EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
November 18, 2003, among Wave Systems Corp., a Delaware corporation (the
"Company"), and the purchasers 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 of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.
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
I.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"ACTION" shall have the meaning ascribed to such term in Section
3.1(j).
"AFFILIATE" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 144. With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"CLOSING" means the closing of the purchase and sale of the Common
Stock and the Warrants pursuant to Section 2.1.
"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 the Purchasers' obligations to pay the
Subscription Amount have been satisfied or waived.
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"CLOSING PRICE" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Trading Market
(as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if there is no
such price on such date, then the closing bid price on the Trading Market on the
date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New
York time) for the closing bid price for regular session trading on such day),
or (c) if the Common Stock is not then listed or quoted on a Trading Market and
if prices for the Common Stock are then quoted on the OTC Bulletin Board, the
closing bid price of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board (as reported by Bloomberg L.P. at 4:15 PM (New
York time), (d) 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 Pink Sheets LLC (formerly 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 (e) if the shares of Common Stock are not then publicly traded the
fair market value of a share of Common Stock as determined by a qualified
independent 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, $0.01 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 Xxxxxxx XxXxxxxxx 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.
"ESCROW AGREEMENT" shall mean the Escrow Agreement dated the date of
this Agreement among the Company, each Purchaser and the Escrow Agent, in the
form of Exhibit D hereto.
"ESCROW AGENT" shall mean Xxxxxxx Xxxxxxxxx LLP with offices located at
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to such
term in Section 3.1(o).
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"LIENS" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
"LOSSES" means a lien, charge, security interest, encumbrance, rights
of first refusal, preemptive right or other restriction.
"MATERIAL ADVERSE EFFECT" shall have the meaning assigned 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 $1.90, 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 deposition), whether commenced or threatened.
"REGISTRATION STATEMENT" means the registration statement to be filed
by the Company pursuant to the Registration Rights Agreement.
"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.
"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.
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"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 listed on a Trading Market, a
day on which the Common Stock is traded on the over the counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on the OTC Bulletin Board, 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), (ii) and (iii) 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
American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market or the over-the-counter bulletin board.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants, the Escrow
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 quoted
on the OTC Bulletin Board, the volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if
the Common Stock is not then listed or quoted on the OTC Bulletin Board 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) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Purchasers holding a
majority of Shares then outstanding.
"WARRANTS" means the Common Stock purchase warrants, in the form of
Exhibit C, issuable to the Purchasers at the Closing.
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants.
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ARTICLE II
PURCHASE AND SALE
II.1 CLOSING. At the Closing, 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) - (v). The maximum
aggregate Subscription Amounts shall not exceed $20,000,000. Upon satisfaction
of the conditions set forth in Section 2.2, the Closing shall occur at the
offices of the Escrow Agent, or such other location as the parties shall
mutually agree.
II.2 CLOSING CONDITIONS.
(a) At the Closing the Company shall deliver or cause to be delivered
to the Escrow Agent (except as otherwise provided below):
(i) this Agreement duly executed by the Company;
(ii) 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 Warrant, registered in the name of such Purchaser, pursuant
to which such Purchaser shall have the right to purchase up to the number of
shares of Common Stock equal to 25% of the Shares to be issued to such Purchaser
at the Closing, which shall be exercisable immediately and have an exercise
price equal to $ 2.62 and be exercisable for a period of 3 years;
(iv) the Registration Rights Agreement duly executed by the
Company;
(v) the Escrow Agreement and Release Notice; and
(vi) a legal opinion of Company Counsel, in the form of Exhibit B
attached hereto.
(b) At the Closing each Purchaser shall deliver or cause to be
delivered by the Escrow Agent 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 of the Company using the instructions attached hereto as Exhibit A; and
(iii) 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 and all covenants of
the other party shall have been performed if due prior to such date.
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(d) 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
new 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 such Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
III.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth under the corresponding section of the disclosure schedules attached
hereto (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. The Company has no direct or indirect subsidiaries.
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. 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 and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, (i) could not, individually or in the aggregate
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) has had or could not reasonably be expected to result in a
material adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) could not, individually or in the
aggregate, adversely impair the Company's ability
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to perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder or thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than Required Approvals. Each of the Transaction
Documents has been (or upon delivery will be) 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, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and general principles of equity.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.
(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) subject to obtaining the Required Approvals, conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result, in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as has not had or could not 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 4.6 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
and Warrant 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
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applicable state securities laws ((i) through (iv) above are collectively
referred to herein as the "REQUIRED APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Shares and Warrants 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, 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 and the Warrants.
(g) CAPITALIZATION. The capitalization of the Company as of November 5,
2003 is as described on Schedule 3.1(g). The Company has not issued any capital
stock since such date 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.
Except as set forth on 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 set forth on Schedule 3.1(g) and 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. Except as set forth on Schedule
3.1(g), the issuance 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 two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials 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. The Company has identified and made available
to the Purchasers a copy of all SEC Reports filed within the 10 days preceding
the date hereof. 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
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state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
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 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 or the identity of its auditors, (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 or similar plans.
(j) LITIGATION. 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 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 that has had or could reasonably be expected to result
in a Material Adverse Effect. The Company does not have pending before the
Commission any request for confidential treatment of information. 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 that has had or could reasonably be
expected to result in a Material Adverse Effect. The Commission has not issued
any stop order or other order suspending the effectiveness of any
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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 has had or could reasonably be expected to result in a
Material Adverse Effect.
(l) COMPLIANCE. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived) that has had or
could reasonably be expected to result in a Material Adverse Effect, (ii) is in
violation of any order of any court, arbitrator or governmental body that has
had or could reasonably be expected to result in a Material Adverse Effect, or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority that has had or could 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 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 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,
except where the failure to be in compliance would not reasonably be expected to
result in a Material Adverse Effect.
(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 has
had or could reasonably be expected to result in a
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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 that has had or could reasonably be
expected to result in a Material Adverse Effect. 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 that has had or could reasonably be expected to result in a Material
Adverse Effect.
(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 required to
be 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
that has had or could reasonably be expected to result in a Material Adverse
Effect 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. 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 and that has had or could reasonably
be expected to result in a Material Adverse Effect. 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
11
disclosures 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 the
date of its most recently filed period report under the Exchange Act (such date,
the "EVALUATION DATE"). The Company presented in its most recently filed period
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no 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, the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls and that had had or could reasonably be expected to
result in a Material Adverse Effect.
(s) CERTAIN FEES. Except as set forth in this Agreement and on Schedule
3.1(s), 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, other than to XX Xxxxx Securities Inc., pursuant
to a Placement Agency Agreement, dated October 23, 2003, and the Company has not
taken any action that would cause any Purchaser to be liable for any such fees
or commissions. The Company agrees that the Purchasers shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
any Person for fees of the type contemplated by this Section 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 in accordance with the terms of
the Transaction Documents. 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,
an "investment company" within the meaning of 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 that have not been satisfied.
(w) LISTING. The Company is currently in compliance with Nasdaq's
listing requirements.
12
(x) TAX STATUS. The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, statue or local tax. None of the Company's
tax returns is presently being audited by any taxing authority.
(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. 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 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.
(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
13
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).
(bb) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF SECURITIES. The
Company acknowledges and agrees that the Purchasers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the Securities. 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 Company and
its representatives.
(cc) 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.
(dd) NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise that has had or could reasonably be expected to result in a
Material Adverse Effect, between the accountants and lawyers formerly or
presently employed by the Company and the Company is current with respect to any
fees owed to its accountants and lawyers.
III.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. If a Purchaser is an entity, 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
14
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 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
exercises any Warrants, 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, general
solicitation 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) RESIDENCE. If such Purchaser is an individual, then such Purchaser
resides in the state or province identified in the address of such Purchaser set
forth on the signature page hereto; if such Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of such Purchaser in which its
15
investment decision was made is located at the address or addresses of such
Purchaser set forth on the signature page hereto.
(g) RULE 144. Subject to Section 4.1(a), such Purchaser acknowledges
and agrees that the Securities are "restricted securities" as defined in Rule
144 promulgated under the Securities Act as in effect from time to time and must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Such
Purchaser has been advised or is aware of the provisions of Rule 144, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring following the required holding period under Rule 144 and the number of
shares being sold during any three-month period not exceeding specified
limitations.
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
IV.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Securities:
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
16
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. 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, 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 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 relating to the Shares and Warrant Shares 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, either directly or to the Depository Trust Company account on the
Holder's behalf via the
17
Deposit Withdrawal Agent Commission System, 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 fifth 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.
IV.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.
IV.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.
IV.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
18
Current Report on Form 8-K, in each case reasonably acceptable to counsel for
the placement agent disclosing the transactions contemplated hereby. The Company
and such counsel for the placement agent shall consult with each other in
issuing any 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 counsel to the placement agent, 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).
IV.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.
IV.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.
IV.7 USE OF PROCEEDS. Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for 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.
IV.8 INDEMNIFICATION OF PURCHASERS. Subject to the provisions of this
Section 4.8, 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
19
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.
IV.9 RESERVATION OF COMMON STOCK. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.
IV.10 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 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.
IV.11 PARTICIPATION IN FUTURE FINANCING. From the date hereof until 90
days after the Effective Date, the Company shall not effect a financing of its
Common Stock or Common Stock Equivalents (a "Subsequent Financing") unless (i)
the Company delivers to each of the Purchasers hereunder a written notice at
least 10 Trading Days prior to the closing of such
20
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 fifth (5th) 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 its Pro-Rata
Portion (as defined below) of 50% of proceeds to be raised in such Subsequent
Financing (the "Subsequent Financing Percentage") to the Company on the same
terms set forth in the Subsequent Financing Notice. If one or more Purchasers
shall fail to so notify the Company of their willingness to participate in their
Pro-Rata Portion of the Subsequent Financing Percentage, the Company may effect
the remaining portion of such Subsequent Financing on the terms and to the
Persons set forth in the Subsequent Financing Notice; provided that the Company
must provide the Purchasers with a second Subsequent Financing Notice, and the
Purchasers will again have the right of first refusal set forth above in this
Section 4.11, 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 with the Person identified in the Subsequent
Financing Notice. "Pro Rata Portion" is the ratio of (x) such Purchaser's
Subscription Amount and (y) the aggregate sum of all of the Subscription
Amounts. If any Purchaser no longer holds any Shares, then the Pro Rata Portions
shall be re-allocated among the remaining Purchasers. Notwithstanding anything
to the contrary herein, this Section 4.11 shall not apply in respect of the
issuance of the following: (a) shares of Common Stock, options or warrants to
employees, key consultants, service providers, advisors, 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) securities upon the exercise of or conversion of any
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, (c) securities in connection with acquisitions or
strategic investments (including, without limitation, any licensing or
distribution arrangements), the primary purpose of which is not to raise capital
(except as in (e) below), (d) securities to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings or similar
transactions, where the principal consideration for such transaction is not the
issuance of such securities, or (e) any warrants issued to XX Xxxxx Securities
Inc. and the shares of Common Stock issuable upon exercise thereof.
IV.12 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 4.12 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 and Warrant Shares.
21
Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of
the issuance of: (a) shares of Common Stock, options or warrants to employees,
key consultants, service providers, advisors, 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) securities upon the exercise of or conversion of any 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, (c) securities in connection with acquisitions or strategic
investments (including, without limitation, any licensing or distribution
arrangements), the primary purpose of which is not to raise capital (except as
in (e) below), (d) securities to financial institutions or lessors in connection
with commercial credit arrangements, equipment financings or similar
transactions, where the principal consideration for such transaction is not the
issuance of such securities or (e) any warrants issued to XX Xxxxx Securities
Inc. and the shares of Common Stock issuable upon exercise thereof.
IV.13 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.
ARTICLE V
MISCELLANEOUS
V.1 FEES AND EXPENSES. The Company agrees to pay $20,000 to X.X. Xxxxx
Securities, Inc. for its legal fees and expenses incurred in connection with the
investigation and negotiation of the transaction and the preparation and
negotiation of the Transaction Documents. 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.
V.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.
V.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
22
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.
V.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 of the 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.
V.5 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
V.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 the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
V.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 4.5.
V.8 GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
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
23
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 this Agreement,
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.
V.9 SURVIVAL. The representations, warranties and covenants contained
herein shall survive the Closing and delivery and/or exercise of the Securities,
as applicable.
V.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
V.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.
V.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.
V.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.
V.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
24
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.
V.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
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.
V.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser 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 Xxxxxxx
Xxxxxxxxx LLP. Xxxxxxx Xxxxxxxxx LLP does not represent the Purchasers but only
X.X. Xxxxx Securities, Inc. 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.
V.17 LIQUIDATED DAMAGES. The Company's obligations to pay any
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled.
(Signature Page Follows)
25
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.
WAVE SYSTEMS CORP.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxx
Title: CFO
ADDRESS FOR NOTICE:
------------------
With a copy to:
[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK SIGNATURE PAGE
FOR PURCHASER FOLLOWS]
26
[PURCHASERS SIGNATURE PAGE - WAVX]
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:
------------------
Spectra Capital Management
By: /s/ Xxxxxxx Xxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxx
Title: Spectra Capital Management
Subscription Amount:
Shares:
Warrant Shares:
[PURCHASER'S SIGNATURE PAGES FOLLOW]
27
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
BRISTOL INVESTMENT FUND, LTD.
By: /s/ Xxxx Xxxxxxx
-------------------------
Name: Xxxx Xxxxxxx
Title: Director
Subscription Amount:
Shares:
Warrant Shares:
28
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Xxxxxxx and Xxxx XxXxxxxx
By: /s/ Xxxxxxx XxXxxxxx
------------------------
Name: Xxxxxxx XxXxxxxx
Title:
Subscription Amount:
Shares:
Warrant Shares:
29
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Crescent International Ltd.
By: /s/ Xxx Xxxx
-----------------------
Name: Xxx Xxxx
Title:
Subscription Amount:
Shares:
Warrant Shares:
30
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Xxxxxxx International Equity Fund LLC
By: /s/ Xxxxxxx Xxxxx
---------------------------
Name: Xxxxxxx Xxxxx
Title: Managing Member of Xxxxxxx Capital, LLC, its
General Partner
Subscription Amount:
Shares:
Warrant Shares:
31
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Elliot International LP
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President of Elliot International Capital Advisors Inc.
as attorney in fact
Subscription Amount:
Shares:
Warrant Shares:
32
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Elliot Associates LP
By: /s/ Xxxxxx Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President Elliot Capital Advisors LP, as general partner &
Xxxxxxx Associates Inc., as general partner
Subscription Amount:
Shares:
Warrant Shares:
33
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Omicron Master Trust
By: Omicron Capital LP., as advisor
By: Omicron Capital Inc., its general partner
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
Subscription Amount:
Shares:
Warrant Shares:
34
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Alexander Global Master Fund Ltd
By: Alexandra Investment Management, LLC, as Investment Manager
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman & CEO
Subscription Amount:
Shares:
Warrant Shares:
35
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Cranshire Capital LP
By: /s/ Xxxxxxxx X Xxxxx
-------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President, Downsview Capital, the General Partner
Subscription Amount:
Shares:
Warrant Shares:
36
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Longview International Equity Fund, LP
By: /s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: Investment Manager
Subscription Amount:
Shares:
Warrant Shares:
37
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Longview Equity Fund LP
By: /s/ Xxxxx X. Xxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxx
Title: Investment Manager
Subscription Amount:
Shares:
Warrant Shares:
38
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Deephaven Small Cap Growth Fund, LLC
By: /s/ Xxxxx Xxxxxxxxx
---------------------------
Name: Xxxxx Xxxxxxxxx
Title: Director of Private Placements
Subscription Amount:
Shares:
Warrant Shares:
39
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Xxxx and Xxxx Xxxxxx
By: /s/ Xxxx X. Xxxxxx /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx X Xxxxxx, Xxxx Xxxxxx
Title:
Subscription Amount:
Shares:
Warrant Shares:
40
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Enable Growth Partners
By: /s/ Xxxxx Xxxxxx
---------------------
Name: Xxxxx Xxxxxx
Title: Managing Partner
Subscription Amount:
Shares:
Warrant Shares:
41
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Midsummer Investment Ltd.
By: Midsummer Capital LLC
By: /s/ Xxxxx Xxxxxxx
----------------------
Name: Xxxxx Xxxxxxx
Title: Managing Director
Subscription Amount:
Shares:
Warrant Shares:
42
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Portside Growth & Opportunity Fund
By: /s/ Xxxx Xxxxx
------------------------
Name: Xxxx Xxxxx
Title: Director
Subscription Amount:
Shares:
Warrant Shares:
43
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
Gamma Opportunity Capital Partners LP
By: /s/ Xxxxxxxxxxx Xxxxxxx
----------------------------
Name: Xxxxxxxxxxx Xxxxxxx
Title: Managing Director
Subscription Amount:
Shares:
Warrant Shares:
44
[PURCHASERS SIGNATURE PAGE - WAVX]
[PURCHASER] ADDRESS FOR NOTICE:
------------------
By:
-----------------------
Name:
Title:
Subscription Amount:
Shares:
Warrant Shares:
45
EXHIBIT A
Wave Systems Corp.
Bank ABA/Routing #: 000000000
Account #: 610185055
HSBC Bank
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
46
SCHEDULE 3.1(a) TO THE
STOCK PURCHASE AGREEMENT FOR
WAVE SYSTEMS CORP.
LIST OF SUBSIDIARIES
NAME OF SUBSIDIARY STATE OR COUNTRY OF INCORPORATION
Wave Systems Holdings, Inc. (1) Delaware
WaveXpress, Inc. (2)(3) Delaware
Earthquest, Ltd. (1) England
GlobalWave Limited (1) England
(1) Wholly-owned subsidiary of Wave Systems Corp.
(2) WaveXpress ownership:
5.16 SHAREHOLDER OWNERSHIP PERCENTAGE
Wave Systems Corp. 69.1%
Xxxxxxx Corporation 25.6%
Others 5.3%
------
Total 100.0%
(3) WaveXpress, Inc. convertible securities, options and warrants:
NUMBER OF SHARES ISSUABLE
DESCRIPTION SECURITY HOLDER UPON EXERCISE OR CONVERSION
----------- --------------- ---------------------------
Convertible Notes Wave Systems Corp. 13,834,048
Warrants Wave Systems Corp. 694,444
Convertible preferred Stock Xxxxxxx Corporation 946,667
Employee Stock Options Employees 1,402,841
The Stockholder Agreement between Wave, WaveXpress and Xxxxxxx Corporation dated
October 15, 1999 contains certain restrictions on the transfer of shares or any
convertible securities of WaveXpress, Inc.
47
SCHEDULE 3.1(g) TO THE
STOCK PURCHASE AGREEMENT FOR
WAVE SYSTEMS CORP.
CAPITAL STOCK ISSUED AND OUTSTANDING AS OF NOVEMBER 5, 2003:
ARTICLE VI ARTICLE VII SHARES ISSUED AND
PAR VALUE SHARES AUTHORIZED OUTSTANDING
Class A Common $0.01 120,000,000 63,374,124
Class B Common (1) (2) $0.01 13,000,000 205,725
Preferred $0.01 2,000,000 0
----------- ----------
Total 135,000,000 63,579,849
(1) Shares of Class B Common Stock are convertible into shares of Class A
Common Stock on a one-for-one basis at the option of the holder.
(2) Holders of Class B Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders, except that holders of
Class B Common Stock will have five votes per share in cases where one or
more directors are nominated for election by persons other than Wave's
Board of Directors and where there is a vote on any merger, consolidation
or other similar transaction which is not recommended by Wave's Board of
Directors. In addition, holders of Class B Common Stock will have five
votes per share on all matters submitted to a vote of the stockholders in
the event that any person or group of persons acquires beneficial
ownership of 20% or more of the outstanding voting securities of Wave.
OPTIONS AND WARRANTS OUTSTANDING AND REGISTRATION RIGHTS:
Options granted pursuant to Employee Stock Option plans 9,119,476
Warrants Outstanding 195,154
Wave granted registration rights in respect of warrants issued to a consultant
(the "Consultant") to purchase up to 44,365 shares of its Class A Common Stock
in connection with a Sales Representative Agreement (the "Sales Rep. Agreement")
between Wave and the Consultant. Pursuant to the Sales Rep. Agreement, Wave
agreed that in the event that it files a registration statement relating to an
offering of securities, it shall include in such registration statement, all or
any part of the shares issuable pursuant to the Consultant's warrants except
that if, in connection with any underwritten public offering the managing
underwriter(s) thereof impose a limitation on the number of shares of Common
Stock that may be included in the registration statement because, in such
underwriter(s)' judgment, marketing or other factors dictate such limitation is
necessary to facilitate public distribution, then Wave shall be obligated to
include in the registration statement only such limited portion of the
Consultant's warrant shares.
48
SCHEDULE 3.1(s) TO THE
STOCK PURCHASE AGREEMENT FOR
WAVE SYSTEMS CORP.
CERTAIN FEES:
In addition to the fees set forth in the Agreement, the Company is party to an
agreement with Xxxxxxx Xxxx Partners, LLC ("Xxxxxxx Hill") pursuant to which
Xxxxxxx Xxxx shall be allowed to participate and earn up to twenty percent (20%)
of the investment banking fees paid by the Company in the Company's next equity
financing with a minimum of ten percent (10%) in any offering managed by another
firm in respect to Purchasers originally contacted by Xxxxxxx Hill.
49
