STOCK PURCHASE AGREEMENT
EXHIBIT
10.23
THIS
STOCK PURCHASE AGREEMENT (the “Agreement”)
is
made as of July 26, 2007, by and between Wyndcrest DD Holdings, Inc. (the
“Company”),
a
corporation organized under the laws of the State of Delaware, with its
principal offices at 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000, and the
purchaser whose name and address is set forth on the signature pages hereto
(the
“Purchaser”).
IN
CONSIDERATION of the mutual covenants contained in this Agreement, the Company
and the Purchaser agree as follows:
SECTION
1. Authorization
of Sale of the Shares.
Subject
to the terms and conditions of this Agreement, the Company has authorized the
issuance and sale in a private placement of up to 17,857,142
shares
(the “Shares”)
of
common stock, par value $0.0001 per share (the “Common
Stock”),
of
the Company. The Company reserves the right to increase or decrease the number
of Shares sold in this private placement prior to the Closing Date (as defined
below) for the purpose of including therein the Other Purchasers (as defined
below), if any.
SECTION
2. Agreement
to Sell and Purchase the Shares.
At the
Closing (as defined below), the Company will, subject to the terms and
conditions of this Agreement, issue and sell to the Purchaser, and the Purchaser
will buy from the Company, upon the terms and conditions hereinafter set forth,
the number of Shares set forth on the signature pages hereto, for an aggregate
purchase price equal to the number of such Shares multiplied
by a
per-share purchase price of $1.40.
The
Company may, in its sole and absolute discretion, enter into the same form
of
purchase agreement with certain other investors (the “Other
Purchasers”)
and
may, in its sole and absolute discretion, complete sales of additional Shares
to
them. The Purchaser and such Other Purchasers, if any, are hereinafter sometimes
collectively referred to as the “Purchasers,” and this Agreement and the stock
purchase agreements executed by such Other Purchasers, if any, are hereinafter
sometimes collectively referred to as the “Agreements.”
SECTION
3. Delivery
of the Shares at the Closing.
The
completion of the purchase and sale of the Shares (the “Purchaser
Shares”)
referenced in the first paragraph of Section 2 hereof (the “Closing”)
shall
occur at the offices of Xxxxxxxx & Xxxxxx, LLP, 0000 Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxx Xxxxxx, Xxxxxxxxxx as soon as practicable and as agreed to by the
parties hereto, on the date of and concurrently with the execution of this
Agreement, or on such later date or at such different location as the parties
shall agree in writing, but not prior to the date that the conditions for
Closing set forth below have been satisfied or waived by the appropriate party
(the “Closing
Date”).
At
the
Closing, the Company shall deliver to the Purchaser one or more stock
certificates registered in the name of the Purchaser, or, if so indicated on
the
Stock Certificate Questionnaire attached hereto as Appendix II, in such nominee
name(s) as designated by the Purchaser, representing the number of Shares set
forth on the signature pages hereto, each bearing an appropriate legend
referring to the fact that the Purchaser Shares were sold in reliance upon
the
exemption from the registration requirements of the Securities Act of 1933,
as
amended (the “Securities
Act”)
provided by Section 4(2) thereof and Rule 506 thereunder. The name or names
in
which the stock certificates are to be registered are set forth in the Stock
Certificate Questionnaire attached hereto as Appendix II. The Company’s
obligation to complete the purchase and sale of the Purchaser Shares and deliver
such stock certificate(s) to the Purchaser at the Closing shall be subject
to
the following conditions, any one or more of which may be waived by the Company:
(a) receipt by the Company of same-day funds in the full amount of the purchase
price for the Purchaser Shares being purchased hereunder; (b) [omitted]; and
(c)
the accuracy in all material respects of the representations and warranties
made
by the Purchaser in Section 5.8 hereof, and the accuracy of all other
representations and warranties made herein by the Purchaser (in each case,
as if
such representations and warranties were made on the Closing Date), and the
fulfillment in all material respects of those undertakings made herein by the
Purchaser to be fulfilled prior to the Closing. The Purchaser’s obligation to
accept delivery of such stock certificate(s) and to pay for the Purchaser Shares
evidenced thereby shall be subject to the following conditions, any one or
more
of which may be waived by the Purchaser:
(a) each
of
the representations and warranties of the Company made herein which is qualified
by materiality or material adverse effect or words of similar effect shall
be
accurate in all respects as of the Closing Date (except to the extent any such
representations and warranties expressly relate to a specific date, in which
case such representations and warranties shall be accurate as of such date),
and
each of the representations and warranties of the Company made herein which
is
not so qualified shall be accurate in all material respects as of the Closing
Date (except to the extent such representations and warranties expressly relate
to a specific date, in which case such representations and warranties shall
be
accurate in all material respects as of such date);
(b) receipt
by the Purchaser of a certificate executed by the chief executive officer and
the chief financial or accounting officer of the Company, dated as of the
Closing Date, to the effect that (i) each of the representations and warranties
of the Company made herein which is qualified by materiality or material adverse
effect or words of similar effect shall be accurate in all respects as of the
Closing Date (except to the extent such representations and warranties expressly
relate to a specific date, in which case such representations and warranties
shall be accurate as of such date), and each of the representations and
warranties of the Company made herein which is not so qualified shall be
accurate in all material respects as of the Closing Date (except to the extent
such representations and warranties expressly relate to a specific date, in
which case such representations and warranties shall be accurate in all material
respects as of such date) and (ii) the Company has complied in all material
respects with all the agreements and satisfied all the conditions herein on
its
part to be performed or satisfied on or prior to such Closing Date;
and
(c) the
fulfillment in all material respects of those undertakings made herein by the
Company to be fulfilled prior to the Closing.
The
Purchaser’s obligations hereunder are expressly not conditioned on the purchase
by any or all of the Other Purchasers, if any, of the Shares that they have
agreed to purchase from the Company.
-2-
SECTION
4. Representations,
Warranties and Covenants of the Company.
The
Company hereby represents and warrants to, and covenants with, the Purchaser
as
follows, subject to the specific exceptions and qualifications set forth in
the
Disclosure Schedule delivered to the Purchaser by the Company on or prior to
entering into this Agreement (the “Disclosure
Schedule”):
4.1 Organization;
Good Standing.
The
Company’s subsidiaries are listed on Schedule 4.1 of the Disclosure Schedule.
Each of the Company and the Company’s material subsidiaries (as identified on
Schedule 4.1 of the Disclosure Schedule) (the “Subsidiaries”)
is
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or organization. The Company and
each
of the Subsidiaries is duly qualified to do business and is in good standing
as
a foreign corporation in each jurisdiction in which the nature of the business
conducted by it or location of the assets or properties owned, leased or
licensed by it requires such qualification, except for such jurisdictions where
the failure to so qualify individually or in the aggregate would not have a
material adverse effect on the assets, properties, condition, financial or
otherwise, or in the results of operations, business affairs or business
prospects of the Company and the Subsidiaries considered as a whole (a
“Material
Adverse Effect”);
and
to the Company’s knowledge, no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit
or
curtail, such power and authority or qualification.
4.2 Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of
180,000,000 shares of Common Stock and 25,000,000 shares of preferred stock,
par
value $0.0001 per share (the “Preferred
Stock”),
of
the Company. As of the date hereof: (i) 72,675,183 shares of Common Stock are
issued and outstanding (including 3,137,254 shares of restricted stock), and
1,000,000 shares of Preferred Stock, designated the Company’s 8% Senior
Cumulative Convertible Preferred Stock, are issued and outstanding, each of
which is convertible into (subject to adjustment) one share of Common Stock,
without the payment of any additional consideration; (ii) 6,463,500 shares
of
Common Stock are reserved for issuance and issuable upon exercise of outstanding
options to purchase Common Stock; and (iii) 13,179,370 shares of Common Stock
are reserved for issuance and issuable upon exercise of outstanding warrants
to
purchase Common Stock, and except as set forth in this Section 4.2 there are
no
other options, warrants or other rights to purchase from the Company any shares
of its capital stock other than pursuant to the Agreements. The certificates
evidencing the Purchaser Shares are in due and proper legal form and have been
duly authorized for issuance by the Company. All of the issued and outstanding
shares of Common Stock have been duly and validly issued and are fully paid
and
nonassessable. There are no statutory preemptive or other similar rights to
subscribe for or to purchase or acquire any shares of Common Stock of the
Company or any equity securities of the Subsidiaries or any such rights pursuant
to their respective Certificates of Incorporation or Articles of Incorporation
or bylaws, or equivalent formation and governance documents, or any agreement
or
instrument to or by which the Company or any of the Subsidiaries is a party
or
bound, except for any such rights under any such agreement or instrument that
has been waived prior to the date hereof. The Purchaser Shares, when issued
and
delivered and paid for as provided herein, will be duly and validly issued
and
will be fully paid and nonassessable and will be issued free and clear of any
security interests, liens, encumbrances, equities, restrictions on transfer
(other than as arising under applicable securities laws or this Agreement),
third party rights or claims. All outstanding shares of capital stock of each
of
the Subsidiaries have been duly authorized and validly issued, and are fully
paid and nonassessable and are owned directly by the Company or by another
wholly owned subsidiary of the Company. Assuming the accuracy of the
representations and warranties of Purchaser in Section 5 of this Agreement,
the
Purchaser Shares will be issued in compliance with all applicable federal and
state securities laws.
-3-
4.3 Due
Authorization.
This
Agreement has been duly authorized, executed and delivered by the Company and,
assuming execution and delivery by each of the other parties thereto,
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as such enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of
general application relating to the enforcement of creditor’s rights and the
application of equitable principles relating to the availability of remedies,
and except as rights to indemnity or contribution, including, but not limited
to, the indemnification provisions contained in Section 7 of this Agreement,
may
be limited by federal or state securities laws or the public policy underlying
such laws. All necessary corporate action has been duly and validly taken by
the
Company to authorize the execution, delivery and performance of this Agreement
and the issuance and sale of the Shares by the Company.
4.4 No
Default or Consents.
Neither
the execution, delivery and performance of this Agreement by the Company nor
the
consummation by the Company of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the
Shares) will give rise to a right to terminate or accelerate the due date of
any
payment due under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or an event which with notice or lapse
of
time or both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or the Subsidiaries
pursuant to the terms of, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of the Subsidiaries is
a
party or by which either the Company or the Subsidiaries or any of their
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or any
of
the Subsidiaries or violate any provision of the charter or bylaws, or
equivalent formation and governance documents, of the Company or any of the
Subsidiaries, except for such consents or waivers which have already been
obtained and are in full force and effect.
4.5 Permits.
Each of
the Company and the Subsidiaries has all requisite corporate power and
authority, and all necessary authorizations, approvals, consents, orders,
licenses, certificates and permits of and from all governmental or regulatory
bodies or any other person or entity (collectively, the “Permits”),
to
own, lease and license its assets and properties and conduct its business,
all
of which are valid and in full force and effect, except where the lack of such
Permits, individually or in the aggregate, would not have a Material Adverse
Effect. Each of the Company and the Subsidiaries has fulfilled and performed
in
all material respects all of its material obligations with respect to such
Permits and no event has occurred that allows, or after notice or lapse of
time
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the Company thereunder. Except as may be required
as
to the Company under the Securities Act and state Blue Sky laws, no other
Permits are required to enter into, deliver and perform this Agreement and
to
issue and sell the Purchaser Shares to the Purchaser.
-4-
4.6 Real
and Personal Property.
Each of
the Company and the Subsidiaries has good and marketable title in fee simple
to
all real property, and good and marketable title to all other property, owned
by
it, in each case free and clear of all liens, encumbrances, claims, security
interests and defects, except such as (i) secure the indebtedness (the
“Falcon
Indebtedness”)
of
Digital Domain, Inc. (“DDI”)
to
Falcon Mezzanine Partners II, LP (“Falcon”)
pursuant to the terms of that Amended and Restated Purchase Agreement (the
“Falcon
Agreement”)
dated
as of May 16, 2007 between, among others, DDI and Falcon, or (ii) do not
materially affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property by the Company and
the
Subsidiaries. All property held under lease by the Company and the Subsidiaries
is held by them under valid, existing and enforceable leases, free and clear
of
all liens, encumbrances, claims, security interests and defects, except such
as
(i) secure the Falcon Indebtedness, or (ii) have arisen in the ordinary course
of business of the Company and the Subsidiaries and do not materially interfere
with the use made or proposed to be made of such property by the Company and
the
Subsidiaries.
4.7 Material
Contracts.
Each
contract, document or other agreement which is material to the current business
of the Company and the Subsidiaries, taken as a whole (the “Material
Contracts”), is in full force and effect and is valid and enforceable by and
against the Company and the Subsidiaries, as the case may be, in accordance
with
its terms. Neither the Company nor any of the Subsidiaries, if a subsidiary
is a
party, nor to the Company's knowledge, any other party, is in default in the
observance or performance of any term or obligation to be performed by it under
any such Material Contract.
4.8 No
Violation.
Neither
the Company nor the Subsidiaries is in violation of any term of its charter
or
bylaws, or equivalent formation and governance documents, or of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation, where
the
consequences of such violation, individually or in the aggregate, would have
a
Material Adverse Effect.
4.9 Consents
and Approvals.
Each
approval, consent, order, authorization, designation, declaration or filing
of,
by or with any regulatory, administrative or other governmental body necessary
in connection with the execution and delivery by the Company of this Agreement
and the consummation of the transactions herein contemplated required to be
obtained or performed by the Company has been so obtained or
performed.
4.10 Financial
Statements.
The
financial statements of the Company (including all notes and schedules thereto)
included as Schedule 4.10 in the Disclosure Schedule (the “Financial
Statements”)
present fairly the financial condition of the Company and its consolidated
subsidiaries at the dates indicated and the results of operations, stockholders’
equity and cash flows of the Company and its consolidated subsidiaries for
the
periods specified; and such financial statements and related schedules and
notes
thereto have been prepared in conformity with accounting principles generally
accepted in the United States, consistently applied throughout the periods
involved, except as may be noted therein. Except as set forth in the Financial
Statements, the Company and its Subsidiaries have no material liabilities or
obligations, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of the most recent
balance sheet included in the Financial Statements and (ii) liabilities and
obligations of a type or nature not required under generally accepted accounting
principles to be reflected in the Financial Statements, which individually
and
in the aggregate would not have a Material Adverse Effect. The Company and
its
Subsidiaries maintain and will continue to maintain a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
-5-
4.11 Intellectual
Property.
Each of
the Company and the Subsidiaries owns or possesses legally enforceable rights
to
use all patents, patent applications, patent rights, inventions, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, trade secrets, domain names, mask works, licenses, know-how and
other similar rights and proprietary knowledge (collectively, “Intangibles”)
necessary for the conduct of its current business. Neither the Company nor
any
of the Subsidiaries has infringed the rights of others with respect to (a)
the
Intangibles, (b) any product or service marketed or sold by the Company or
any
of the Subsidiaries, or (c) any software programs present on the computers
and
other software-enabled electronic devices that it owns or leases or that it
has
otherwise provided to its employees for their use in connection with its
business, except for any such infringement that would not result in a Material
Adverse Effect.
4.12 No
Material Adverse Change.
Since
the date of the most recent balance sheet of the Company included in the
Financial Statements, (i) there has not been any material adverse change in
the
business, properties, management, financial position, stockholders’ equity,
results of operations or prospects of the Company and the Subsidiaries taken
as
a whole; (ii) neither the Company nor any of the Subsidiaries has sustained
any
material loss or interference with its business from fire, explosion, flood
or
other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator
or governmental or regulatory authority; and (iii) neither the Company nor
any
of the Subsidiaries has (A) issued or incurred any liability or obligation,
direct or contingent, for borrowed money, except such liabilities or obligations
incurred in the ordinary course of business, (B) entered into any other
transaction not in the ordinary course of business, (C) made, or agreed to
make,
any material change to any Material Contract which would result in a Material
Adverse Effect, or (D) made, or agreed to make, any declaration, setting aside
or payment or other distribution in respect of any of its capital stock, or
any
direct or indirect redemption, purchase, or other acquisition of any of such
stock.
4.13 Legal
Proceedings.
There
are no claims, actions, suits, proceedings, arbitrations, complaints, charges,
judgments, injunctions or governmental investigations pending, or to the
Company’s knowledge threatened, to which Company or any of the Subsidiaries (or
any of their respective officers or directors, in such capacity) is a party
or
of which any property of the Company or any of the Subsidiaries is the subject
which the management of the Company believes will have a Material Adverse
Effect. The scope of the representation and warranty in the immediately
preceding sentence includes, without limitation, actions, suits, proceedings
or
investigations pending or threatened in writing involving the prior employment
of any of the Company’s or the Subsidiaries’ employees, their services provided
in connection with the Company’s or such Subsidiary’s business, or any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior
employers.
-6-
4.14 Employees.
Neither
the Company nor any of the Subsidiaries is involved in any labor dispute nor,
to
the knowledge of the Company, is any such dispute threatened, which dispute
would have a Material Adverse Effect. The Company is not aware of any existing
or imminent labor disturbance by the employees of any of its or any of the
Subsidiaries’ principal suppliers or contractors which would have a Material
Adverse Effect. Neither the Company nor any Subsidiary is bound by or subject
to
(and none of their respective assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge
of
the Company, has sought to represent any of the employees, representatives
or
agents of the Company or any of its Subsidiaries. The Company is not aware
of
any threatened or pending litigation between the Company or the Subsidiaries
and
any of its executive officers which, if adversely determined, would have a
Material Adverse Effect and has no reason to believe that any executive officers
or other key employees currently serving will not remain in the employment
of
the Company and the Subsidiaries. To the Company’s knowledge, none of the
employees of the Company or any of the Subsidiaries is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such employee’s
ability to promote the interests of the Company and the Subsidiaries or that
would conflict with the Company’s or any Subsidiary’s business.
4.15 Taxes.
Each of
the Company and the Subsidiaries has timely filed all Federal, state, local
and
foreign tax returns which are required to be filed through the date hereof,
which returns are true and correct in all material respects, or has received
timely extensions thereof, and has paid all taxes shown on such returns and
all
assessments received by it to the extent that the same are material and have
become due. There are no tax audits or investigations pending; nor are there
any
material proposed additional tax assessments against the Company or any of
the
Subsidiaries.
4.16 Insurance.
All
material fire and casualty, general liability, and business interruption
insurance policies maintained by the Company or any of the Subsidiaries are
in
full force and effect, are with reputable insurance carriers, provide full
and
adequate coverage for all normal risks incident to the business of the Company
and the Subsidiaries and their respective properties and assets, and are in
character and amount at least reasonably equivalent to that carried by persons
engaged in similar businesses and subject to the same or similar perils or
hazards, except for any such failures to maintain insurance policies that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
4.17 Environmental
Laws.
(i)
Each of the Company and the Subsidiaries is in compliance in all material
respects with all applicable rules, laws and regulation relating to the use,
treatment, release, storage or disposal of hazardous or toxic substances or
pollution or the protection of employee health or safety, public health or
the
environment (“Environmental
Laws”);
(ii)
neither the Company nor the Subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under Environmental
Laws; (iii) each of the Company and the Subsidiaries has received all permits,
licenses or other approvals required of it under Environmental Laws to conduct
its business and is in compliance with all material terms and conditions of
any
such permit, license or approval; (iv) to the Company’s knowledge, no facts
currently exist that will require the Company or any of the Subsidiaries to
make
future material capital expenditures to comply with Environmental Laws; and
(v)
no property which is or has been owned, leased or occupied by the Company or
the
Subsidiaries has been designated as a Superfund site pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as
amended (42 U.S.C. Section 9601, et. seq.) (“CERCLA”),
or
otherwise designated as a contaminated site under applicable state or local
law.
Neither the Company nor any of the Subsidiaries has been named as a “potentially
responsible party” under CERCLA.
-7-
4.18 Foreign
Transactions Reporting Act.
The
operations of the Company and the Subsidiaries are and have been conducted
at
all times in compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as
amended, the money laundering statutes of all jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money
Laundering Laws”),
and
no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of the
Subsidiaries with respect to the Money Laundering Laws is pending, or to the
best knowledge of the Company, threatened.
4.19 OFAC.
Neither
the Company nor any of its subsidiaries nor, to the knowledge of the Company,
any director, officer, agent, employee or affiliate of the Company or any of
its
subsidiaries, is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
and
the Company will not directly or indirectly use the proceeds of the offering
of
the Shares, or lend, contribute or otherwise make available such proceeds to
any
subsidiary, joint venture partner or other person or entity, for the purpose
of
financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.
4.20 ERISA.
The
Company has fulfilled its obligations, if any, under the minimum funding
standards of Section 302 of the U.S. Employee Retirement Income Security Act
of
1974 (“ERISA”)
and
the regulations and published interpretations thereunder with respect to each
"plan" as defined in Section 3(3) of ERISA (and such regulations and published
interpretations) in which its employees are eligible to participate and each
such plan is in compliance in all material respects with the presently
applicable provisions of ERISA and such regulations and published
interpretations. No “Reportable Event” (as defined in ERISA) has occurred with
respect to any “Pension Plan” (as defined in ERISA) for which the Company has
any liability.
4.21 Use
of
Proceeds.
The
Company intends to use the net proceeds from the sale of the Shares for general
working capital and other corporate purposes.
-8-
4.22 Investment
Company.
The
Company is not, and after giving effect to the offering and sale of the Shares
and the application of the proceeds thereof as described in Section 4.21, will
not be, an “investment company” or an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations of the Securities and Exchange Commission (the
“SEC”)
thereunder.
4.23 No
Restrictions on Subsidiaries.
Except
as provided in the Acquisition Documents (as such term is defined in the Falcon
Agreement), the Subsidiaries are not currently prohibited, directly or
indirectly, under any agreement or other instrument to which any such Subsidiary
is a party or is subject, from paying any dividends to the Company, from making
any other distribution on the Subsidiary’s capital stock, from repaying to the
Company any loans or advances to the Subsidiary from the Company or from
transferring any of such Subsidiary’s properties or assets to the
Company.
4.24 Brokers
or Finders.
No
broker, investment banker, financial advisor or other individual, corporation,
general or limited partnership, limited liability company, firm, joint venture,
association, enterprise, joint securities company, trust, unincorporated
organization or other person or entity is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or
on behalf of the Company.
4.25 Certain
Transactions.
Other
than agreements or arrangements relating to (i) compensation and standard
employee benefits generally made available to all employees of the Company
or
applicable Subsidiary, (ii) standard director and officer indemnification on
terms approved by the Board of Directors of the Company or the applicable
Subsidiary, and (iii) the purchase of shares of the Company’s capital stock and
the issuance of options to purchase shares of the Company’s Common Stock, in
each instance, approved in the written minutes of the Board of Directors of
the
Company, there are no agreements, understandings or proposed transactions
between the Company or any Subsidiary and any of its officers, directors,
consultants or key employees, or any affiliate thereof.
4.26 Rights
of Registration and Voting Rights.
Neither
the Company nor any of the Subsidiaries is under any obligation to register
under the Securities Act any of its currently outstanding securities or any
securities issuable upon exercise or conversion of its currently outstanding
securities. To the Company’s knowledge, no stockholder of the Company has
entered into any agreements with respect to the voting of capital shares of
the
Company.
SECTION
5. Representations,
Warranties and Covenants of the Purchaser.
The
Purchaser represents and warrants to, and covenants with, the Company
that:
5.1 Experience.
(i) The
Purchaser is knowledgeable, sophisticated and experienced in financial and
business matters, and is making, and is qualified to make, decisions with
respect to investments in shares representing an investment decision like that
involved in the purchase of the Shares, including investments in securities
issued by the Company and/or comparable entities, has the ability to bear the
economic risks of an investment in the Shares and has had the opportunity to
request, receive, review and consider all information it deems relevant in
making an informed decision to purchase the Shares; (ii) the Purchaser is
acquiring the number of Shares set forth on the signature pages hereto in the
ordinary course of its business and for its own account for investment only
and
with no present intention of distributing any of such Shares and subject to
no
arrangement or understanding with any other persons regarding the distribution
of such Shares (this representation and warranty not limiting the Purchaser’s
right to sell pursuant to a Registration Statement (as defined in Section 7.5)
or otherwise in compliance with the Securities Act and the rules and regulations
thereunder (the “Rule
and Regulations”),
or,
other than with respect to any claims arising out of a breach of this
representation and warranty, the Purchaser’s right to indemnification under
Section 7.7 hereof); (iii) the Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers
to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares,
except in compliance with the Securities Act and the Rules and Regulations
and
any applicable state securities laws; (iv) the Purchaser has, in connection
with
its decision to purchase the number of Shares set forth on the signature pages
hereto, relied solely upon the representations and warranties of the Company
contained in this Agreement (including Appendix I attached hereto; provided,
that, it is acknowledged and agreed that Appendix I does not modify or alter
in
any manner the representations and warranties of the Company set forth in
Section 4 hereof); (v) the Purchaser has had an opportunity to discuss this
investment with representatives of the Company and ask questions of them; and
(vi) the Purchaser is an “accredited investor” within the meaning of Rule 501(a)
of Regulation D promulgated under the Securities Act.
-9-
5.2 Reliance
on Exemptions.
The
Purchaser understands that the Shares are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of the
Securities Act, the Rules and Regulations and state securities laws and that
the
Company is relying upon the truth and accuracy of, and the Purchaser’s
compliance with, the representations, warranties, covenants, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order
to
determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Shares.
5.3 Confidentiality.
The
Purchaser understands that the information contained in the materials provided
to the Purchaser by the Company and its representatives in connection with
the
purchase and sale of the Shares is strictly confidential and proprietary to
the
Company and is being submitted to the Purchaser solely for such Purchaser’s
confidential use. The Purchaser agrees to use the information contained in
such
materials for the sole purpose of evaluating a possible investment in the Shares
and the Purchaser acknowledges that it is prohibited from reproducing or
distributing this Agreement or any other materials or other information provided
by the Company in connection with the Purchaser’s consideration of its
investment in the Company, in whole or in part, or divulging or discussing
any
of their contents, except to its financial, investment or legal advisors who
need to know such contents in connection with the Purchaser’s proposed
investment in the Purchaser Shares and who agree in writing to be bound by
an
equivalent obligation of confidentiality and non-use with respect to such
contents. Further, the Purchaser understands that the existence and nature
of
all conversations and presentations, if any, regarding the Company and the
offering of the Shares must be kept strictly confidential. The foregoing
agreements shall not apply to any information that is or becomes publicly
available through no fault of the Purchaser, or that the Purchaser is required
to disclose pursuant to applicable law, regulation or legal process; provided,
however, that if the Purchaser is requested or ordered to disclose any such
information pursuant to any court or other government order or any other
applicable legal procedure, it shall provide the Company with prompt notice
of
any such request or order in time sufficient to enable the Company to seek
an
appropriate protective order.
-10-
5.4 Investment
Decision.
The
Purchaser understands that nothing in this Agreement or any other materials
presented to the Purchaser in connection with the purchase and sale of the
Shares constitutes legal, tax or investment advice. The Purchaser has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the
Shares.
5.5 Risk
of Loss.
The
Purchaser understands that its investment in the Shares involves a significant
degree of risk, including a risk of total loss of the Purchaser’s investment,
and the Purchaser has full cognizance of and understands all of the risk factors
related to the Purchaser’s purchase of the Shares, including, but not limited
to, those set forth in Appendix I attached hereto (provided, that, it is
acknowledged and agreed that Appendix I does not modify or alter in any manner
the representations and warranties of the Company set forth in Section 4
hereof). The Purchaser understands that no representation is being made as
to
the future value of the Common Stock.
5.6 Legend.
The
Purchaser understands that, until such time as a Registration Statement has
been
declared effective or the Purchaser Shares may be sold pursuant to Rule 144
under the Securities Act without any restriction as to the number of securities
as of a particular date that can then be immediately sold, the Purchaser Shares
will bear a restrictive legend in substantially the following form:
“THE
SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO TRANSFER RESTRICTIONS IN ACCORDANCE WITH THE TERMS
OF
A STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY
OF
WHICH IS ON FILE WITH THE COMPANY. THE SHARES MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE
SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE
CASE
OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES
NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE
LAWS.”
-11-
5.7 Residency.
The
Purchaser’s principal executive offices are in the jurisdiction set forth
immediately below the Purchaser’s name on the signature pages hereto.
5.8 Organization;
Validity; Enforcements.
The
Purchaser further represents and warrants to, and covenants with, the Company
that (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby
and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, (ii) the making and performance of this Agreement
by the Purchaser and the consummation of the transactions herein contemplated
will not violate any provision of the organizational documents of the Purchaser
or conflict with, result in the breach or violation of, or constitute, either
by
itself or upon notice or the passage of time or both, a default under any
material agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which the Purchaser is a party, or
any
statute or any authorization, judgment, decree, order, rule or regulation of
any
court or any regulatory body, administrative agency or other governmental agency
or body applicable to the Purchaser, (iii) no consent, approval, authorization
or other order of any court, regulatory body, administrative agency or other
governmental agency or body is required on the part of the Purchaser for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, (iv) upon the execution and mutual delivery
of
this Agreement by the parties hereto, this Agreement shall constitute a legal,
valid and binding obligation of the Purchaser, enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to the enforcement of creditor’s rights and the application of
equitable principles relating to the availability of remedies, and except as
rights to indemnity or contribution, including, but not limited to, the
indemnification provisions set forth in Section 7.7 of this Agreement, may
be
limited by federal or state securities laws or the public policy underlying
such
laws, and (v) there is not in effect any order enjoining or restraining the
Purchaser from entering into or engaging in any of the transactions contemplated
by this Agreement.
SECTION
6. Survival
of Representations, Warranties and Agreements.
Notwithstanding any investigation made by either party to this Agreement, all
covenants and agreements made by the Company and the Purchaser herein and in
the
certificates for the Purchaser Shares delivered pursuant hereto shall survive
the execution of this Agreement, the delivery to the Purchaser of the Purchaser
Shares and the payment therefor. All representations and warranties made by
the
Company and the Purchaser herein and in the certificates for the Purchaser
Shares delivered pursuant hereto shall survive for a period of one year
following the later of the execution of this Agreement, the delivery to the
Purchaser of the Purchaser Shares and the payment therefor.
-12-
SECTION
7. Registration
of the Shares; Compliance with the Securities Act.
7.1 Certain
Definitions.
(a) “Holder”
means
any
holder of Registrable Securities who is a party to this Agreement.
(b) “IPO”
means
the initial underwritten registered public offering of the Company’s equity
securities by the Company.
(c) “Other
Registrable Securities”
means
any and all shares of the Common Stock and other securities issued by the
Company that are covered by piggyback registration rights similar to those
conferred on the Holders pursuant to the terms of Section 7.2 (but which may
include rights of priority with respect to inclusion in piggyback registrations
of the Company’s securities).
(d) “Registrable
Securities”
means
any and all of the (i) Shares purchased by the Purchasers pursuant to the
Agreements; (ii) equity securities issued in respect of such Shares in any
reorganization; and (iii) equity securities issued in respect of the securities
referred to in the preceding clauses (i) and (ii) as the result of a stock
split, stock dividend, recapitalization or combination.
(e) “Registration
Expenses”
means
all expenses incident to the Company’s performance of or compliance with Section
7.5 of this Agreement, including, without limitation, all: (i) registration
and
filing fees, (ii) fees and expenses relating to compliance with securities
or
blue sky laws (including fees and expenses of counsel in connection with blue
sky qualifications of the securities registered), (iii) printing, messenger
and
delivery expenses, (iv) internal expenses of the Company (including all salaries
and expenses of its officers and employees performing legal or accounting
duties), (v) fees and expenses of counsel for the Company and fees and expenses
for independent certified public accountants retained by the Company (including
the expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort
letters), (vi) fees and expenses of any special experts retained by the Company
in connection with such registration, (vii) reasonable fees and expenses of
a
single counsel for the holders of Registrable Securities and Other Registrable
Securities participating in the subject offering selected by the holders of
a
majority of the Registrable Securities and Other Registrable Securities offered
therein, (viii) fees and expenses in connection with any review of underwriting
arrangements by the National Association of Securities Dealers, Inc. (the
“NASD”)
and
(ix) fees and expenses of underwriters customarily paid by issuers or sellers
of
securities (but not including any underwriting discounts or commissions
attributable to the sale of Registrable Securities).
7.2 Piggyback
Registration Rights.
(a) Whenever
the Company proposes to register the offer and sale of any of its Common Stock
under the Securities Act other than pursuant to a registration statement on
Form
S-8 or S-4 or any similar form or in connection with a registration the primary
purpose of which is to register debt securities and the registration form to
be
used may be used for the registration of Registrable Securities, the Company
will give prompt written notice to all Holders of its intention to effect such
a
registration and will include (subject to the priority provisions described
hereinbelow) in such registration all Registrable Securities of such Holders
with respect to which the Company has received written requests for inclusion
therein (a “Piggyback
Registration”)
within
20 days after the delivery of the Company’s notice; provided, that (x) if such
registration involves an underwritten public offering, all Holders must sell
their Registrable Securities included therein to the underwriters on the same
terms and conditions as applicable to the Company and the other holders of
the
Company’s securities included therein and (y) if, at any time after giving
written notice of its intention to register any Common Stock pursuant to this
Section 7.2(a) and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any
reason not to register such Common Stock, the Company shall give written notice
thereof to all such Holders and, thereupon, shall be relieved of its obligation
to register any Registrable Securities in connection with such
registration.
-13-
(b) The
Registration Expenses of the Holders will be paid by the Company in all
Piggyback Registrations (including, without limitation, the expenses of any
withdrawn registration pursuant to Section 7.2(a)(y) above).
(c) If
a
Piggyback Registration is an underwritten primary registration on behalf of
the
Company, the Company will include in such registration all Registrable
Securities timely requested to be included in such registration; provided,
that
if the managing underwriters advise the Company in writing that in their good
faith opinion the inclusion of any Registrable Securities in such offering
would
adversely affect the marketability of the offering, then such Registrable
Securities shall not be permitted to be included; and provided further, that
if
in connection with such offering, the managing underwriters advise the Company
in writing that in their opinion the total number of securities requested to
be
included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company will include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, Other Registrable Securities, if any, subject
to
contractually agreed rights of priority with respect to piggyback registrations
of the Company, conformably with the terms of the applicable contractual
agreement between the Company and the holder thereof, and (iii) third, the
Registrable Securities and Other Registrable Securities (other than those
adverted to in the foregoing clause (ii)) requested to be included in such
registration reduced pro rata among the holders of such Registrable Securities
and Other Registrable Securities on the basis of the respective number of shares
of such Registrable Securities and Other Registrable Securities so requested
to
be included therein.
(d) If
a
Piggyback Registration is an underwritten secondary registration on behalf
of
holders of the Company's securities other than Registrable Securities, and
the
managing underwriters advise the Company in writing that in their good faith
opinion the inclusion of any Registrable Securities in the offering would
adversely affect the marketability of the offering, then such Registrable
Securities shall not be permitted to be included. Additionally, if in connection
with such an offering, the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in
such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration, (ii) second, Other Registrable
Securities, if any, subject to contractually agreed rights of priority with
respect to piggyback registrations of the Company, conformably with the terms
of
the applicable contractual agreement between the Company and the holder thereof,
and (iii) third, the Registrable Securities and Other Registrable Securities
(other than those adverted to in the foregoing clause (ii)) requested to be
included in such registration reduced pro rata among the holders of such
Registrable Securities and Other Registrable Securities on the basis of the
number of shares of such Registrable Securities and Other Registrable Securities
so requested to be included therein.
-14-
7.3 Form
S-3 Registration.
(a) If
Purchaser, together with any and all of its Affiliates (as defined below),
invests $5,000,000 or more to purchase Common Stock pursuant to this Agreement
and any Other Agreements, then at any time following six (6) months after the
effective date of the registration statement filed by the Company relating
to
the IPO, the Purchaser (together with its Affiliates) will be entitled to
request one (1) registration (in total), whether underwritten or otherwise,
under the Securities Act of all or part of its Registrable Securities (on a
continuous or delayed basis as permitted pursuant to Rule 415 of the Rules
and
Regulations, or any successor rule, of the SEC under the Securities Act) on
Form
S-1 or any similar long-form registration (“Long-Form
Registration”)
or on
Form S-3 or any similar short-form registration (“Short-Form
Registration”),
if
available. Such request shall specify the approximate number of Registrable
Securities requested to be registered. The registration requested pursuant
to
this Section 2(a) is referred to herein as the "Demand
Registration".
The
Demand Registration will be a Short-Form Registration whenever the Company
is
permitted to use any applicable short form. Notwithstanding anything to the
contrary in this Agreement, the Company shall not be obligated to file any
such
registration statement within such time period:
(i) if
the
Purchaser (together with its Affiliates) proposes to sell Registrable Securities
at an estimated aggregate price to the public of less than $2,000,000;
or
(ii) if
the
Company has, within such 6-month period following the IPO, already effected
a
registration under the Securities Act, other than a registration from which
the
Purchaser’s Registrable Securities have been excluded (with respect to all or
any portion of such Registrable Securities requested be included in such
registration) pursuant to the provisions of Section 7.2.
(b) At
least
20 days prior to the date that the Company intends to file a registration
statement effecting a demand registration requested by an Other Purchaser
pursuant to rights conferred on such Other Purchaser in an Other Agreement
identical, mutatis mutandis,
to
those conferred in this Section 7.3 on the Purchaser, the Company will give
written notice to the Purchaser of its intention to effect such a registration
and will include in such registration all Registrable Securities of the
Purchaser with respect to which the Company has received written requests for
inclusion therein within 20 days after the receipt by the Purchaser of the
Company’s notice. Notwithstanding anything to the contrary herein, Purchaser
acknowledges that the Purchaser, together with certain Other Purchasers, shall
together hold the right to request such a demand registration and, upon notice
from the Company that such a demand registration has been requested by any
Other
Purchaser, Purchaser’s right with respect to the Demand Registration under this
Section 7.3 shall be to include its Registrable Securities in such registration
statement on the terms provided above.
-15-
(c) Notwithstanding
the foregoing, if the Company shall furnish to the Purchaser a certificate
signed by the President, Chief Executive Officer or Chief Financial Officer
of
the Company stating that in the good faith judgment of the Board of Directors
of
the Company, it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed within the time period
specified in Section 7.3(a) hereof, then the Company shall have the right to
defer such filing for a period of not more than 180 days after the expiration
of
such time period.
(d) Subject
to the terms of Section 7.5, a Demand Registration shall not be deemed
“effected” for purposes of this Section 7.3 until such time as a registration
statement covering all of the Registrable Securities requested by the Purchaser
to be included therein has been declared effective by the SEC.
(e) The
Registration Expenses of the Purchaser will be paid by the Company in a Demand
Registration.
7.4 Lock-Up
Agreement.
The
Purchaser (for itself and each assignee Holder) hereby agrees not to effect
any
public sale or distribution (including sales pursuant to Rule 144 promulgated
under the Securities Act) of equity securities of the Company, or any securities
convertible or exercisable into or exchangeable for such securities, during
(x)
the 180-day period beginning on the effective date of the IPO, and (y) the
90-day period beginning on the effective date of the registration pursuant
to
Section 7.3 or any Piggyback Registration that is an underwritten offering
in
which Registrable Securities are included; provided, that the foregoing
provisions of this Section 7.4 (i) shall not apply to the sale of any shares
to
an underwriter pursuant to an underwriting agreement, (ii) shall not apply
to
transactions (including any sales of Common Stock or other securities) relating
to shares of Common Stock or other securities acquired in open market
transactions after the completion of the IPO, and (iii) shall only be applicable
to the Holder if each executive officer and director of the Company and each
stockholder of the Company holding more than 5% of the Company’s outstanding
Common Stock agrees to similar restrictions. If the underwriters managing the
registered public offering waive any such restriction for the benefit of any
stockholder of the Company, they will also grant an equivalent waiver to the
Holder, whether or not participating in such offering.
7.5 Registration
Procedure.
Whenever the Holders have requested that any Registrable Securities be included
in a Piggyback Registration pursuant to Section 7.2 hereof or the Company
undertakes a registration of securities pursuant to its obligations under
Section 7.3 hereof, the Company will, subject to the provisions hereof, use
its
reasonable best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company will:
-16-
(a) prepare
and file with the SEC a registration statement (a “Registration
Statement”)
with
respect to such Registrable Securities and use its reasonable best efforts
to
cause such Registration Statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the holders of
a
majority of the Registrable Securities and Other Registrable Securities covered
by such Registration Statement copies of all such documents proposed to be
filed);
(b) prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary
to
keep such Registration Statement effective for a period of not less than 180
days; provided, however, that (i) such 180 day period shall be extended for
a
period of time equal to the period that the Holders refrain from selling any
securities included in any underwritten registration at the request of the
managing underwriters; and (ii) in the case of any registration of Registrable
Securities which are intended to be offered on a continuous or delayed basis,
such 180 day period shall be extended, if necessary, to keep the Registration
Statement effective until all such Registrable Securities are sold, provided
that Rule 415, or any successor rule, under the Securities Act, then permits
such an offering on a continuous or delayed basis, and provided further that
applicable rules under the Securities Act governing the obligation to file
a
post-effective amendment then permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of
the
Securities Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the Registration Statement,
the incorporation by reference in the Registration Statement of information
otherwise required to be included in such a post-effective amendment that is
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”); and comply
with the provisions of the Securities Act with respect to the disposition of
all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set
forth in such Registration Statement;
(c) furnish
to each Holder included therein such number of copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus) and such
other documents as such holder may reasonably request in order to facilitate
the
disposition of the Registrable Securities owned by such Holder;
(d) use
its
reasonable best efforts to register or qualify such Registrable Securities
under
such other securities or blue sky laws of such U.S. state jurisdictions as
any
Holder thereof reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Holder (provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection, (ii) subject itself
to
taxation in any such jurisdiction or (iii) consent to general service of process
(i.e., service of process which is not limited solely to securities law
violations) in any such jurisdiction);
-17-
(e) notify
each Holder of such Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein, in the context in which
they
were made, not misleading, and, at the request of any such Holder, promptly
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein, in the context in which they were
made, not misleading;
(f) cause
all
such Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed;
(g) provide
a
transfer agent, registrar and CUSIP number for all such Registrable Securities
not later than the effective date of such Registration Statement;
(h) enter
into such customary agreements (including, in the case of underwritten
offerings, underwriting agreements in customary form with the managing
underwriter(s) approved by the Company) and take all such other actions as
the
Holders of a majority of the Registrable Securities and Other Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities and
Other Registrable Securities (including, without limitation, effecting a stock
split or a combination of shares);
(i) make
available for inspection by any Holder, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company,
and
cause the Company’s officers, directors, employees and independent accountants
to supply all information reasonably requested by any such Holder, underwriter,
attorney, accountant or agent in connection with such registration
statement;
(j) otherwise
use its reasonable best efforts to comply with all applicable rules and
regulations of the SEC in connection with such registration, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with the
first
day of the Company’s first full calendar quarter after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions
of
Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder;
(k) permit
any Holder of Registrable Securities, that is or might reasonably be deemed
to
be an underwriter or a controlling person of the Company, to participate in
the
preparation of such Registration Statement and to require the insertion therein
of material, furnished to the Company in writing, which in the reasonable
judgment of such Holder and its counsel should be included therein;
-18-
(l) in
the
event of the issuance of any stop order suspending the effectiveness of the
Registration Statement, or of any order suspending or preventing the use of
any
related prospectus or suspending the qualification of any securities included
in
such Registration Statement for sale in any U.S. jurisdiction, use its
reasonable best efforts promptly to obtain the withdrawal of such
order;
(m) use
its
reasonable best efforts to cause such Registrable Securities covered by such
Registration Statement to be registered with or approved by such other U.S.
federal or state governmental agencies or authorities as may be necessary to
enable the holders thereof to consummate the disposition of such Registrable
Securities; and
(n) obtain
a
“cold comfort” letter from the Company’s independent public accountants in
customary form and covering such matters of the type customarily covered by
“cold comfort” letters as the holders of a majority of the Registrable
Securities and Other Registrable Securities being sold reasonably
request.
If
any
such Registration Statement refers to any Holder by name or otherwise as the
holder of any securities of the Company and if such Holder is a controlling
person of the Company, such Holder shall have the right to require (i) the
insertion therein of language, in form and substance reasonably satisfactory
to
such Holder and presented to the Company in writing, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Company’s
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or
(ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force,
the
deletion of the reference to such Holder; provided, that with respect to this
clause (ii) such Holder shall furnish to the Company an opinion of counsel
to
such effect, which opinion and counsel shall be reasonably satisfactory to
the
Company.
7.6 Transfer
of Shares.
The
Purchaser agrees that it will not effect any disposition of the Shares or its
right to purchase the Shares that would constitute a sale within the meaning
of
the Securities Act or any applicable state securities laws, except as
contemplated in a Registration Statement referred to in Section 7.5 or as
otherwise permitted by law.
7.7 Indemnification.
For the
purpose of this Section 7.7, the term “Holder/Affiliate” shall mean any
affiliate (as defined in Rule 405 promulgated under the Securities Act) (an
“Affiliate”)
of the
Holder, and any person who controls the Holder or any such Affiliate of the
Holder within the meaning of Section 15 of the Securities Act or Section 20
of
the Exchange Act.
(a) The
Company agrees to indemnify and hold harmless the Holder and each
Holder/Affiliate against any losses, claims, damages, liabilities or expenses,
joint or several, to which the Holder or Holder/Affiliate may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed)), insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof as contemplated below) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in a Registration Statement, including the prospectus (the
“Prospectus”),
financial statements and schedules, and all other documents filed as a part
thereof, as amended at the time of effectiveness of a Registration Statement,
including any information deemed to be a part thereof as of the time of
effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rules
430B,
430C or 434, of the Rules and Regulations, or the Prospectus, in the form first
filed with the SEC pursuant to Rule 424(b) of the Rules and Regulations, or
filed as part of a Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required, or any amendment or supplement thereto, or
arise
out of or are based upon the omission or alleged omission to state in any of
them a material fact required to be stated therein or necessary to make the
statements in any of them, in light of the circumstances under which they were
made, not misleading, or arise out of or are based in whole or in part on any
breach by the Company of its representations or warranties contained in this
Agreement, or any failure of the Company to perform its obligations hereunder,
and will promptly reimburse each such Holder and each such Holder/Affiliate
for
any legal and other expenses as such expenses are reasonably incurred by such
Holder or such Holder/Affiliate in connection with investigating, defending
or
preparing to defend, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided,
however,
that
the Company will not be liable for amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld, and,
provided,
further,
that
the Company will not be liable in any such case to the extent, that any such
loss, claim, damage, liability, action or expense arises out of or is based
upon
(i) an untrue statement or alleged untrue statement or omission or alleged
omission made in a Registration Statement, the Prospectus or any amendment
or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Holder expressly for use
therein, or (ii) any statement or omission in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Holder prior to the
pertinent sale or sales by the Holder, or a violation by the Holder of any
provision of federal or state securities law applicable to the
Holder.
-19-
(b) Each
Holder will severally, but not jointly, or jointly and severally, with the
Other
Purchasers, indemnify and hold harmless the Company, each of its directors,
each
of its officers, including such officers who signed a Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages, liabilities or expenses to which the Company, each of its
directors, each of its officers and each such controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including
in
settlement of any litigation, but only if such settlement is effected with
the
written consent of such Holder (which consent shall not be unreasonably withheld
or delayed)), insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof as contemplated below) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained
in a
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any omission or alleged omission to state therein a material fact required
to
be stated therein or necessary to make the statements in a Registration
Statement, the Prospectus or any amendment or supplement thereto not misleading
in the light of the circumstances under which they were made, in each case
to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in a Registration Statement,
the Prospectus, or any amendment or supplement thereto, in reliance upon and
in
conformity with written information furnished to the Company by or on behalf
of
the Holder expressly for use therein, and will promptly reimburse the Company,
each of its directors, each of its officers and each such controlling person
for
any legal and other expense reasonably incurred by the Company, each of its
directors, each of its officers and each such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that any
individual Holder’s aggregate liability under this Section 7.7 shall not
exceed the amount of proceeds received by such Holder on the sale of the Shares
pursuant to a Registration Statement.
-20-
(c) Promptly
after receipt by an indemnified party under this Section 7.7 of notice of the
threat or commencement of any action indemnifiable hereunder, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party under this Section 7.7, promptly notify the indemnifying party in writing
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party for
contribution or otherwise under the indemnity agreement contained in this
Section 7.7 to the extent it is not prejudiced as a result of such failure.
In
case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory
to
such indemnified party; provided,
however,
if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded,
based on an opinion of counsel reasonably satisfactory to the indemnifying
party, that there may be a conflict of interest between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to
the indemnifying party, the indemnified party or parties shall have the right
to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election to assume the defense of such action and approval by
the
indemnified party of counsel, the indemnifying party will not be liable to
such
indemnified party under this Section 7.7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in
connection with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel,
reasonably satisfactory to such indemnifying party, representing all of the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of commencement of action, in each of which cases the reasonable fees and
expenses of counsel shall be at the expense of the indemnifying party. In no
event shall any indemnifying party be liable in respect of any amounts paid
in
settlement of any action unless the indemnifying party shall have approved
in
writing the terms of such settlement; provided
that
such consent shall not be unreasonably withheld. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could have
been sought hereunder by such indemnified party from all liability on claims
that are the subject matter of such proceeding.
-21-
(d) If
the
indemnification provided for in this Section 7.7 is required by its terms but
is
for any reason held by a court of competent jurisdiction to be unavailable
to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) of this Section 7.7 in respect to any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred
to
herein (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Holder from the private placement of Common
Stock hereunder and the resale of the Purchaser Shares of such Holder pursuant
to a Registration Statement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
the relative fault of the Company and the Holder in connection with the
statements or omissions or inaccuracies in the representations and warranties
in
this Agreement and/or a Registration Statement which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company on the one hand and each Holder on the other shall be deemed to be
in
the same proportion as the amount paid by such Holder to the Company pursuant
to
this Agreement for the Purchaser Shares purchased by the Purchaser that were
sold pursuant to a Registration Statement bears to the difference between the
amount the Purchaser paid for such Shares that were sold pursuant to a
Registration Statement and the amount received by such Holder from such sale.
The relative fault of the Company, on the one hand, and each Holder on the
other
shall be determined by reference to, among other things, whether the untrue
or
alleged statement of a material fact or the omission or alleged omission to
state a material fact or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Company or by such Holder
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or
payable by a party as a result of the losses, claims, damages, liabilities
and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in paragraph (c) of this Section 7.7, any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
paragraph (c) of this Section 7.7 with respect to the notice of the threat
or
commencement of any threat or action shall apply if a claim for contribution
is
to be made under this paragraph (d); provided,
however,
that no
additional notice shall be required with respect to any threat or action for
which notice has been given under paragraph (c) for purposes of indemnification.
The Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 7.7 were determined solely by pro rata
allocation (even if the Holders were treated as one entity for such purpose)
or
by any other method of allocation which does not take account of the equitable
considerations referred to in this paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each Holder’s obligations to contribute pursuant
to this Section 7.7 is several, and not joint, or joint and several, with that
of the Other Purchasers and other Holders.
-22-
7.8 Participation
in Underwritten Registrations.
A
Holder may not participate in any Piggyback Registration hereunder or, if the
Purchaser, a registration pursuant to Section 7.3 hereof which is underwritten
unless the Holder (a) agrees to sell its Registrable Securities on the basis
provided in any underwriting arrangements approved by the Company in connection
therewith, and (b) completes and executes all customary questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; provided, that
the
Holder as a holder of Registrable Securities included in any underwritten
registration shall not be required to make any representations or warranties
to
the Company or the underwriters other than representations and warranties
regarding such Holder and such Holder’s intended method of distribution.
7.9 Information
Available.
The
Company, upon the reasonable request of a Holder and with prior notice, will
be
available to such Holder or a representative thereof at the Company’s
headquarters to discuss information relevant for disclosure in the Registration
Statement covering the Registrable Securities owned by such Holder and will
otherwise cooperate with the Holder conducting an investigation for the purpose
of reducing or eliminating the Holder’s exposure to liability under the
Securities Act, including the reasonable production of information at the
Company’s headquarters, subject to appropriate confidentiality limitations.
7.10 Reports
Under Exchange Act.
With a
view to making available to the Holders the benefits of Rule 144 under the
Securities Act and any other rule or regulation of the SEC that may at any
time
permit a Holder to sell securities of the
Company to the public without registration or pursuant to a registration on
Form
S-3, the Company shall:
(a) make
and
keep available
adequate current public
information,
as
those terms are understood and defined in Rule 144, at all times after the
effective date of the registration statement relating to the IPO;
(b) use
commercially reasonable efforts to file with the SEC in a timely manner all
reports and other documents required to be filed by the Company under the
Securities Act and the Exchange Act (at any time after the Company has become
subject to such reporting requirements); and
(c) furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) to
the extent accurate, a
written
statement by the Company that it has complied with the reporting requirements
of
Rule 144 (at any time after ninety (90) days after the effective date of the
registration statement relating to the IPO), the Securities Act, and the
Exchange Act (at any time after the Company has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii)
a
copy of the most recent annual or quarterly report of the Company and such
other
reports and documents filed by the Company in compliance with such reporting
requirements; and (iii) such other information as may be reasonably requested
in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration (at any time after the
Company has become subject to the reporting requirements under the Exchange
Act)
or pursuant to Form
S-3
(at any time after the Company so qualifies to use such form).
-23-
SECTION
8. Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of the Purchaser under this Agreement are several and not joint
(or
joint and several) with the obligations of any Other Purchaser, and the
Purchaser shall not be responsible in any way for the performance of the
obligations of any Other Purchaser under the Agreements. The decision of
the
Purchaser to purchase the Purchaser Shares pursuant to this Agreement has
been
made by such Purchaser independently of any Other Purchaser. Nothing contained
in the Agreements, 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 Agreements. The Purchaser acknowledges
that no Other Purchaser has acted as agent for such Purchaser in connection
with
making its investment hereunder and that no Other Purchaser will be acting
as
agent of such Purchaser in connection with monitoring its investment in
the
Purchaser Shares or enforcing its rights under this Agreement. The Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall
not be
necessary for any Other Purchaser to be joined as an additional party in
any
proceeding for such purpose.
SECTION
9. Notices.
All
notices required or permitted hereunder shall be in writing and shall be
deemed
effectively given: (i) upon delivery to the party to be notified; (ii)
when
received by confirmed facsimile or (iii) one (1) business day after deposit
with
a nationally recognized overnight carrier, specifying next business day
delivery, with written verification of receipt. All communications shall
be sent
to the Company and the Purchaser as follows or at such other addresses
as the
Company or the Purchaser may designate upon ten (10) days’ advance written
notice to the other party:
(a) if
to the
Company, to:
Wyndcrest
DD Holdings, Inc.
000
X.X.
Xxxxxxx Xxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attn.:
Xxxx X. Xxxxxx
Facsimile:
(000) 000-0000
with
a
copy to (which shall not constitute notice):
|
Xxxxxx
X. Xxxxxxx, Esq., General Counsel
Facsimile:
(000) 000-0000
|
|
with
a copy to (which shall not constitute notice):
|
|
Xxxxxxxx
& Xxxxxx, LLP
0000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn.:
D. Xxxxxx Xxxxxx
Facsimile:
(000) 000-0000
|
-24-
(b) if
to the
Purchaser, at its address as set forth on the signature pages to this
Agreement.
SECTION
10. Changes.
This
Agreement may not be modified or amended except pursuant to an instrument
in
writing signed by the Company and the Purchaser. Any amendment or modification
effected in accordance with this Section 10 shall be binding upon each
holder of
any securities purchased under this Agreement at the time outstanding,
each
future holder of all such securities, and the Company.
SECTION
11. Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
SECTION
12. Severability.
In case
any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability
of the
remaining provisions contained herein shall not in any way be affected
or
impaired thereby.
SECTION
13. Governing
Law; Venue.
This
Agreement and any disputes or claims arising out of or in connection with
its
subject matter shall be governed by and construed in accordance with the
law of
the State of California without regard to the conflicts of laws principles
of
that or any other jurisdiction. The parties irrevocably agree that the
state and
Federal courts of Los Angeles County, California shall have exclusive
jurisdiction to settle any dispute or claim that arises out of or in connection
with this Agreement. Each of the parties agrees to waive to the fullest
extent
permitted by applicable law any objection that it now has or may hereafter
have
to the venue of any litigation, proceeding or action arising out of, or
in
connection with, this Agreement being laid in any such court, or that any
such
litigation, proceeding or action was brought in an inconvenient
forum.
SECTION
14. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered (including by facsimile)
to
the other parties.
SECTION
15. Entire
Agreement.
This
Agreement (including the Appendices attached hereto) and the instruments
referenced herein contain the entire understanding of the parties with
respect
to the matters covered herein and therein and, except as specifically set
forth
herein or therein, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such
matters.
-25-
SECTION
16. Fees
and Expenses.
Except
as expressly set forth herein, each of the Company and the Purchaser shall
pay
its respective fees and expenses related to the transactions contemplated
by
this Agreement.
SECTION
17. Parties.
This
Agreement is made solely for the benefit of and is binding upon the Purchaser
and the Company and, to the extent expressly provided in Section 7.7, each
Holder and Holder/Affiliate, any person controlling the Company or such
Holder,
the officers and directors of the Company and, subject to the provisions
of
Section 7.7, no other person, shall acquire or have any right under or
by virtue
of this Agreement.
SECTION
18. Assignment.
Except
as otherwise expressly provided herein, the provisions hereof shall inure
to the
benefit of, and be binding upon, the parties hereto and their respective
successors and assigns. This Agreement and the rights of the Purchaser
hereunder
may be assigned by the Purchaser only with the prior written consent of
the
Company, except such consent shall not be required in cases of (i) assignments
by an investment adviser to a fund for which it is the adviser or by or
among
funds that are under common control or (ii) any assignment by the Purchaser,
or
any other Holder, only of its rights to participate in piggyback registrations
under Section 7 of this Agreement, to a transferee from the Purchaser or
such
other Holder of all or a portion of the Purchased Shares, provided that
such
transfer of securities shall not have been consummated in violation of
the
provisions of this Agreement and, provided further that, in each such case,
such
transferee agrees in writing to be bound by the terms of this Agreement
as a
Holder hereunder. Notwithstanding anything to the contrary contained herein,
the
rights to cause the Company to register Registrable Securities in piggyback
registrations pursuant to this Agreement may be assigned (but only with
all
related obligations) by the Purchaser or any other Holder only to a transferee
from it of Purchased Shares who, after such transfer, holds at least 20%
of the
total number of Purchased Shares purchased by the Purchaser pursuant to
this
Agreement (subject to appropriate adjustment for stock splits, stock dividends,
combinations, recapitalizations and similar fundamental corporate events)
(the
“Minimum
Holding Condition”);
provided that the foregoing restriction shall not apply to assignments
by an
investment adviser, which itself then satisfies the Minimum Holding Condition,
to a fund for which it is the adviser or by or among funds that are under
common
control.
SECTION
19. Use
of
Purchaser’s Name.
Notwithstanding anything to the contrary set forth herein, the Company
shall not
publicly disclose the name of the Purchaser for marketing purposes or otherwise,
or include the name of the Purchaser in any filing with the SEC or any
other
regulatory agency or securities exchange, without the prior written consent
of
the Purchaser, except to the extent such disclosure is required by applicable
laws, rules or regulations, in which case the Company shall provide the
Purchaser with prior notice of such disclosure; provided,
further,
that
notwithstanding the foregoing, the Company shall have the right to disclose
the
name of the Purchaser in oral communications between the Company and its
representatives and potential Other Purchasers; provided, that, in connection
with any disclosure pursuant to the foregoing proviso, the Company shall
only be
permitted to disclose that the Purchaser has invested in the Common Stock
and
shall not state or suggest that the Purchaser endorses, sponsors, promotes
or
encourages an investment in the Company by any potential Other
Purchaser.
-26-
SECTION
20. Further
Assurances.
Each
party agrees to cooperate fully with the other party and to execute such
further
instruments, documents and agreements and to give such further written
assurance
as may be reasonably requested by the other party to evidence and reflect
the
transactions described herein and contemplated hereby and to carry into
effect
the intents and purposes of this Agreement.
[Remainder
of Page Intentionally Left Blank]
-27-
IN
WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to
be executed by their duly authorized representatives as of the day and
year
first above written.
|
WYNDCREST
DD HOLDINGS, INC.
|
|
By: _________________________________
Name:
Title:
|
-28-
[INVESTOR
SIGNATURE PAGE]
Print
or
Type:
|
Name
of Purchaser
(Individual
or Institution):
|
|
_________________________________
|
|
Name
of Individual representing
Purchaser
(if an Institution):
|
|
_________________________________
|
|
Title
of Individual representing
Purchaser
(if an Institution):
|
|
_________________________________
|
Signature
by:
|
Individual
Purchaser or Individual
representing
Purchaser:
|
|
_________________________________
|
|
Address: ___________________________
|
|
Telephone: ___________________________
|
|
Facsimile: ___________________________
|
|
Number
of Shares
to
Be Purchased
|
Price
Per Share
In
Dollars
|
Aggregate
Price
|
||
|
$1.40
|
$
|
|||
-29-
SUMMARY
INSTRUCTION SHEET FOR PURCHASER
(to
be
read in conjunction with the entire
Stock
Purchase Agreement which this follows)
A. Complete
the following items on BOTH
Stock
Purchase Agreements (Please sign two
originals):
| 1. |
Page
__ - Signature:
|
|
(i)
|
Name
of Purchaser (Individual or
Institution)
|
|
(ii)
|
Name
of Individual representing Purchaser (if an
Institution)
|
|
(iii)
|
Title
of Individual representing Purchaser (if an
Institution)
|
|
(iv)
|
Signature
of Individual Purchaser or Individual representing
Purchaser
|
|
2.
|
Appendix
II - Stock Certificate
Questionnaire:
|
Provide
the information requested by the Stock Certificate Questionnaire.
|
3.
|
Return
BOTH
properly completed and signed Stock Purchase Agreements including
the
properly completed Appendix II to (initially by facsimile with
original
copy by overnight delivery):
|
|
Wyndcrest
DD Holdings, Inc.
000
X.X. Xxxxxxx Xxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attn.:
Xxxxxxxx Xxxxxxx
Facsimile:
(000) 000-0000
|
B. Instructions
regarding the transfer of funds for the purchase of Shares will be sent
by
facsimile to the Purchaser at a later date.
-30-
Appendix
I
RISK
FACTORS
References
to “we”, “us”, and “our” in the risk factors discussed herein are to Wyndcrest
DD Holdings, Inc, and, as the context may require, its
subsidiaries.
An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below before making a decision to
invest
in our common stock. The risks and uncertainties described below are not
the
only ones we face. Additional risks and uncertainties not presently known
to us,
or that we currently deem immaterial, could negatively impact our business,
results of operations or financial condition in the future. If any of the
following risks and uncertainties develops into actual events, our business,
results of operations and financial condition could be adversely affected.
In
those cases, the value of our common stock could decline and you may lose
all or
part of your investment.
Risks
Related to Our Business and Industry
The
entertainment industry is highly competitive.
The
entertainment industry is highly competitive. We may not be able to compete
successfully against either current or future competitors. Increased competition
could result in reduced revenues, lower margins, and/or loss of market
share,
any of which could significantly harm our business.
Our
operating results may fluctuate significantly.
Our
operating results may fluctuate as a result of a number of factors, many
of
which are outside of our control. For these reasons, comparing our operating
results on a period-to-period basis may not be meaningful, and you should
not
rely on our past results as an indication of our future performance. Each
of the
risk factors listed herein under the caption “Risks Related to Our Business and
Industry”, and the following factors, may affect our operating results:
|
·
|
our
ability to continue to attract clients for our services and products;
|
|
·
|
the
amount and timing of operating costs and capital expenditures
related to
the maintenance and expansion of our businesses, operations and
infrastructure;
|
|
·
|
our
focus on long term goals over short term results;
|
|
·
|
the
results of our investments in high risk
projects;
|
|
·
|
general
economic conditions and those economic conditions specific to
our business
lines; and
|
|
·
|
geopolitical
events such as war, threat of war or terrorist actions.
|
-31-
In
addition, our business has historically been cyclical and seasonal in nature,
reflecting overall economic conditions as well as client budgeting and
buying
patterns in the advertising and entertainment industries generally. The
cyclicality and seasonality in our business could become more pronounced
and may
cause our operating results to fluctuate more widely.
Changes
in the United States, global or regional economic conditions could adversely
affect our profitability.
Our
services, and the products we plan to offer, are luxuries that are dependent
on
the amount of disposable income available to consumers. A decrease in economic
activity in the United States or in other regions of the world in which
we do
business could adversely affect demand for our products and services. In
addition, an increase in price levels generally, or in price levels in
a
particular sector such as the energy sector, could result in a shift in
consumer
demand away from entertainment products. Such events could cause a decrease
in
the demand for the services we offer which would have an adverse effect
on our
business and results of operations.
We
intend to undertake acquisitions to expand our business, which may pose
risks to
our business and dilute the ownership of our existing
stockholders.
A
key
component of our business strategy includes strengthening our competitive
position through internal development and growth. However, we intend to
selectively pursue strategic acquisitions of companies in our industry
and
contiguous industries. To finance any acquisition, it may be necessary
for us to
raise additional funds through public or private financings. Additional
funds
may not be available on terms that are favorable to us, and, in the case
of
equity financings, would result in dilution to our stockholders. We cannot
assure you that we will be able to consummate any acquisitions or, if
consummated, successfully integrate the operations and management of future
acquired companies. If we are unable to attract and consummate acquisitions,
our
growth could be adversely impacted. Furthermore, any acquisition that is
consummated presents several financial and operational risks that could
have an
adverse effect on our operating results. These risks include:
|
·
|
costs
associated with integrating the acquired
businesses;
|
|
·
|
potential
liabilities of the acquired
businesses;
|
|
·
|
possible
adverse tax and accounting effects of the
acquisition;
|
|
·
|
diversion
of our management’s attention from the day-to-day operation of our
business to the integration of the acquired
business;
|
|
·
|
key
employees of the acquired business leaving after the acquisition;
and
|
|
·
|
the
acquired business not performing at the level we projected when
we
determined the purchase price.
|
-32-
Interruption
or failure of our information technology systems could impair our ability
to
effectively provide our services and products, which could damage our
reputation.
Our
continued success will depend on our ability to meet our clients’ tight
schedules, and our provision of our services and products depends on the
continuing operation of our information technology and communications systems.
Our systems are vulnerable to damage or interruption from earthquakes,
terrorist
attacks, floods, fires, power loss, telecommunications failures, computer
viruses or other attempts to harm our systems, and similar events. Our
facility
is located in an area with a high risk of major earthquakes and is also
subject
to break-ins, sabotage and intentional acts of vandalism. Some of our systems
are not fully redundant, and our disaster recovery planning cannot account
for
all eventualities. The occurrence of a natural disaster or other unanticipated
problems at our facility could result in lengthy interruptions in our projects
and our ability to deliver services. Interruptions in our projects could
hinder
our ability to retain and attract clients and our brand could be damaged
if
clients believe we are unreliable, either of which, could adversely affect
our
business and operating results.
Our
future success depends on certain key personnel.
Our
future success depends on the continued service and performance of our
senior
management and key technical personnel, including Xxxx X. Xxxxxx, Xxxx
Xxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxxx and Xx Xxxxxxx, whom we rely
on
for management of our company, development of our business strategy and
management of our strategic relationships. Certain of our executive officers
are
bound by employment and noncompetition agreements. However, while it is
standard
in the entertainment industry to rely on employment agreements as a method
of
retaining the services of key personnel, these agreements cannot assure
us of
the continued services of such employees. Furthermore, many of our other
management and key technical personnel are not bound by employment or
noncompetition agreements, and, as a result, these employees can leave
with
little or no prior notice. The loss of any such key personnel, particularly
with
no notice, could cause delays on the projects such key personnel were
responsible for. Such losses may also have and adverse impact on our
relationship with those clients with whom such key personnel had strategic
relationships.
To
be successful, we must continue to attract and retain qualified personnel.
Our
future success depends to a significant extent on our ability to identify,
attract, hire, train and retain qualified creative, technology and managerial
personnel. Competition for the caliber of talent required to make our products
and provide our services, particularly for creative and technology personnel,
will continue to intensify as film studios build their in-house animation
and
visual special effects capabilities, and as the markets for video games
and
visual special effects software continue to develop. There can be no assurance
that we will be successful in identifying, attracting, hiring, training
and
retaining such qualified personnel in the future and our failure to do
so could
have an adverse effect on our business.
-33-
We
depend on cutting-edge technology and computer systems and we cannot predict
the
effect that rapid technological change or alternative forms of entertainment
may
have on us or our industry.
The
entertainment industry in general, and the sectors thereof in which we
operate
in particular, continue to undergo significant changes, primarily due to
technological developments. The rapid growth of technology and shifting
consumer
tastes prevent us from being able to accurately predict the overall effect
that
technological growth or the availability of alternative forms of entertainment
may have on the potential revenue from and profitability of our operating
units’
services and products. Furthermore, because we are required to provide
cutting
edge products to continue to win business we must ensure that our production
environment integrates the latest tools and techniques developed in the
industry. This requires us to either develop these capabilities by upgrading
our
own proprietary software, which can result in substantial research and
development costs, or to purchase third-party licenses, which can result
in
significant expenditures. In the event we seek to obtain third-party licenses,
we cannot guarantee that they will be available or, once obtained, will
continue
to be available on commercially reasonable terms, or at all. Furthermore,
any
error or defect in our software, a failure of our hardware or a failure
of our
backup facilities may result in a delay in delivery of products and services
that could result in significantly increased production costs and may affect
our
ability to complete the work in a timely fashion. Such delays could have
an
adverse effect on our brand name and our relationship with our clients.
Our
revenue may be adversely affected if we fail to protect our proprietary
technology or enhance or develop new technology.
We
depend
on our proprietary technology to develop and produce our products and provide
our services. We own no patents. We rely on a combination of copyright
and trade
secret protection and nondisclosure agreements to establish and protect
our
proprietary rights. In addition, we also rely on third-party software which
is
readily available to others. Failure of our copyrights and trade secret
protection, non-disclosure agreements or other measures to provide protection
of
our technology, and the availability of third-party software, may make
it easier
for our competitors to obtain technology equivalent to or superior to our
technology. Such failures may cause us to seek patents on our proprietary
technology. We cannot provide any assurances that patents will issue from
any
patent applications we may file or that, if patents do issue, any claims
allowed
will be sufficiently broad to protect our technology or that they will
not be
challenged, invalidated or circumvented. Furthermore, if such competitors
develop or license technology that is superior to ours or that makes our
technology obsolete, we may be required to incur significant costs to enhance
or
acquire new technology so that it remains competitive. We cannot assure
you that
such costs would not have an adverse effect on our operating results.
In
addition, we may be required to litigate in the future to enforce our
intellectual property rights, to protect our trade secrets, to determine
the
validity and scope of the proprietary rights of others or to defend against
claims of infringement or invalidity. Any such litigation could result
in
substantial costs and diversion of resources and could have an adverse
effect on
our business and/or our operating results.
-34-
Others
may assert intellectual property infringement claims against us.
Companies
in the visual special effects and related segments of the entertainment
industry
are constantly subject to the possibility of claims that their products,
services or techniques misappropriate or infringe the intellectual property
rights of third-parties with respect to their technology and software,
previously developed works or other entertainment or intellectual property.
There can be no assurance that infringement or misappropriation claims
(or
claims for indemnification resulting from such claims) will not be asserted
or
prosecuted against us, or that any assertions or prosecutions will not
adversely
affect our business and/or our operating results. Irrespective of the validity
or the successful assertion of such claims, we would incur significant
costs and
diversion of resources with respect to the defense thereof, which could
have an
adverse effect on our business and/or our operating results. If any claims
or
actions are asserted against us, we may seek to obtain a license of a
third-party’s intellectual property rights. We cannot provide any assurances,
however, that under such circumstances a license would be available on
reasonable terms or at all.
We
depend on revenues from a few significant relationships and any loss,
cancellation, reduction, or delay in these relationships could harm our
business.
In
general, we have historically derived a material portion of our revenue
from one
or a limited number of customers. We expect that in future periods we may
also
enter into contracts with customers which represent a significant concentration
of our revenues. If such contracts were terminated, our revenues and net
income
could significantly decline. Our future success will depend on our continued
ability to develop and manage relationships with our significant customers.
Any
adverse change in our relationship with any of the major motion picture
studios
or other principal customers could have an adverse effect on our business.
Although we are attempting to expand our customer base, we expect that
our
customer concentration will not change significantly in the near future.
The
markets in which we sell our services and products are dominated by a relatively
small number of customers. We cannot be sure that we will be able to retain
our
largest customers, that we will be able to attract additional customers,
or that
our customers will continue to buy our products and services in the same
amounts
as in prior years. The loss of one or more of our largest customers, any
reduction in revenues from these customers or our inability to successfully
develop relationships with additional customers each could significantly
harm
our business.
Management
will be subject to certain conflicts of interest arising from their management
of our business.
Certain
members of our management will devote time, which may be substantial, to
their
other business activities (which may include management of other companies),
and
will have certain other conflicts of interest.
The
inability to successfully manage the growth of our business may have an
adverse
effect on our operating results.
Since
our
acquisition of Digital Domain, Inc. in April 2006, we have begun to implement
improvements to its financial, inventory, management and reporting controls
and
to hire additional technical, administrative and management personnel.
While
necessary, these improvements require incurring expenses that limit our
management’s ability to pursue potential market opportunities. If our management
is unable to successful manage expenses in a manner that allows us to both
improve operations and at the same time pursue potential market opportunities,
the growth of our business could be adversely impacted.
-35-
We
may not be able to implement our strategies of entering into the film production
and video game development businesses effectively or at
all.
Our
business strategy contemplates the potential expansion of our business
into two
new business lines: film production and video game production. Entry into
either
of these business lines presents significant challenges and subjects our
business to significant risks, and the inability to successfully manage
these
challenges could adversely affect our successful entry into one or both
of these
markets. Such failures would significantly limit our ability to grow our
business while at the same time diverting significant resources from our
historical core businesses.
Our
reported financial results could be adversely affected by changes in financial
accounting standards or by the application of existing or future accounting
standards to our business as it evolves.
As
a
result of the enactment of the Xxxxxxxx-Xxxxx Act of 2002 and the review
of
accounting policies by the SEC and national and international accounting
standard bodies, the frequency of accounting policy changes may accelerate.
For
example, accounting policies affecting software revenue recognition have
been
the subject of frequent interpretations, which could significantly affect
the
way we account for revenue related to our products. In addition, the rules
for
tax accounting are in the process of being changed. As we enhance, expand
and
diversify our business and product offerings, the application of existing
or
future financial accounting standards, particularly those relating to the
way we
account for revenue and taxes, could have a significant adverse effect
on our
reported results although not necessarily on our cash flows.
Risks
Related to the Purchase and Ownership of Our Common Stock
There
is no public market for our securities and transferability of any shares
of
common stock purchased by you will be limited.
There
is
no public market for our securities and there can be no assurance that
an active
trading market will ever develop, or, if developed, that it will be sustained.
Our common stock has not been registered under the Securities Act or the
Exchange Act. There can be no assurance as to if or when we will register
any of
our securities. Investors must therefore be prepared to bear the economic
risk
of an investment in shares of common stock for an indefinite period of
time.
-36-
The
terms of the sale of shares of our common stock and the purchase price
of the
shares offered hereby were arbitrarily determined.
The
purchase price of the shares, and other terms of the sale of shares of
our
common stock, were determined arbitrarily by us and do not bear any direct
relationship to our and our subsidiaries’ assets, book value or any other
generally accepted criteria of valuation.
Future
sales of common stock may have an adverse effect on its market
price.
In
the
event that a public market does eventuate for the trading of the common
stock,
future sales of such stock by stockholders under Rule 144 promulgated under
the
Securities Act or through outstanding registration rights granted to the
holders
of our securities could have an adverse effect on the market prices of
the
common stock. Sales of substantial amounts of common stock or the perception
that such sales could occur could adversely affect the prevailing market
price
for the common stock. In addition, sales of common stock pursuant to the
exercise of “piggyback” registration rights may further adversely affect the
market price of the common stock.
The
common stock offered is subject to substantial restrictions on
transfer.
The
shares of common stock offered hereby will be restricted, and you will
not be
able to sell or otherwise transfer such shares unless the sale or other
transfer
of such shares has been registered, qualified or deemed to be exempt from
such
registration or qualification under the Securities Act and applicable state
securities or “blue sky” laws.
We
may issue additional preferred stock, which may impair the value of the
common
stock and may have rights superior to your common stock rights.
In
addition to the above-referenced shares of common stock that we may issue
without stockholder approval, we have the right to authorize and issue
preferred
stock. At present there are outstanding 1,000,000 shares of our preferred
stock,
designated our 8% Senior Cumulative Convertible Preferred Stock, the holders
of
which have rights superior to the rights of the holders of our Common Stock.
While we have no present plans to issue any additional shares of preferred
stock, our Board of Directors has the authority, without stockholder approval,
to create and issue one or more series or classes of such preferred stock
and to
determine the voting, liquidation, dividend and other rights of holders
of such
preferred stock. The holders of shares of any such series or class of preferred
stock may have rights superior to the holders of common stock.
Our
principal stockholders, directors and management will continue to own a
large
percentage of our voting stock after this offering, which will allow them
to
exercise significant influence over matters subject to stockholder
approval.
Our
executive officers, directors and stockholders holding 5% or more of our
outstanding common stock will beneficially own or control approximately __%
of the outstanding shares of our common stock following the closing of
this
offering, if fully subscribed. Accordingly, these executive officers, directors
and principal stockholders, acting as a group, will have substantial influence
over the outcome of corporate actions requiring stockholder approval, including
the election of directors, any merger, consolidation or sale of all or
substantially all of our assets or any other significant corporate transaction.
These stockholders may also delay or prevent a change of control or otherwise
discourage a potential acquirer from attempting to obtain control of us,
even if
such a change of control would benefit our other stockholders. This significant
concentration of stock ownership may adversely affect the value of our
common
stock due to investors’ perception that conflicts of interest may exist or
arise.
-37-
We
do not intend to pay dividends on our common stock.
We
do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. We currently anticipate that we will retain all of our available
cash,
if any, for use as working capital and for other general corporate purposes.
Any
payment of future dividends will be at the discretion of our Board of Directors
and will depend upon, among other things, our earnings, financial condition,
capital requirements, level of indebtedness, statutory and contractual
restrictions applying to the payment of dividends and other considerations
that
the Board of Directors deems relevant. Investors must rely on sales of
their
common stock after price appreciation, which may never occur, as the only
way to
realize a return on their investment. Investors seeking cash dividends
should
not purchase our common stock.
Some
provisions of our charter documents and Delaware law may have anti-takeover
effects that could discourage an acquisition of us by others, even if an
acquisition would be beneficial to our stockholders.
Provisions
in our charter documents, as well as provisions of Delaware law, could
make it
more difficult for a third-party to acquire us, even if doing so would
benefit
our stockholders. In addition, we are subject to Section 203 of the
Delaware General Corporation Law, which generally prohibits a Delaware
corporation from engaging in any broad range of business combinations with
any
stockholder (an “interested stockholder”) who owns, or at any time in the last
three years owned, 15% or more of its outstanding voting stock for a period
of
three years following the date on which the stockholder became an interested
stockholder. This provision could have the effect of delaying or preventing
a
change of control, whether or not it is desired by or beneficial to our
stockholders.
You
will experience immediate and substantial dilution as a result of this
offering
and may experience additional dilution in the future.
If
you
purchase shares of our common stock, you will pay more for your shares
than the
amounts paid by existing stockholders for their shares, and, as a result,
you
will incur an immediate and substantial dilution in your investment. If
we raise
additional funding by issuing equity securities or convertible debt, or
if we
acquire other companies or technologies or finance strategic alliances
by
issuing equity, the newly issued or issuable shares will further dilute
your
percentage ownership and may also reduce the value of your
investment.
-38-
We
have broad discretion in the use of the net proceeds from this offering,
and we
may not use these proceeds effectively.
We
have
not determined the specific allocation of the net proceeds of the sale
of shares
of our common stock. Our management will have broad discretion in the
application of the net proceeds therefrom and could spend the proceeds
in ways
that do not necessarily improve our results of operations or enhance the
value
of our common stock. The failure by our management to apply these funds
effectively could result in financial losses that could have a material
adverse
effect on our business or financial condition, cause the value of our common
stock to decline and/or delay product development.
-39-
Appendix
II
STOCK
CERTIFICATE QUESTIONNAIRE
Pursuant
to Section 3 of the Agreement, please provide us with the following information:
|
1.
|
The
exact name that your Shares are to be registered in (this is
the name that
will appear on your stock certificate(s)). You may use a nominee
name if
appropriate:
|
_____________________________
|
|
|
2.
|
The
relationship between the Purchaser of the Shares and the Registered
Holder
listed in response to item 1 above:
|
_____________________________
|
|
|
3.
|
The
mailing address of the Registered Holder listed in response to
item 1
above:
|
_____________________________
_____________________________
_____________________________
_____________________________
|
|
|
4.
|
The
Social Security Number or Tax Identification Number of the Registered
Holder listed in response to item 1 above:
|
_____________________________
|
-40-
