EXHIBIT 7.2
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Execution Version
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement is dated as of November 12, 2007, by
and among NewStar Financial, Inc., a Delaware corporation (the "Company"), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and Rule 506 promulgated thereunder, 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.
WHEREAS, the Purchasers desire to purchase and the Company desires to
sell, upon the terms and conditions stated in this Agreement, up to a maximum of
$125,000,000 of the Company's Common Stock (as defined below); provided,
however, that (i) the purchase by the Purchasers and the sale by the Company to
such Purchasers of that number of shares that exceed 19.99% of the shares of
Common Stock outstanding immediately prior to any issuance of Common Stock
contemplated hereunder (the "Excess Securities") and (ii) the purchase by any
Purchaser and the sale by the Company to such Purchaser and its Affiliates of
any shares of Common Stock to (and only to) the extent that such Purchaser and
its Affiliates would thereafter own a number of shares of Common Stock (assuming
the exercise in full by such Purchaser of such securities of the Company that
are convertible into or exercisable for shares of Common Stock) in excess of
19.99% of the then outstanding shares of Common Stock (together with the Excess
Securities, the "Second Closing Securities"), shall be subject to the
Stockholder Approval (as defined below).
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 agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings set
forth in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section 3.1(j).
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
"Agreement" means this Securities Purchase Agreement between the parties
hereto (including any exhibits and schedules hereto and the Disclosure
Schedules) and all amendments hereto made in accordance with the provisions of
Section 5.5.
"Closing" shall have the meaning ascribed to such term in Section 2.1.
"Closing Date" means each of the Initial Closing Date and Second Closing
Date.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.01 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries that would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants, stock appreciation rights, restricted stock units or other
instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.
"Company Counsel" means Xxxxxxx Xxxxxx Xxxxxx & Dodge LLP with offices
located at 000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000.
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"Discussion Time" shall have the meaning ascribed to such term in Section
3.2(f).
"Effective Date" means the date that the initial Registration Statement is
first declared effective by the Commission.
"Equity Incentive Plan" means (i) any equity incentive, stock option or
similar plan and (ii) any other agreement, arrangement, understanding or other
document pursuant to which the Company is obligated to grant or issue Common
Stock or Common Stock Equivalents to current or former employees in connection
with their services to the Company, in each case adopted or approved by a
majority of the non-employee members of the board of directors of the Company or
a majority of the members of a committee of non-employee directors established.
"Evaluation Date" shall have the meaning ascribed to such term in Section
3.1(q).
"Excess Securities" shall have the meaning ascribed to such term in
preamble to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
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"Governmental Authority" shall have the meaning ascribed to such term in
Section 3.1(d).
"Initial Closing" shall have the meaning ascribed to such term in Section
2.1.
"Initial Closing Date" shall have the meaning ascribed to such term in
Section 2.1.
"Law" shall have the meaning ascribed to such term in Section 3.1(d).
"Legend Removal Date" shall have the meaning ascribed to such term in
Section 4.1(c).
"Lien" or Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"Losses" shall have the meaning ascribed to such term in Section 4.8(a).
"Material Adverse Effect" means any circumstance, event, occurrence or
development that, individually or in the aggregate, would have or would
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
condition of the Company and the Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company's ability to perform in any material
respect on a timely basis its obligations under any Transaction Document.
"Material Permits" shall have the meaning ascribed to such term in Section
3.1(m).
"Per Share Purchase Price" equals $10.00 (ten dollars), subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Placement Agent" means Citi.
"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.
"Proxy Statement" shall have the meaning ascribed to such term in Section
4.7.
"Purchaser Party" shall have the meaning ascribed to such term in Section
4.8.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated the date hereof, among the Company and the Purchasers, in the form of
Exhibit B attached hereto.
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"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of all or part of the Shares.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h).
"Second Closing" shall have the meaning ascribed to such term in Section
2.1.
"Second Closing Date" shall have the meaning ascribed to such term in
Section 2.1.
"Second Closing Securities" shall have the meaning ascribed to such term
in the preamble to this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Short Sales" means all "short sales" as defined in Rule 200 of Regulation
SHO under the Exchange Act (but shall not be deemed to include the location
and/or reservation of borrowable shares of Common Stock).
"Stockholders' Agreement" means the Stockholders' Agreement dated as of
June 18, 2004 as amended by (i) the First Amendment thereto dated as of August
22, 2005 (ii) the Second Amendment thereto dated as of June 5, 2006 (iii) the
Third Amendment thereto dated as of December 12, 2006 and (iv) the Fourth
Amendment thereto dated as of March 26, 2007.
"Stockholder Approval" shall have the meaning ascribed to such term in
Section 4.7.
"Stockholder Meeting" shall have the meaning ascribed to such term in
Section 4.7.
"Subscription Amount" means, as to each Purchaser, the aggregate amount to
be paid for Shares purchased hereunder set forth opposite such Purchaser's name
on Exhibit A-1 and Exhibit A-2 under the heading "Subscription Amount," in
United States dollars and in immediately available funds.
"Subsidiary" and collectively, "Subsidiaries" means a subsidiary of the
Company.
"Trading Day" means a day on which the Common Stock is traded on a Trading
Market.
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"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or
the New York Stock Exchange.
"Transaction Document" and collectively, the "Transaction Documents" means
this Agreement and the Registration Rights Agreement and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
"Transfer Agent" means The Bank of New York and any successor transfer
agent of the Company.
"U.S." means the United States of America.
ARTICLE II.
PURCHASE AND SALE
2.1 Closings. Upon the terms and subject to the conditions set forth herein,
the Company agrees to sell, and each Purchaser, severally and not jointly,
agrees to purchase at the Per Share Purchase Price (a) the Shares set forth
opposite such Purchaser's name on Exhibit A-1 at a closing (the "Initial
Closing") to take place at 10:00 a.m. (Eastern time) on the later to occur of
(i) the twelfth Trading Day after the date hereof and (ii) the first Trading Day
following the satisfaction or waiver of the conditions set forth in Section 2.3
of this Agreement (other than those conditions that by their nature are to be
satisfied at the Initial Closing, but subject to satisfaction or waiver thereof)
and (b) the Shares set forth opposite such Purchaser's name on Exhibit A-2 at a
closing (the "Second Closing" and, together with the Initial Closing, each a
"Closing") to take place at 10:00 a.m. (Eastern time) on the third Trading Day
following the satisfaction or waiver of the conditions set forth in Section 2.3
of this Agreement (other than those conditions that by their nature are to be
satisfied at the Second Closing, but subject to satisfaction or waiver thereof).
The date on which the Initial Closing is to occur is referred to herein as the
"Initial Closing Date" and the date on which the Second Closing is to occur is
referred to herein as the "Second Closing Date." The Company and each Purchaser
shall deliver the other items set forth in Section 2.2 deliverable at the
Closing. The Closing shall occur at the offices of Company Counsel or such other
location as the parties shall mutually agree.
2.2 Deliveries.
(a) On or prior to the Initial Closing Date, the Company shall deliver
or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel dated as of the Initial
Closing Date, in the form of Exhibit C attached hereto;
(iii) a copy of the irrevocable instructions to the Transfer Agent
instructing the Transfer Agent to deliver, on an expedited basis, a
certificate evidencing the number of its respective Shares as set forth
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opposite such Purchaser's name on Exhibit A-1 hereto, registered in the
name of such Purchaser;
(iv) the Registration Rights Agreement duly executed by the
Company; and
(v) a certificate, dated as of the Initial Closing Date and signed
by its Chief Executive Officer or its Chief Financial Officer, certifying
to the fulfillment of the conditions specified in Sections 2.3(b)(i) and
(ii).
(b) On or prior to the Second Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i) a legal opinion of Company Counsel dated as of the Second
Closing Date, in the form of Exhibit C attached hereto
(ii) a copy of the irrevocable instructions to the Transfer Agent
instructing the Transfer Agent to deliver, on an expedited basis, a
certificate evidencing the number of its respective Shares as set forth
opposite such Purchaser's name on Exhibit A-2 hereto, registered in the
name of such Purchaser;
(iii) a certificate, dated as of the Second Closing Date and signed
by its Chief Executive Officer or its Chief Financial Officer, certifying
to the fulfillment of the conditions specified in Sections 2.3(b)(i) and
(ii).
(c) Prior to each of the Initial Closing Date and the Second Closing
Date, respectively, the Company shall deliver to the custodian for each
Purchaser a certificate evidencing the number of its respective Shares,
registered in such names as set forth (i) opposite such Purchaser's name on
Exhibit A-1 hereto with respect to the Initial Closing and (ii) as set forth
opposite such Purchaser's name on Exhibit A-2 hereto with respect to the Second
Closing.
(d) On or prior to the Initial Closing Date, each Purchaser shall
deliver or cause to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) the Registration Rights Agreement duly executed by such
Purchaser.
(e) On or prior to each of the Initial Closing Date and the Second
Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company such Purchaser's Subscription Amount to be purchased at such Closing as
set forth on Exhibit A-1 and Exhibit A-2, respectively, by wire transfer to the
account as specified in writing by the Company.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder with respect to each
Closing with a given Purchaser are subject to the following conditions being
met:
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(i) the representations and warranties of such Purchaser that are
contained herein and (A) that are qualified by materiality or Material
Adverse Effect shall be true when made and on the Initial Closing Date and
the Second Closing Date, respectively, (except for representations and
warranties that speak as of a specific date which shall be accurate as of
such date), and (B) that are not qualified by materiality or Material
Adverse Effect shall be accurate in all material respects when made and on
each of the Initial Closing Date and the Second Closing Date,
respectively, (except for representations and warranties that speak as of
a specific date which shall be accurate in all material respects as of
such date);
(ii) all obligations, covenants and agreements of such Purchaser
required to be performed at or prior to each of the Initial Closing Date
and Second Closing Date shall have been performed;
(iii) the delivery by such Purchaser of the items set forth in
Section 2.2(c) and 2.2(d) of this Agreement;
(iv) no Law shall prohibit the consummation of the Closing; and
(v) with respect to the Second Closing Date only, the Company
shall have obtained the Stockholder Approval.
(b) The respective obligations of each Purchaser hereunder with respect
to each Closing are subject to the following conditions being met:
(i) the representations and warranties of the Company that are
contained herein and (A) that are qualified by materiality or Material
Adverse Effect shall be true when made and on the Initial Closing Date and
the Second Closing Date, respectively, (except for representations and
warranties that speak as of a specific date which shall be accurate as of
such date), and (B) that are not qualified by materiality or Material
Adverse Effect shall be accurate in all material respects when made and on
each of the Initial Closing Date and the Second Closing Date,
respectively, (except for representations and warranties that speak as of
a specific date which shall be accurate in all material respects as of
such date);
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to each of the Initial Closing Date
and the Second Closing Date shall have been performed;
(iii) the delivery by the Company of the items set forth in Section
2.2(a) and 2.2(b) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect
to the Company since the date hereof;
(v) from the date hereof to each of the Initial Closing Date and
the Second Closing Date, respectively, trading in the Common Stock shall
not have been suspended by the Commission or the Company's principal
Trading Market (except for any suspension of trading of limited duration
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agreed to by the Company, which suspension shall be terminated prior to
the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading
Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the
reasonable judgment of such Purchaser, makes it impracticable or
inadvisable to purchase the Shares at the Closing;
(vi) the Shares shall have been approved for listing on the Trading
Market subject to official notice of issuance;
(vii) no Law shall prohibit the consummation of the Closing;
(viii) with respect to the Initial Closing Date only, the Company
receives funds in an aggregate amount of at least $72,480,800, which
amount includes at least $17,395,390 from an unaffiliated Purchaser that
does not currently hold Common Stock;
(ix) with respect to the Second Closing Date only, the Company
receives funds in an aggregate amount of at least $52,519,200, which
amount includes at least $12,604,610 from an unaffiliated Purchaser that
does not currently hold Common Stock; and
(x) with respect to the Second Closing Date only, the Company
shall have obtained the Stockholder Approval.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation otherwise made herein that it expressly
claims to qualify and any other representation or warranty to the extent that
the relevance of the disclosed matter to that representation or warranty is
readily apparent, the Company hereby makes the following representations and
warranties to each Purchaser on the date hereof and on each Closing Date:
(a) Subsidiaries. All of the direct and indirect Subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities. There are no outstanding options or other rights to
acquire from the Company or any Subsidiary, or other obligation of the Company
or any Subsidiary to issue, any capital stock of or other equity interests in,
or any securities convertible into or exchangeable for any capital stock of or
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equity interests in, any Subsidiary. There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any shares
of capital stock or other equity interests in any Subsidiary. Other than the
Subsidiaries, there are no other corporations, partnerships, joint ventures,
associations or other entities in which the Company or any Subsidiary owns, of
record or beneficially, any material direct or indirect equity or other interest
or any right (contingent or otherwise) to acquire the same.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority, including all necessary governmental licenses, authorizations and
permits, 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
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct its 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 have or reasonably be expected to result
in a Material Adverse Effect and no Proceeding has been instituted or, to the
Company's knowledge, has been threatened by any Governmental Authority, in any
such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
or curtail such power and authority or qualification.
(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 and no further action is required by
the Company, its Board of Directors or its stockholders in connection therewith
other than in connection with the Required Approvals. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and,
when executed and delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Shares and
the consummation by the Company of the other 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, or (ii) require any consent
(other than the Stockholder Approval) or other action by any Person under,
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
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upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, permit, license, order,
judgment, injunction, decree or other restriction (a "Law") of any court or
governmental, administrative, regulatory or Trading Market authority to which
the Company or a Subsidiary is subject (each a "Governmental Authority")
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as would not have or reasonably
be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals; Committee Approval. Assuming the
accuracy of the Purchasers' representations and warranties set forth in Section
3.2, the Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
Governmental Authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing
with, and the declaration of effectiveness by, the Commission of the
Registration Statement, (iii) filings with the Commission pursuant to Rule 14a-6
of the Exchange Act, (iv) application(s) and notification(s) to each applicable
Trading Market for the issuance and sale of the Shares and the listing of the
Shares for trading or quotation, as the case may be, thereon in the time and
manner required thereby, (v) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities laws; and
(vi) with respect to the Second Closing, the Stockholder Approval (collectively,
the "Required Approvals"). A special committee of the Board of Directors has (i)
determined that it is advisable and in the best interest of the Company to enter
into this Agreement, (ii) approved the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby, and
(iii) resolved to recommend that the stockholders of the Company approve the
transactions contemplated hereby.
(f) Issuance of the Shares. The Shares are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement.
(g) Capitalization. The authorized capital stock of the Company consists
of 180 million shares of capital stock, classified as (i) 50 million shares of
preferred stock, par value $0.01 per share, of which 25 million shares have been
designated Series A Convertible Preferred Stock, (ii) 120 million shares of
common stock, par value $0.01 per share, and (iii) 10 million shares of class A
common stock, par value $0.01 per share. As of September 30, 2007, there were
outstanding 36,254,443 shares of Common Stock, 1,452,656 warrants to subscribe
for an aggregate of 1,452,656 shares of Common Stock (all of which warrants were
exercisable) and employee stock options to purchase an aggregate of 3,353,279
shares of Common Stock (of which options to purchase an aggregate of 1,568,162
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shares of Common Stock were exercisable). Since September 30, 2007 through the
date of this Agreement, other than in connection with the issuance of shares of
Common Stock pursuant to the exercise of warrants or stock options outstanding
as of September 30, 2007 and employee stock options to purchase an aggregate of
15,000 shares of Common Stock granted after September 30, 2007, there has been
no change in the number of outstanding shares of Common Stock or in the number
of outstanding warrants or employee stock options. Except with respect to
certain registration rights granted pursuant to the Stockholders' Agreement, no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as described in this Section 3.1(g), as set forth
in the SEC Reports, pursuant to an Equity Incentive Plan or as a result of the
purchase and sale of the Shares as contemplated by this Agreement, there are no
outstanding options, warrants, scrip 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
Common Stock Equivalents, 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 Common Stock Equivalents. The
issuance and sale of the 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 any of such securities.
There are no outstanding obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Common Stock. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Except for the Required Approvals, no further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares.
(h) SEC Reports; Financial Statements. Except as set forth on Schedule
3.1(h), as of the date hereof, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and 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 that the Company was required to file such materials) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, 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, as applicable,
and none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company is not
aware of any event occurring on or prior to the Closing Date (other than the
transactions contemplated by the Transaction Documents) that requires the filing
of a Form 8-K after the Closing. 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
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accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. All material agreements to which the
Company is a party or to which the property or assets of the Company are subject
are included as part of or specifically identified in the SEC Reports.
(i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
a subsequent SEC Report filed prior to the date hereof or on Schedule 3.1(i),
(i) there has been no event, occurrence or development that has had or that
could reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities, except pursuant
to an Equity Incentive Plan (vi) the Company has not made any amendment to its
certificate of incorporation or bylaws (whether by merger, consolidation or
otherwise), (viii) neither the Company nor any Subsidiary has entered into any
settlement, or offer or proposal to settle, (x) any material Proceeding
involving or against the Company or any Subsidiary, (y) any stockholder
litigation or dispute against the Company or any of its officers or directors or
(z) any Proceeding or dispute that relates to the transactions contemplated by
the Transaction Documents. The Company does not have pending before the
Commission any request for confidential treatment of information.
(j) Litigation. There is no Proceeding pending or, to the knowledge of
the Company, threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, or other
Governmental Authority (collectively, an "Action") which (i) adversely affects
or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Shares or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or executive officer thereof,
is or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or executive officer of the
Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect. None of the Company's or its Subsidiaries' employees is a member of a
12
union that relates to such employee's relationship with the Company, and neither
the Company or any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. No executive officer, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(l) 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 (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or Governmental Authority, or (iii) is or has
been in violation of any Law, including without limitation all foreign, federal,
state and local laws applicable to its business and all such laws that affect
the environment, except in each case as would not have or reasonably be expected
to result in a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Governmental
Authorities necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could not have or
reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in 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 (i) that do not materially affect the value of such
property and (ii) that do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries and
Liens for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance in all material respects. Neither the Company nor
any Subsidiary owns any real property.
(o) Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are customary in the businesses in which the Company and the
Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason
13
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a significant
increase in cost.
(p) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports or pursuant to the Transaction Documents, none of the executive
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, executive
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
executive officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for (i) payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including stock option
agreements and restricted stock unit agreements under any Equity Incentive Plan.
(q) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 that
are applicable to it. 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. The
Company has disclosed, based on its most recent evaluation of internal
accounting controls prior to the date hereof, to the Company's auditors and
audit committee (i) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company's ability to record, process,
summarize and report financial information and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal control over financial reporting. The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms. The Company's certifying
officers have evaluated the effectiveness of the Company's disclosure controls
and procedures as of the end of the period covered by the Company's most
recently filed periodic report under the Exchange Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company's internal control over financial reporting (as
such term is defined in the Exchange Act) that has materially affected the
Company's internal control over financial reporting. There are no outstanding
14
loans or other extensions of credit made by the Company or any of its
Subsidiaries to any executive officer (as defined in Rule 3b-7 under the
Exchange Act) or director of the Company. The Company has not, since the
enactment of the Xxxxxxxx-Xxxxx Act, taken any action prohibited by Section 402
of the Xxxxxxxx-Xxxxx Act.
(r) Certain Fees. Except as set forth on Schedule 3.1(r), 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
the Transaction Documents. The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in connection
with the transactions contemplated by the Transaction Documents.
(s) Private Placement. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Shares by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Shares hereunder does not contravene the rules and regulations of the Trading
Market.
(t) Investment Company. The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Shares, will not be or be an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(u) Registration Rights. Except as set forth on Schedule 3.1(u), no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is in compliance with all such listing and
maintenance requirements and the consummation of the transactions contemplated
by the Transaction Documents do not violate the Marketplace Rules of the Nasdaq
Stock Market.
(w) Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's certificate or articles of
incorporation, bylaws (or other organizational or charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
15
including without limitation as a result of the Company's issuance of the Shares
and the Purchasers' ownership of the Shares.
(x) Disclosure. All disclosure furnished by or on behalf of the Company
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Shares to be integrated or aggregated with prior offerings by
the Company for purposes of the Securities Act or any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated.
(z) Tax Status. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, (i) the Company and each Subsidiary has accurately and timely filed all
federal, state and foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) the
Company and each Subsidiary has paid or accrued all taxes shown as due thereon,
or, where payment is not due yet, has established in accordance with GAAP an
adequate accrual for all material taxes through the end of the last period for
which the Company and its Subsidiaries ordinarily record items in their
respective books and (iii) there is no tax deficiency in any material amount
which has been asserted or threatened against the Company or any Subsidiary.
(aa) No General Solicitation. Neither the Company nor any person acting
on behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. The Company has offered the Shares
for sale only to the Purchasers and certain other "accredited investors" within
the meaning of Rule 501 under the Securities Act.
(bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
(cc) No Disagreements with Accountants. Our independent registered public
accounting firm has informed us that there are no disagreements of any kind
presently existing between the Company and the independent registered public
accounting firm employed by the Company.
16
(dd) Acknowledgment Regarding Purchasers' Purchase of Shares. 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 Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser, any
Affiliate thereof or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers' purchase of the Shares. The
Company further represents to each Purchaser that the Company's decision to
enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by
the Company and its representatives.
(ee) Regulation M Compliance. The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting
purchases of, any of the Shares, or (iii) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid to
the Placement Agent in connection with the placement of the Shares.
(ff) Form Eligibility. The Company is not an "ineligible issuer" (as
defined in Rule 405 promulgated under the Securities Act) and is eligible to
register the Shares for resale by the Purchasers on a registration statement on
Form S-1 under the Securities Act. The Company is subject to the reporting
requirements of the Exchange Act, and has filed all reports required thereby.
Provided none of the Purchasers is deemed to be an underwriter with respect to
any Shares, to the Company's knowledge, there exist no facts or circumstances
(including without limitation any required approvals or waivers or any
circumstances that may delay or prevent the obtaining of accountant's consents)
that reasonably could be expected to prohibit or delay the preparation and
filing of a registration statement on Form S-1 under the Securities Act
registering the Shares for public resale as contemplated in the Registration
Rights Agreement.
(gg) Equal Treatment of Purchasers. Except as set forth on Schedule
3.1(gg), the Company has not entered into any Transaction Document (including
without limitation any letter agreement) with any Purchaser that amends,
supplements or otherwise modifies the terms of the Transaction Documents.
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by such Purchaser of the transactions
17
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except in relation to
enforceability (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(b) Own Account. Such Purchaser understands that the Shares are
"restricted securities" and have not been registered under the Securities Act or
any applicable state or other securities law and is acquiring the Shares as
principal for its own account and not with a view to or for distributing or
reselling such Shares or any part thereof in violation of the Securities Act or
any applicable state or other securities law, has no present intention of
distributing any of such Shares in violation of the Securities Act or any
applicable state or other securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding
the distribution of such Shares (this representation and warranty not limiting
such Purchaser's right to sell the Shares pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws) in
violation of the Securities Act or any applicable state or other securities law.
Such Purchaser is acquiring the Shares hereunder in the ordinary course of its
business.
(c) Purchaser Status. At the time such Purchaser was offered the Shares,
it was, and at the date hereof it is, either: (i) an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a "qualified institutional buyer" as defined in Rule 144A(a) under
the Securities Act. No Purchaser is required to be registered as a broker-dealer
under Section 15 of the Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, 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 Shares and, at the present time,
is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the Shares as
a result of any advertisement, article, notice or other communication regarding
the Shares published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(f) Short Sales and Confidentiality Prior to the Date Hereof. Other than
the transaction contemplated hereunder, such Purchaser has not, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser,
directly or indirectly executed any transaction, including Short Sales, in the
securities of the Company during the period commencing from the time that such
Purchaser first received a term sheet (written or oral) from the Company or any
18
other Person setting forth the material terms of the transactions contemplated
hereunder until the date hereof ("Discussion Time"). Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser's assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Shares covered by this Agreement. Other than
to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
(g) Filings, Consents and Approvals. The Purchaser is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other Governmental Authority
or other Person in connection with the execution, delivery and performance by
the Purchaser of the Transaction Documents, including without limitation that it
is not required to make any filings or obtain any approvals under the
Xxxx-Xxxxx-Xxxxxx Antitrust and Improvements Act of 1976, other than any filings
required pursuant to Section 13 or Section 16 of the Exchange Act.
(h) Provision of Information. Such Purchaser has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the Shares and the finances, operations and business of the Company; and (ii)
the opportunity to request such additional information which the Company
possesses or can acquire without unreasonable effort or expense.
(i) Certain Fees. No brokerage or finder's fees or commissions are or
will be payable by such Purchaser to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents.
(j) Acknowledgement. Each Purchaser acknowledges that the Company has
relied upon the representations and warranties of the Purchasers set forth in
Section 3.2 in its determination that no registration under the Securities Act
is required for the offer and sale of the Shares by the Company to the
Purchasers as contemplated by this Agreement.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Each of the Purchasers agrees that its Shares may only be disposed
of in compliance with state and federal securities laws. In connection with any
transfer of Shares, other than pursuant to an effective registration statement
or Rule 144, to the Company or to an Affiliate of a Purchaser, the Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the form
19
and substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred Shares under the Securities Act. As a condition of transfer, other
than pursuant to an effective registration statement or Rule 144, any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is required by
this Section 4.1, of a legend on any of its Shares in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
(c) Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of
such Shares pursuant to Rule 144, or (iii) if such Shares are eligible for sale
under Rule 144(k), or (iv) 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). The Company shall cause
its counsel to issue a legal opinion to the Transfer Agent promptly after the
Effective Date if required by the Transfer Agent to effect the removal of the
legend hereunder. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three (3) Trading Days following the delivery by a Purchaser
to the Company or the Transfer Agent of a certificate representing Shares issued
with a restrictive legend (such third Trading Day, the "Legend Removal Date"),
deliver or cause to be delivered to such Purchaser a certificate representing
such Shares that is free from all restrictive and other legends. Notwithstanding
the foregoing, the Company shall not be required to remove any legends until all
Shares represented by a single certificate are no longer subject to
restrictions. If only a portion of the Shares represented by any single
certificate are subject to restrictions, the holder of the certificate may
request, or the Company may require, that such certificate be cancelled and two
new certificates be issued. One certificate shall represent, and be in the
amount of, Shares not subject to restrictions and shall bear no legend and the
second certificate shall represent, and be in the amount of, Shares subject to
restrictions and shall bear an appropriate legend. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge
the restrictions on transfer set forth in this Section. Certificates for Shares
subject to legend removal hereunder shall be transmitted by the Transfer Agent
20
to the Purchasers by crediting the account of the Purchaser's prime broker or
custodian bank with the Depository Trust Company system.
(d) Each Purchaser, severally and not jointly with the other Purchasers,
agrees that the removal of the restrictive legend from certificates representing
Shares as set forth in this Section 4.1 is predicated upon the Company's
reliance that the Purchaser will sell any Shares pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if Shares
are sold pursuant to a Registration Statement, they will be sold in compliance
with the plan of distribution set forth therein.
4.2 Furnishing of Information. As long as any Purchaser owns Shares and the
Company remains subject to the requirements of the Exchange Act, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Shares, if the Company is not required to file reports pursuant
to the Exchange Act, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Shares under Rule 144. The Company
further covenants that it will take such further action as any holder of Shares
may reasonably request, to the extent required from time to time to enable such
Person to sell such Shares without registration under the Securities Act within
the requirements of the exemption provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Shares in a manner that would require the registration under the Securities Act
of the sale of the Shares to the Purchasers or that would be integrated with the
offer or sale of the Shares for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity; Notice of Certain Events. The
Company shall, by 8:30 a.m. (New York City time) on the Trading Day immediately
following the date hereof, issue a Current Report on Form 8-K, disclosing the
material terms of the transactions contemplated hereby and filing the
Transaction Documents as exhibits thereto. The Company and each Purchaser shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Each party hereto shall promptly notify
the other parties hereof of (i) any notice or other communication from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; (ii) any
material notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement; (iii) any
21
actions, suits, claims, investigations or proceedings commenced or, to its
knowledge, threatened against, relating to or involving or otherwise affecting
the Company or any of its Subsidiaries or such Purchaser and any of its
Affiliates that relate to the consummation of the transactions contemplated by
this Agreement; (iv) any inaccuracy of any representation or warranty of that
party contained in this Agreement at any time during the term hereof that could
reasonably be expected to cause any condition set forth in Section 2.3 not to be
satisfied; and (v) any failure of that party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving that notice.
4.5 Shareholder Rights Plan. No claim will be made or enforced by the Company
or, with the consent of the Company, any other Person, that any Purchaser is an
"Acquiring Person" under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Shares under the Transaction Documents or
under any other agreement between the Company and the Purchasers.
4.6 Use of Proceeds. The Company shall use the net proceeds from the sale of
the Shares hereunder for working capital purposes and shall not use such
proceeds for the satisfaction of any portion of the Company's debt (other than
payment of trade payables in the ordinary course of the Company's business and
prior practices), or to redeem any Common Stock or Common Stock Equivalents or
to settle any outstanding litigation.
4.7 Stockholder Approval. The Company shall provide each stockholder entitled
to vote at a special meeting of stockholders of the Company (the "Stockholder
Meeting") a proxy statement meeting the requirements of Section 14 of the
Exchange Act and the related rules and regulations thereunder promulgated by the
Commission (the "Proxy Statement") soliciting each such stockholder's
affirmative vote at the Stockholder Meeting, which meeting shall be called
promptly but in no event later than 90 days from the date hereof, for approval
of resolutions approving the Company's issuance of all Second Closing Securities
(the "Stockholder Approval") in accordance with the law and the rules and
regulations of Nasdaq and the Delaware General Corporation Law, and the Company
shall use its reasonable efforts to solicit its stockholders' approval of such
resolutions. Notwithstanding any other provision of this Agreement, no Second
Closing Securities shall be issued under this Agreement to any Purchaser prior
to Stockholder Approval (which, for this purpose shall not include the vote of
any shares acquired by such Purchaser in the Initial Closing) except in
accordance with the rules and interpretations of Nasdaq. The Company and the
Purchasers shall cooperate with one another (i) in connection with the
preparation of the Proxy Statement, and (ii) in taking such actions or making
any such filings, furnishing information required in connection with the Proxy
Statement and seeking timely to obtain any such actions, consents, approvals or
waivers. The Purchasers and their counsel shall be given no less than three
Trading Days to review and comment on the Proxy Statement before that document
(or any amendment thereto) is filed with the Commission, and reasonable and good
faith consideration shall be given to any comments made by such party and its
counsel. Each of the Purchasers and the Company shall provide the other party
and its counsel with (x) any comments or other communications, whether written
or oral, that such party or its counsel may receive from time to time from the
22
Commission or its staff with respect to the Proxy Statement promptly after
receipt of those comments or other communications and (y) a reasonable
opportunity to participate in the response to those comments and to provide
comments on that response (to which reasonable and good faith consideration
shall be given), including by participating in any discussions or meetings with
the Commission.
4.8 Indemnification of Purchasers. Subject to the provisions of this Section
4.8(a), the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur, it
being understood and agreed that such losses and damages are not limited to
out-of-pocket expenses (collectively "Losses") as a result of or relating to (a)
any breach of any of the representations, warranties, covenants or agreements
made by the Company in this Agreement or in the other Transaction Documents or
(b) any action instituted against a Purchaser, or any of them or their
respective Affiliates, by any stockholder of the Company who is not an Affiliate
of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is principally based upon any one or
more of the following: (i) a breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or (ii) any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser that is determined by a final judgment of a court of competent
jurisdiction to constitute fraud, gross negligence or willful misconduct;
provided that, for the sake of clarity, the Company shall advance any expenses
actually and reasonably incurred by or on behalf of any Purchaser Party in
connection with a Proceeding promptly after receipt by the Company of a
reasonably detailed invoice therefor, but the relevant Purchaser Party(ies)
shall reimburse the Company for all amounts so advanced by the Company if and
only to the extent that a court of competent jurisdiction shall have finally
determined that the relevant Purchaser Party's conduct constituted fraud, gross
negligence or willful misconduct). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser Party shall promptly notify the Company in writing
(provided, that the failure of any Purchaser Party to give such notice shall not
relieve the Company of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that such failure shall have
prejudiced the Company), and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party if the Company acknowledges in writing its obligation to
indemnify such Purchaser Party hereunder for any Losses that may result from
such action. Any Purchaser Party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
23
of time to acknowledge in writing its obligation to indemnify such Purchaser
Party hereunder or to assume such defense and to employ counsel or (iii) in such
action there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate counsel.
The Company will not be liable to any Purchaser Party under this Agreement (i)
for any settlement by a Purchaser Party effected without the Company's prior
written consent, which shall not be unreasonably withheld or delayed, if the
Company has previously acknowledged in writing its obligations to indemnify such
Purchaser Party hereunder against Losses that may result from such action; or
(ii) to the extent, but only to the extent that any Losses are proximately
caused by (A) any Purchaser Party's breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents, (B) any violations by the
Purchaser of state or federal securities laws or (C) any conduct by such
Purchaser that has been finally determined by a court of competent jurisdiction
to have constituted fraud, gross negligence or willful misconduct. The Company
shall obtain the prior written consent of the relevant Purchaser Party(ies)
before entering into any settlement of any third party claim if the settlement
does not release the relevant Purchaser Party(ies) from all liabilities and
obligations with respect to such claim or the settlement imposes injunctive or
other equitable relief against the relevant Purchaser Party(ies).
4.9 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement.
4.10 Listing of Common Stock. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Trading Market. The Company
shall use its reasonable best efforts to cause the Shares to be approved for
listing on the Trading Market, subject to official notice of issuance, prior to
the respective Closing Date.
4.11 Equal Treatment of Purchasers. No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration is also
offered to all of the parties to the Transaction Documents. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended for
the Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Shares or otherwise.
4.12 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliate or other Person acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at the beginning of the Discussion Time and ending at the time that the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.4. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that until the later of (i) such time as the
24
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4 and (ii) such time as any material
non-public information provided to a Purchaser is disclosed or ceases to be
material, such Purchaser will maintain the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission
currently takes the position that coverage of short sales of shares of the
Common Stock "against the box" prior to the Effective Date of the Registration
Statement with the Shares is a violation of Section 5 of the Securities Act, as
set forth in Item 65, Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser
makes any representation, warranty or covenant hereby that it will not engage in
Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.4. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Shares covered by this Agreement.
4.13 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Shares for, sale to the Purchasers at the
Closing under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser. Each Purchaser shall take all commercially reasonable actions
that are reasonably requested by the Company related to, or to effectuate, the
filing of a Form D or any filing required pursuant to the "Blue Sky" laws of the
states of the United States which, for purposes of clarity, shall not include
the payment of any fees by such Purchaser.
4.14 Investment Company. The Company shall conduct its business in a manner so
that it will not become subject to the Investment Company Act of 1940, as
amended.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
(a) This Agreement may be terminated by any Purchaser, as to such
Purchaser's obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchasers, by written notice to
the other parties, if (i) the Initial Closing has not occurred on or before the
date 30 Trading Days after the date of this Agreement or (ii) as described below
in paragraph (b) with respect to the Second Closing; provided, however, that the
right to terminate this Agreement under this Section 5.1 shall not be available
to any Person whose failure to comply with its obligations under this Agreement
25
has been the cause of or resulted in the failure of the Closing to occur on or
before such time. Nothing in this Section 5.1 shall affect the right of any
party to xxx for any breach by the other party (or parties).
(b) A Purchaser's obligations under this Agreement with respect to the
Second Closing may be terminated by such Purchaser, without any effect
whatsoever on the Company's other obligations hereunder to such Purchaser
(including without limitation Section 4.8) and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties if: (i) between the date hereof and the Second Closing: (A)
the Company shall have breached any of its representations, warranties,
covenants or obligations contained herein, which breach would result in the
failure to satisfy any condition set forth in Section 2.3(b) at the time of the
Second Closing and which the Company would be incapable of curing prior to the
Second Closing Date or (ii) the Second Closing shall not have been consummated
on or before the earlier of (A) the date that is 15 Trading Days after the date
that the Company obtains the Stockholder Approval and (B) on or before the date
that is 120 calendar days after the date of this Agreement.
(c) Sections 5.2, 5.3, 5.6, 5.8 and 5.9 shall survive any termination
hereof pursuant to this Section 5.1.
5.2 Fees and Expenses. Except as set forth in this Section 5.2, 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 (i) the reasonable out-of-pocket expenses incurred by the
Purchasers (including reasonable fees and expenses of their counsel) up to
$300,000 on a pro rata basis in accordance with their relative Subscription
Amounts based upon reasonably detailed invoices therefor and (ii) all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Shares to the Purchasers.
5.3 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 thereof 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.
5.4 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 at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
26
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Purchasers holding at least 75% of the Shares then held by the
Purchasers or, in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought; provided that (i) any amendment of any of
Sections 2.2, 2.3, 3.2, 4.1, 4.2, 4.3, 4.4, 4.5, 4.8, 4.10, 4.11, 4.12, 5.1,
this Section 5.5 or the amount payable by any Purchaser for its Shares can only
be effected by a written instrument signed by the Company and each Purchaser and
(ii) no amendment to this Agreement that treats any Purchaser disparately by its
terms (as opposed to its effect) from the other Purchasers may be effected
without the consent of the disparately affected Purchaser. 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 any party to exercise any
right hereunder in any manner impair the exercise of any such right.
5.6 Headings. 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.
5.7 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
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Shares or rights to acquire Shares hereunder,
provided such transferee agrees in writing to be bound, with respect to the
transferred Shares and in all other respects bound to the terms of this
Agreement, by the provisions of the Transaction Documents that apply to the
"Purchasers."
5.8 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 (i) as otherwise set forth in Section 4.8 and (ii) the
Placement Agent is an intended third party beneficiary of Article III hereof.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or 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 waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably
27
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 other manner permitted by law. The parties hereby waive
all rights to a trial by jury. If any party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
substantially prevailing party in such action or proceeding shall be reimbursed
by the other party for its reasonable attorneys' fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares until the 2 year anniversary
of the Closing Date. Notwithstanding the preceding sentence, any breach of
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence if notice of the inaccuracy or breach thereof
shall have been given in writing to the party against whom indemnity may be
sought prior to such time.
5.11 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 or by e-mail delivery of a ".pdf" format data file, 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 or ".pdf" signature page were an original thereof.
5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
28
5.14 Replacement of Shares. If any certificate or instrument evidencing any
Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation thereof (in
the case of mutilation), 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. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Shares.
5.15 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
contained in the Transaction Documents and hereby agrees to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 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 or non-performance of the obligations of any other
Purchaser under any Transaction Document or any breach of any representation or
warranty of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other 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 Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through Company
Counsel. Company Counsel does not represent any of the Purchasers but only the
Company. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.
29
5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.19 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(Signature Pages Follow)
30
SIGNATURE PAGE DATE SIGNED: NOVEMBER 12, 2007
--------------
PURCHASER
------------------------------------ ------------------------------------
Signature Second Signature (if purchasing jointly)
------------------------------------ ------------------------------------
Printed Name Printed Second Name
------------------------------------ ------------------------------------
Entity Name Entity Name
------------------------------------ ------------------------------------
Address Address
------------------------------------ ------------------------------------
City, State and Zip Code City, State and Zip Code
------------------------------------ ------------------------------------
Telephone-Business Telephone--Business
------------------------------------ ------------------------------------
Facsimile-Business Facsimile--Business
------------------------------------ ------------------------------------
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which Shares should be issued:
------------------------------------
31
============================================================================
This Securities Purchase Agreement is agreed to and accepted as of November 12,
2007.
NEWSTAR FINANCIAL, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman and Chief Executive
Officer
32
CERTIFICATE OF SIGNATORY
(To be completed if Shares are being subscribed for by an entity)
I,______________________________, am the ___________________________
of _____________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute
and carry out the terms of the Securities Purchase Agreement and to purchase and
hold the Shares, and certify further that the Securities Purchase Agreement has
been duly and validly executed on behalf of the Entity and constitutes a legal
and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this___ day of November 2007.
------------------------------------
(Signature)
EXHIBIT A-1
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SCHEDULE OF PURCHASERS FOR THE INITIAL CLOSING
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PURCHASER SHARES SUBSCRIPTION AMOUNT
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TOTAL 7,248,080
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EXHIBIT A-2
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SCHEDULE OF PURCHASERS FOR THE SECOND CLOSING
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PURCHASER SHARES SUBSCRIPTION AMOUNT
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TOTAL 5,251,920
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EXHIBIT B
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REGISTRATION RIGHTS AGREEMENT
EXHIBIT C
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FORM OF OPINION OF COMPANY COUNSEL
1. The Company is validly existing as a corporation and in good
standing under Delaware law with the corporate power and authority to own and
use its properties and assets and to conduct its business as currently
conducted.
2. The Company has the corporate power and authority to (a) execute,
deliver and perform the Transaction Documents, (b) issue, sell and deliver the
Shares and (c) carry out and perform its obligations under the Transaction
Documents and consummate the transactions contemplated thereby.
3. The Transaction Documents have been duly and validly executed and
delivered by the Company. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby, including without limitation, the issuance of the Shares,
have been duly authorized by all necessary corporate action on the part of the
Company. The Transaction Documents constitute legal, valid and binding
obligations of the Company, enforceable against the Company according to their
terms.
4. Subject to the accuracy of the Purchasers' representations set forth
in Section 3.2 of the Purchase Agreement, no approval, authorization, waiver,
consent, registration, filing, qualification, license or permit of or with any
court, regulatory, administrative or other governmental body is required for the
execution and delivery of the Transaction Documents or the consummation of the
transactions contemplated thereby, except for the filing of a Form D with the
Commission and such other filings required under applicable state securities
laws and we express no opinion with respect to the rules of the NASD.
5. The Shares have been duly authorized and, when paid for and issued
in accordance with the Purchase Agreement, the Shares will be validly issued,
fully paid and non-assessable.
6. Subject to the accuracy of the Purchasers' representations set forth
in Section 3.2 of the Purchase Agreement, the offer and sale of the Shares to
the Purchasers in accordance with the terms of the Purchase Agreement is exempt
from the registration requirements of Section 5 of the Securities Act and from
the securities registration and qualification requirements of all applicable
state securities laws.
7. The execution, delivery and performance by the Company, and the
compliance by the Company with the terms of the Transaction Documents and the
issuance, sale and delivery of the Shares pursuant to the Transaction Documents
will not (a) violate any provision of the Certificate of Incorporation or
Bylaws, (b) result in a breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or result in
or permit the termination or modification of, any agreement or instrument that
is included as an exhibit to the SEC Reports, or (c) violate any order, writ,
judgment or decree known to us to which the Company is a party or is subject.
