Exhibit 4.1
FORM OF SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
December 5, 2003, among DynTek, Inc. (the "Company"), and the purchasers listed
on Schedule 1 hereto (each a "Purchaser" and collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and the Purchasers, severally and not jointly, desire to
purchase from the Company the number of (i) shares of Common Stock, and (ii)
Warrants set forth opposite each Purchaser's name on Schedule 1 hereto.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 144. With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Closing" means the closing of the purchase and sale of the Common
Stock and the Warrants pursuant to Section 2.1 on December 5, 2003, or such
other date as agreed to by the parties.
"Closing Date" means the date of the Closing.
"Closing Price" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Trading Market
(as reported by Bloomberg L.P. at 4:15 p.m. (New York time) as the last reported
closing bid price for regular session trading on such day), or (b) if there is
no such price on such date, then the closing bid price on the Trading Market on
the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m.
(New York time) as the closing bid price for regular session trading on such
day), or (c) if the Common Stock is not then listed or quoted on the Trading
Market and if prices for the Common Stock are then reported in the "pink sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) if the
shares of Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A common stock of the Company, $.0001
par value per share, and any securities into which such Class A common stock may
hereafter be reclassified.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Company Counsel" means Xxxxx Xxxxxxx LLP.
"Disclosure Schedules" means the Disclosure Schedules attached as Annex
I hereto.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Intellectual Property Rights" shall have the meaning ascribed to such
term in Section 3.1(o).
"Liens" means a lien, charge, security interest, encumbrance, right of
first refusal or other restriction.
"Material Adverse Effect" shall have the meaning ascribed to such term
in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(m).
"Per Share Purchase Price" equals $0.66, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the date of this
Agreement and before the Closing.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
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"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares and the Warrant Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and each
Purchaser, in the form of Exhibit A hereto.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h).
"Securities" means the Shares, the Warrants and the Warrant Shares to
be acquired pursuant to the Transaction Documents.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Subscription Amount" means, as to each Purchaser and the Closing, the
amounts set forth below such Purchaser's signature block on the signature page
hereto, in United States dollars and in immediately available funds.
"Subsidiary" shall have the meaning ascribed to such term in Section
3.1(a).
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on a Trading Market, a
day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting price);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), and (ii) hereof, then Trading Day shall mean a Business Day.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the OTC
Bulletin Board, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Registration Rights
Agreement, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Warrants" means the Common Stock Purchase Warrants, in the form of
Exhibit B, issuable to the Purchasers at Closing, which (i) with respect to the
warrants to purchase 30% of the shares of Common Stock issued on the Closing
Date, such warrants to be exercisable immediately and have an exercise price
equal to $0.75 for the Warrant Shares and a term of exercise of five (5) years,
and which (ii) with respect to the warrants to purchase 20% of the shares of
Common Stock issued on the Closing Date, such warrants to be exercisable
immediately and have an exercise price equal to $1.00 for the Warrant Shares and
a term of exercise of five (5) years (collectively, the "Warrants").
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"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the terms and subject to the conditions set forth in
this Agreement, at the Closing, the Company shall sell and issue to each
Purchaser and each Purchaser shall purchase from the Company (i) the number of
Shares set forth opposite each Purchaser's name on Schedule 1 hereto, and (ii)
the number of Warrants set forth opposite each Purchaser's name on Schedule 1
hereto. Each Purchaser shall purchase from the Company, and the Company shall
issue and sell to each Purchaser, a number of Shares equal to such Purchaser's
Subscription Amount divided by the Per Share Purchase Price. The Warrants shall
be issued, without additional consideration, on the basis of one Warrant for
each Share purchased. Upon satisfaction of the conditions set forth in Section
2.2, the Closing shall occur at the offices of Xxxxx Peabody LLP, or such other
location as the parties shall mutually agree.
2.2 Closing Conditions.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser (except as otherwise provided below):
(i) a stock certificate representing the number of Shares
purchased by each Purchaser;
(ii) within three (3) Trading Days of the Closing Date,
Warrants, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire up to the number of
shares of Common Stock equal an aggregate of 50% of the Shares to be
issued to such Purchaser at such Closing; and
(iii) the Registration Rights Agreement duly executed by the
Company.
(b) At the Closing each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount as to such Closing
by wire transfer to the account of the Company as provided to the
Purchasers in writing prior to the Closing Date; and
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(iii) the Registration Rights Agreement duly executed by such
Purchaser.
(c) All representations and warranties of each of the parties
herein shall remain true and correct as of the Closing Date.
(d) As of the Closing Date, there shall have been no Material
Adverse Effect with respect to the Company since the date hereof.
(e) From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:
(a) Subsidiaries. Other than as disclosed in the SEC Reports, the
Company has no direct or indirect operating subsidiaries (a "Subsidiary" and
collectively, the "Subsidiaries"). The Company owns, directly or indirectly, all
of the capital stock of each Subsidiary free and clear of any lien, charge,
security interest, encumbrance, right of first refusal or other restriction
(collectively, "Liens"), and all the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not result in (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(iii) a material adverse effect on the Company's ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect").
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(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (iii) with
respect to the indemnification provisions set forth in the Registration Rights
Agreement, as limited by public policy.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as would not result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (a) the filing with the Commission of the Registration Statement, the
application(s) to each Trading Market, if necessary, for the listing of the
Shares and Warrant Shares for trading thereon in the time and manner required
thereby, and applicable Blue Sky filings, (b) such as have already been obtained
or such exemptive filings as are required to be made under applicable securities
laws, and (c) such other filings as may be required following the Closing Date
under the Securities Act, the Exchange Act and corporate law.
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(f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the Transaction Documents, will
be duly and validly issued, fully paid and nonassessable, free and clear of all
Liens. The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to this Agreement and
the Warrants.
(g) Capitalization. The capitalization of the Company is as
described in the Company's most recent periodic report filed with the
Commission. The Company has not issued any capital stock since such filing other
than pursuant to the exercise of employee stock options under the Company's
stock option plans and pursuant to the conversion or exercise of Common Stock
Equivalents outstanding on the date hereof. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities, for employee
stock options under the Company's stock option plans, or otherwise as reflected
in the Company's periodic reports filed with the Commission, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or Section 15(d) of the Exchange Act,
for the two (2) years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the
"SEC Reports" and, together with the Disclosure Schedules to this Agreement, the
"Disclosure Materials"). As of their respective dates, the SEC Reports complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
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(i) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as disclosed in the
SEC Reports, (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
(j) Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor, to the knowledge of
the Company, any director or officer thereof, except as disclosed in the SEC
Reports, is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. Except as disclosed in the SEC Reports, to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.
(l) Compliance. Except as disclosed in the SEC Reports, neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business, except in the case of clauses (i), (ii) and (iii) as would not result
in a Material Adverse Effect.
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(m) Regulatory Permits. The Company and the Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not have or reasonably be expected to result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries, taken as a whole,
and good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, taken as a whole,
in each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in material compliance.
(o) Patents and Trademarks. To the knowledge of the Company and
each Subsidiary, the Company and the Subsidiaries have, or have rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and other similar rights that are
necessary or material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have would result in a
Material Adverse Effect (collectively, the "Intellectual Property Rights").
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes the rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable.
(p) Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (a) for payment of salary
or consulting fees for services rendered, (b) reimbursement for expenses
incurred on behalf of the Company and (c) for other employee benefits, including
stock option agreements under any stock option plan of the Company.
(q) Internal Accounting Controls. The Company and each of its
subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company
and designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Form 10-K or 10-Q, as the case may be, is
being prepared.
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(r) Certain Fees. Except for payments payable to members of the
National Association of Securities Dealers, Inc. ("Broker/Dealers"), which fees
shall be paid by the Company, no brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement. The Purchasers
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement.
(s) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.
(t) Investment Company. The Company is not, and is not an Affiliate
of, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(u) Listing and Maintenance Requirements. The Company has not, in
the twelve (12) months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market, other than a letter from the Trading Market
on which the Common Stock is or has been listed or quoted notifying the Company
that its securities would be delisted if the trading price did not increase
above One Dollar ($1.00) per share. The Company is, and has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements, other than potential trading
price issues concerning such Trading Market's rules and regulations.
(v) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance of
the Securities and the Purchasers' ownership of the Securities.
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(w) Disclosure. The Company confirms that, neither the Company nor
any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, furnished by or on behalf of the Company are true and correct and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(x) Solvency. Based on the financial condition of the Company as of
the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets, together with the anticipated proceeds
the Company would receive under the Transaction Documents, do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs,
taking into account the particular capital requirements of the business
conducted by the Company, projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the anticipated proceeds the Company would receive under the Transaction
Documents, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company, acknowledging that the
Company is relying upon the accuracy and completeness of the representations and
warranties set forth herein to, among other things, ensure that registration
under Section 5 of the Securities Act is not required in connection with the
sale of the Securities hereby, as follows:
(a) Organization; Authority. Such Purchaser, if not a natural
person, is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms.
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(b) Investment Intent. Such Purchaser understands that the
Securities are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such Securities and has
no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
such Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Purchaser is not, and is
not required to be, registered as a broker-dealer under Section 15 of the
Exchange Act. In making an investment decision as to whether to purchase the
Securities offered hereby, each Purchaser has relied solely upon the SEC Reports
and the representation and warranties of the Seller contained herein.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(f) Compliance with the Securities Laws. Such Purchaser agrees to
comply with the requirements of Regulation M, if applicable, with respect to the
resale of the Shares by the Purchaser. Such Purchaser hereby confirms its
understanding that it may not cover short sales made prior to the Effective Date
with Shares registered for resale on the Registration Statement. The Purchaser
acknowledges that it does not intend to cover short positions made by it before
the Effective Date with Shares held by it and registered on the Registration
Statement.
(g) No Conflicts. Neither the execution and delivery of this
Agreement and/or any Transaction Document, nor the consummation of the
Transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Purchaser
is subject or any provision of its organizational documents or other similar
governing instruments.
(h) No Advice. Purchaser understands that nothing in this Agreement
or any other materials presented to Purchaser in connection with the purchase
and sale of the Securities constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Securities.
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(i) No Litigation, Etc. There is no action, suit, proceeding,
judgment, claim or investigation pending or, to the knowledge of the Purchaser,
threatened against the Purchaser which could reasonably be expected in any
manner to challenge or seek to prevent, enjoin, alter or materially delay any of
the transactions contemplated by the Transaction Documents.
(j) Approvals. The execution, delivery and performance by the
Purchaser of this Agreement and the Transaction Documents to which it is a
party, and the consummation of the transactions set forth herein require no
material action by or in respect of, or material filing with, any governmental
body, agency, official or authority, by the Purchaser other than (i) any
filings, authorizations, consents and approvals as may be required under the
Xxxx-Xxxxx-Xxxxxx Improvements Act of 1976, as amended; (ii) the filing by the
Purchaser with the SEC of such reports under the Exchange Act as may be required
in connection with this Agreement, the Transaction Documents and the
transactions contemplated hereby, and (iii) any filings required by the
securities or blue sky laws of the various states.
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement, or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT.
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The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and, if required under the terms of such arrangement, such
Purchaser may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the
Company and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders thereunder.
(c) Subject to compliance with all laws, rules and regulations
including, but not limited to, the Securities Act and the Exchange Act,
certificates evidencing the Shares and Warrant Shares shall not contain any
legend (including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii) following
any sale of such Shares or Warrant Shares pursuant to Rule 144, or (iii) if such
Shares or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable regulation of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission). Subject to compliance with all laws, rules and regulations
including, but not limited to, the Securities Act and the Exchange Act, the
Company shall cause its counsel to issue a legal opinion to the Company's
transfer agent promptly after the Effective Date if required by the Company's
transfer agent to effect the removal of the legend hereunder. If all or any
portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, such Warrant
Shares shall be issued free of all legends. The Company agrees that at such time
as such legend is no longer required under this Section 4.1(c), it will, upon
written request from the Purchaser and following the submission to Company
counsel of such materials as shall be reasonably requested by such counsel
therefor, no later than four (4) Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a certificate
representing Shares or Warrant Shares, as the case may be, issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
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(d) Each Purchaser severally and not jointly agrees that the
removal of the restrictive legend from certificates representing Securities as
set forth in this Section 4.1 is predicated upon the Company's reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any such holder of Securities, the Company
shall deliver to such holder a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 Securities Laws Disclosure; Publicity. The Company shall, within
twenty four (24) hours of the Closing, issue a press release or file a Current
Report on Form 8-K, disclosing the transactions contemplated hereby and make
such other filings and notices in the manner and time required by the
Commission. The Company and Xxxxxx Capital shall consult with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and neither the Company nor Xxxxxx Capital shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of Xxxxxx Capital, or without the
prior consent of Xxxxxx Capital, with respect to any press release of the
Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).
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4.5 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between
the Company and the Purchasers.
4.6 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.7 Use of Proceeds. The Company covenants and agrees that all of the
net proceeds that it receives from the sale of Shares pursuant to this
Agreement, although distributed, allocated and expended by the Company in its
sole discretion, shall be used for working capital and general corporate
purposes.
4.8 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, and provided any
such person has complied with all laws, rules and regulations and is not in
breach of any of its representations, warranties, or agreements made in any of
the Transaction Documents, the Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. The 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 Purchasers who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers 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 Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement, provided such person has complied
with all laws, rules and regulations and is not in breach of any of its
representations, warranties and agreements made in any of the Transaction
Documents.
4.9 Reserved.
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4.10 Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to the Warrants.
4.11 Listing of Common Stock. The Company hereby agrees to use
commercially reasonable efforts to maintain the listing of the Common Stock on
the Trading Market, and as soon as reasonably practicable following the Closing
(but not later than the earlier of the Effective Date and the first anniversary
of the Closing Date) to list the applicable Shares and Warrant Shares on the
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will include in such
application the Shares and Warrant Shares, and will take such other action as is
necessary or desirable in the opinion of the Purchasers to cause the Shares and
Warrant Shares to be listed on such other Trading Market as promptly as
possible. The Company will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Trading Market.
4.12 Indemnification by the Purchasers. Each of the Purchasers
(severally, but not jointly) agrees to indemnify and hold harmless the Company
and its officers, directors, agents, representatives, shareholders and employees
and each of their respective affiliates, from and against any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such party may suffer or
incur which are caused by or arise out of (i) any breach or default in the
performance by it of any covenant or agreement made by it in this Agreement or
in any of the Transaction Documents; (ii) any breach of warranty or
representation made by it in this Agreement or in any of the Transaction
Documents, or (iii) any other action of the Purchaser that results in an
Indemnification Liability to the Company. The liability of each Purchaser under
this Section 4.12 shall be limited to the amount of each Purchaser's
Subscription Amount, and the procedures and timing for indemnification by the
Purchasers under this Section 4.12 shall follow the procedures and provisions of
Sections 5.16(b) and (c), mutatis mutandis, with respect to indemnification by
the Company of the Purchasers.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement; provided, that the Company shall pay a maximum of $10,000 for
the aggregate fees and expenses of counsel to Xxxxxx Capital. The Company shall
pay all stamp and other taxes and duties levied in connection with the sale of
the Securities.
5.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
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5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature pages attached hereto prior to 5:00 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number on the signature pages attached hereto on a day that is not a
Trading Day or later than 5:00 p.m. (New York City time) on any Trading Day, (c)
the Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications to the Company shall be as set forth below and for each Purchaser
shall be as set forth on the signature pages attached hereto.
If to the Company:
00000 Xxx Xxxxxx Xxxxxx,
Xxxxx 000
Xxxxxx, XX 00000
Attention: Mr. Xxxxx Xxxx, President
Telephone: (000) 000-0000
With a copy to:
Xxxxx Peabody LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Fax: 000-000-0000
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
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5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities and otherwise, by the provisions hereof that apply to the
"Purchasers."
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to the
conflicts of laws principles thereof. The parties hereto hereby irrevocably
agree that any suit or proceeding arising directly and/or indirectly pursuant to
or under this Agreement, shall be brought solely in a federal or state court
located in the City, County and State of New York. By its execution hereof, the
parties hereby covenant and irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto waive any claim
that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in personam jurisdiction with respect
thereto. In the event of any such action or proceeding, the party prevailing
therein shall be entitled to payment from the other party hereto of its
reasonable counsel fees and disbursements in an amount judicially determined.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and delivery of the Securities for a
period of twelve (12) months.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
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5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.14 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall, to the
extent permissible under applicable law, be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.15 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
5.16 Indemnification by the Company.
(a) The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Purchaser, the officers, directors,
agents and employees of each of them, each Person who controls any such
Purchaser (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys' fees) and expenses (including the cost
(including without limitation, reasonable attorneys' fees) and expenses relating
to an Indemnified Party's (as defined below) actions to enforce the provisions
of this Section 5.16) (collectively, "Losses"), as incurred, to the extent
arising out of or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the
Registration Rights Agreement, any certificate, instrument or document
contemplated hereby or thereby, (ii) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the Registration Rights
Agreement, any certificate, instrument or document contemplated hereby or
thereby, or (iii) any cause of action, suit or claim brought or made against
such Indemnified Party and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement, the Registration Rights
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnified Parties. If the indemnification provided for in
this Section 5.16 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any Losses, then the Indemnifying Party
(as defined below), in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of Losses in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and of the Indemnified Party on
the other in connection with the actions or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The Company shall
notify the Purchasers promptly of the institution, threat or assertion of any
proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
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(b) Conduct of Indemnification Proceedings. If any proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Company
(the "Indemnifying Party") in writing, and the Indemnifying Party shall have the
right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have materially prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such proceeding; or (3) the named
parties to any such proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel for all Indemnified Parties in any matters related on a factual
basis shall be at the expense of the Indemnifying Party). The Indemnifying Party
shall not be liable for any settlement of any such proceeding affected without
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such proceeding.
-22-
(c) Timing of Payments. All reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such proceeding in a
manner not inconsistent with this Section 5.16) shall be paid to the Indemnified
Party, as incurred, within ten (10) Trading Days of written notice thereof to
the Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative faults of the
parties.
[Remainder of page intentionally left blank]
-23-
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
DYNTEK, INC.
By:
-----------------------------------
Xxxxx Xxxx
Chief Executive Officer
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PURCHASERS SIGNATURE PAGE
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By:
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Name:
Title:
-----------------------------------------------------
Address
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Facsimile Number
Subscription Amount:$
--------------------------------
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By:
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Name:
Title:
-----------------------------------------------------
Address
-----------------------------------------------------
Facsimile Number
Subscription Amount:$
--------------------------------
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By:
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Name:
Title:
-----------------------------------------------------
Address
-----------------------------------------------------
Facsimile Number
Subscription Amount:$
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-1-
SCHEDULE 1
TO
COMMON STOCK AND WARRANTS PURCHASED
Name of Purchaser Amount of Shares and Warrants So Purchased
1. ________________________________ ______ Shares ______ Warrants
2. ________________________________ ______ Shares ______ Warrants
3. ________________________________ ______ Shares ______ Warrants
4. ________________________________ ______ Shares ______ Warrants
5. ________________________________ ______ Shares ______ Warrants
6. ________________________________ ______ Shares ______ Warrants
7. ________________________________ ______ Shares ______ Warrants
8. ________________________________ ______ Shares ______ Warrants
*Final Schedule will reflect both Warrants (i.e., $0.75 exercise and $1.00
exercise)
-1-
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
EXHIBIT B
COMMON STOCK PURCHASE WARRANT
