EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
September 25, 2003, among Mpower Holding Corporation (the "Company"), and the
purchasers identified on the signature pages hereto (each 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 the
Purchasers, and each Purchaser, severally and not jointly, desires to purchase
from the Company in the aggregate, up to 16,000,000 shares of Common Stock and
Warrants 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 agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule
144. With respect to a Purchaser, any investment fund or managed account
that is managed on a discretionary basis by the same investment manager as
such Purchaser will be deemed to be an Affiliate of such Purchaser.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other
governmental action to close.
"Closing" means the closing of the purchase and sale of the Common
Stock and the Warrants pursuant to Section 2.1.
"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 Subscription Amount and (ii) the Company's obligations to deliver
the Securities have been satisfied or waived.
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the common stock of the Company, $0.001 par value
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 Shearman & Sterling LLP.
"Disclosure Schedules" means the Disclosure Schedules 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.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000 Xxxxxxxxx
Xxxxxx, 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 $1.35.
"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.
"Purchaser Questionnaire" means the Purchase Questionnaire dated the
date hereof and attached as Exhibit E 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 and the Warrant Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and
each Purchaser, in the form of Exhibit A hereto.
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"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 and the Warrant 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 (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on a Trading
Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices); provided, that in the event that the Common Stock is not listed or
quoted as set forth in (i) or (ii) hereof, then Trading Day shall mean a
Business Day.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
OTC Bulletin Board, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement and the Registration
Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the primary
Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
ET to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Common
Stock is not then listed or quoted on an Trading Market and if prices for
the Common Stock are then reported in the "Pink Sheets" published by the
National
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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 (c) in all other cases, the
fair market value of a share of Common Stock as determined in good faith by
the Board of Directors.
"Warrants" means the Common Stock Purchase Warrants, in the form of
Exhibit D, issuable to the Purchasers at the Closing, which warrants shall
be exercisable immediately and have an exercise price equal to $1.62 and be
exercisable for a period of 5 years.
"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 and (b)
the Warrants as determined pursuant to Section 2.2(a)(iii). The aggregate number
of Shares sold hereunder shall be up to 16,000,000. Upon satisfaction of the
conditions set forth in Section 2.2, the Closing shall occur at the offices of
the FW, or such other location as the parties shall mutually agree.
2.2 Closing Conditions.
(a) On the Closing Date, except as otherwise set forth below, the
Company shall deliver or cause to be delivered to each Purchaser the
following:
(i) this Agreement duly executed by the Company;
(ii) within 3 Trading Days of the Closing Date, 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) within 3 Trading Days of the Closing Date, a Warrant,
registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire up to the number of shares of
Common Stock equal to 20% of the Shares to be issued to such Purchaser
at the Closing;
(iv) the Registration Rights Agreement duly executed by the
Company;
(v) a legal opinion of Company Counsel, substantially in the form
of Exhibit B attached hereto; and
(vi) a legal opinion of Xxxxxxx X. Xxxxxxxxx, General Counsel and
Secretary of the Company, substantially in the form of Exhibit C
attached hereto.
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(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 an
account as specified in writing by the Company;
(iii) a properly completed Purchaser Questionnaire from each
Purchaser; and (iv) the Registration Rights Agreement duly executed by
such Purchaser; and
(iv) the Registration Rights Agreement duly executed by such
Purchaser.
(c) All representations and warranties of the other party contained
herein shall remain true and correct as of the Closing Date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:
(a) Subsidiaries. The subsidiaries listed on Schedule 3.1(a) attached
hereto (each a "Subsidiary" and collectively, the "Subsidiaries") are the
only subsidiaries of the Company. 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.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is
in violation of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where
the failure to be so qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a material
adverse effect on the results of operations, assets, business or financial
condition of the Company and the Subsidiaries, taken as a whole or (ii) 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) or (ii), a "Material Adverse Effect").
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(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company and no further action is
required by the Company in connection therewith 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 general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by
applicable law.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of
the Company or any Subsidiary is bound, or (iii) subject to the Required
Approvals, 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; except in
the case of each of clauses (ii) and (iii), such as could not result in or
reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) filings required pursuant to Section 4.4 of this
Agreement, (ii) the filing with the Commission of the Registration
Statement, (iii) such filings as are required to be made under applicable
state securities laws (collectively, the "Required Approvals"), and (iv)
those which if not obtained, made or given could not reasonably be expected
to have a Material Adverse Effect.
(f) Issuance of the Securities. The Securities are duly authorized for
issuance and sale to the Purchasers pursuant to this Agreement and, when
issued and paid for in accordance with the Transaction Documents, will be
duly and validly issued, fully paid
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and nonassessable, free and clear of all Liens. The Company has duly and
validly reserved from its duly authorized capital stock the Warrant Shares
issuable upon exercise of the Warrants.
(g) Capitalization. The capitalization of the Company is as described
in the Company's report on Form 10-Q for the quarter ended June 30, 2002
("June 10-Q") filed with the Commission. The Company has not issued any
capital stock since such filing other than pursuant to the exercise of
employee stock options under the Company's stock option plans, the issuance
of shares of Common Stock to employees pursuant to the Company's employee
stock purchase plan and pursuant to the conversion or exercise of
outstanding Common Stock Equivalents. 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, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company
or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. The issue and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
year 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 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
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cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments and the
absence of complete footnotes.
(i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its
capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company
stock option, director compensation or officer compensation plans. The
Company does not have pending before the Commission any request for
confidential treatment of information.
(j) Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency
or regulatory authority (federal, state, county, local or foreign)
(collectively, an "Action") which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor to the Company's knowledge 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, to the Company's
knowledge, any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
(l) Compliance. Except as disclosed in the SEC Reports, neither the
Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company or any Subsidiary
under), nor has the Company or any Subsidiary received notice of a claim
that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound (whether or not
such default or
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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 reasonably be expected to
result in a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate 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 for Liens as 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 except
where non-compliance could not reasonably be expected to result in a
Material Adverse Effect.
(o) Patents and Trademarks. To the knowledge of the Company and each
Subsidiary, the Company and the Subsidiaries have, or have rights to use,
all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
that are necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have or reasonably be expected to result in a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Neither the Company nor
any Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable.
(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. 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
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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) Internal Accounting Controls. The Company and each of its
subsidiaries maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company
has established disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including its subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's most recently filed period 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 a date within 90 days prior to the filing date of the June
10-Q (such date, the "Evaluation Date"). The Company presented in the June
10-Q the conclusions of the certifying officers about the effectiveness of
the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no 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. Except as set forth on Schedule 3(s) attached hereto,
no brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by
or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by
this Agreement.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2 hereof and on each
of the Purchaser Questionnaires, 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
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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, after giving effect to
the offering and sale of the Securities will not be, required to register
as an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
(v) Registration Rights. Except as set forth on the disclosure schedule
to the Registration Rights Agreement, 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 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 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. Other than the terms of the transactions contemplated
by this Agreement, the Company confirms that, neither the Company nor any
other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company has not
distributed any offering material in connection with the offering and sale
of the Securities other than the June 30 10-Q and the Company's Annual
Report on Form 10-K for the fiscal year ended December 21, 2002. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished by
or on behalf of the Company are true and correct and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(z) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2 and in each
Purchaser's Purchaser Questionnaire, 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
11
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; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii)
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 paid. The Company does not intend to incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts
of cash to be payable on or in respect of its debt).
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of such Purchaser.
Each Transaction Document to which it is 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) Investment Intent. Such Purchaser understands that the Securities
are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Securities as principal for its own account for investment purposes only
and not with a view to or for distributing or reselling such Securities or
any part thereof, has no present intention of distributing any of such
Securities and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and
warranty not limiting
12
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 Questionnaire. Purchaser has delivered to the Company the
appropriate Purchaser Questionnaire. The Purchaser has answered all
questions on the appropriate Purchaser Questionnaire attached as Exhibit E
hereto and the answers thereto are true, correct and complete as of the
Closing Date. The Purchaser will notify the Company immediately of any
change in any information provided by the Purchaser on the Purchaser
Questionnaire until such time as the Purchaser has sold all of its
Securities.
(d) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
(e) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(f) 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. The
Purchaser has, in connection with its decision to purchase the Securities,
relied only upon the SEC Reports and this Agreement and the representations
and warranties of the Company contained in this Agreement. The Purchaser
agrees that it and each of its affiliates will not offer or sell the
Securities by means of any form of directed selling efforts, general
solicitation or general advertising, within the meaning of Rule 502(c)
under the Securities Act, including, but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(g) Sales outside the United States. The Purchaser acknowledges,
represents and agrees that no action has been or will be taken in any
jurisdiction outside the United States by the Company that would permit an
offering of the Securities, or possession or distribution of offering
materials in connection with the issue of the Securities, in any
jurisdiction outside the United States where legal action by the Company
for that purpose is required. The Purchaser, if outside the United States,
will comply with all applicable laws and regulations in each foreign
jurisdiction in which it purchases, offers, sells or delivers Securities or
has in its possession or distributes any offering material, in all cases at
its own expense.
13
(h) Compliance with the Securities Laws. Such Purchaser agrees to
comply with the requirements of Regulation M, if applicable, with respect
to the sale of the Shares and Warrant Shares by the Purchaser. Such
Purchaser hereby confirms its understanding that it may not cover short
sales made prior to the Effective Date with Shares or Warrant Shares
registered for resale on the Registration Statement. The Purchaser
acknowledges that it does not intend to cover short positions made by it
before the Effective Date with Shares or Warrant Shares held by it and
registered on the Registration Statement.
(i) Prior Rights. Such Purchaser, if a party to that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated December 18, 2002,
among the Company and the purchasers identified on the signature pages
thereto, hereby expressly waives any right of first refusal, preemptive
right or right to receive notice that it may otherwise have pursuant to
Section 4.8 of the Purchase Agreement relating solely to the sale and
issuance of the Shares pursuant to this Agreement.
(j) No Reliance. The Purchaser understands that nothing in the SEC
Reports, the Transaction Documents or any other materials presented to the
Purchaser in connection with the purchase and sale of the Securities
constitutes legal, tax or investment advice. The Purchaser has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of
Securities.
(k) Confidential Information. The Purchaser represents to the Company
that, at all times during the Company's offering of the Securities, the
Purchaser has maintained in confidence this proposed offering, and
covenants that it will continue to maintain in confidence such information
until the later of the date such information (a) becomes generally publicly
available other than through a violation of this provision by the Purchaser
or its agents or (b) 5 Trading Days from the date hereof.
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement, to the Company,
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, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing
to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.
14
(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 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 and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)), (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities Act,
or (ii) following any sale of such Shares or Warrant Shares pursuant to
Rule 144, or (iii) if such Shares or Warrant Shares are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under applicable
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
15
to the Company's transfer agent promptly after the Effective Date if
required by the Company's transfer agent to effect the removal of the
legend hereunder. If all or any portion of a Warrant is exercised at a time
when there is an effective registration statement to cover the resale of
the Warrant Shares, such Warrant Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section 4.1(c), it
will, no later than five Trading Days following the delivery by a Purchaser
to the Company or the Company's transfer agent of a certificate
representing Shares or Warrant Shares, as the case may be, issued with a
restrictive legend (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 liquidated damages and not as
a penalty, for each $1,000 of Shares or Warrant Shares (based on the VWAP
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 such third 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 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, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom.
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with 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
16
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 Closing Date, issue a press
release or file a Current Report on Form 8-K, in each case reasonably acceptable
to The Shemano Group, on behalf of the Purchasers, disclosing 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 The Shemano Group, on behalf of the Purchasers,
with respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except (i) as required by federal securities law in connection with the
registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).
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.
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 not use the net proceeds from the
sale of the Securities hereunder 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 Indemnification of Purchasers. 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,
17
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 misrepresentation, breach or inaccuracy, or any
allegation by a third party that, if true, would constitute a breach or
inaccuracy, 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 cause of action, suit or claim brought or made against such Purchaser
Party and arising solely out of or solely resulting from the execution,
delivery, performance or enforcement of this Agreement or any of the other
Transaction Documents and without causation by any other activity, obligation,
condition or liability pertaining to such Purchaser. 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.
4.9 Indemnification of Company. Each Purchaser, severally and not jointly
with the other Purchasers, will indemnify and hold the Company and its
directors, officers, shareholders, partners, employees and agents (each, a
"Company 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 Company Party may suffer or incur as a
result of or relating to: (a) any misrepresentation, breach or inaccuracy, or
any allegation by a third party that, if true, would constitute a breach or
inaccuracy, of any of the representations, warranties, covenants or agreements
made by the Purchaser in this Agreement or in the other Transaction Documents;
or (b) any cause of action, suit or claim brought or made against such Company
Party and arising solely out of or solely resulting from the execution,
delivery, performance or enforcement of this Agreement or any of the other
Transaction Documents and without causation by any other activity, obligation,
condition or liability pertaining to the Company. Each Purchaser, severally and
not jointly, will reimburse each Company Party 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. In no event shall the liability of any Purchaser hereunder be greater
in amount than the Subscription Amount of such Purchaser.
4.10 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.11 Listing of Common Stock. The Company hereby agrees to use commercially
reasonably efforts to maintain the listing of the Common Stock on the Trading
Market, and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary of the
Closing Date) to list all of the Shares and Warrant Shares on the Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause the Shares and Warrant Shares to be listed on such other
Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its
18
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 Participation in Future Financing. From the date hereof until 12
months after the Closing Date, the Company shall not effect a financing of its
Common Stock or Common Stock Equivalents in any transaction consisting of two or
more investors, other than any Purchasers hereunder (a "Subsequent Financing")
unless (i) the Company delivers to each of such Purchasers a written notice at
least 5 Trading Days prior to the closing of such Subsequent Financing (the
"Subsequent Financing Notice") of its intention to effect such Subsequent
Financing, which 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 and (ii) such Purchaser shall not have notified the
Company by 6:30 p.m. (New York City time) on the third (3rd) Trading Day after
its receipt of the Subsequent Financing Notice of its willingness to provide (or
to cause its designee to provide), subject to completion of mutually acceptable
documentation, up to such Purchaser's Pro-Rata Portion of such financing to the
Company on the same terms set forth in the Subsequent Financing Notice. "Pro
Rata Portion"shall mean the number of shares of Common Stock or the number of
shares of Common Stock into which the Common Stock Equivalents are convertible
(the "Underlying Securities") equal to the product of (i) the total number of
shares of Common Stock or Underlying Securities that the Company proposes to
issue at such time and (ii) a fraction, the numerator of which shall be the
total number of shares of Common Stock which such Purchaser holds at such time,
and the denominator of which shall be the total number of shares of Common Stock
then outstanding. Notwithstanding anything to the contrary herein, this Section
4.12 shall not apply to the following (a) the granting of options to employees,
officers and directors of the Company pursuant to any stock option plan or
director compensation plan duly adopted by the Board of Directors or the members
of a committee of directors established for such purpose, or (b) the exercise of
any security issued by the Company in connection with the offer and sale of the
Company's securities pursuant to this Agreement, or (c) the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided such securities have not been amended
since the date hereof, or (d) acquisitions or strategic investments, the primary
purpose of which is not to raise capital.
4.13 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. In addition, neither the Company nor
any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents
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 and Warrant Shares. Notwithstanding anything to the contrary herein,
this Section 4.13 shall not apply to the following (a) the granting of options
to employees, officers and directors of the Company pursuant to any stock option
plan or director compensation plan duly adopted by the Board of Directors or the
members of a committee of directors established for such purpose, or (b) the
exercise of any security issued by the Company in connection with the offer and
sale of the Company's securities pursuant to this Agreement, or (c) the exercise
of or conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided
19
such securities have not been amended since the date hereof, or (d) acquisitions
or strategic investments, the primary purpose of which is not to raise capital.
4.14 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.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. 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.
5.3 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.
5.4 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
20
5.5 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".
5.6 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 4.8.
5.7 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. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, New York 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. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by delivering a copy thereof via 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.
Each party hereto (including its affiliates, agents, officers, directors and
employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, 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.
5.8 Survival. The representations and warranties herein shall survive the
Closing and delivery of the Shares and Warrant Shares.
5.9 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
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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.
5.10 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.
5.11 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.
5.12 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.
5.13 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.14 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
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additional party in any proceeding for such purpose. Each Purchaser was
introduced to the Company by The Shemano Group, which has acted solely as agent
for the Company and not for any Purchaser. 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 The
Shemano Group. 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.
(Signature Page Follows)
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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.
MPOWER HOLDING CORPORATION Address for Notice:
------------------
By:_____________________________________
Name:
Title:
With copy to (which shall not constitute notice):
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.
[PURCHASER] Address for Notice:
By:__________________________
Name:
Title:
Subscription Amount: $
Shares:
Warrant Shares:
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