Exhibit 10.78
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of June
17, 2004, among Implant Sciences Corporation, a Massachusetts corporation (the
"COMPANY"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "PURCHASER" and collectively the
"PURCHASERS"); and
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company in the aggregate, $5,000,000 of shares of Common Stock,
Warrants and certain Additional Investment Rights on the Closing Date.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"ACTION" shall have the meaning ascribed to such term in Section
3.1(j).
"ADDITIONAL INVESTMENT RIGHT" means the Additional Investment Rights
as described in Section 2.2(a)(iv).
"ADDITIONAL INVESTMENT RIGHT SHARES" means the shares of Common Stock
issuable upon exercise of the Additional Investment Rights.
"AFFILIATE" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule
144. With respect to a Purchaser, any investment fund or managed account
that is managed on a discretionary basis by the same investment manager as
such Purchaser will be deemed to be an Affiliate of such Purchaser.
"CLOSING" means the closing of the purchase and sale of the Common
Stock, the Warrants and the Additional Investment Rights pursuant to
Section 2.1.
"CLOSING DATE" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers' obligations to
pay the
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Subscription Amount and (ii) the Company's obligations to deliver the
Securities have been satisfied or waived.
"CLOSING PRICE" means on any particular date (a) the last reported
closing price per share of Common Stock on such date on the Trading Market
(as reported by Bloomberg L.P. at 4:15 PM (New York time) as the last
reported closing price for regular session trading on such day), or (b) if
there is no such price on such date, then the closing price on the Trading
Market on the date nearest preceding such date (as reported by Bloomberg
L.P. at 4:15 PM (New York time) as the closing price for regular session
trading on such day), or (c) if the Common Stock is not then listed or
quoted on the Trading Market and if prices for the Common Stock are then
reported in the "pink sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) if the shares of Common Stock are not then
publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Purchasers of a
majority in interest of the Shares then outstanding.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value $0.10
per share, and any securities into which such common stock may hereafter be
reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
"COMPANY COUNSEL" means Ellenoff Xxxxxxxx & Schole LLP
"DISCLOSURE SCHEDULES" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"EFFECTIVE DATE" means the date that the Registration Statement is
first declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXEMPT ISSUANCE" means the issuance of (a) shares of Common Stock or
options to employees, consultants, officers or directors of the Company
pursuant to any stock or option plan duly adopted 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 for
such purpose, (b) shares of Common Stock to employees approved by a
majority of the non-employee
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members of the Board of Directors of the Company, (c) securities upon the
exercise of or conversion of any securities issued hereunder, convertible
securities, options or warrants issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities, (d)
securities issued in connection with the acquisition of assets, other than
cash, licenses, sublicenses, intellectual property or proprietary
rights,(e) securities issued pursuant to acquisitions or strategic
transactions, provided any such issuance shall only be to a Person which
is, itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business
is investing in securities, and (f) shares of Common Stock upon exercise of
warrants issued in connection with the initial public offering of the
Company, including underwriters' warrants (as such warrants may be adjusted
with respect to the extension of the exercise period thereof).
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to such
term in Section 3.1(o).
"LIENS" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to such term
in Section 3.1(b).
"MATERIAL PERMITS" shall have the meaning ascribed to such term in
Section 3.1(m).
"PER SHARE PURCHASE PRICE" equals $10.67(1), 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.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a
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(1) 85% of the lesser of (i) the average of the 5 consecutive Closing Prices
immediately prior to the date hereof and (ii) the Closing Price on the Trading
Day immediately prior to the date hereof.
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deposition), actually commenced or as to the threat of which the Company
has actual knowledge.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and
each Purchaser, in the form of EXHIBIT A hereto.
"REGISTRATION STATEMENT" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares, the Warrant Shares and the
Additional Investment Right 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).
"SECURITIES" means the Shares, the Warrants, the Warrant Shares, the
Additional Investment Rights and the Additional Investment Right Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amounts set
forth below such Purchaser's signature block on the signature page hereto,
in United States dollars and in immediately available funds.
"SUBSIDIARY" shall mean the subsidiaries of the Company, if any, set
forth on SCHEDULE 3.1(a).
"TRADING DAY" means a day on which the Common Stock is traded on a
Trading Market.
"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 SmallCap Market, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the OTC Bulletin Board.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants, the
Additional Investment Rights and the Registration Rights Agreement and any
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other documents or agreements executed in connection with the transactions
contemplated hereunder.
"WARRANTS" means the Common Stock Purchase Warrants as described in
Section 2.2(a)(iii).
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 CLOSING. On the Closing Date, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser, (a) a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price, (b) the
Warrants as determined pursuant to Section 2.2(a)(iii) and (c) the Additional
Investment Rights as determined pursuant to Section 2.2(a)(iv). The aggregate
Subscription Amounts for Shares sold hereunder shall be $5,000,000. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of FW or such other location as the parties shall mutually agree.
2.2 DELIVERIES.
(a) On the 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 copy of the irrevocable instructions to the Company's
transfer agent instructing the transfer agent to deliver, on an
expedited basis, a certificate evidencing a number of Shares equal to
such Purchaser's Subscription Amount divided by the Per Share Purchase
Price, registered in the name of such Purchaser;
(iii) a copy of a Warrant, registered in the name of such
Purchaser, exercisable immediately upon issuance for a term of 5
years, pursuant to which such Purchaser shall have the right to
acquire up to the number of shares of Common Stock equal to 25% of the
Shares to be issued to such Purchaser at an exercise price of
$14.43(2), which Warrant shall otherwise in the form of EXHIBIT C
attached hereto;
(iv) a copy of an Additional Investment Right, registered in
the name of such Purchaser, pursuant to which such Purchaser shall
have the right to purchase up to such Purchaser's pro rata share
(based on the
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(2) 115% of the lesser of (i) the average of the 5 consecutive Closing Prices
immediately prior to the date hereof and (ii) the Closing Price immediately
prior to the date hereof.
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number of shares purchased hereunder) of $2,500,000 divided by the
Additional Investment Right Exercise Price and which shall be
exercisable immediately upon issuance until the earlier of (a) 100
days after the Effective Date and (b) the 8 month anniversary of the
Closing Date, at an exercise price equal to $11.61(3) (the "ADDITIONAL
INVESTMENT RIGHT EXERCISE PRICE"), which Additional Investment Right
shall otherwise in the form of EXHIBIT D attached hereto;
(v) the Registration Rights Agreement duly executed by the
Company; and
(vi) a legal opinion of Company Counsel, in the form of
EXHIBIT B attached hereto.
(b) On the Closing Date, each Purchaser shall deliver or cause to
be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer
to the account as specified in writing by the Company; and
(iii) the Registration Rights Agreement duly executed by such
Purchaser.
2.3 CLOSING CONDITIONS.
(a) The obligations of the Company hereunder in connection
with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and
on the Closing Date of the representations and warranties of the
Purchasers contained herein;
(ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date
shall have been performed; and
(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement, including without limitation,
Subscription Amounts in the aggregate of $5,000,000.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met:
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(3) 92.5% of the lesser of (i) the average of the 5 consecutive Closing Prices
immediately prior to the date hereof and (ii) the Closing Price immediately
prior to the date hereof.
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(i) the accuracy in all material respects on the Closing
Date of the representations and warranties of the Company contained
herein;
(ii) all obligations, covenants and agreements of the
Company required to be performed at or prior to the Closing Date shall
have been performed;
(iii) the delivery by the Company of the items set forth
in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof; and
(v) From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service,
or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities 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
each Purchaser, makes it impracticable or inadvisable to purchase the
Shares at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. EXCEPT AS SET FORTH
UNDER THE CORRESPONDING SECTION OF THE DISCLOSURE SCHEDULES DELIVERED TO THE
PURCHASERS CONCURRENTLY HEREWITH (THE "DISCLOSURE SCHEDULES") WHICH DISCLOSURE
SCHEDULES SHALL BE DEEMED A PART HEREOF, THE COMPANY HEREBY MAKES THE
REPRESENTATIONS AND WARRANTIES SET FORTH BELOW TO EACH PURCHASERExcept as set
forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser:
(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 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. If the Company has no subsidiaries, then
references in the Transaction Documents to the Subsidiaries will be
disregarded.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing
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and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite authority
to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation
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 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,
could not have or 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, prospects or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company's ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of (i),
(ii) or (iii), a "MATERIAL ADVERSE EFFECT") and no Proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such authority or qualification.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company and no further action is
required by the Company in connection therewith 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 delivered
in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) as limited by federal and state laws or
the public policy underlying such laws with respect to indemnity or
contribution.
(d) NO CONFLICTS. Except as set forth in SCHEDULE 3.1(d), 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 thereby do not and will not
(i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or any
8
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, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected, or
(iv) conflict with or violate the terms of any agreement by which the
Company or any Subsidiary is bound or to which any property or asset of the
Company or any Subsidiary is bound or affected; except in the case of each
of clauses (ii) and (iii), such as could not have or reasonably be expected
to result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. Except as set forth in SCHEDULE
3.1(e), the Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than (i) filings required pursuant to Section 4.4 of this Agreement, (ii)
the filing with the Commission of the Registration Statement, (iii)
application(s) to each applicable Trading Market for the listing of the
Shares, Warrant Shares and the Additional Investment Right Shares for
trading thereon in the time and manner required thereby, and (iv) the
filing of Form D with the Commission and such filings as are required to be
made under applicable state securities laws (collectively, the "REQUIRED
APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Shares, Warrants and Additional
Investment Rights are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction
Documents. The Warrant Shares and Additional Investment Right Shares, when
issued in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement, the Warrants and the Additional Investment
Rights.
(g) CAPITALIZATION. The capitalization of the Company is as set forth
on SCHEDULE 3.1(g). Except as set forth in SCHEDULE 3.1(g), the Company has
not issued any capital stock since the filing of the Company's most recent
periodic report other than pursuant to the exercise of employee stock
options under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock purchase
plan and pursuant
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to the conversion or exercise of outstanding Common Stock Equivalents.
Except as set forth in SCHEDULE 3.1(g), no Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities and as set
forth in SCHEDULE 3.1(g), there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible
into or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or
may become bound to issue additional shares of Common Stock, or securities
or rights convertible or exchangeable into shares of Common Stock. Except
as set forth in SCHEDULE 3.1(g), the issue and sale of the Securities will
not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in
a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. 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. 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. Except as disclosed in the SEC
Reports, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company's capital stock to which the
Company is a party or, to the knowledge of the Company, between or among
any of the Company's stockholders.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company
was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as
the "SEC REPORTS") on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in
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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.
(i) MATERIAL CHANGES. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in
a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be disclosed
in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending
before the Commission any request for confidential treatment of
information.
(j) LITIGATION. Except as set forth in SCHEDULE 3.1(j), there is no
action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency
or regulatory authority (federal, state, county, local or foreign)
(collectively, an "ACTION") which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or 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 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. Except as set forth in SCHEDULE 3.1(k), 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.
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(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 body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business except in each case as could not have a Material Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the
failure to possess such permits 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 fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to
the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except as set forth in SCHEDULE 3.1(n) and except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries
are in compliance.
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other
similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure
to so have could have a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights of others.
12
(p) 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 prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged. To the best of
Company's knowledge, such insurance contracts and policies are accurate and
complete. Neither the Company nor any Subsidiary has any reason 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.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$60,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) XXXXXXXX-XXXXX; INTERNAL ACCOUNTING CONTROLS. Except as set forth
in SCHEDULE 3.1(r), the Company is in material compliance with all
provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it as
of the Closing Date. 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 established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company
and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its subsidiaries,
is made known to the certifying officers by others within those entities,
particularly during the period in which the Company's most recently filed
periodic report under the Exchange Act, as the case may be, is being
prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the date prior
to the filing date of the 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
13
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 significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the Company's
internal controls.
(s) CERTAIN FEES. No brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement
except for the payment of fees to Pacific Wave and the V Group. The
Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(t) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Trading Market.
(u) 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. The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(v) REGISTRATION RIGHTS. Except as set forth in SCHEDULE 3.1(v),
no Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company.
(w) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common Stock
is registered pursuant to Section 12(b) 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, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable
14
any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar anti-takeover
provision under the Company's Certificate of Incorporation (or similar
charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and
the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation the Company's
issuance of the Securities and the Purchasers' ownership of the Securities.
(y) DISCLOSURE. The Company confirms that, neither the Company nor
any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, non-public information other than information
contained in the Disclosure Schedules. The Company understands and confirms
that the Purchasers will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business
and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, furnished by or on behalf of the Company with
respect to the representations and warranties made herein are true and
correct with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.
(z) 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 Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation
system on which any of the securities of the Company are listed or
designated.
(aa) SOLVENCY. Based on the financial condition of the Company as of
the Closing Date after giving effect to the receipt by the Company of the
proceeds from the sale of the Securities hereunder, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be
paid on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; and (ii) the
current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its debt when such amounts are required to be
15
paid. The Company does not intend to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(bb) FORM S-3 ELIGIBILITY. The Company is eligible to register the
resale of its Common Stock by the Purchasers under Form S-3 promulgated
under the Securities Act and the Company hereby covenants and agrees to use
its best efforts to maintain its eligibility to use Form S-3 until the
Registration Statement covering the resale of the Shares shall have been
filed with, and declared effective by, the Commission.
(cc) TAXES. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal,
state and foreign income and franchise tax returns and has paid or accrued
all taxes shown as due thereon, and the Company has no knowledge of a tax
deficiency which has been asserted or threatened against the Company or any
Subsidiary.
(dd) 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.
(ee) 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 corrupt 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.
(ff) ACCOUNTANTS. The Company's accountants are set forth on SCHEDULE
3.1(FF) of the Disclosure Schedule. To the Company's knowledge, such
accountants, who the Company expects will express their opinion with
respect to the financial statements to be included in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 2003 are independent
accountants as required by the Securities Act.
(gg) 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 hereby. The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the
16
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby 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 has
been based solely on the independent evaluation of the transactions
contemplated hereby by the Company and its representatives.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company 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
authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by such Purchaser of
the transactions contemplated by this Agreement 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
(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) PURCHASER REPRESENTATION. Such Purchaser understands that the
Securities are "restricted securities" and have not been registered under
the Securities Act or any applicable state securities law and is acquiring
the Securities as principal for its own account and not with a view to or
for distributing or reselling such Securities or any part thereof, has no
present intention of distributing any of such Securities and has no
arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not
limiting such Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal
and state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. Such Purchaser does not
have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which
it
17
exercises any Warrants or Additional Investment Rights, it will be 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.
Such Purchaser is not 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
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(f) SHORT SALES. Each Purchaser represents that prior to execution of
this Agreement, neither it nor any Person over which the Purchaser has
direct control, have made any net short sales of, or granted any option for
the purchase of or entered into any hedging or similar transaction with the
same economic effect as a net short sale, in the Common Stock. Each
Purchaser, severally and not jointly with the other Purchasers, understands
and acknowledges that the SEC currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" with the
Securities purchased hereunder prior to the Effective Date is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section 5
under Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporate Finance. Accordingly, each Purchaser hereby agrees
not to use any of the Securities to cover any short sales prior to the
Effective Date. Additionally, each Purchaser, severally and not jointly
with the other Purchasers, agrees to comply with Regulation M under the
federal securities laws.
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other
18
than pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance
of which opinion and shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT.
The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities
to a financial institution that is an "accredited investor" as defined in
Rule 501(a) under the Securities Act and who agrees to be bound by the
provisions of this Agreement and the Registration Rights Agreement and, if
required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor
shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the
Company will execute and deliver such reasonable documentation as a
19
pledgee or secured party of Securities may reasonably request in connection
with a pledge or transfer of the Securities, including, if the Securities
are subject to registration pursuant to the Registration Rights Agreement,
the preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates evidencing the Shares, Warrant Shares and Additional
Investment Right 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, Warrant Shares or Additional Investment Right Shares pursuant to
Rule 144, or (iii) if such Shares, Warrant Shares or Additional Investment
Right 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 Company's transfer agent promptly after the Effective Date
if required by the Company's transfer agent to effect the removal of the
legend hereunder. If all or any portion of a Warrant or Additional
Investment Right is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares or
Additional Investment Right Shares, such Warrant Shares or Additional
Investment Right Shares, as the case may be, shall be issued free of all
legends. 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) (unless
the Company bona fide disputes any assertion by the Purchaser that such
legend removal is proper under Section 4.1(c)(iv)), it will, no later than
three Trading Days following the delivery by a Purchaser to the Company or
the Company's transfer agent of a certificate representing Shares, Warrant
Shares or Additional Investment Right Shares, as the case may be, issued
with a restrictive legend (such date, the "LEGEND REMOVAL DATE"), deliver
or cause to be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Shares, Warrant Shares or
Additional Investment Right Shares (based on the Closing Price of the
Common Stock on the date such Securities are submitted to the Company's
transfer agent) subject to Section 4.1(c), $10 per Trading Day (increasing
to $20 per Trading Day five (5) Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered. Nothing herein shall limit such Purchaser's right
to pursue actual damages for the Company's failure to deliver certificates
representing any Securities as required by the Transaction Documents, and
such Purchaser shall have the right to pursue all remedies
20
available to it at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief.
(e) Each Purchaser, severally and not jointly with the other
Purchasers, (i) agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom and (ii) undertakes to comply with applicable
prospectus delivery requirements.
4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market 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. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a press release
or file a Current Report on Form 8-K, in each case reasonably acceptable to each
Purchaser disclosing the material terms of the transactions contemplated hereby.
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, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such
21
Purchaser, except (i) as required by federal securities law in connection with
the registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).
4.5 SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.6 NON-PUBLIC INFORMATION. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.7 USE OF PROCEEDS. The Company shall use the net proceeds from the sale
of the Securities hereunder for the acquisition of businesses and assets and
working capital purposes and not 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), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.8 REIMBURSEMENT. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder, or unless such Proceeding is
based upon a breach of such Purchaser's representation, warranties or covenants
under the Transaction Documents or any agreements or understandings such
Purchaser may have with any such stockholder or any violations by such Purchaser
of state or federal securities laws or any conduct by such Purchaser which
constitutes fraud, or willful misconduct), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon
22
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
4.9 INDEMNIFICATION OF PURCHASERS. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (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 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 based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
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, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. 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 of time 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. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by an Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.
4.10 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement, Warrant Shares pursuant to any exercise of the Warrants and
Additional Investment Right Shares pursuant to any exercise of the Additional
Investment Rights.
23
4.11 LISTING OF COMMON STOCK. The Company hereby agrees to use best efforts
to maintain the listing of the Common Stock on a Trading Market, and as soon as
reasonably practicable following the Closing (but not later than the earlier of
the Effective Date) to list all of the Shares, Warrant Shares and Additional
Investment Right Shares on such Trading Market. The Company further agrees, if
the Company applies to have the Common Stock traded on any other Trading Market,
it will include in such application all of the Shares, Warrant Shares and
Additional Investment Right Shares and will take such other action as is
necessary to cause all of the Shares, Warrant Shares and Additional Investment
Right Shares to be listed on such other Trading Market as promptly as possible.
The Company will take all action reasonably necessary to continue the listing
and trading of its Common Stock on a Trading Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Trading Market.
4.12 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 to treat for the Company 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 Securities or otherwise.
4.13 PARTICIPATION IN FUTURE FINANCING. Subject to prior existing rights of
Laurus Funds, from the date hereof until 14 months after the Closing Date, upon
any financing by the Company of its Common Stock or Common Stock Equivalents (a
"SUBSEQUENT FINANCING"), each Purchaser shall have the right to participate in
up to 100% of such Subsequent Financing (the "PARTICIPATION MAXIMUM"); PROVIDED,
HOWEVER, if the lead investor in the Pre-Notice (as defined below) object to any
of the Purchaser's participation in the Subsequent Financing, the Purchasers'
rights hereunder, in the aggregate, shall be on an all or nothing basis. At
least 5 Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention to
effect a Subsequent Financing ("PRE-NOTICE"), which Pre-Notice shall ask such
Purchaser if it wants to review the details of such financing (such additional
notice, a "SUBSEQUENT FINANCING NOTICE"). Upon the request of a Purchaser, and
only upon a request by such Purchaser, for a Subsequent Financing Notice, the
Company shall promptly, but no later than 1 Trading Day after such request,
deliver a Subsequent Financing Notice to such Purchaser. The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent Financing is proposed to be effected, and
attached to which shall be a term sheet or similar document relating thereto. If
by 6:30 p.m. (New York City time) on the fifth Trading Day after all of the
Purchasers have received the Pre-Notice, notifications by the Purchasers of
their willingness to participate in the Subsequent Financing (or to cause their
designees to participate) is, in the aggregate, less than the total amount of
the Subsequent Financing, then the Company may effect the remaining portion of
such Subsequent Financing on the terms and to the Persons set forth in the
Subsequent
24
Financing Notice. If the Company receives no notice from a Purchaser as of such
5th Trading Day, such Purchaser shall be deemed to have notified the Company
that it does not elect to participate. The Company must provide the Purchasers
with a second Subsequent Financing Notice, and the Purchasers will again have
the right of participation set forth above in this Section 4.13, if the
Subsequent Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such Subsequent Financing
Notice within 60 Trading Days after the date of the initial Subsequent Financing
Notice. In the event the Company receives responses to Subsequent Financing
Notices from Purchasers seeking to purchase more than the aggregate amount of
the Subsequent Financing, each such Purchaser shall have the right to purchase
their Pro Rata Portion (as defined below) of the Participation Maximum. "PRO
RATA PORTION" is the ratio of (x) the Subscription Amount of Securities
purchased by a participating Purchaser and (y) the sum of the aggregate
Subscription Amount of all participating Purchasers. Notwithstanding the
foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance.
4.14 SUBSEQUENT EQUITY SALES. From the date hereof until 30 days after the
Effective Date, neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common Stock Equivalents; provided, however, the 30 day period
set forth in this Section 4.14 shall be extended for the number of Trading Days
during such period in which (y) trading in the Common Stock is suspended by any
Trading Market, or (z) following the Effective Date, the Registration Statement
is not effective or the prospectus included in the Registration Statement may
not be used by the Purchasers for the resale of the Shares, Warrant Shares and
Additional Investment Right Shares. Notwithstanding the foregoing, this Section
4.14 shall not apply in respect of an Exempt Issuance. In addition to the
limitations set forth herein, from the date hereof until 24 months from the
Closing Date, the Company shall be prohibited from effecting or enter into an
agreement to effect any Subsequent Financing involving a "VARIABLE RATE
TRANSACTION" or an "MFN TRANSACTION" (each as defined below). The term "VARIABLE
RATE TRANSACTION" shall mean a transaction (other than an Exempt Issuance) in
which the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time after
the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock. The term "MFN
TRANSACTION" shall mean a transaction (other than an Exempt Issuance) in which
the Company issues or sells any securities in a capital raising transaction or
series of related transactions which grants to an investor the right to receive
additional shares based upon future transactions of the Company on terms more
favorable than those granted to such investor in such offering.
4.15 DELIVERY OF SECURITIES AFTER CLOSING. The Company shall deliver, or
cause to be delivered, the respective Shares, Warrants and Additional Investment
Right
25
purchased by each Purchaser to such Purchaser within 3 Trading Days of the
Closing Date.
ARTICLE V.
MISCELLANEOUS
5.1 FEES AND EXPENSES. The Company shall reimburse RAM Capital Resources
LLC ("RAM") up to the sum of $15,000 for its legal fees. The Company shall
deliver, prior to the Closing, a completed and executed copy of the Closing
Statement, attached hereto as ANNEX A. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Securities.
5.2 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 6:30 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 6:30 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.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.5 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the
26
provisions hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.
5.8 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 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 inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.9 SURVIVAL. The representations and warranties herein shall survive the
Closing and delivery of the Shares, Warrant Shares and Additional Investment
Right Shares.
5.10 EXECUTION. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered
27
to the other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.
5.11 SEVERABILITY. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
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.
5.13 REPLACEMENT OF SECURITIES. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 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
28
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.
5.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only RAM, who has acted as placement agent to the
transaction. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.
5.17 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.
(SIGNATURE PAGE FOLLOWS)
29
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
IMPLANT SCIENCES CORPORATION ADDRESS FOR NOTICE:
By:
----------------------------------
Name:
Title:
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
30
[PURCHASER SIGNATURE PAGES TO IMX SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: ______________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Authorized Entity:_____________________________________________
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount:
Shares:
Warrant Shares:
Additional Investment Right Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
31
ANNEX A
CLOSING STATEMENT
Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase $5,000,000 of Common Stock, Warrants and
Additional Investment Right from Implant Sciences Corporation (the "COMPANY").
All funds will be wired to the Company. All funds will be disbursed in
accordance with this Closing Statement.
DISBURSEMENT DATE: June 17, 2004
I. PURCHASE PRICE
GROSS PROCEEDS TO BE RECEIVED IN TRUST $ 5,000,004
II. DISBURSEMENTS
Implant Sciences Corporation $ 4,710,004
Xxxxxxx Xxxxxxxxx LLP $ 15,000
Ellenoff Xxxxxxxx Schole & Cyruli, LLP $ 25,000
Pacificwave Partners Limited $ 200,000
U Group $ 50,000
TOTAL AMOUNT DISBURSED: $ 5,000,004
WIRE INSTRUCTIONS:
TO:
IMPLANT SCIENCES CORPORATION
Citizens Providence
1 Citizens Bank
Xxxxxxxxx, XX 00000
ABA ROUTING NO: 000000000
ACCT NO: 113033-133-1
FOR FURTHER CREDIT TO:
Implant Sciences Corporation
SWIFT CODE: XXXXXX00 (For international transfers)
PHONE #: 000-000-0000
TO: XXXXXXX XXXXXXXXX LLP
STERLING NATIONAL BANK
000 XXXXX XXXXXX
XXX XXXX, XX 00000
ABA ROUTING NO: 000000000
32
ACCT NO: 00-000-00000
Acct Name: Xxxxxxx Xxxxxxxxx LLP Operating Account "C"
Ref: RAM/IMX
TO: ELLENOFF XXXXXXXX SCHOLE & CYRULI, LLP
The Citibank Private Bank
000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
ABA Routing No.: 000000000
Account No.: 00000000
Contact: Xxxxxxx Xxxxxxx, 000-000-0000
TO: PACIFICWAVE PARTNERS LIMITED
Citibank
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
ABA Routing No.: 000000000
Account No.: 00200817765
Account Name: Bengal Capital Limited
TO: UGROUP
ABA Routing No.:
Account No.:
Contact:
33
