Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of March
3, 2006 among uWink, Inc., a Utah corporation (the "COMPANY"), and the
purchasers identified on the signature pages hereto (each, a "Purchaser" and
collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, securities of
the Company as more fully described in this Agreement.
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,
severally and not jointly, agrees as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"ADVICE" has the meaning set forth in Section 6.5.
"AGREEMENT" has the meaning set forth in the preamble.
"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 under the Securities Act.
"BENEFIT PLANS" means (i) all "employee pension benefit plans," as
defined in section 3(2) of ERISA, established, maintained, or contributed
to by the Company or its Subsidiaries for the benefit of any employees or
agents of the Company or its Subsidiaries; (ii) all "employee welfare
benefit plans," as defined in section 3(1) of ERISA, established,
maintained, or contributed to by the Company or its Subsidiaries for the
benefit of any employees or agents of the Company or its Subsidiaries; and
(iii) to the knowledge of the Company, all other material incentive,
employment, supplemental retirement, severance, deferred compensation and
other employee benefit plans, programs, agreements and arrangements
established, maintained, or contributed to by the Company or its
Subsidiaries for the benefit of any employees or agents of the Company or
its Subsidiaries, without regard to the coverage of any such plan, program,
agreement or arrangement by ERISA or any provision of the Code.
"BOARD" means the board of directors of the Company.
"BUSINESS DAY" means any day other than Saturday, Sunday or other day
on which commercial banks in the City of New York are authorized or
required by law to remain closed.
"CLOSING" means the closing of the purchase and sale of the Shares and
the Warrants pursuant to Section 2.1.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value $0.001
per share.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and
Convertible Securities.
"COMPANY" has the meaning set forth in the preamble.
"CONVERTIBLE SECURITIES" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock.
"EFFECTIVE DATE" means the date that the Registration Statement is
first declared effective by the Commission.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section 6.1(b).
"ELIGIBLE MARKET" means any of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market or the NASDAQ SmallCap
Market.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT" has the meaning set forth in Section 6.1(d)(i) through (v).
"EVENT PAYMENTS" has the meaning set forth in Section 6.1(d).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED STOCK" means Common Stock, Options, or any equity or equity
equivalent securities, including, without limitation, any debt, preferred
stock or other instrument or security that is, at any time during its life
and under any circumstances, convertible into or exchangeable or
exercisable for Common Stock or Common Stock Equivalents and that is issued
or issuable: (A) upon exercise or conversion of any options or other
securities described in Schedule 3.1(f) (provided that such exercise or
conversion occurs in accordance with the terms thereof, without amendment
or modification, and that the applicable exercise or conversion price or
ratio is described in such schedule) or otherwise pursuant to any employee
benefit plan described in Schedule 3.1(f) or hereafter adopted by the
Company and approved by its stockholders, (B) in connection with any
issuance of shares or grant of options to employees, officers, directors or
consultants of the Company pursuant to a stock option plan, employee stock
purchase plan or other incentive stock plan duly adopted by the Board or in
respect of the issuance of Common Stock upon exercise of any such options,
(C) pursuant to the Company's bona fide acquisition of another corporation,
or all or a portion of its assets, by merger, purchase of assets or stock
or other corporate reorganization in each case, as approved by the Board
and not for the principal purpose of raising capital or (D) in connection
with a bona fide joint venture or development agreement or strategic
partnership, in either case not for the principal purpose of raising
capital.
"FILING DATE" means the date that is 45 days after the Closing Date,
with respect to the initial Registration Statement required to be filed
hereunder, and, with respect to any additional Registration Statements that
may be required pursuant to Section 6.1, the 45th day following the date on
which the Company first knows, or reasonably should have known, that such
additional Registration Statement is required under such Section.
"GAAP" has the meaning set forth in Section 3.1(g).
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.4(c).
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"INDEMNIFYING PARTY" has the meaning set forth in Section 6.4(c).
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
3.1(t).
"LIEN" means any lien, charge, claim, security interest, encumbrance,
right of first refusal or other restriction.
"LOCKED UP SECURITIES" has the meaning set forth in Section 4.9.
"LOSSES" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
preparation and reasonable attorneys' fees.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 3.1(b).
"MATERIAL PERMITS" has the meaning set forth in Section 3.1(u).
"NASD" has the meaning set forth in Section 3.1(i).
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means any 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 any court or other federal, state, local or other
governmental authority or other entity of any kind.
"PRICE PER SHARE" means $0.30 per Share and Warrant. to purchase 0.5
Underlying Shares.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus including post effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"PURCHASER" or "PURCHASERS" has the meaning set forth in the preamble.
"PURCHASER COUNSEL" has the meaning set forth in Section 6.2(a).
"REGISTRABLE SECURITIES" means any Common Stock (including the Shares
and Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
"REGISTRATION STATEMENT" means each registration statement required to
be filed under Article VI, including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
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"REGULATORY ORDER" has the meaning set forth in Section 3.1(i).
"RELATED PERSON" has the meaning set forth in Section 4.7.
"REQUIRED EFFECTIVENESS DATE" means 180 days from the Closing Date.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules 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.
"SCHEDULE" means the section numbers of the Disclosure Schedule that
correspond to the first, or principal, section of the Agreement to which
the disclosures relate.
"SEC REPORTS" has the meaning set forth in Section 3.1(g).
"SECURITIES" means the Shares, the Warrants and the Underlying Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELF-REGULATORY ORGANIZATION" has the meaning set forth in Section
3.1(i).
"SHARES" means an aggregate of 5,000,000 shares of Common Stock, which
are being issued and sold to the Purchasers at the Closing.
"SHORT SALES" has the meaning set forth in Section 3.2(h).
"SUBSEQUENT PLACEMENT" has the meaning set forth in Section 4.5.
"SUBSIDIARY" means any Person in which the Company, directly or
indirectly, owns at least 20% of the capital stock or holds an equity or
similar interest.
"TAXES" means any federal, state, county, local, or foreign taxes,
charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties,
capital stock, paid-up capital, profits, withholding, Social Security,
single business and unemployment, disability, real property, personal
property, registration, ad valorem, value added, alternative or add-on
minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposes or required to be withheld by the United States or any
state, county, local or foreign government or subdivision or agency
thereof, including any interest, penalties, and additions imposed thereon
or with respect thereto.
"TAX RETURN" means any report, return, information return, or other
information required to be supplied to a governmental authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes the Company and any amendments thereof.
"TRADING MARKET" means any Eligible Market, or any national securities
exchange, market or trading or quotation facility on which the Common Stock
is then listed or quoted.
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"TRANSACTION DOCUMENTS" means this Agreement, the Warrants and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants.
"WARRANTS" means, collectively, the warrants to purchase Common Stock
that are issued and sold pursuant to this Agreement, in the form of Exhibit
A, and any warrants or replacement warrants issued upon exercise, transfer,
exchange or partial exercise of such warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Shares and a Warrant to purchase such number of Underlying
Shares, each as indicated below such Purchaser's name on the signature page of
this Agreement, at the Price Per Share and for an aggregate purchase price for
such Purchaser as indicated below such Purchaser's name on the signature page of
this Agreement. The Closing shall take place at the offices of the Company,
immediately following the execution hereof, or at such other location or time as
the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered
to each Purchaser the following:
(i) a copy of one or more stock certificates, free and clear of
all restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Shares equal to the number of
Shares indicated below such Purchaser's name on the signature page of this
Agreement, registered in the name of such Purchaser;
(ii) a copy of a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire
such number of Underlying Shares indicated below such Purchaser's name on
the signature page of this Agreement, on the terms set forth therein; and
(iii) a legal opinion of Preston, Gates & Xxxxx, counsel to the
Company, in the form of Exhibit B, executed by such counsel.
2.3 At the Closing, each Purchaser shall deliver or cause to be delivered
to the Company the purchase price indicated below such Purchaser's name on the
signature page of this Agreement, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing to such
Purchaser by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
(a) Subsidiaries. Other than as set forth in the SEC Reports (as
defined in Section 3.1(g)) the Company has no Subsidiaries.
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(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own 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 do 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, individually or in the aggregate, (i) adversely affect the legality,
validity or enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole on a consolidated basis, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(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 hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company, its officers, Board and
stockholders and no further consent or action is required by the Company, its
officers, Board or its stockholders. Each of the Transaction Documents has been
(or upon delivery will be) duly executed by the Company and is, or when
delivered in accordance with the terms hereof, will constitute, the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as may be limited by (1) applicable
bankruptcy, insolvency, reorganization or others laws of general application
relating to or affecting the enforcement of creditors' rights generally and (2)
the effect of rules of law governing the availability of equitable remedies and
(ii) as rights to indemnity or contribution may be limited under federal or
state securities laws or by principles of public policy thereunder.
(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 hereby and 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, (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 material agreement, credit
facility, debt or other instrument (whether evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any of its
Subsidiaries is a party or by which any property or asset of the Company or any
of its Subsidiaries 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 and the
rules and regulations of the principal market, system or exchange on which the
Common Stock is traded, quoted or listed), or by which any property or asset of
the Company or a Subsidiary is bound or affected.
(e) 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 and shall not be subject to preemptive rights or similar rights of
stockholders. The Company has reserved from its duly authorized capital stock
the maximum number of Underlying Shares issuable upon exercise of the Warrants.
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(f) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws, and none of such issuances were, and the
issuance of the Securities will not be, made in violation of any preemptive
rights or other rights. Except as disclosed in Schedule 3.1(f), 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 exercisable 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. There are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing rights to
security holders) and the issue and sale of the Securities (including the
Underlying Shares) 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. To the knowledge of
the Company and except as specifically disclosed in the SEC Reports or in any
Schedule 13D or Schedule 13G filed with the Commission, no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time. The
Shares and the Underlying Shares, when issued, will conform in all material
respects to the description of the Company's Common Stock contained in the
Company's SEC Reports and other filings with the SEC.
(g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file such material)
(the foregoing materials (together with any materials filed by the Company under
the Exchange Act, whether or not required) being collectively referred to herein
as the "SEC REPORTS") on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of 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, 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 the
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 United
States 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 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. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(h) Material Changes. Since September 30, 2005, except as set forth in
the SEC Reports, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that would 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 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
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method of accounting or the identity of its auditors, except as disclosed in its
SEC Reports or as required by changes in GAAP, (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 (other than pursuant to written agreements with
employees to repurchase stock upon the termination of such employee's
employment) and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans or as disclosed in the SEC Reports.
(i) Absence of Litigation. Except as set forth in the SEC Reports, (A)
there are no actions, suits, claims, proceedings, inquiries or investigations
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries or any of their
respective assets that could (i) adversely affect or challenge the legality,
validity or enforceability of any of the Transaction Documents, individually or
in the aggregate, (ii) have a Material Adverse Effect or (iii) if adversely
decided, would have a Material Adverse Effect on, or delay the issuance of, the
Securities or the consummation of the transactions contemplated by the
Agreement, (B) no action, suit, proceeding, claim, investigation or inquiry by
the Company or any Subsidiary is currently pending nor does the Company intend
to initiate any action, suit, proceeding, claim, investigation or inquiry, in
each case, that if resolved in a manner adverse to the Company, would have a
Material Adverse Effect, (C) neither the Company nor any Subsidiary (i) is
subject to any order, decree, agreement, memorandum of understanding or similar
arrangement with, or commitment letter or similar submission to, or (ii) has
received any extraordinary supervisory letter from, or adopted any board
resolutions at the request of, any Self-Regulatory Organization or governmental
entity charged with the supervision or regulation of broker-dealers or the
supervision or regulation of its business (each such item referred to in clauses
"(i)" and "(ii)" of this Section 3.1(i), a "REGULATORY ORDER"), including any
such Regulatory Order that restricts materially the conduct of the business of
the Company or any Subsidiary, or in any manner relates to the capital adequacy,
credit policies or management of the Company or any Subsidiary, and (D) neither
the Company nor any Subsidiary has received written notice from any governmental
entity or Self-Regulatory Organization that such organization or authority is
contemplating issuing or requesting any such Regulatory Order. For purposes of
this Agreement, the term "SELF-REGULATORY ORGANIZATION" shall mean the National
Association of Securities Dealers, Inc. (or any successor entity thereto)
("NASD"), the American Stock Exchange, the National Futures Association, the
Chicago Board of Trade, the New York Stock Exchange, any national securities
exchange (as defined in the Exchange Act), any other securities exchange,
futures exchange, contract market, commodities market, any other such exchange,
clearinghouse or corporation or other similar federal, state or foreign
self-regulatory body or organization.
(j) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body or (iii) to the Company's knowledge, is in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as would not,
individually or in the aggregate, have or result in a Material Adverse Effect.
None of the Company or any Subsidiary is in default under, or in violation of
any of the listing or quotation requirements of any Eligible Market on which the
Common Stock is currently traded, listed or quoted as in effect on the date
hereof, and the Company is not aware of any facts which could reasonably lead to
de-listing or suspension of trading in the Common Stock by any Eligible Market
on which the Common Stock is then traded, listed or quoted in the foreseeable
future.
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(k) 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 and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, 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. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
(l) Certain Fees. 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, and the Company has not taken
any action that would cause any Purchaser to be liable for any such fees or
commissions.
(m) Private Placement. Neither the Company nor any Person acting on
the Company's behalf has sold or offered to sell or solicited any offer to buy
the Securities by means of any form of general solicitation or advertising.
Neither the Company nor any of its Affiliates nor any Person acting on the
Company's behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer to
buy any security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the Securities Act
in connection with the offer and sale of the Securities as contemplated hereby
or (ii) cause the offering of the Securities pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes of
any applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market. The
Company is not a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
(n) Listing and Maintenance Requirements. The Company has not, in the
two years preceding the date hereof, received notice (written or oral) from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements. The approval of the
Company's stockholders is not required under the listing or maintenance
requirements of any Trading Market for the consummation of the transactions
contemplated herein.
(o) Registration Rights. The Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied. No Person, including
current or former stockholders of the Company, underwriters, brokers or agents,
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 or to require that the Company include any such securities in the
registration of Securities as contemplated herein.
(p) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
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(q) Disclosure. The Company confirms that it has not provided to the
Purchasers any material non-public information other than information related to
the transactions contemplated by the Transaction Documents. The Company
understands and confirms that each of the Purchasers will rely on the foregoing
representations in effecting the transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the 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 the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed. The Company acknowledges and
agrees that no Purchaser makes or has made (i) any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 or (ii) any statement, commitment or
promise to the Company or, to its knowledge, any of its representatives which is
or was an inducement to the Company to enter into this Agreement or otherwise.
(r) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm's length purchaser with respect to the Company and to
this Agreement and the transactions contemplated hereby.
(s) Patents and Trademarks. 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
do so would have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Except as disclosed in the SEC Reports, there is no
Proceeding that is pending, or to the Company's knowledge, is threatened
against, the Company regarding the infringement of any of the Intellectual
Property Rights. Neither the Company nor any Subsidiary has knowledge that, or
has received, a notice that the Intellectual Property Rights used by the Company
or any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, (i) all such Intellectual Property Rights are
enforceable and (ii) there is no existing infringement by another Person of any
of the Intellectual Property Rights.
(t) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company believes to be prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. The Company
has no reason to believe that it or any of the Subsidiaries will not be able to
renew their respective existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue their respective businesses without a significant increase in cost.
The Company has in full force and effect D&O insurance in amounts that are
commercially reasonable.
(u) 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, individually or in the aggregate, have 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.
(v) 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,
10
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.
(w) Employee Benefits. Each of the Benefit Plans has been administered
in accordance with its terms and any federal, state or local statute, law,
ordinance, regulation, order, writ, injunction, directive, judgment or decree
applicable to the Company, the Subsidiaries, or any of their respective
properties, or assets, as the case may be (including, where applicable, ERISA
and the Code), except where the failure to so administer such Benefit Plan would
not have a Material Adverse Effect. Each of the Benefit Plans intended to be
"qualified" within the meaning of section 401(a) of the Code has been determined
by the United States Internal Revenue Service to be so qualified, except where
the failure to so qualify such Benefit Plan would not have a Material Adverse
Effect.
(x) Taxes. (i) The Company has filed (or joined in the filing of) when
due all Tax Returns required by applicable law to be filed with respect to the
Company and all Taxes shown to be due on such Tax Returns have been paid; (ii)
all such Tax Returns were true, correct and complete in all material respects as
of the time of such filing; or (iii) any liability of the Company for Taxes not
yet due and payable, or which are being contested in good faith, in each case as
of July 31, 2005, has been accrued or reserved for on the financial statements
of the Company in accordance with GAAP, in each case except in the case that any
such failure to file or pay Taxes would not result in a Material Adverse Effect.
(y) No Manipulation of Stock. The Company has not taken, in violation
of applicable law, any action designed to or that might cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
transactions contemplated hereby or the sale or resale of the shares of Common
Stock.
(z) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (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.
(aa) Xxxxxxxx-Xxxxx Act. The Company is in compliance with applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement.
(bb) Registrations. None of the Company or the Subsidiaries is subject
to registration under the Investment Advisers Act of 1940, as amended, or the
Investment Company Act of 1940, as amended, or similar laws of any governmental
entity. Neither the Company nor any Subsidiary is required to register as a
broker-dealer with any governmental entity or any self-regulatory organization.
Except where so registered, none of the activities of the Company or any
Subsidiary require any of them to be registered as an exchange or transfer
agent, a clearing agency, a municipal securities dealer, a government securities
dealer, a futures commission merchant, a commodity trading advisory or commodity
pool operator.
3.2 Representations, Warranties and Certain Agreements of the Purchasers.
Each Purchaser hereby, as to itself only and for no other Purchaser, represents
and warrants to the Company and agrees that:
(a) Organization; Authority. If such Purchaser is a legal entity, such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
11
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 hereunder and thereunder. The purchase by such Purchaser of
the Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of such Purchaser. This Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and binding obligation of
such Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement, at all times to
sell or otherwise dispose of all or any part of such Securities pursuant to an
effective registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any period of time.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and the Warrants, it was, and at the date hereof it is, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(d) Reliance on Exemptions. Such Purchaser understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire such securities.
(e) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the 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.
(f) Information. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
that have been requested by such Purchaser. Such Purchaser and its advisors, if
any, have been afforded the opportunity to ask questions of the Company. Such
Purchaser understands that its investment in the Securities involves a high
degree of risk. Neither such inquiries nor any other investigation conducted by
or on behalf of such Purchaser or its advisors shall modify, amend or affect
such Purchaser's right to rely on the truth, accuracy and completeness of the
disclosure made to such Persons in respect of the Company or this transaction
and the Company's representations and warranties contained in this Agreement.
Each Purchaser acknowledges and agrees that the Company has not made (i) any
representations or warranties to such Purchaser with respect to the transactions
contemplated hereby other than those specifically set forth in the Transaction
Documents or (ii) any oral statement, commitment or promise that is or was an
inducement to such Purchaser to enter into this Agreement or otherwise.
(g) Purchaser Questionnaire. Each Purchaser has completed or caused to
be completed the Purchaser Questionnaire in the form as set forth on Exhibit C,
and the information provided by each Purchaser in such Purchaser's Purchaser
Questionnaire is true and correct as of the date of this Agreement; PROVIDED,
that the Purchasers shall be entitled to update such information by providing
written notice thereof to the Company before the Effective Date.
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(h) Restrictions on Short Sales. Each Purchaser represents, warrants
and covenants that neither Purchaser nor any Affiliate of such Purchaser that
(i) had knowledge of the transactions contemplated hereby, (ii) has or shares
discretion relating to such Purchaser's investments or trading or information
concerning such Purchaser's investments, including in respect of the Securities
or (iii) is subject to such Purchaser's review or input concerning such
Affiliate's investments or trading, has or will, directly or indirectly, during
the period beginning on the date on which the Company or any representative of
the Company, first contacted such Purchaser regarding the transactions
contemplated by this Agreement and ending on the date that is 120 days after the
Closing Date, engage in (x) any "short sales" (as such term is defined in Rule
3b-3 promulgated under the Exchange Act) of the Common Stock, including, without
limitation, the maintaining of any short position with respect to, establishing
or maintaining a "put equivalent position" (within the meaning of Rule 16a-1(h)
under the Exchange Act) with respect to, entering into any swap, derivative
transaction or other arrangement (whether any such transaction is to be settled
by delivery of Common Stock, other securities, cash or other consideration) that
transfers to another, in whole or in part, any economic consequences or
ownership, or otherwise dispose of, any of the Securities by the Purchaser or
(y) any hedging transaction that establishes a net short position with respect
to the Securities (clauses "(x)" and "(y)" together, a "SHORT SALE"); except for
(1) Short Sales by the Purchaser or Affiliate of such Purchaser which was, prior
to the date on which such Purchaser was first contacted by the Company or a
representative of the Company regarding the transactions contemplated by this
Agreement, a market maker for the Common Stock, provided that such Short Sales
are in the ordinary course of business of such Purchaser or Affiliate of such
Purchaser and are in compliance with the Securities Act, the rules and
regulations of the Securities Act and such other securities laws as may be
applicable, (2) Short Sales by the Purchaser or an Affiliate of such Purchaser
which by virtue of the procedures of such Purchaser are made without knowledge
of the transactions contemplated by this Agreement, (3) Short Sales by the
Purchaser or an Affiliate of such Purchaser to the extent that such Purchaser or
Affiliate of such Purchaser is acting in the capacity of a broker-dealer
executing unsolicited third-party transactions or (4) Short Sales of the
Underlying Shares in connection with the Automatic Exercise as defined in
Section 4(c) of the Warrants.
(i) Acknowledgement Regarding Purchasers' Purchase of Securities. Each
Purchaser acknowledges and agrees that it is acting solely in the capacity of an
arm's length purchaser with respect to the Company and to this Agreement and the
transactions contemplated hereby.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel from outside counsel to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited Investor" as defined in Rule 501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Securities:
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[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE EXERCISABLE] 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 COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS
OR BLUE SKY LAWS.
Certificates evidencing Securities shall not be required to contain such legend
(i) following any sale of such Securities pursuant to Rule 144, or (ii) if such
Securities are eligible for sale under Rule 144(k) or (iii) if such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). Until a Registration Statement covering the resale of the
Securities is effective under the Securities Act, the Company will not effect or
publicly announce its intention to effect any exchange, recapitalization or
other transaction that effectively requires or rewards physical delivery of
certificates evidencing the Common Stock.
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. Upon the request of
any Purchaser, the Company shall deliver to such Purchaser 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 such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 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 to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that 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 Reservation of Securities. The Company shall maintain a reserve from
its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 Subsequent Placements.
(a) The Purchasers collectively shall have the right to participate as
investors in up to 50% of any offering by the Company of any of its or the
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock Equivalents, but
not including any Excluded Stock (any such offering being referred to as a
"SUBSEQUENT Placement") for which a definitive, binding agreement is entered
into during the 12-month period following the Closing Date. Each Purchaser's
individual right of participation shall be on a pro rata basis based on the 50%
of number of shares of Common Stock held by the Purchaser immediately prior to
the effectiveness of such Subsequent Placement as compared to the aggregate
number of shares of Common Stock outstanding immediately prior to the
effectiveness of such Subsequent Placement.
14
4.6 Securities Laws Disclosure; Publicity. The Company shall, no later than
5:30 a.m., Pacific Time, on the first Business Day following the Closing Date,
issue a press release (a copy of which will be provided each Purchaser or its
counsel for review as early as practicable prior to its filing) disclosing the
material terms of the transactions contemplated hereby (the "PRESS RELEASE").
Thereafter, the Company shall timely file any filings and notices required by
the Commission or applicable law with respect to the transactions contemplated
hereby. 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 consent of such Purchaser, except to the extent such disclosure (but not
any disclosure as to the controlling Persons thereof) is required by subpoena,
applicable law or Trading Market regulations, in which case the Company shall
provide such Purchaser with prior notice of such disclosure.
4.7 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a Purchaser
or any of its Affiliates (a "RELATED PERSON") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its actual and reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only expenses and
Losses that result directly from (i) such Purchaser's or Related Person's gross
negligence or willful misconduct or (ii) any breach by such Purchaser of any of
the representations, warranties or covenants made by such Purchaser in this
Agreement or any other Transaction Document. In addition, the Company shall
indemnify and hold harmless each Purchaser and Related Person and each Purchaser
shall indemnify and hold harmless the Company from and against any and all
Losses, as incurred, arising out of or relating to any breach by such party of
any of the representations, warranties or covenants made by such party in this
Agreement or any other Transaction Document. The conduct of any Proceedings for
which indemnification is available under this paragraph shall be governed by
Section 6.4(c) below. The indemnification obligations of any party under this
paragraph shall be in addition to any liability that such party may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company or the Purchasers and
any such Related Persons, as the case may be. The Company also agrees that
neither the Purchasers nor any Related Persons 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 transactions contemplated by the
Transaction Documents, except to the extent that any Losses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or Related Person in connection with such transactions or any breach
by such Purchaser of any of the representations, warranties or covenants made by
such Purchaser in this Agreement or any other Transaction Document. If the
Company or any Purchaser breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company or such
Purchaser may have under any Transaction Document or applicable law, the Company
or such Purchaser promptly shall pay or reimburse the Purchasers or the Company,
as the case may be, for all costs of collection and enforcement, including the
indemnification obligations under this paragraph and reasonable attorneys' fees
and expenses.
4.8 Delivery of Certificates and Warrants. Within three Business Days
following the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following: (a) one or more stock certificates, free and
clear of all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing the number of Shares indicated below such
Purchaser's name on the signature page of this Agreement, registered in the name
of such Purchaser; and (b) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire such number of
Underlying Shares indicated below such Purchaser's name on the signature page of
this Agreement, on the terms set forth therein.
15
4.9 Lock Up. Each Purchaser agrees that such Purchaser will not for a
period of at least six months after the Closing Date offer to sell, contract to
sell or otherwise sell (including without limitation in a Short Sale) or
transfer, assign, pledge, hypothecate or otherwise encumber or dispose of any
Securities issued to such Purchaser pursuant to this Agreement ("Locked Up
Securities"). Notwithstanding the foregoing, if such Purchaser is an individual,
he or she may transfer any Locked Up Securities either during his or her
lifetime or on death by will or intestacy to his or her immediate family or to a
trust the beneficiaries of which are exclusively such Purchaser and/or a member
or members of his or her immediate family; provided, however, that prior to any
such transfer each transferee shall agree to receive and hold such Locked Up
Securities, subject to the provisions of this Section 4.9, and there shall be no
further transfer except in accordance with the provisions of this Section 4.9.
For the purposes of this Section 4.9, "immediate family" shall mean spouse,
lineal descendant, father, mother, brother or sister of the transferor. Each
Purchaser agrees and consents to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of Locked Up Securities held
by such Purchaser except in compliance with this Agreement.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made on and as
of such date;
(b) Performance. The Company and each other Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing;
(c) Securities Exemptions. The offer and sale of the Securities to the
Purchasers pursuant to this Agreement shall be exempt from the registration
requirements of the Securities Act and the registration and/or qualification
requirements of all applicable state securities laws;
(d) No Statute or Rule Challenging Transaction. No statute, rule,
regulation, executive order, decree, ruling, injunction, action, proceeding or
interpretation shall have been enacted, entered, promulgated, endorsed or
adopted by any court or governmental authority of competent jurisdiction or any
self-regulatory organization or the staff of any of the foregoing, having
authority over the matters contemplated hereby which questions the validity of,
or challenges or prohibits the consummation of, any of the transactions
contemplated by this Agreement;
(e) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not be restricted or suspended by the Commission or the
Trading Market (except for any restriction or suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company);
(f) Litigation. No Proceeding shall have been instituted or threatened
against the Company that would, individually or in the aggregate, have a
Material Adverse Effect;
(g) Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the Company executed by the President of the
Company, dated as of the Closing, certifying to the fulfillment of the
conditions specified in Sections 5.1(a) and 5.1(b) of this Agreement;
16
(h) Secretary's Certificate. The Company shall have delivered to the
Purchasers a certificate of the Company executed by an officer of the Company,
dated as of the Closing, certifying (i) resolutions adopted by the Board
authorizing the execution of the Transaction Documents, the issuance of the
Securities, the filing of the Registration Statement, and the transactions
contemplated hereby; and (ii) the Certificate of Incorporation and Bylaws of the
Company, each as amended, and copies of any required third party consents,
approvals and filings required in connection with the consummation of the
transactions contemplated by this Agreement; and
(i) Other Documents. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by this
Agreement as the Purchasers or their counsel may reasonably request.
5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Shares and Warrants at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of the Purchasers contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date;
(b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing;
(c) Securities Exemptions. The offer and sale of the Securities to the
Purchasers pursuant to this Agreement shall be exempt from the registration
requirements of the Securities Act and the registration and/or qualification
requirements of all applicable state securities laws;
(d) Payment of Purchase Price. Each Purchaser shall have delivered to
the Company by wire transfer of immediately available funds, full payment of the
purchase price for the Shares and Warrants as indicated below each Purchaser's
name on such Purchaser's signature page;
(e) Receipt of Purchaser Questionnaires. Each Purchaser shall have
delivered to the Company a completed Purchaser Questionnaire in the form
attached hereto as Exhibit C;
(f) No Statute or Rule Challenging Transaction. No statute, rule,
regulation, executive order, decree, ruling, injunction, action, proceeding or
interpretation shall have been enacted, entered, promulgated, endorsed or
adopted by any court or governmental authority of competent jurisdiction or any
self-regulatory organization or the staff of any of the foregoing, having
authority over the matters contemplated hereby which questions the validity of,
or challenges or prohibits the consummation of, any of the transactions
contemplated by this Agreement; and
(g) Other Documents. The Purchasers shall have delivered to the
Company such other documents relating to the transactions contemplated by this
Agreement as the Company or counsel may reasonably request.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Registration.
(a) As promptly as possible, the Company shall prepare and file with
the Commission a Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415.
17
(b) The Company shall use all commercially reasonable efforts to cause
the Registration Statement to be filed with the Commission by the Filing Date,
and declared effective on or before the Required Effectiveness Date. The Company
shall use all commercially reasonable efforts to keep the Registration Statement
continuously effective under the Securities Act from the date such Registration
Statement becomes effective until the later of (i) the first anniversary of the
Effective Date or such earlier date when all Registrable Securities have been
resold under such Registration Statement, and (ii) the date on which all
Registrable Securities may be resold without restriction or limitation under the
federal securities laws or may be sold pursuant to paragraph (k) of Rule 144
(the "EFFECTIVENESS PERIOD").
(c) The Company shall notify each Purchaser in writing promptly (and
in any event within one Business Day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) On every monthly anniversary of any Event (as defined below) until
the applicable Event is cured, as partial relief for the damages suffered
therefrom by the Purchasers (which remedy shall not be exclusive of any other
remedies available under this Agreement, at law or in equity), the Company shall
pay to each Purchaser an amount in cash, as liquidated damages and not as a
penalty, equal to 1.5% of the aggregate purchase price paid by such Purchaser
hereunder for every month, prorated for any partial month. The payments to which
a Purchaser shall be entitled pursuant to this Section 6.1(d) are referred to
herein as "EVENT PAYMENTS". Any Event Payments payable pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to the
cure of an Event.
For such purposes, each of the following shall constitute an "EVENT":
(i) the Registration Statement is not declared effective by the
Required Effectiveness Date;
(ii) after the Effective Date, any Registrable Securities covered
by such Registration Statement are not listed on an Eligible Market
directly or indirectly due to an action or inaction of the Company;
(iii) the Common Stock is not listed or quoted, or is suspended
from trading, on an Eligible Market for a period of ten consecutive Trading
Days; or
(iv) the Company fails to have available a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock
available to issue Underlying Shares upon any exercise of the Warrants.
(e) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement (other than a Registration Statement filed on a Form S-4 or S-8)
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities.
6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than three Business Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment, or not less
than one Business Day for any supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by reference), the
Company shall furnish to each Purchaser and any counsel designated by any
Purchaser (each, a "PURCHASER COUNSEL") copies of all such documents proposed to
be filed. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which Purchasers holding
a majority of the Registrable Securities shall reasonably object in writing.
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(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten Business
Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and, at the request of any
Purchaser, as promptly as reasonably possible provide such Purchaser true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Purchasers thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) Notify the Purchasers of Registrable Securities to be sold and
each Purchaser Counsel as promptly as reasonably possible, and (if requested by
any such Person) confirm such notice in writing no later than one Business Day
thereafter, of any of the following events: (i) the initial filing of the
Registration Statement with the Commission; (ii) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (iii)
any Registration Statement or any post-effective amendment is declared
effective; (iv) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (v) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation of any Proceeding; or (vi) the
financial statements included in any Registration Statement become ineligible
for inclusion therein or any statement made in any Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(d) Use commercially reasonable efforts to avoid the issuance of or,
if issued, obtain the withdrawal of (i) any order suspending the effectiveness
of any Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
(e) Promptly deliver to each Purchaser and Purchaser Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(f) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; and (iii) maintain the
listing of such Registrable Securities on each such Trading Market.
(g) Use commercially reasonable efforts to register or qualify or
cooperate with the selling Purchasers and respective Purchaser Counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions within the United
States as any Purchaser reasonably requests in writing, to keep each such
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registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; PROVIDED, HOWEVER, that the
Company shall not be required to qualify to do business or consent to service of
process in any jurisdiction in which it is not now so qualified or has not so
consented.
(h) Cooperate with the Purchasers to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall
be free, to the extent permitted by law, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such Purchasers may request.
(i) Upon the occurrence of any event described in Section 6.2(c)(vi),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(j) Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
(k) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all actual and reasonable fees and expenses incident to the
performance of or compliance with this Agreement by the Company, including
without limitation (a) all registration and filing fees and expenses, including
without limitation those related to filings with the Commission, any Trading
Market and in connection with applicable state securities or blue sky laws, (b)
printing expenses (including without limitation expenses of printing
certificates for Registrable Securities and of printing prospectuses requested
by the Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Purchaser,
the officers, directors, partners and members and each Person who controls any
such Purchaser (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) to the fullest extent permitted by applicable
law, from and against any and all Losses, as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that (i) such untrue statements, alleged
untrue statements, omissions or alleged omissions are based solely upon
information regarding such Purchaser furnished in writing to the Company by such
20
Purchaser expressly for use therein, or to the extent that such information
relates to such Purchaser or such Purchaser's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Purchaser expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or (ii) in
the case of an occurrence of an event of the type specified in Section
6.2(c)(iv)-(vi), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such Purchaser
of the Advice contemplated in Section 6.5. 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.
(b) Indemnification by Purchasers. Each Purchaser shall, severally and
not jointly, indemnify and hold harmless the Company, each of its directors,
each of its officers who signed the Registration Statement and each Person who
controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act) to the fullest extent permitted by applicable
law, from and against all Losses (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review) arising
primarily out of any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising primarily out of any omission of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading to the extent, but only to the extent, that (i) such untrue
statements or omissions are based solely upon information regarding such
Purchaser furnished in writing to the Company by such Purchaser expressly for
use in such Registration Statement or such Prospectus, or to the extent that
such information relates to such Purchaser or such Purchaser's proposed method
of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (ii) in the case of an occurrence of an event of the type
specified in Section 6.2(c)(iv)-(vi), the use by such Purchaser of an outdated
or defective Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Purchaser of the Advice contemplated in Section 6.5. In no event shall the
liability of any selling Purchaser hereunder be greater in amount than the
dollar amount of the net proceeds received by such Purchaser upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) 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 Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall 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 proximately and materially
adversely 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: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) 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 (iii) 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 in writing 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
21
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 such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld or delayed. 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. Each Indemnified Party shall furnish such information regarding
itself or the claim that is the subject matter of such Proceeding in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the investigation and defense of such
claim.
All 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) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6.4(a)
or (b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. The obligations of the
Purchasers under this Section 6.4(d) shall be several and not joint.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
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6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement and, upon written request of the Company, will represent to the
Company that it has so complied. Each Purchaser further agrees that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Sections 6.2(c)(iv), (v) or (vi), such Purchaser will discontinue
disposition of such Registrable Securities under the Registration Statement
until such Purchaser's receipt of the copies of the supplemented Prospectus
and/or amended Registration Statement contemplated by Section 6.2(j), or until
it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right to any of its security
holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a Registration Statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
Registration Statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to the
Purchaser designated as the lead investor on the signature pages hereto up to an
aggregate of $10,000 for its actual and reasonable legal fees and expenses
incurred in connection with its due diligence and the preparation and
negotiation of the Transaction Documents. Except as expressly set forth in the
Transaction Documents to the contrary, 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. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.
7.3 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. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
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7.4 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 prior to 5:00 p.m. on a
Business Day, (b) the next Business Day after the date of transmission, if such
notice or communication is delivered via facsimile on a day that is not a
Business Day or later than 5:00 p.m. on any Business Day, (c) the Business Day
following the date of deposit with a nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The addresses and facsimile numbers for such notices and
communications are those set forth on the signature pages hereof, or such other
address or facsimile number as may be designated in writing hereafter, in the
same manner, by any such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed by the Company and the holders of
a majority of the Shares. 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.
7.6 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.
7.7 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 the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers."
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.7 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trial. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE
OF CALIFORNIA FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY
PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED
HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF
THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO
ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY
PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF
DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
24
7.10 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.
7.11 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.
7.12 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.
7.13 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.
7.14 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Warrants, or any
Purchaser enforces or exercises its rights hereunder or 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 by a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
7.15 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
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7.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. 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 represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents.
[SIGNATURE PAGES TO FOLLOW]
26
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.
UWINK, INC.
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: CEO
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
Signature Page to Securities Purchase Agreement
PURCHASER NAME:________________________________________________
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
Number of Shares:
Warrant: To purchase Underlying Shares
Total Value of Investment: $
With a copy to
(Purchaser Counsel):
Full Address:__________________________________________
__________________________________________
__________________________________________
Facsimile #:
Telephone #:
Attn:
Signature Page to Securities Purchase Agreement
Exhibits:
---------
A Form of Warrant
B Form of Legal Opinion
C Purchaser Questionnaire
SCHEDULES
References to schedule numbers below refer to the corresponding section numbers
in the Securities Purchase Agreement.
SCHEDULE 3.1(F)
Common Stock, $0.001 par value per share: 50,000,000 shares authorized;
12,975,300 shares issued and outstanding.
Preferred Stock: 5,000,000 shares authorized; 0 shares issued and outstanding.
Options to purchase shares of Common Stock: Options outstanding to purchase
3,483,654 shares of Common Stock (including 500,000 options to be issued to
Xxxxx Xxxxxxxx pursuant to the employment agreement to be executed at Closing).
Warrants to purchase shares of Common Stock: Warrants outstanding to purchase
2,519,656 shares of Common Stock.
Debt Convertible into shares of Common Stock:
$200,000 10% Note dated October 10, 2005 issued to Xxxxxxx Xxxxxx due April 10,
2006. Note is convertible at the option of the holder into the same securities
issued pursuant to (and on the same terms and conditions pari passu with the
investors in) any offering of securities ("Follow-On Securities") by the Company
resulting in gross proceeds to the Company of at least $3,000,000 ("Follow-On
Offering"). Upon exercise of such option (which exercise must occur
contemporaneous with the consummation of the Follow-On Offering), the entire
then outstanding principal amount and accrued and unpaid interest of the note
shall be converted (the "Conversion") into Follow-On Securities. The pro rata
percentage of Follow-On Securities which shall be issued by the Company to the
holder upon the Conversion shall be equal to: the sum of (1) the original
principal amount plus the then current accrued and unpaid interest, plus (2)
twenty percent (20%) of such total amount (such sum, the "Conversion Amount"),
divided by (1) the total dollar amount received by the Company pursuant to the
Follow-On Offering, plus (2) the Conversion Amount. The Follow-On Securities
issued to the Holder upon the Conversion shall be of the same type and class,
and shall contain the identical rights and restrictions, as the securities
issued by the Company in the Follow-On Offering. The entire then outstanding
principal amount and accrued interest of the note will be subject to mandatory
redemption in cash by the Company within 2 business days following the closing
of the Follow-On Offering. Upon such redemption of the note or upon repayment of
the note at maturity, the Company shall issue to the Holder the Warrants to
purchase 200,000 shares of Common Stock at $0.59 cents per share.
$100,000 10% Note dated September 8, 2005 issued to Xxxxxxx Xxxxx due September
8, 2007. The principal and accrued and unpaid interest amount of this Note will
be subject to mandatory conversion into the same securities issued pursuant to
(and on the same terms and conditions pari passu with the investors in) any
offering of securities ("Follow-On Securities") by the Company resulting in
gross proceeds to the Company of at least $3,000,000 ("Follow-On Offering").
Contemporaneous with the consummation of the Follow-On Offering, the entire then
outstanding principal amount and accrued and unpaid interest of this Note shall
be automatically converted (the "Conversion") into Follow-On Securities. The pro
rata percentage of Follow-On Securities which shall be issued by the Company to
the holder upon the Conversion shall be equal to: the sum of (1) the original
principal amount plus the then current accrued and unpaid interest, plus (2)
twenty percent (20%) of such total amount (such sum, the "Conversion Amount"),
divided by (1) the total dollar amount received by the Company pursuant to the
Follow-On Offering, plus (2) the Conversion Amount. The Follow-On Securities
issued to the Holder upon the Conversion shall be of the same type and class,
and shall contain the identical rights and restrictions, as the securities
issued by the Company in the Follow-On Offering.
The Company is in discussion with Xx. Xxxxx regarding offering him an
opportunity to convert the note at $0.30 per share plus a warrant to purchase
0.5 shares at $0.345 per share. If so converted, the note will convert into
approximately 400,000 shares plus warrants to purchase approximately 200,000
shares.
$100,000 20% Convertible Note issued to Xxx Xxxxxx due November 24, 2005.
Company has agreed with Xx. Xxxxxx to repay this note plus accrued interest of
approximately $20,000 out of the proceeds of the financing contemplated by this
Agreement and to issue 50,000 shares of Common Stock to Xx. Xxxxxx in exchange
for Xx. Xxxxxx extending the term of the note.
SCHEDULE 3.1(J)
$100,000 20% Convertible Note issued to Xxx Xxxxxx was due November 24, 2005.
Company has agreed with Xx. Xxxxxx to repay this note plus accrued interest of
approximately $20,000 out of the proceeds of the financing contemplated by this
Agreement and to issue 50,000 shares of Common Stock to Xx. Xxxxxx in exchange
for Xx. Xxxxxx extending the term of the note.
$184,336.62 12% Note dated July 23, 2001 issued to Xxx Xxxxxxxx, a former
employee, due November 23, 2001. Xx. Xxxxxxxx has agreed to extend the maturity
of the Note to February 15, 2007.
SCHEDULE 3.1(K)
$184,336.62 12% Note dated July 23, 2001 issued to Xxx Xxxxxxxx, a former
employee, due November 23, 2001. Note is secured by inventory and accounts
receivable. Xx. Xxxxxxxx has agreed to extend the maturity of the Note to
February 15, 2007.
$100,000 10% Note dated September 8, 2005 issued to Xxxxxxx Xxxxx due September
8, 2007 is secured by the assets of the Company, other than any assets of the
Company that secure any debt of the Company outstanding on the date the note.
As a result of a credit decision by Westfield (the landlord), the executed Lease
Agreement dated February 3, 2006 relating to the space for the prototype
restaurant in Woodland Hills, CA is between Westfield and Xxxxx Xxxxxxxx
personally. The Company will to enter into agreement with Xxxxx Xxxxxxxx such
that the Company will have access to and ownership of the assets in the Woodland
Hills location.
SCHEDULE 3.1(L)
At Closing, the Company will pay a $75,000 commission to Xxxxxxxx Curhan Ford &
Co.
SCHEDULE 3.1(O)
Agreement with Xxx Xxxxxxxxx dated April 1, 2005 to register 120,000 shares of
Common Stock in the Company's Form SB-2 then on file with the SEC, which SB-2
was never declared effective; Company is in the process of officially
withdrawing the SB-2.
Piggyback registration rights granted to Marino Capital Partners, Inc. on 50,000
shares of Common Stock issuable upon exercise of Warrants at $2.37 per share.
Registration rights triggered upon exercise of Warrant.
SCHEDULE 3.1(V)
As a result of a credit decision by Westfield (the landlord), the executed Lease
Agreement dated February 3, 2006 relating to the space for the prototype
restaurant in Woodland Hills, CA is between Westfield and Xxxxx Xxxxxxxx
personally. The Company will to enter into agreement with Xxxxx Xxxxxxxx such
that the Company will have access to and ownership of the assets in the Woodland
Hills location.
