PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the ___ day of
November, 2006 by and among UTIX Group, Inc., a Delaware corporation (the
"Company"), and the Investors set forth on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Section 4(2) of the 1933 Act, or Regulation D ("Regulation
D") promulgated thereunder; and
B. The Investors wish to purchase from the Company, and the Company
wishes to sell and issue to the Investors, in one or more closings, upon the
terms and conditions stated in this Agreement, (i) up to an aggregate of
2,692,320 shares of the Company's Series B Convertible Preferred Stock, par
value $0.001 per share (the "Preferred Stock"), such shares of Preferred Stock
to have the relative rights, preferences and designations set forth in the
Certificate of Designations set forth in EXHIBIT A hereto (the "Certificate of
Designations"), at a purchase price of $1.30 per share (the "Per Share Purchase
Price"), and (ii) warrants to purchase up to an aggregate of 403,848 shares of
Common Stock (subject to adjustment) at an exercise price of $2.60 per share
(subject to adjustment) in the form attached hereto as EXHIBIT B; and
C. Contemporaneous with the sale of the Shares and the Warrants at the
first closing, the parties hereto will execute and deliver a Registration Rights
Agreement, in the form attached hereto as EXHIBIT C (the "Registration Rights
Agreement"), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"COMMON STOCK" means the Company's common stock, par value $0.001 per
share, and any securities into which the common stock may be reclassified.
"COMPANY'S KNOWLEDGE" means the actual knowledge of the executive
officers (as defined in Rule 405 under the 0000 Xxx) of the Company, after due
inquiry.
"CONFIDENTIAL INFORMATION" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"CONTROL" (including the terms "controlling", "controlled by" or "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"CONVERSION SHARES" means the shares of Common Stock issuable upon the
conversion of the Shares.
"EFFECTIVE DATE" means the date on which the initial Registration
Statement is declared effective by the SEC.
"EFFECTIVENESS DEADLINE" means the date on which the initial
Registration Statement is required to be declared effective by the SEC under the
terms of the Registration Rights Agreement.
"INTELLECTUAL PROPERTY" means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents.
"PERSON" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
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"PURCHASE PRICE" means up to Three Million Five Hundred Thousand
Sixteen Dollars ($3,500,016).
"REGISTRATION STATEMENT" has the meaning set forth in the Registration
Rights Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"SEC FILINGS" has the meaning set forth in Section 4.6.
"SECURITIES" means the Shares, the Conversion Shares, the Warrants and
the Warrant Shares.
"SHARES" means the shares of Preferred Stock to be purchased hereunder.
"SUBSIDIARY" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person.
"TRANSACTION DOCUMENTS" means this Agreement, the Certificate of
Designations, the Warrants and the Registration Rights Agreement.
"WARRANTS" means the warrants to be purchased hereunder.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of the Warrants.
"1933 ACT" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
2. PURCHASE AND SALE OF THE SHARES AND WARRANTS. Subject to the
terms and conditions of this Agreement, on each Closing Date hereunder, each of
the Investors purchasing Shares and Warrants on such Closing Date shall
severally, and not jointly, purchase, and the Company shall sell and issue to
the Investors, the Shares and the Warrants in the respective amounts set forth
opposite the Investors' names on the signature pages attached hereto in exchange
for each Investor's pro rata share of the Purchase Price being paid on such
Closing Date as specified in Section 3 below.
3. CLOSING. Upon confirmation that the other conditions to
closing specified herein have been satisfied or duly waived by the Investors, on
the first Closing Date the Company shall file the Certificate of Designations
with the Secretary of State of Delaware. Unless and Investor
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has made alternative arrangements with the Company, upon confirmation that the
Certificate of Designations has been filed and has become effective, on each
Closing Date the Company shall deliver to Xxxxxxxxxx Xxxxxxx PC, in trust, a
certificate or certificates, registered in such name or names as the applicable
Investors may designate, representing the Shares and the Warrants being
purchased by such Investors on such Closing Date, with instructions that such
certificates are to be held for release to the Investors only upon payment in
full of the Purchase Price payable on such Closing Date to the Company by all
the Investors. Upon such receipt by Xxxxxxxxxx Xxxxxxx PC of the certificates,
each Investor shall promptly, but no more than one Business Day thereafter,
cause a wire transfer in same day funds to be sent to the account of the Company
as instructed in writing by the Company, in an amount representing such
Investor's pro rata portion of the Purchase Price being paid on such Closing
Date as set forth on the signature pages to this Agreement. On the date (each, a
"Closing Date") the Company receives the applicable portion of the Purchase
Price from an Investor, the certificates evidencing the Shares and the Warrants
being purchased by such Investor on such Closing Date shall be released to such
Investor (a "Closing"). Each Closing shall take place at the offices of
Xxxxxxxxxx Xxxxxxx PC, 1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other location and on such other date as the Company and
the Investors shall mutually agree.
The Company shall have the right to conduct multiple Closings;
provided, however, that (i) on the first Closing Date the Company shall receive
a minimum investment of at least $3 million, (ii) any Investor making an
investment in the Shares and Warrants shall become a party to this Agreement and
the Registration Rights Agreement, (iii) any additional Closing shall occur on
or prior to November 15, 2006 and (iv) the Company shall not have the right to
receive an aggregate investment of more than $3.5 million.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each
of the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and to own its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not had and could not reasonably
be expected to have a Material Adverse Effect. The Company's Subsidiaries are
listed on SCHEDULE 4.1 hereto.
4.2 AUTHORIZATION. The Company has full power and
authority and has taken all requisite action on the part of the Company, its
officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of the Transaction Documents, (ii) the authorization of
the performance of all obligations of the Company hereunder or thereunder, and
(iii) the authorization, issuance (or reservation for issuance) and delivery of
the Securities. The Transaction Documents constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy,
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insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors' rights generally.
4.3 CAPITALIZATION. SCHEDULE 4.3 sets forth (a) the
authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the number
of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Securities) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company. All of the issued
and outstanding shares of the Company's capital stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive
rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties. Except as described on SCHEDULE
4.3, all of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights, were issued in full compliance
with applicable state and federal securities law and any rights of third parties
and are owned by the Company, beneficially and of record, subject to no lien,
encumbrance or other adverse claim. Except as described on SCHEDULE 4.3, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on SCHEDULE
4.3, there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated by this Agreement, neither the Company nor
any of its Subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind. Except as described on SCHEDULE 4.3 and except
for the Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as described on
SCHEDULE 4.3 and except as provided in the Registration Rights Agreement, no
Person has the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.
Except as described on SCHEDULE 4.3, the issuance and sale of the
Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to any other Person (other than the Investors) and
will not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security.
Except as described on SCHEDULE 4.3, the Company does not have
outstanding stockholder purchase rights or "poison pill" or any similar
arrangement in effect giving any Person the right to purchase any equity
interest in the Company upon the occurrence of certain events.
4.4 VALID ISSUANCE. The Shares have been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction
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Documents or imposed by applicable securities laws and will have the relative
rights, powers and preferences set forth in the Certificate of Designations. The
Warrants have been duly and validly authorized. Upon the due conversion of the
Shares in accordance with the Certificate of Designations, the Conversion Shares
will be validly issued, fully paid and nonassessable, and shall be free and
clear of all encumbrances and restrictions (other than those created by the
Investors), except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws. Upon the due exercise of the
Warrants, the Warrant Shares will be validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws and except for those created by the Investors. The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the conversion of the Shares and the exercise of the Warrants, free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws
and except for those created by the Investors.
4.5 CONSENTS. Except as described in SCHEDULE 4.5, (i)
the execution, delivery and performance by the Company of the Transaction
Documents and (ii) the offer, issuance and sale of the Securities require no
consent of, action by or in respect of, or filing with, any Person, governmental
body, agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws or any other notices required thereby, all of
which the Company undertakes to file within the applicable time periods. Subject
to the accuracy of the representations and warranties of each Investor set forth
in Section 5 hereof, the Company has taken all action necessary to exempt (i)
the issuance and sale of the Securities, (ii) the issuance of the Conversion
Shares upon the due conversion of the Shares, (iii) the issuance of the Warrant
Shares upon due exercise of the Warrants, and (iv) the other transactions
contemplated by the Transaction Documents from the provisions of any stockholder
rights plan or other "poison pill" arrangement, any anti-takeover, business
combination or control share law or statute binding on the Company or to which
the Company or any of its assets and properties may be subject and any provision
of the Company's Amended and Restated Certificate of Incorporation or Bylaws
that is or could reasonably be expected to become applicable to the Investors as
a result of the transactions contemplated hereby, including without limitation,
the issuance of the Securities and the ownership, disposition or voting of the
Securities by the Investors or the exercise of any right granted to the
Investors pursuant to this Agreement or the other Transaction Documents.
4.6 DELIVERY OF SEC FILINGS; BUSINESS. The Company has
made available to the Investors through the XXXXX system, true and complete
copies of the Company's most recent Annual Report on Form 10-KSB for the fiscal
year ended September 30, 2005 (the "10-KSB"), and all other reports filed by the
Company pursuant to the 1934 Act since the filing of the 10-KSB and prior to the
date hereof (collectively, the "SEC Filings"). The SEC Filings are the only
filings required of the Company pursuant to the 1934 Act for such period. The
Company and its Subsidiaries are engaged in all material respects only in the
business described in the SEC Filings and the SEC Filings contain a complete and
accurate description in all material respects of the business of the Company and
its Subsidiaries, taken as a whole.
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4.7 USE OF PROCEEDS. The net proceeds of the sale of the
Shares and the Warrants hereunder shall be used by the Company for working
capital and general corporate purposes.
4.8 NO MATERIAL ADVERSE CHANGE. Since September 30, 2005
except as identified and described in the SEC Filings or as described on
SCHEDULE 4.8, there has not been:
(i) any change in the consolidated assets,
liabilities, financial condition or operating results of the Company from that
reflected in the financial statements included in the Company's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 2006, except for changes in the
ordinary course of business which have not had and could not reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend,
or any authorization or payment of any distribution, on any of the capital stock
of the Company, or any redemption or repurchase of any securities of the
Company;
(iii) any material damage, destruction or loss,
whether or not covered by insurance to any assets or properties of the Company
or its Subsidiaries;
(iv) any waiver, not in the ordinary course of
business, by the Company or any Subsidiary of a material right or of a material
debt owed to it;
(v) any satisfaction or discharge of any lien,
claim or encumbrance or payment of any obligation by the Company or a
Subsidiary, except in the ordinary course of business and which is not material
to the assets, properties, financial condition, operating results or business of
the Company and its Subsidiaries taken as a whole (as such business is presently
conducted and as it is proposed to be conducted);
(vi) any change or amendment to the Company's
Amended and Restated Certificate of Incorporation or Bylaws, or material change
to any material contract or arrangement by which the Company or any Subsidiary
is bound or to which any of their respective assets or properties is subject;
(vii) any material labor difficulties or labor
union organizing activities with respect to employees of the Company or any
Subsidiary;
(viii) any material transaction entered into by the
Company or a Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any key
employee, or material change in the composition or duties of the senior
management of the Company or any Subsidiary;
(x) the loss or threatened loss of any customer
which has had or could reasonably be expected to have a Material Adverse Effect;
or
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(xi) any other event or condition of any
character that has had or could reasonably be expected to have a Material
Adverse Effect.
4.9 SEC FILINGS.
(a) At the time of filing thereof, the SEC
Filings complied as to form in all material respects with the requirements of
the 1934 Act and did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each registration statement and any
amendment thereto filed by the Company since January 1, 2003 pursuant to the
1933 Act and the rules and regulations thereunder, as of the date such statement
or amendment became effective, complied as to form in all material respects with
the 1933 Act and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein not misleading; and each prospectus filed
pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of the
closing of any sale of securities pursuant thereto did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
4.10 NO CONFLICT, BREACH, VIOLATION OR DEFAULT. The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under (i) the Company's Amended and Restated Certificate of
Incorporation or the Company's Bylaws, both as in effect on the date hereof
(true and complete copies of which have been made available to the Investors
through the XXXXX system), or (ii)(a) any statute, rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of their respective assets
or properties, or (b) any agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject.
4.11 TAX MATTERS. The Company and each Subsidiary has
timely prepared and filed all tax returns required to have been filed by the
Company or such Subsidiary with all appropriate governmental agencies and timely
paid all taxes shown thereon or otherwise owed by it. The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods
are adequate in all material respects, and there are no material unpaid
assessments against the Company or any Subsidiary nor, to the Company's
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and its
Subsidiaries, taken as a whole. All taxes and other assessments and levies that
the Company or any Subsidiary is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper governmental entity
or third party when due. There are no tax liens or claims pending or, to the
Company's Knowledge, threatened against the
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Company or any Subsidiary or any of their respective assets or property. Except
as described on SCHEDULE 4.11, there are no outstanding tax sharing agreements
or other such arrangements between the Company and any Subsidiary or other
corporation or entity.
4.12 TITLE TO PROPERTIES. Except as disclosed in the SEC
Filings, the Company and each Subsidiary has good and marketable title to all
real properties and all other properties and assets owned by it, in each case
free from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and each Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.13 CERTIFICATES, AUTHORITIES AND PERMITS. The Company
and each Subsidiary possess adequate certificates, authorities or permits issued
by appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.14 LABOR MATTERS.
(a) Except as set forth on SCHEDULE 4.14, the
Company is not a party to or bound by any collective bargaining agreements or
other agreements with labor organizations. The Company has not violated in any
material respect any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees' health, safety, welfare, wages and hours.
(b) (i) There are no labor disputes existing, or
to the Company's Knowledge, threatened, involving strikes, slow-downs, work
stoppages, job actions, disputes, lockouts or any other disruptions of or by the
Company's employees, (ii) there are no unfair labor practices or petitions for
election pending or, to the Company's Knowledge, threatened before the National
Labor Relations Board or any other federal, state or local labor commission
relating to the Company's employees, (iii) no demand for recognition or
certification heretofore made by any labor organization or group of employees is
pending with respect to the Company and (iv) to the Company's Knowledge, the
Company enjoys good labor and employee relations with its employees and labor
organizations.
(c) The Company is, and at all times has been,
in compliance in all material respects with all applicable laws respecting
employment (including laws relating to classification of employees and
independent contractors) and employment practices, terms and conditions of
employment, wages and hours, and immigration and naturalization. There are no
claims pending against the Company before the Equal Employment Opportunity
Commission or any other administrative body or in any court asserting any
violation of Title VII of the Civil Rights Act of
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1964, the Age Discrimination Act of 1967, 42 U.S.C. 'SS' 1981 or 1983 or any
other federal, state or local Law, statute or ordinance barring discrimination
in employment.
(d) Except as disclosed in the SEC Filings or as
described on SCHEDULE 4.14, the Company is not a party to, or bound by, any
employment or other contract or agreement that contains any severance,
termination pay or change of control liability or obligation, including, without
limitation, any "excess parachute payment," as defined in Section 2806(b) of the
Internal Revenue Code.
(e) Except as specified in SCHEDULE 4.14, to the
Company's Knowledge, each of the Company's employees is a Person who is either a
United States citizen or a permanent resident entitled to work in the United
States. To the Company's Knowledge, the Company has no liability for the
improper classification by the Company of such employees as independent
contractors or leased employees prior to the initial Closing.
4.15 INTELLECTUAL PROPERTY.
(a) All Intellectual Property of the Company and
its Subsidiaries is currently in compliance with all legal requirements
(including timely filings, proofs and payments of fees) and is valid and
enforceable. No Intellectual Property of the Company or its Subsidiaries which
is necessary for the conduct of Company's and each of its Subsidiaries'
respective businesses as currently conducted or as currently proposed to be
conducted has been or is now involved in any cancellation, dispute or
litigation, and, to the Company's Knowledge, no such action is threatened. No
patent of the Company or its Subsidiaries has been or is now involved in any
interference, reissue, re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and
consent, royalty or other agreements concerning Intellectual Property which are
necessary for the conduct of the Company's and each of its Subsidiaries'
respective businesses as currently conducted or as currently proposed to be
conducted to which the Company or any Subsidiary is a party or by which any of
their assets are bound (other than generally commercially available, non-custom,
off-the-shelf software application programs having a retail acquisition price of
less than $10,000 per license) (collectively, "License Agreements") are valid
and binding obligations of the Company or its Subsidiaries that are parties
thereto and, to the Company's Knowledge, the other parties thereto, enforceable
in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors' rights
generally, and there exists no event or condition which will result in a
material violation or breach of or constitute (with or without due notice or
lapse of time or both) a default by the Company or any of its Subsidiaries under
any such License Agreement.
(c) The Company and its Subsidiaries own or have
the valid right to use all of the Intellectual Property that is necessary for
the conduct of the Company's and each of its Subsidiaries' respective businesses
as currently conducted or as currently proposed to be conducted and for the
ownership, maintenance and operation of the Company's and its Subsidiaries'
properties and assets, free and clear of all liens, encumbrances, adverse claims
or
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obligations to license all such owned Intellectual Property and Confidential
Information, other than licenses entered into in the ordinary course of the
Company's and its Subsidiaries' businesses. The Company and its Subsidiaries
have a valid and enforceable right to use all third party Intellectual Property
and Confidential Information used or held for use in the respective businesses
of the Company and its Subsidiaries.
(d) To the Company's Knowledge, the conduct of
the Company's and its Subsidiaries' businesses as currently conducted does not
infringe or otherwise impair or conflict with (collectively, "Infringe") any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company's Knowledge, the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There is no
litigation or order pending or outstanding or, to the Company's Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Confidential Information of the Company and its Subsidiaries and the Company's
and its Subsidiaries' use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company's Knowledge, there is no
valid basis for the same.
(e) The consummation of the transactions
contemplated hereby and by the other Transaction Documents will not result in
the alteration, loss, impairment of or restriction on the Company's or any of
its Subsidiaries' ownership or right to use any of the Intellectual Property or
Confidential Information which is necessary for the conduct of Company's and
each of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted.
(f) The Company and its Subsidiaries have taken
reasonable steps to protect the Company's and its Subsidiaries' rights in their
Intellectual Property and Confidential Information. Each employee, consultant
and contractor who has had access to Confidential Information which is necessary
for the conduct of Company's and each of its Subsidiaries' respective businesses
as currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company's standard forms thereof, except where the failure to do so has not had
and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate. Except under confidentiality obligations,
there has been no material disclosure of any of the Company's or its
Subsidiaries' Confidential Information to any third party.
4.16 ENVIRONMENTAL MATTERS. To the Company's Knowledge,
neither the Company nor any Subsidiary (i) is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), (ii) owns or operates any real property contaminated with any substance
that is subject to any Environmental Laws, (iii) is liable for any off-site
disposal or
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contamination pursuant to any Environmental Laws, or (iv) is subject to any
claim relating to any Environmental Laws, which violation, contamination,
liability or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or, to
the Company's Knowledge, threatened investigation that might lead to such a
claim.
4.17 LITIGATION. Except as described on SCHEDULE 4.17,
there are no pending actions, suits or proceedings against or affecting the
Company, its Subsidiaries or any of its or their properties; and to the
Company's Knowledge, no such actions, suits or proceedings are threatened or
contemplated.
4.18 FINANCIAL STATEMENTS. The financial statements
included in each SEC Filing present fairly, in all material respects, the
consolidated financial position of the Company as of the dates shown and its
consolidated results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with United States
generally accepted accounting principles applied on a consistent basis ("GAAP")
(except as may be disclosed therein or in the notes thereto, and, in the case of
quarterly financial statements, as permitted by Form 10-QSB under the 1934 Act).
Except as set forth in the financial statements of the Company included in the
SEC Filings filed prior to the date hereof or as described on SCHEDULE 4.18,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
contingent or otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect.
4.19 INSURANCE COVERAGE. The Company and each Subsidiary
maintains in full force and effect insurance coverage that is customary for
comparably situated companies for the business being conducted and properties
owned or leased by the Company and each Subsidiary, and the Company reasonably
believes such insurance coverage to be adequate against all liabilities, claims
and risks against which it is customary for comparably situated companies to
insure.
4.20 BROKERS AND FINDERS. No Person will have, as a result
of the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than as
described in SCHEDULE 4.20.
4.21 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.
4.22 NO INTEGRATED OFFERING. Neither the Company nor any
of its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would
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adversely affect reliance by the Company on Section 4(2) for the exemption from
registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.
4.23 PRIVATE PLACEMENT. The offer and sale of the
Securities to the Investors as contemplated hereby is exempt from the
registration requirements of the 1933 Act.
4.24 QUESTIONABLE PAYMENTS. Neither the Company nor any of
its Subsidiaries nor, to the Company's Knowledge, any of their respective
current or former stockholders, directors, officers, employees, agents or other
Persons acting on behalf of the Company or any Subsidiary, has on behalf of the
Company or any Subsidiary or in connection with their respective businesses: (a)
used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature.
4.25 TRANSACTIONS WITH AFFILIATES. Except as disclosed in
the SEC Filings or as disclosed on SCHEDULE 4.25, none of the officers or
directors of the Company and, to the Company's Knowledge, none of the employees
of the Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company's Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4.26 INTERNAL CONTROLS. The Company is in material
compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002 currently
applicable to the Company. The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in 1934
Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including the Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which the
Company's most recently filed periodic report under the 1934 Act, as the case
may be, is being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the end of the
period covered by
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the most recently filed periodic report under the 1934 Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed periodic
report under the 1934 Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Item 308 of Regulation S-B) or, to the Company's Knowledge, in other
factors that could significantly affect the Company's internal controls. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the 0000 Xxx.
4.27 DISCLOSURES. Neither the Company nor any Person
acting on its behalf has provided the Investors or their agents or counsel with
any information that constitutes or might constitute material, non-public
information. The written materials delivered to the Investors in connection with
the transactions contemplated by the Transaction Documents do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:
5.1 ORGANIZATION AND EXISTENCE. Such Investor is a
validly existing corporation, limited partnership or limited liability company
and has all requisite corporate, partnership or limited liability company power
and authority to invest in the Securities pursuant to this Agreement.
5.2 AUTHORIZATION. The execution, delivery and
performance by such Investor of the Transaction Documents to which such Investor
is a party have been duly authorized and will each constitute the valid and
legally binding obligation of such Investor, enforceable against such Investor
in accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors' rights generally.
5.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to
be received by such Investor hereunder will be acquired for such Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however,
to such Investor's right at all times to sell or otherwise dispose of all or any
part of such Securities in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time. Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an
entity engaged in a business that would require it to be so registered.
5.4 INVESTMENT EXPERIENCE. Such Investor acknowledges
that it can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and
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experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby.
5.5 DISCLOSURE OF INFORMATION. Such Investor has had an
opportunity to receive all information related to the Company requested by it
and to ask questions of and receive answers from the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC Filings.
Neither such inquiries nor any other due diligence investigation conducted by
such Investor shall modify, limit or otherwise affect such Investor's right to
rely on the Company's representations and warranties contained in this
Agreement.
5.6 RESTRICTED SECURITIES. Such Investor understands that
the Securities are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 LEGENDS. It is understood that, except as provided
below, certificates evidencing the Securities may bear the following or any
similar legend:
(a) "The securities represented hereby may not
be transferred unless (i) such securities have been registered for sale pursuant
to the Securities Act of 1933, as amended, (ii) such securities may be sold
pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel
reasonably satisfactory to it that such transfer may lawfully be made without
registration under the Securities Act of 1933, as amended, or qualification
under applicable state securities laws."
(b) If required by the authorities of any state
in connection with the issuance of sale of the Securities, the legend required
by such state authority.
5.8 NO GENERAL SOLICITATION. Such Investor did not learn
of the investment in the Securities as a result of any general solicitation or
general advertising.
5.9 BROKERS AND FINDERS. No Person will have, as a result
of the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Investor.
5.10 PROHIBITED TRANSACTIONS. During the last thirty (30)
days prior to the date hereof, neither such Investor nor any Affiliate of such
Investor which (x) had knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to such Investor's investments or trading or
information concerning such Investor's investments, including in respect of the
Securities, or (z) is subject to such Investor's review or input concerning such
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Affiliate's investments or trading (collectively, "Trading Affiliates") has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any "put equivalent position" (as defined in
Rule 16a-1(h) under the 0000 Xxx) with respect to the Common Stock, granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a "Prohibited
Transaction"). Prior to the earliest to occur of (i) the termination of this
Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline, such
Investor shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction. Such Investor acknowledges
that the representations, warranties and covenants contained in this Section
5.10 are being made for the benefit of the Investors as well as the Company and
that each of the other Investors shall have an independent right to assert any
claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.10.
5.11 RELIANCE ON EXEMPTIONS. Such Investor understands
that the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Investor's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Investor set forth herein
in order to determine the availability of such exemptions and the eligibility of
such Investor to acquire the Securities.
6. CONDITIONS TO CLOSING.
6.1 CONDITIONS TO THE INVESTORS' OBLIGATIONS. The
obligation of each Investor to purchase the Shares and the Warrants at each
Closing is subject to the fulfillment to such Investor's satisfaction, on or
prior to the applicable Closing Date, of the following conditions, any of which
may be waived by such Investor (as to itself only):
(a) The representations and warranties made by
the Company in Section 4 hereof qualified as to materiality shall be true and
correct at all times prior to and on such Closing Date, except to the extent any
such representation or warranty expressly speaks as of a specific date, in which
case such representation or warranty shall be true and correct as of such date,
and, the representations and warranties made by the Company in Section 4 hereof
not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on such Closing Date, except to the extent
any such representation or warranty expressly speaks as of a specific date, in
which case such representation or warranty shall be true and correct in all
material respects as of such specific date. The Company shall have performed in
all material respects all obligations and covenants herein required to be
performed by it on or prior to such Closing Date.
(b) The Company shall have obtained any and all
consents, permits, approvals, registrations and waivers necessary or appropriate
for consummation of the purchase and sale of the Shares and the Warrants and the
consummation of the other transactions
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contemplated by the Transaction Documents to be consummated on or prior to such
Closing Date, all of which shall be in full force and effect.
(c) The Company shall have executed and
delivered the Registration Rights Agreement.
(d) The Certificate of Designations shall have
been filed with the Secretary of State of Delaware and shall be effective.
(e) No judgment, writ, order, injunction, award
or decree of or by any court, or judge, justice or magistrate, including any
bankruptcy court or judge, or any order of or by any governmental authority,
shall have been issued, and no action or proceeding shall have been instituted
by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(f) The Company shall have delivered a
Certificate, executed on behalf of the Company by its Chief Executive Officer or
its Chief Financial Officer, dated as of such Closing Date, certifying to the
fulfillment of the conditions specified in subsections (a), (b), (d), (e) and
(i) of this Section 6.1.
(g) The Company shall have delivered a
Certificate, executed on behalf of the Company by its Secretary, dated as of
such Closing Date, certifying the resolutions adopted by the Board of Directors
of the Company approving the transactions contemplated by this Agreement and the
other Transaction Documents and the issuance of the Securities, certifying the
current versions of the Amended and Restated Certificate of Incorporation and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
(h) The Investors shall have received an opinion
from Xxxxxxx Xxxx LLP, the Company's counsel, dated as of such Closing Date, in
form and substance reasonably acceptable to the Investors and addressing such
legal matters as the Investors may reasonably request.
(i) No stop order or suspension of trading shall
have been imposed by the SEC or any other governmental or regulatory body with
respect to public trading in the Common Stock.
(j) On the first Closing Date only, the Company
shall have received a minimum investment of at least $3 million and shall have
provided the Investors with written evidence reasonably satisfactory to the
Investors thereof.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
Company's obligation to sell and issue the Shares and the Warrants at any
Closing is subject to the fulfillment to the satisfaction of the Company on or
prior to the applicable Closing Date of the following conditions, any of which
may be waived by the Company:
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(a) The representations and warranties made by
the Investors in Section 5 hereof, other than the representations and warranties
contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on such Closing Date with
the same force and effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on such Closing Date with the same
force and effect as if they had been made on and as of said date. The Investors
shall have performed in all material respects all obligations and covenants
herein required to be performed by them on or prior to such Closing Date.
(b) The Investors shall have executed and
delivered the Registration Rights Agreement.
(c) No judgment, writ, order, injunction, award
or decree of or by any court, or judge, justice or magistrate, including any
bankruptcy court or judge, or any order of or by any governmental authority,
shall have been issued, and no action or proceeding shall have been instituted
by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(d) The Investors shall have delivered the
applicable portion of the Purchase Price to the Company.
6.3 TERMINATION OF OBLIGATIONS TO EFFECT CLOSING;
EFFECTS.
(a) The outstanding obligations of the Company,
on the one hand, and the Investors, on the other hand, to effect any Closing
shall terminate as follows:
(i) Upon the mutual written consent of
the Company and the Investors purchasing Shares and Warrants at such Closing;
(ii) By the Company if any of the
conditions set forth in Section 6.2 shall have become incapable of fulfillment,
and shall not have been waived by the Company;
(iii) By an Investor (with respect to
itself only) if any of the conditions set forth in Section 6.1 shall have become
incapable of fulfillment, and shall not have been waived by the Investor; or
(iv) By either the Company or any
Investor (with respect to itself only) if the initial Closing has not occurred
on or prior to November 15, 2006;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect a Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.
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(b) In the event of termination by any Investor
of its obligations to effect a Closing pursuant to this Section 6.3, written
notice thereof shall forthwith be given to the other Investors and the other
Investors shall have the right to terminate their obligations to effect such
Closing upon written notice to the Company and the other Investors. Nothing in
this Section 6.3 shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents.
7. COVENANTS AND AGREEMENTS OF THE COMPANY.
7.1 RESERVATION OF COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of providing for the conversion of the
Shares and the exercise of the Warrants, such number of shares of Common Stock
as shall from time to time equal the Conversion Shares and the Warrant Shares
issuable from time to time.
7.2 REPORTS. The Company will furnish to the Investors
and/or their assignees such information relating to the Company and its
Subsidiaries as from time to time may reasonably be requested by the Investors
and/or their assignees; provided, however, that the Company shall not disclose
material nonpublic information to the Investors, or to advisors to or
representatives of the Investors, unless prior to disclosure of such information
the Company identifies such information as being material nonpublic information
and provides the Investors, such advisors and representatives with the
opportunity to accept or refuse to accept such material nonpublic information
for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect thereto.
7.3 NO CONFLICTING AGREEMENTS. The Company will not take
any action, enter into any agreement or make any commitment that would conflict
or interfere in any material respect with the Company's obligations to the
Investors under the Transaction Documents.
7.4 INSURANCE. The Company shall not materially reduce
the insurance coverages described in Section 4.19.
7.5 COMPLIANCE WITH LAWS. The Company will comply in all
material respects with all applicable laws, rules, regulations, orders and
decrees of all governmental authorities.
7.6 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. If
the Company applies to have its Common Stock or other securities traded on any
stock exchange or market, it shall include in such application the Conversion
Shares and the Warrant Shares and will take such other action as is necessary to
cause such Common Stock to be so listed. Thereafter, the Company will use
commercially reasonable efforts to continue the listing and trading of its
Common Stock on such exchange or market and, in accordance, therewith, will use
commercially reasonable efforts to comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of such
exchange or market, as applicable.
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7.7 TERMINATION OF COVENANTS. The provisions of Sections
7.2 through 7.5 shall terminate and be of no further force and effect on the
date on which the Company's obligations under the Registration Rights Agreement
to register or maintain the effectiveness of any registration covering the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) shall terminate.
7.8 REMOVAL OF LEGENDS. Upon the earlier of (i)
registration for resale pursuant to the Registration Rights Agreement or (ii)
Rule 144(k) becoming available the Company shall (A) deliver to the transfer
agent for the Common Stock (the "Transfer Agent") irrevocable instructions that
the Transfer Agent shall reissue a certificate representing shares of Common
Stock without legends upon receipt by such Transfer Agent of the legended
certificates for such shares, together with either (1) a customary
representation by the Investor that Rule 144(k) applies to the shares of Common
Stock represented thereby or (2) a statement by the Investor that such Investor
has sold the shares of Common Stock represented thereby in accordance with the
Plan of Distribution contained in the Registration Statement, and (B) cause its
counsel to deliver to the Transfer Agent one or more blanket opinions to the
effect that the removal of such legends in such circumstances may be effected
under the 1933 Act. From and after the earlier of such dates, upon an Investor's
written request, the Company shall promptly cause certificates evidencing the
Investor's Securities to be replaced with certificates which do not bear such
restrictive legends, and Conversion Shares subsequently issued upon due
conversion of the Shares and Warrant Shares subsequently issued upon due
exercise of the Warrants shall not bear such restrictive legends provided the
provisions of either clause (i) or clause (ii) above, as applicable, are
satisfied with respect to such Conversion Shares or Warrant Shares, as
applicable. When the Company is required to cause unlegended certificates to
replace previously issued legended certificates, if unlegended certificates are
not delivered to an Investor within three (3) Business Days of submission by
that Investor of legended certificate(s) to the Transfer Agent as provided above
(or to the Company, in the case of the Warrants), the Company shall be liable to
the Investor for liquidated damages in an amount equal to 1.5% of the aggregate
purchase price of the Securities evidenced by such certificate(s) for each
thirty (30) day period (or portion thereof) beyond such three (3) Business Day
that the unlegended certificates have not been so delivered.
8. SURVIVAL AND INDEMNIFICATION.
8.1 SURVIVAL. The representations, warranties, covenants
and agreements contained in this Agreement shall survive for any Closing
hereunder.
8.2 INDEMNIFICATION. The Company agrees to indemnify and
hold harmless each Investor and its Affiliates and their respective directors,
officers, employees and agents from and against any and all losses, claims,
damages, liabilities and expenses (including without limitation reasonable
attorney fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened and the costs of enforcement thereof) (collectively, "Losses") to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement
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made by or to be performed on the part of the Company under the Transaction
Documents, and will reimburse any such Person for all such amounts as they are
incurred by such Person.
8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly
after receipt by any Person (the "Indemnified Person") of notice of any demand,
claim or circumstances which would or might give rise to a claim or the
commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall assume the payment of all fees and expenses;
PROVIDED, HOWEVER, that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company of its obligations hereunder except to the
extent that the Company is materially prejudiced by such failure to notify. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless: (i) the Company and the Indemnified Person
shall have mutually agreed to the retention of such counsel; or (ii) in the
reasonable judgment of counsel to such Indemnified Person representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The Company shall not be liable for any
settlement of any proceeding effected without its written consent, which consent
shall not be unreasonably withheld, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Company shall indemnify and
hold harmless such Indemnified Person from and against any loss or liability (to
the extent stated above) by reason of such settlement or judgment. Without the
prior written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Person from all liability arising out of such proceeding.
9. MISCELLANEOUS.
9.1 SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned by a party hereto without the prior written consent of the Company or
the Investors, as applicable, provided, however, that an Investor may assign its
rights and delegate its duties hereunder in whole or in part to an Affiliate or
to a third party acquiring some or all of its Securities in a private
transaction without the prior written consent of the Company or the other
Investors, after notice duly given by such Investor to the Company provided,
that no such assignment or obligation shall affect the obligations of such
Investor hereunder. The provisions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
9.2 COUNTERPARTS; FAXES. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute
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one and the same instrument. This Agreement may also be executed via facsimile,
which shall be deemed an original.
9.3 TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 NOTICES. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given as hereinafter described (i) if given by personal
delivery, then such notice shall be deemed given upon such delivery, (ii) if
given by telex or telecopier, then such notice shall be deemed given upon
receipt of confirmation of complete transmittal, (iii) if given by mail, then
such notice shall be deemed given upon the earlier of (A) receipt of such notice
by the recipient or (B) three days after such notice is deposited in first class
mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one Business Day
after delivery to such carrier. All notices shall be addressed to the party to
be notified at the address as follows, or at such other address as such party
may designate by ten days' advance written notice to the other party:
If to the Company:
UTIX Group, Inc.
7 New England Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx Xxxxx, Chief Financial Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxxx Xxxx LLP
00 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5 EXPENSES. The parties hereto shall pay their own
costs and expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Xxxxxxxxxx Xxxxxxx PC in connection with the
negotiation and execution of the Transaction Documents in an aggregate amount
not to exceed $35,000. Such expenses shall be paid not later than the initial
Closing. The Company shall reimburse the Investors upon demand for all
reasonable out-of-pocket expenses incurred by the Investors, including without
limitation
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reimbursement of attorneys' fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Transaction
Documents. In the event that legal proceedings are commenced by any party to
this Agreement against another party to this Agreement in connection with this
Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys' fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.
9.6 AMENDMENTS AND WAIVERS. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this paragraph 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.
9.7 PUBLICITY. Except as set forth below, no public
release or announcement concerning the transactions contemplated hereby shall be
issued by the Company or the Investors without the prior consent of the Company
(in the case of a release or announcement by the Investors) or the Investors (in
the case of a release or announcement by the Company) (which consents shall not
be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities
exchange or securities market, in which case the Company or the Investors, as
the case may be, shall allow the Investors or the Company, as applicable, to the
extent reasonably practicable in the circumstances, reasonable time to comment
on such release or announcement in advance of such issuance. By 8:30 a.m. (New
York City time) on the trading day immediately following the initial Closing
Date, the Company shall issue a press release disclosing the consummation of the
transactions contemplated by this Agreement. No later than the fourth Business
Day following the initial Closing Date, the Company will file a Current Report
on Form 8-K attaching the press release described in the foregoing sentence as
well as copies of the Transaction Documents, to the extent not already filed
with the SEC. In addition, the Company will make such other filings and notices
in the manner and time required by the SEC. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Investor, or include the
name of any Investor in any filing with the SEC (other than the Registration
Statement and any exhibits to filings made in respect of this transaction in
accordance with periodic filing requirements under the 0000 Xxx) or any
regulatory agency, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or trading market regulations, in
which case the Company shall provide the Investors with prior notice of such
disclosure.
9.8 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
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9.9 ENTIRE AGREEMENT. This Agreement, including the
Exhibits and the Disclosure Schedules, and the other Transaction Documents
constitute the entire agreement among the parties hereof with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.
9.10 FURTHER ASSURANCES. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.
9.11 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York without regard to the choice of
law principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12 INDEPENDENT NATURE OF INVESTORS' OBLIGATIONS AND
RIGHTS. The obligations of each Investor under any Transaction Document are
several and not joint with the obligations of any other Investor, and no
Investor shall be responsible in any way for the performance of the obligations
of any other Investor under any Transaction Document. The decision of each
Investor to purchase Securities pursuant to the Transaction Documents has been
made by such Investor independently of any other Investor. Nothing contained
herein or in any Transaction Document, and no action taken by any Investor
pursuant thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no Investor will be acting as agent of such Investor in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
24
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement
or caused their duly authorized officers to execute this Agreement as of the
date first above written.
The Company: UTIX GROUP, INC.
By:_________________________
Name:
Title:
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The Investors:
------------------------------------
By:_________________________
Name:
Title:
Purchase Price: $
Number of Shares:
Number of Warrants:
Address for Notice:
-----------------------------
-----------------------------
-----------------------------
with a copy to:
-----------------------------
-----------------------------
-----------------------------
Attn:
------------------------
Telephone:
-------------------
Facsimile:
-------------------
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