by the office in the State of Incorporation in
which the amendment was filed or (y) a photocopy of the amendment as filed,
together with an unqualified confirmation from Company Counsel that such
amendment has been filed. If the Filing Evidence is timely received by the
Security Agent, the Security Agent shall release the Security Deposit to the
Company and deliver the Certificates, as contemplated in subparagraph (iii)
below, to the respective Buyers. If the filing of the Authorized Share Increase
was not approved by July 15, 2005 or if the Filing
16
Evidence is not received by the Security Agent by the Filing Evidence Date, the
Company shall be obligated to pay to each Buyer on the Cancellation Date (as
defined below) an amount equal to fifty percent (50%) of such Buyer's Purchase
Price, plus accrued dividends on fifty percent (50%) of such Buyer's Purchased
Shares through the Cancellation Date. In such event, the Escrow Agent shall
release the Security Deposit to the Buyer and the Other Buyers, pro rata among
them in accordance with their respective Purchase Prices, against cancellation,
as of the Cancellation Date, of (q) fifty percent (50%) of each Buyer's original
number of Purchased Shares and (r) fifty percent (50%) of such Buyer's original
Warrants (in the manner contemplated by subparagraph (iii) below) and such
release shall be applied against the Company's obligations to the each relevant
Buyer under this Section 4(o). . Interest, if any, earned on the Security
Deposit shall be paid to the Company (subject to the requirements of the Joint
Escrow Instructions), but the Company shall remain obligated to each Buyer for
the payment of accrued dividends on the cancelled Purchased Shares through the
Cancellation Date. The "Filing Evidence Date"is July 29, 2005. The "Cancellation
Date" is the earlier of (i) the first Trading Day after the date, which shall
not be before the conclusion of the Company's shareholders meeting, on which on
which the Company advises the Security Agent in writing that the shareholders
did not approve the Authorized Share Increase, or (ii) the Trading Day after the
Filing Evidence Date, if the Filing Evidence is not received by the Filing
Evidence Date
(iii) In furtherance of the foregoing, the parties agree as follows:
The Certificates representing the Purchased Shares and the Warrants will each be
initially issued in two instruments, each for half of the amounts contemplated
by this Agreement. One such stock certificate and one such Warrant instrument
will be released and delivered to the Buyer on the Closing Date. The other stock
certificate and other Warrant instrument will be released to the Buyer, but
continue to be held by the Security Agent on behalf of the Buyer pending the
release of the Security Deposit. If the Security Deposit is released to the
Company, such second stock certificate and second Warrant instrument shall be
delivered to the Buyer. If the Security Deposit is released to the Buyers, such
second stock certificate and second Warrant instrument shall be delivered to the
Company for cancellation.
(iv) In addition to, and not in lieu of, the foregoing, the Company
agrees that if the Authorized Share Increase is not approved by July 15, 2005 or
if the Filing Evidence is not received by Security Agent by the Filing Evidence
Date, the Company will not, without the prior written consent of a Majority in
Interest of the Holders in each instance (which consent is in the sole
discretion of the Holders and may be withheld for any reason or for no reason
whatsoever) enter into any New Transaction whatsoever until the date which is
the first annual anniversary of the Closing Date.
P. NASD RULE 2710. The Company is aware that the Corporate
Financing Rule 2710 ("NASD Rule 2710") of the National Association of Securities
Dealers ("NASD") is or may become applicable to the transactions contemplated by
the Transaction Agreements or to the sale by a Holder of any of the Securities.
If NASD Rule 2710 is so applicable, the Company shall, to the extent required by
such rule, cooperate with any broker or selling shareholder in respect of any
consents, authorizations or approvals that may be necessary for the NASD to
timely and expeditiously permit the shareholder to sell the securities.
5. TRANSFER AGENT INSTRUCTIONS.
17
A. The Company warrants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 4(a) hereof, it
will give the Transfer Agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Purchased Shares in
such amounts as specified from time to time by the Company to the Transfer
Agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Buyer or its nominee and in such denominations to be specified
by the Holder in connection with each conversion of the Purchased Shares. Except
as so provided, the Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement and
the other Transaction Agreements. Nothing in this Section shall affect in any
way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act or upon request from a Holder while the Registration Statement is
effective, the Company shall (except as provided in clause (2) of Section 4(a)
of this Agreement) permit the transfer of the Securities and, in the case of the
Conversion Shares, the Warrant Shares or the Payment Shares, as may be
applicable, promptly instruct the Transfer Agent to issue one or more
certificates for Common Stock without legend in such name and in such
denominations as specified by the Buyer.
B. The Company shall assume any fees or charges of the Transfer
Agent or Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement. Notwithstanding the foregoing, it shall be the Holder's
responsibility to obtain all needed formal requirements (specifically: medallion
guarantee and prospectus delivery compliance) in connection with any electronic
issuance of shares of Common Stock
C. The Company will authorize the Transfer Agent to give
information relating to the Company directly to the Holder or the Holder's
representatives upon the request of the Buyer or any such representative, to the
extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Holder in connection with a Notice of
Conversion or a Notice of Exercise, or (ii) the aggregate number of outstanding
shares of Common Stock of all shareholders (as a group and not individually) as
of a current or other specified date. At the request of the Holder, the Company
will provide the Holder with a copy of the authorization so given to the
Transfer Agent.
6. CLOSING DATES.
A. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
B. The closing of the purchase and issuance of Purchased Securities
shall occur on the Closing Date at the offices of the Escrow Agent.
C. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Purchased Securities to the Buyer pursuant to this Agreement on the Closing Date
is conditioned upon:
A. The execution and delivery of this Agreement by the Buyer on or
before the Closing Date;
18
B. Delivery by the Buyer to the Escrow Agent by the Closing Date of
good funds as payment in full of an amount equal to the Purchase Price in
accordance with this Agreement;
C. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date;
D. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
E. The Company shall have received the consent from the requisite
number of 2004 Investors to the effect that the transactions contemplated by
this Agreement and the other Transaction Agreements will not result in an
automatic adjustment to the terms of any of the 2004 Transaction Agreements (the
"2004 Investors Consent").
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Purchased Securities on the Closing Date is conditioned upon:
A. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company on or before the Closing Date;
B. The filing of the Certificate of Designations in the State of
Incorporation and in any other state where such filing is required prior to the
Closing Date;
C. The delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement (including the provisions of
Section 4(o)(iii) hereof);
D. Delivery by the Company to the Escrow Agent of written
confirmation that there are no changes to the Disclosure Letter, a copy of which
shall be attached to such confirmation;
E. Delivery by the Company to the Escrow Agent of the executed
Company Principal's Agreements from each Company Principal and the related
Principals (as defined in each Company Principal's Agreement) of such Company
Principal;
F. On such Closing Date, each of the Transaction Agreements
executed by the Company on or before such date shall be in full force and effect
and the Company shall not be in default thereunder;
G. The accuracy in all material respects on such Closing Date of
the representations and warranties of the Company contained in this Agreement,
each as if made on such date, and the performance by the Company on or before
such date of all covenants and agreements of the Company required to be
performed on or before such date ;
H. The Buyer shall have received an opinion of counsel for the
Company, dated such Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, substantially to the effect set forth in ANNEX III
attached hereto;
I. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained;
19
J. From and after the date hereof to and including such Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii), no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market;
and
K. The Company shall have received the 2004 Investors Consent.
9. INDEMNIFICATION.
A. (i) The Company agrees to indemnify and hold harmless the
Buyer and its officers, directors, employees, and agents, and each Buyer Control
Person from and against any losses, claims, damages, liabilities or expenses
incurred (collectively, "Damages"), joint or several, and any action in respect
thereof to which the Buyer, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Buyer Control Person becomes
subject to, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Company contained in this Agreement, as such Damages
are incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer, other than
by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws (in each case, as determined by a non-appealable judgment to
such effect), (x) becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of the Company, in connection with or
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or if the Buyer is impleaded in
any such action, proceeding or investigation by any Person, or (y) becomes
involved in any capacity in any action, proceeding or investigation brought by
the SEC, any self-regulatory organization or other body having jurisdiction,
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or (z) is impleaded in any such action, proceeding or
investigation by any Person, then in any such case, the Company shall indemnify,
defend and hold harmless the Buyer from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Buyer, directly or indirectly, and reimburse such Buyer for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred.
The indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Buyer, any such Affiliate and any such
Person. The Company also agrees that neither the Buyer nor any such Affiliate,
partner, director, agent, employee or Buyer Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except to the extent such
liability is based on a material misrepresentation made by the Buyer in Section
2 hereof.
B. All claims for indemnification by any Indemnified Party (as
defined below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any
Person claiming indemnification under any provision of this Section (an
"Indemnified Party") might seek indemnity under paragraph (a) of this Section is
asserted against or sought to be collected from such Indemnified Party by a
Person other than a party hereto or an Affiliate thereof (a "Third Party
Claim"), the Indemnified Party shall deliver a written notification,
20
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of this Section
against any Person (the "Indemnifying Party"), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by
such failure of the Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under this Section and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have
the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party shall
not be indemnified in full pursuant to paragraph (a) of this Section).
The Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense of
the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this
subparagraph (x), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be
necessary or appropriate protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party will,
at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in contesting any Third
Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this subparagraph (x), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under paragraph (a) of this
Section with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to paragraph (b) of this Section, or if
the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, each in a
reasonable manner, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party shall
have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the Indemnified
Party in a reasonable manner and in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the
Indemnifying Party, which consent will not be unreasonably withheld).
The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party,
provide reasonable cooperation to the Indemnified Party and its counsel
in
21
contesting any Third Party Claim which the Indemnified Party is
contesting. Notwithstanding the foregoing provisions of this
subparagraph (y), if the Indemnifying Party has notified the Indemnified
Party within the Dispute Period that the Indemnifying Party disputes its
liability or the amount of its liability hereunder to the Indemnified
Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in
subparagraph(z) below, the Indemnifying Party will not be required to
bear the costs and expenses of the Indemnified Party's defense pursuant
to this subparagraph (y) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party
shall reimburse the Indemnifying Party in full for all reasonable costs
and expenses incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant
to this subparagraph (y), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under paragraph
(a) of this Section or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party with respect to
such Third Party Claim, the amount of Damages specified in the Claim
Notice shall be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate
a resolution of such dispute; provided, however, that it the dispute is
not resolved within thirty (30) days after the Claim Notice, the
Indemnifying Party shall be entitled to institute such legal action as
it deems appropriate.
(ii) In the event any Indemnified Party should have a claim
under paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
C. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
22
11. GOVERNING LAW: MISCELLANEOUS.
A. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on FORUM
NON CONVENIENS, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Buyer for
any reasonable legal fees and disbursements incurred by the Buyer in enforcement
of or protection of any of its rights under any of the Transaction Agreements.
B. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
C. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
D. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
E. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
F. This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original.
G. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
H. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
I. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
J. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
12. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid,
in the United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by domestic or
international express courier, with delivery costs and fees prepaid,
23
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Aboudi & Xxxxxxxxxx
Attn: Xxxxx Xxxxxx, Esq.
Rechov Gavish 3, POB 2432
Kfar Xxxx Xxxxxxxxxx Xxxx 00000 Xxxxxx
Telephone No.: (000-000-0) 000-0000
Telecopier No.: (000-000-0) 000-0000
BUYER: At the address set forth on the signature page of this
Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT OR
SECURITY AGENT: Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and
the Buyer's representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Certificates and the
payment of the Purchase Price, for a period of two (2) years after the Closing
Date and shall inure to the benefit of the Buyer and the Company and their
respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
24
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, with respect to the Purchased Shares and the
Purchase Price specified below, each the undersigned represents that the
foregoing statements made by it above are true and correct and that it has
caused this Agreement to be duly executed on its behalf (if an entity, by one of
its officers thereunto duly authorized) as of the date first above written.
PURCHASED SHARES ______________________________
[NOTE: MINIMUM NUMBER OF PURCHASED SHARES IS 2,500]
x STATED VALUE OF $100 PER SHARE =
PURCHASE PRICE: $_____________________________
[NOTE: MINIMUM PURCHASE PRICE IS $250,000.00]
BUYER:
________________________________ _____________________________________
Address Printed Name of Buyer
________________________________
By: _________________________________
Telecopier No. _________________ (Signature of Authorized Person)
______________________________ _____________________________________
Jurisdiction of Incorporation Printed Name and Title
or Organization
COMPANY:
AMEDIA NETWORKS, INC.
By: /s/ Xxxxx Xxxxxxx
Title: President and Chief Executive Officer
26
