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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
October 25, 2000, by and among Applied Digital Solutions, Inc., a Missouri
corporation, with headquarters located at 000 Xxxxx Xxxx Xxx, Xxxxx 000, Xxxx
Xxxxx, Xxxxxxx, 00000 (the "COMPANY"), and the investors listed on the Schedule
of Buyers attached hereto (individually, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT");
B. The Company has authorized the following new series of its preferred
stock, $.001 par value per share: the Series C convertible preferred stock (the
"PREFERRED STOCK"), which series shall be further divided into two subseries,
designated the "Series C-1 convertible preferred stock" (the "SERIES C-1
PREFERRED STOCK") and the "Series C-2 convertible preferred stock" (the "SERIES
C-2 PREFERRED STOCK") which shall be convertible into shares of the Company's
Common Stock, $.001 par value per share (the "COMMON STOCK") (as converted, the
"CONVERSION SHARES"), in accordance with terms of the Company's Certificate of
Designation in the form attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"). The stated value per share of Preferred Stock shall be $1,000.
C. The Company has authorized the issuance of Common Stock Purchase
Warrants in the form attached hereto as EXHIBIT B (the "WARRANTS"), to acquire
shares of Common Stock (such shares of Common Stock issued upon exercise of the
Warrants are hereinafter referred to as the "WARRANT SHARES");
D. The Buyers wish to purchase for $20,000,000, upon the terms and
conditions stated in this Agreement, an aggregate of 26,000 shares of Series C-1
Preferred Stock (the "SERIES C-1 PREFERRED STOCK") in the respective amounts set
forth opposite each Buyer's name on the Schedule of Buyers; and to receive, in
consideration for such purchase, the Warrants, to purchase an aggregate of
800,000 shares of Common Stock, subject to adjustment as provided therein;
E. Subject to the terms and conditions set forth in this Agreement, the
Buyers have the right to purchase up to 26,000 shares of Series C-2 Preferred
Stock for an aggregate of $20,000,000 (the "SERIES C-2 PREFERRED STOCK"). The
Series C-1 Preferred Stock, the Series C-2 Preferred Stock, the Warrants, the
Warrant Shares and the Conversion Shares are collectively referred to in this
Agreement as the "SECURITIES"; and
F. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENT")
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
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NOW, THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS.
a. PURCHASE OF SERIES C PREFERRED STOCK. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7(a)
below, the Company shall issue and sell to each of the Buyers and the Buyers
shall purchase severally from the Company, in the respective amounts set forth
opposite each Buyer's name on the Schedule of Buyers, for an aggregate of
$20,000,000 an aggregate of 26,000 shares of Series C-1 Preferred Stock (the
"C-1 CLOSING"). Subject to the terms and conditions set forth in Section 1(c)
and satisfaction of the conditions set forth in Sections 6 and 7(b), at the
option of the Buyers, the Company shall issue and sell to the Buyers and the
Buyers shall purchase from the Company up to an aggregate of 26,000 shares of
the Series C-2 Preferred Stock at one or more additional closings (each, a "C-2
CLOSING") for $769.23 per share of Series C-2 Preferred Stock. The C-1 Closing
and the C-2 Closing are referred to in this Agreement as the "CLOSINGS." On each
Closing Date, the Company shall deliver to each Buyer a stock certificate
representing such number of shares of Preferred Stock which such Buyer is then
purchasing, duly executed on behalf of the Company and registered in the name of
such Buyer or its designee (the "STOCK CERTIFICATES").
b. C-1 CLOSING DATE. The date and time of the C-1 Closing (the
"C-1 CLOSING Date") shall be 10:00 a.m. Eastern Daylight Time on October 26,
2000, subject to satisfaction (or waiver) of the conditions to the C-1 Closing
set forth in Sections 6 and 7(a) below (or such later date as is mutually agreed
to by the Company and the Buyers). The C-1 Closing shall occur on the C-1
Closing Date at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
c. C-2 CLOSING DATES. The date and time of any C-2 Closing
(the "C-2 CLOSING Date") shall be, subject to satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7(b), after five (5) days written notice
to the Company from any Buyer that such Buyer has elected to purchase up to its
pro rata share of the Series C-2 Preferred Stock in an amount requiring payment
by such Buyer of not less than $500,000 (the "SERIES C-2 PREFERRED STOCK
NOTICE"). Each Buyer may deliver only one Series C-2 Preferred Stock Notice to
the Company. The Series C-2 Preferred Stock Notice may only be delivered to the
Company prior to the date ending 10 months from the date the Initial
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the United States Securities and Exchange Commission (the
"EFFECTIVE DATE"). The Series C-2 Preferred Stock Notice shall include the
amount and aggregate purchase price of the Series C-2 Preferred Stock to be
purchased by the Buyer and the date selected by the Buyer for the C-2 Closing
Date. The C-2 Closing shall occur on the C-2 Closing Date at the offices of
Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The C-1
Closing Date and the C-2 Closing Dates collectively are referred to in this
Agreement as the "CLOSING DATES".
d. FORM OF PAYMENT. On each of the Closing Dates, each Buyer
shall pay to the Company the applicable purchase price for the Preferred Stock
to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions provided to the Buyers at least two days prior to the Closing Date.
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e. WARRANTS. In consideration of the purchase of the Preferred
Stock, the Company shall, on each Closing Date, issue and deliver to the Buyers,
4,000 Warrants for each $100,000 invested by the Buyers, which Warrants shall be
distributed to the Buyers in amounts equal to such Buyer's pro rata portion of
Preferred Stock.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. INVESTMENT PURPOSE. Such Buyer (i) is acquiring the
Preferred Stock and the Warrants and (ii) upon conversion of the Preferred Stock
and exercise of the Warrants, will acquire the Conversion Shares and Warrant
Shares, respectively, then issuable for its own account for investment only and
not with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act and all applicable state blue sky laws; provided, however, that by
making the representations herein, such Buyer does not agree to hold any
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act and all applicable
state blue sky laws.
b. ACCREDITED INVESTOR STATUS. Such Buyer (i) is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the 1933 Act ("REGULATION D") and (ii) was not formed for the specific
purpose of acquiring any of the Securities.
c RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Preferred Stock and Warrants are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Preferred Stock and the Warrants.
d. INFORMATION. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Stock and the Warrants which have been requested by such Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below.
e. NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Preferred
Stock and the Warrants or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Preferred Stock and the Warrants.
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f. TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A) (i) they
have been subsequently registered thereunder and (ii) they are offered for sale,
sold, assigned and transferred in compliance with the prospectus delivery
requirements of the 1933 Act, (B) such Buyer shall have delivered to the Company
an opinion of counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("RULE 144"); and (ii) any sale
of such securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of such securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 0000 Xxx) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan secured by the Securities.
g. LEGENDS. (i) Such Buyer understands that the certificates
or other instruments representing the Preferred Stock and the Warrants and,
until such time as the sale of the Conversion Shares and the Warrant Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE
SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder (other than the Buyer) of any
Securities upon which it is stamped, if (i) upon a resale, any applicable
Security is registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of any of the Securities may be made without registration under the
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1933 Act, or (iii) such holder provides the Company with reasonable assurances
that any of the Securities can be sold pursuant to Rule 144(k) under the 1933
Act. Each Buyer acknowledges, covenants and agrees to sell any of the Securities
represented by a certificate(s) from which the legend has been removed, only
pursuant to (i) a registration statement effective under the 1933 Act, or (ii)
advice of counsel that such sale is exempt from registration required by Section
5 of the 1933 Act. In the event the above legend is removed from any of the
Securities, the Company may, upon reasonable advance notice to the holder,
require that the above legend be placed on any of the Securities that cannot
then be sold pursuant to an effective registration statement or Rule 144(k)
under the 1933 Act (or any successor rule thereto).
(ii) Each certificate for Preferred Stock shall also bear the
following legend:
ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF
THE COMPANY'S CERTIFICATE OF DESIGNATIONS RELATING TO THE SERIES C
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION
2(b)(vi) THEREOF. THE NUMBER OF SERIES C PREFERRED SHARES REPRESENTED
BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SERIES C PREFERRED
SHARES STATED ON THE FACE HEREOF PURSUANT TO SECTION 2(b)(vi) OF THE
CERTIFICATE OF DESIGNATIONS RELATING TO THE SERIES C PREFERRED SHARES
REPRESENTED BY THIS CERTIFICATE.
h. AUTHORIZATION; ENFORCEMENT. Each Buyer has the requisite
power and authority, corporate or other, to enter into and perform its
obligations under this Agreement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. RESIDENCY. Such Buyer is a resident of that country and/or
state specified in the Schedule of Buyers.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers as set forth
in this Section 3.
a. ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries (a complete list of which as of the date hereof is set forth in
Schedule 3(a)) are duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are organized, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on (i) the business, properties, operations, condition (financial or
otherwise), results of operations or objective prospects of the Company and its
subsidiaries taken as a whole, (ii) on the ability of the Company to perform its
obligations hereunder, under the Certificate of Designation, the Registration
Rights Agreement, the Warrants or under the agreements or instruments to be
entered into or filed in connection herewith or therewith, or (iii) the
Securities.
b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement and the Warrants, to issue, sell and perform its obligations
with respect to the Preferred Stock and the Warrants in accordance with the
terms hereof, the Certificate of Designation and the Warrants, as applicable,
and to issue the Conversion Shares and the Warrant Shares upon conversion of the
Preferred Stock and the exercise of the Warrants, respectively, in accordance
with the Certificate of Designation and the Warrants, respectively, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement and
the Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Preferred Stock and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion of the Preferred
Stock in accordance with the terms of the Certificate of Designation and the
Warrant Shares upon exercise of the Warrants have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its shareholders, (iii) this
Agreement, the Registration Rights Agreement, the certificates for the Preferred
Stock and the Warrants have been duly executed and delivered by the Company,
(iv) this Agreement, the Registration Rights Agreement, the certificates for the
Preferred Stock and the Warrants constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies, and (v) prior to the Closing Date, the Certificate of
Designation will have been filed with the Secretary of State of the State of
Missouri and will be in full force and effect, enforceable against the Company
in accordance with its terms.
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c. CAPITALIZATION. As of October 21, 2000, the authorized
capital stock of the Company consists of 245 million shares of Common Stock, of
which as of the date hereof, 86,119,405 shares were issued and outstanding and 5
million shares of preferred stock $10.00 par value, of which as of October 21,
2000, one (1) share was issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), no shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in
Schedule 3(c), as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities, notes, credit agreements, or other agreements, documents or
instruments evidencing indebtedness of the Company or any of its subsidiaries
and (iii) there are no agreements or arrangements under which the Company or any
of its subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except the Registration Rights Agreement). Except as
disclosed in Schedule 3(c), there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
any of the Securities as described in this Agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation,
as amended and as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's Bylaws, as in effect on the date hereof (the
"BYLAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Securities are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and non-assessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designation and the Warrants,
respectively. As of the date hereof, not less than the aggregate of (i) 200% of
the number of Conversion Shares issuable upon conversion of all of the Series
C-1 Preferred Stock and (ii) the number of Warrant Shares issuable upon exercise
of all of the Warrants to be issued at the C-1 Closing, without regard to
limitations on conversion or exercise, have been duly authorized and reserved
for issuance. Such Conversion Shares and Warrant Shares so reserved shall be
allocated for issuance upon conversion of the Preferred Stock and exercise of
the Warrants pro rata among the Buyers based on the number of Preferred Stock
held by such Buyer relative to the total number of outstanding Preferred Stock.
Subsequent to the date hereof, not less than the aggregate of (i) 150% of the
number of Conversion Shares then issuable upon conversion of all the then
outstanding shares of Preferred Stock and (ii) the number of Warrant Shares
issuable at such time upon exercise of all the then outstanding Warrants,
without regard to limitations on conversion or exercise, shall be duly
authorized and reserved for issuance. Upon conversion or exercise in accordance
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with the Certificate of Designation and the Warrants, as applicable, the
Conversion Shares and Warrant Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.
e. NO CONFLICTS. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Warrants by the Company, the performance by the Company of its
obligations under the Certificate of Designation and the Warrants and the
consummation by the Company of the transactions contemplated hereby and thereby
will not (i) result in a violation of the Articles of Incorporation, any
Certificate of Designation, Preferences and Rights of any outstanding series of
preferred stock of the Company or Bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the principal market or exchange on which the Common Stock is traded or
listed) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Except as disclosed in Schedule 3(e), neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles of
Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or Bylaws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order (collectively referred to as the "MATERIAL CONTRACTS") or any statute,
rule or regulation applicable to the Company or its subsidiaries except for
violations and defaults that, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect. A complete and accurate
list of the Material Contracts is set forth on Schedule 3(e) hereto. The
business of the Company and its subsidiaries is not being conducted, and shall
not be conducted, in violation of any material law, ordinance or regulation of
any governmental entity. Except as specifically contemplated by this Agreement
and as required under the 1933 Act and applicable blue sky laws, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement, the Registration Rights
Agreement or the Warrants or perform its obligations under the Certificate of
Designation in accordance with the terms hereof or thereof. Except as disclosed
in Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of the Nasdaq National
Market, including, without limitation, the requirements set forth in Rule
4310(c)(25)(G)(i) of The Nasdaq Stock Market's Marketplace Rules. The Company
and its subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing or to delisting or suspension of the Common Stock
by the Nasdaq National Market.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31,
1999, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
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therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they are
or were made, not misleading. Neither the Company nor any of its subsidiaries
nor any of their officers, directors, employees or agents have provided the
Buyers with any material, nonpublic information.
g. ABSENCE OF CERTAIN CHANGES. Except as expressly set forth
in Schedule 3(g) or the SEC Documents that are filed no later than September 15,
2000, since December 31, 1999, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or objective prospects of the Company and its
subsidiaries taken as a whole. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings. Except as disclosed in Schedule 3(g) or the SEC Documents that are
filed no later than September 15, 2000, since December 31, 1999, the Company has
not declared or paid any dividends, sold any assets, individually or in the
aggregate, in excess of $2,000,000 outside of the ordinary course of business or
had capital expenditures, individually or in the aggregate, in excess of
$3,000,000.
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h. ABSENCE OF LITIGATION. Except as disclosed in Schedule
3(h), there is no action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or its subsidiaries or their
respective directors or officers, or the Common Stock, which in the reasonable
judgment of the Company's officers has or is expected in the future,
individually or in the aggregate, to (i) have a Material Adverse Effect or (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement, the
Registration Rights Agreement, the Warrants or any of the documents contemplated
herein.
i. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF THE PREFERRED
STOCK. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to this Agreement,
the Registration Rights Agreement, the Warrants and the Certificate of
Designation and the transactions contemplated hereby and thereby. The Company
further acknowledges that each Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement, the Registration Rights Agreement, the Warrants and the Certificate
of Designation and the transactions contemplated hereby and thereby and any
advice given by any of the Buyers or any of their respective representatives or
agents in connection with this Agreement, the Registration Rights Agreement, the
Warrants and the Certificate of Designation and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Preferred Stock and Warrants. The Company further represents to each Buyer that
the Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives. The Company has
not provided to any Buyer any nonpublic information that, in the opinion of the
Company, is material to a decision to purchase or sell Common Stock.
j. NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of any of
the Securities offered hereby.
k. 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 security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause the offering of any of the Securities
to be integrated with prior offerings by the Company for purposes of the 1933
Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated, nor will the Company or any of its Subsidiaries take any action or
steps that would require registration of the issuance by the Company of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
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l. EMPLOYEE RELATIONS. The Company and its subsidiaries are in
compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours except where failure to be in compliance would
not have a Material Adverse Effect. There are no pending investigations
involving the Company or any of its subsidiaries by the U.S. Department of Labor
or any other governmental agency responsible for the enforcement of such
federal, state, local or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company or any of its subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of its subsidiaries. Except as set forth in
Schedule 3(l), no representation question exists respecting the employees of the
Company or any of its subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of its
subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
its subsidiaries. No material labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is imminent.
Schedule 3(l) sets forth a list of every employee benefit plan (whether or not
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained or contributed to by the Company or any of member of its
controlled group (determined in accordance with Section 4001(a)(14) of ERISA)
(collectively the "PLANS"). Except for such failures that would not,
individually or in the aggregate result in a Material Adverse Effect, each of
the Plans have been maintained and administered in accordance with their terms,
ERISA, the Internal Revenue Code of 1986, as amended (the "CODE") and other
applicable laws. None of the Plans is subject to Title IV of ERISA and no Plan
is a multiemployer plan (within the meaning of Section 3(37) of ERISA). Each
Plan intended to qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the Internal Revenue
Service regarding its qualification under such section and no event has occurred
which cause any such Plan to lose its qualification.
m. INTELLECTUAL PROPERTY RIGHTS. Except as set forth on
Schedule 3(m), the Company and its subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
(collectively "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their
respective businesses as now conducted and as presently contemplated to be
operated in the future except for Intellectual Property Rights that,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect. Except as set forth on Schedule 3(m), none of the
Intellectual Property Rights or other intellectual property rights have expired
or terminated, or are expected to expire or terminate within two years from the
date of this Agreement. Except as set forth on Schedule 3(m), the Company and
its subsidiaries do not have any knowledge of any event, fact or circumstance
relating to (i) any infringement by the Company or its subsidiaries of any
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others or (ii) any person or entity now infringing any
Intellectual Property Rights or other similar rights or any such development of
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similar or identical trade secrets or technical information owned or used by the
Company or any of its subsidiaries and, except as set forth on Schedule 3(m),
there is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its subsidiaries
regarding any trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets or other
infringement; and except as set forth on Schedule 3(m), the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.
n. ENVIRONMENTAL LAWS. (i) The Company and its subsidiaries
(A) are in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all terms and conditions of any such permit, license or approval
except where the failure to be so in compliance would not have a Material
Adverse Effect. With respect to the Company and/or its subsidiaries (A) there
are no past or present releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under any Environmental Law and (B) neither the Company nor any of its
subsidiaries has received any notice with respect to the foregoing, nor is any
action pending, or to the Company's knowledge, threatened in connection with the
foregoing. The term "ENVIRONMENTAL LAWS" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its subsidiaries during the period the property was owned, leased or used
by the Company or any of its subsidiaries.
o. TITLE. The Company and its subsidiaries have good and valid
title to all real and personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule 3(o) or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
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Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
p. INSURANCE. Except as set forth on Schedule 3(p), the
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as is
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not individually or in the aggregate have a Material Adverse Effect.
q. REGULATORY PERMITS. The Company and its subsidiaries
possess all material franchises, grants, authorizations, licenses permits,
easements, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to conduct their respective businesses as
currently being conducted (collectively, the "COMPANY PERMITS"). There is no
action pending, or to the knowledge of the Company, threatened regarding the
suspension or cancellation of any of the Company Permits. Neither the Company
nor any of its subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits. Neither the Company nor any of its subsidiaries has
received any notification with respect to possible conflicts, defaults, or
violations of applicable laws.
r. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
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 generally accepted accounting principles 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.
s. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company
nor any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
reasonable judgment of the Company's officers has or is expected in the future,
individually or in the aggregate, to have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries is a party to any contract or agreement
which has or is expected to have a Material Adverse Effect.
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t. TAX STATUS. Except as set forth on Schedule 3(t), the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any foreign,
federal, state or local tax. The Company has not been notified that any of its
tax returns is currently being audited by any taxing authority.
u. CERTAIN TRANSACTIONS. Except as set forth on Schedule 3(u)
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c) or pursuant to approved stock option plans,
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
v. S-3 REGISTRATION. Pursuant to a waiver from the 12 month
timely filing requirement for the use of Form S-3, as specified in General
Instruction I(A)(3) of Form S-3, obtained by the Company from the Office of
Chief Counsel of the SEC on June 23, 2000, as extended on September 22, 2000,
the Company is, and will be for sixty (60) days from September 22, 2000,
eligible to use Form S-3 for registration of the sale by the Buyers and any
other Investor of the Registrable Securities (as such terms are defined in the
Registration Rights Agreement) and, except for the amendment to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 filed with the
SEC on June 23, 2000, the Company has filed and shall file all reports required
to be filed by the Company with the SEC in a timely manner so as to obtain and
maintain such eligibility for the use of Form S-3.
w. DISCLOSURE. All information relating to or concerning the
Company or any of its subsidiaries set forth in this Agreement, the SEC
Documents and provided to the Buyer pursuant to Section 2(d) hereof and
otherwise in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. No
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event or circumstance has occurred or information exists with respect to the
Company or any of its subsidiaries or its or their business, properties,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed (assuming for this purpose that
the Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).
x. INVESTMENT COMPANY STATUS. The Company is not and upon
consummation of the sale of the Securities will not be an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
y. FOREIGN CORRUPT PRACTICES. Neither the Company nor any of
its subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of his
actions for, or on behalf of, the Company used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
z. DILUTIVE EFFECT The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Stock and the Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Stock in
accordance with this Agreement and the Certificate of Designation and its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other stockholders of the Company.
4. COVENANTS AND AGREEMENTS.
a. BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. BLUE SKY. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary in order
to obtain an exemption for or to qualify the Securities for, or obtain exemption
for the Securities for, sale to the Buyers at each Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date. The Company shall make all filings and
reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following the Closing Date.
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c. REPORTING STATUS. Until the earlier of (i) the date as of
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares, and Warrant Shares (assuming
cashless exercise) without restriction pursuant to Rule 144(k) promulgated under
the 1933 Act (or successor thereto) or (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and Warrant Shares and (B) none of the
Preferred Stock or Warrants are outstanding (the "REGISTRATION PERIOD"), the
Company (x) shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, (y) shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination and (z) the
Company will use its best efforts to maintain its ability and eligibility to
register securities on Form S-3.
d. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Series C-1 Preferred Stock and Warrants for general corporate
purposes, including working capital and acquisitions. The Company shall provide
a Use of Proceeds Schedule prior to each C-2 Closing identifying the use of the
proceeds from the sale of the Series C-2 Preferred Stock.
e. FINANCIAL INFORMATION. The Company agrees to file all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the 1934 Act. The
financial statements of the Company will be prepared in accordance with
generally accepted accounting principles, consistently applied, and will fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries and results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). The Company agrees to send
the following to each Investor (as that term is defined in the Registration
Rights Agreement) during the Registration Period: (i) on the same day as the
release thereof, copies of all press releases issued by the Company or any of
its subsidiaries; and (ii) unless otherwise publicly available, copies of any
notices and other information made available or given to the shareholders of the
Company generally, contemporaneously with the making available or giving thereof
to the shareholders.
f. RESERVATION OF SHARES. As of the date hereof, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than the sum of (i) 200% of the number of
Conversion Shares issuable upon conversion of all of the Series C-1 Preferred
Stock and (ii) the number of Warrant Shares issuable upon exercise of all of the
Warrants to be issued at the C-1 Closing, without regard to limitations on
conversion or exercise, in accordance with the terms of this Agreement, and the
Certificate of Designation and the Warrant. At each C-2 Closing, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than the sum of (i) 200% of the number of
Conversion Shares then issuable upon conversion of all of the Series C-2
Preferred Stock to be issued at such C-2 Closing, (ii) 150% of the number of
Conversion Shares then issuable upon conversion of all other then outstanding
Preferred Stock and (ii) the number of Warrant Shares issuable upon exercise of
all of the outstanding Warrants including for such purposes the Warrants to be
issued at such C-2 Closing, without regard to limitations on conversion or
exercise, in accordance with the terms of this Agreement, and the Certificate of
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Designation and the Warrant. Subsequent to the date hereof, the Company shall
take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than the sum of (i) 150% of the number of
Conversion Shares issuable upon conversion of all of the outstanding Preferred
Stock and (ii) the number of Warrant Shares issuable upon exercise of all of the
outstanding Warrants, without regard to limitations on conversion or exercise,
in accordance with the terms of this Agreement, and the Certificate of
Designation and the Warrant. Such Conversion Shares and Warrant Shares so
reserved shall be allocated for issuance upon conversion of the Preferred Stock
and exercise of the Warrants pro rata among the Buyers based on the number of
Preferred Stock held by such Buyer relative to the total number of outstanding
Preferred Stock.
g. LISTING. The Company shall promptly use its best efforts to
secure the listing of the Registrable Securities issuable on the date hereof
upon conversion of then outstanding Preferred Stock upon the Nasdaq National
Market ("NASDAQ") (subject to official notice of issuance) and shall maintain or
use its best efforts to promptly obtain, so long as any other shares of Common
Stock shall be so listed, the listing of all Registrable Securities from time to
time then issuable upon conversion of then outstanding Preferred Stock under the
terms of this Agreement, the Certificate of Designation and the Warrants on each
national securities exchange and automated quotation system, if any, upon which
shares of Common Stock are then listed. Neither the Company nor any of its
subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock from the Nasdaq National
Market other than pursuant to the Certificate of Designation. The Company shall
promptly provide to each Buyer copies of any notices it receives from the Nasdaq
regarding the continued eligibility of the Common Stock for listing on the
Nasdaq or other principal exchange or quotation system on which the Common Stock
is listed or traded, except to the extent that such notices would constitute
material non-public information which, according to applicable law, rule or
regulation should have been disclosed publicly by the Company but which has not
been so disclosed as of such date. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(g).
h. EXPENSES. Each of the Company and the Buyers shall each pay
its respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, delivery and performance of
this Agreement or the Certificate of Determination, the Warrants and the
Registration Rights Agreement; provided, that at the Closing as the Buyers may
request, the Company shall reimburse the Buyers for Buyers' attorneys' fees and
expenses in connection with this Agreement or the Certificate of Designation,
the Warrants and the Registration Rights Agreement up to an aggregate of
$40,000. In addition, the Company shall pay a broker's fee to Xxxx Xxxx in the
amount of $600,000.
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i. FURTHER ISSUANCES OF SECURITIES.
(i) RIGHT OF FIRST REFUSAL. If at any time during the
period beginning from the date hereof and ending 180 days after the Effective
Date, the Company shall desire to issue any Common Stock or other equity
security or any other security convertible, exchangeable or exercisable for
Common Stock (including any debt financing with an equity component and equity
line transaction) or any other right to acquire any Common Stock (the
"CONVERTIBLE SECURITIES") pursuant to Section 4(2) of the 1933 Act or an
offering under Regulation D or Regulation S of the 1933 Act or in any other
private placement, other than Excluded Issuances, then the Company shall first
comply with the terms of this Section 4(i). For purposes hereof, "EXCLUDED
Issuances" shall mean: (A) issuances pursuant to Company authorized stock option
plans to employees, consultants, service providers or directors of the Company,
(B) the issuance of warrants as an ancillary part of any bank facility or
borrowing from any financial institution not undertaken to raise or raising,
directly or indirectly, equity capital or (C) issuances in connection with joint
ventures, licensing arrangements or strategic partnerships that the Board of
Directors of the Company believes in good faith to be in the best interests of
the Company, provided that no more than 2 million shares of Common Stock are
issued in the aggregate pursuant to (C) during the three (3) month period
following the C-1 Closing Date, (D) issuances of Common Stock upon the
conversion of the Preferred Stock or exercise of the Warrants and (E) shares of
Common Stock issued pursuant to any right (contingent or otherwise) to purchase
such shares as set forth in Schedule 3(c)(i) hereto and issuances in connection
with acquisitions of the assets or stock of an unaffiliated third-party
consummated on an arms length basis (including any brokerage commissions or
finders fee relating thereto and any shares issuable in respect of rights
granted by an acquired company which were in existence at the time of
acquisition of such company by the Company).
(ii) NOTICE REQUIREMENTS. The Company shall notify,
or cause to be notified, the Buyers not less than twenty (20) calendar days
prior to the time the Company intends to consummate such issuance (the "ISSUANCE
NOTICE"). The Issuance Notice shall set forth all of the terms of such proposed
issuance.
(iii) EXERCISE OF RIGHT OF FIRST REFUSAL. The Buyers
shall have a right of first refusal to acquire such private-placement
Convertible Securities, which right may be exercised by the Buyers only by
delivery of a written notice to the Company (the "EXERCISE NOTICE"), stating how
much each Buyer is willing to purchase of its pro-rata portion of the proposed
issuance not subscribed for by other Buyers, within ten (10) business days
following receipt of the Issuance Notice (the "REFUSAL PERIOD"). The Exercise
Notice shall state that the Buyers agree to purchase all of the proposed
issuance of such securities on terms economically equal to the terms set forth
in the Issuance Notice. The closing under such right of first refusal shall
occur within ten (10) business days after the last day of the Refusal Period.
(iv) RIGHT TO ISSUE SECURITIES. After expiration of
the Refusal Period, if the provisions of this Section 4(i) have been complied
with in all respects by the Company and no Exercise Notice has been given, or if
given, the Buyers have not agreed to purchase all of the securities set forth in
the Issuance Notice, the Company shall have the right for forty-five (45)
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calendar days following the termination of the Refusal Period to issue such
securities, or any portion thereof not being purchased by the Buyers, specified
in the Issuance Notice on the terms described in the Issuance Notice without
further notice to the Buyers, but after such forty-five (45) calendar days, no
such issuance may be made without again giving notice to the Buyers and
complying with all of the requirements of this Section 4(i).
(v) The Company will not issue any Preferred Stock
other than to the Buyers as contemplated hereby or as otherwise contemplated in
the Certificate of Determination.
j. FILING OF FORM 8-K. Within one business day of each Closing
Date, the Company will file a Form 8-K with the SEC with respect to the issuance
of the Securities at such Closing and the transactions contemplated by this
Agreement. Such filings shall contain appropriate disclosure of the terms and
conditions of the issuance of the Securities and shall include as exhibits forms
of the Agreement, Warrants, Certificate of Designation, Registration Rights
Agreement and, if not previously the subject of a Form 8-K, the Credit Facility
(as such term is defined in the Certificate of Designation), including the
financial covenants contained in the Credit Facility.
k. DISCLOSURE. From and after the date hereof, the Company
will not provide to any Buyer any material non-public information which,
according to applicable law, rule or regulation should be disclosed publicly by
the Company but which has not been so disclosed.
l. CORPORATE EXISTENCE. So long as any Buyer beneficially owns
any Securities, the Company shall maintain its corporate existence in good
standing under the laws of the jurisdiction in which it is incorporated and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets for cash, or, if for securities, where the surviving or
successor entity in such transaction either (i) redeems all of the then
outstanding shares of Preferred Shares in accordance with and subject to the
terms of the Certificate of Designation applicable to such transactions, or
(ii)(A) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (B) is a publicly traded
corporation whose common stock is listed for trading on the American Stock
Exchange, Nasdaq or the New York Stock Exchange.
m. SOLVENCY; COMPLIANCE WITH LAW. The Company individually and
together with its subsidiaries on a consolidated basis (both before and after
giving effect to the transactions contemplated by this Agreement) is solvent
(i.e., its assets have a fair market value in excess of the amount required to
pay its probable liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would lead it to
reasonably conclude that the Company would not have, nor does it intend to take
any action that would impair, its ability to pay its debts from time to time
incurred in connection therewith as such debts mature. The Company will conduct
its business in compliance with all applicable laws, rules, ordinances and
regulations of the jurisdictions in which it is conducting business, including,
without limitation, all applicable local, state and federal environmental laws
and regulations the failure to comply with which would have a Material Adverse
Effect.
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n. INSURANCE. The Company shall maintain liability, casualty
and other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size to the Company.
o. PROXY STATEMENT. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which
meeting shall occur on or before the earlier of (A) the date which is 75 days
after the Proxy Statement Triggering Date (as defined below) and (B) the date on
which the Company holds its next annual meeting of stockholders, which date
shall be no later than June 30, 2001 (the "STOCKHOLDER MEETING DEADLINE"), a
proxy statement, which has been previously reviewed by each Buyer and counsel
for the Buyers, soliciting each such stockholder's affirmative vote at such
stockholder meeting for approval of the Company's issuance of all of the
Securities as described in this Agreement (such affirmative vote being referred
to as the "STOCKHOLDER APPROVAL"), and the Company shall use its best efforts to
(i) solicit its stockholders' approval of such issuance of the Securities and
(ii) cause the Board of Directors of the Company to recommend to the
stockholders that they approve such proposal. If the Company fails to hold a
meeting of its stockholders by the Stockholder Meeting Deadline, then, as
partial relief (which remedy shall not be exclusive of any other remedies
available at law or in equity), the Company shall pay to each holder of
Preferred Stock an amount in cash per Preferred Share held by such holder equal
to the product of (i) $1,000, multiplied by (ii) 0.02; multiplied by (iii) the
quotient of (x) the number of days after the Stockholder Meeting Deadline that a
meeting of the Company's stockholders is not held, divided by (y) 30. The
Company shall make the payments referred to in the immediately preceding
sentence within five days of the earlier of (I) the holding of the meeting of
the Company's stockholders, the failure of which resulted in the requirement to
make such payments, and (II) the last day of each 30-day period beginning on the
Stockholder Meeting Deadline. In the event the Company fails to make such
payments in a timely manner, such payments shall bear interest at the rate of
2.0% per month (pro rated for partial months) until paid in full. "PROXY
STATEMENT TRIGGERING DATE" shall mean the first date after the date of this
Agreement on which there are five (5) trading days in any period of seven (7)
consecutive trading days on which the sum of (A) the number of shares of Common
Stock previously issued upon conversion of any Preferred Stock and upon exercise
of any Warrants and (B) the number of shares of Common Stock issuable upon
conversion of all the outstanding Preferred Stock based on the Conversion Price
in effect on the date of such determination (without regard to any limitation
upon the conversion of any Preferred Stock) and upon exercise of all the
outstanding Warrants based on the Warrant Exercise Price in effect on the date
of such determination (without) regard to any limitation upon the exercise of
any Warrants), equals or exceeds 16% of the number of shares of Common Stock
issued and outstanding immediately prior to the C-1 Closing Date or other date
of determination.
p. NEW TRANSFER AGENT. The Company shall, as soon as possible
but in any event no later than 90 days from the C-1 Closing Date, retain a
transfer agent (the "NEW TRANSFER AGENT") that participates in The Depository
Trust Company ("DTC") Fast Automated Securities Transfer Program and the
Irrevocable Transfer Agent Instructions (as defined below), substantially
identical to the form of EXHIBIT D attached hereto, shall be delivered to and
acknowledged in writing by the New Transfer Agent.
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5. TRANSFER AGENT INSTRUCTIONS.
For Buyer's conversion requests made within 90 days of the C-1
Closing Date, the Company shall issue irrevocable instructions to its transfer
agent (in the form attached hereto as EXHIBIT D) to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Preferred Stock or
exercise of the Warrants, respectively. For Buyer's conversion requests made 90
days after the C-1 Closing Date, the Company shall issue irrevocable
instructions to its transfer agent (in the form attached hereto as EXHIBIT D)
when the legend set forth in Section 2(g) is not required, to electronically
issue such shares (e.g., through DWAC or DTC), or at a Buyer's request or when
the legend set forth in Section 2(g) is required, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Preferred Stock or
exercise of the Warrants, respectively (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act and transfer of such shares to a holder other than the
Buyer, such certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof will be given by the
Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, the Certificate
of Designation and the Warrants. Nothing in this Section 5 shall affect in any
way each Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of any of the Securities. If a Buyer provides the
Company with an opinion of reasonably satisfactory counsel, reasonably
satisfactory in form and substance to the Company, that registration of a resale
by such Buyer of any of the Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares or
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Stock and Warrants to each Buyer at the Closings is subject to the
satisfaction, at or before each of the Closing Dates, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
a. Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
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b. Such Buyer shall have delivered to the Company the
applicable purchase price for the applicable Preferred Stock being purchased by
such Buyer at such Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
c. A Merger Transaction (as defined in the Certificate of
Designation) pursuant to which all of the outstanding Preferred Stock shall have
been converted or redeemed shall not have been consummated.
d. The representations and warranties of such Buyer shall be
true and correct in all material respects as of each of the Closing Dates as
though made at that time (except for representations and warranties that speak
as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to each of the Closing Dates.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. C-1 CLOSING DATE. The obligation of each Buyer hereunder to
purchase the Series C-1 Preferred Stock at the C-1 Closing is subject to the
satisfaction, at or before the C-1 Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
i. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to such Buyer.
ii. The Certificate of Designation shall have been
executed by the Company and filed with the Secretary of the State of Missouri,
and a copy marked as filed shall have been delivered to such Buyer.
iii. The Common Stock shall be authorized for trading
on the Nasdaq National Market, New York Stock Exchange or American Stock
Exchange (collectively, the "EXCHANGES"), and trading in the Common Stock on the
applicable Exchange shall not have been suspended by the SEC or the applicable
Exchange and all of the Conversion Shares and Warrant Shares then issuable upon
conversion of the Series C-1 Preferred Stock or exercise of the Warrants to be
sold at the C-1 Closing shall be listed upon the applicable Exchange (subject to
notice of issuance).
iv. The representations and warranties of the Company
shall be true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case such representations and
warranties shall be true and correct without further qualification) as of the
C-1 Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
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or complied with by the Company at or prior to the C-1 Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the C-1 Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer including,
without limitation, an update as of the C-1 Closing Date regarding the
representation contained in Section 3(c) above.
v. Such Buyer shall have received the opinion of the
Company's counsel dated as of the C-1 Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of EXHIBIT E
attached hereto.
vi. The Company shall have executed and delivered to
such Buyer the Stock Certificates (in such denominations as such Buyer shall
request) for the Series C-1 Preferred Stock being purchased by such Buyer and
the Warrants being given at the C-1 Closing.
vii. The Board of Directors of the Company shall have
adopted the resolutions in substantially the form of EXHIBIT F attached hereto
(the "RESOLUTIONS").
viii. As of the C-1 Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series C-1 Preferred Stock and the
exercise of the Warrants, at least an aggregate of (i) 200% of the number of
Conversion Shares issuable upon conversion of the Series C-1 Preferred Stock,
assuming current conversion; and (ii) the number of Warrant Shares issuable upon
exercise of all of the outstanding Warrants, without regard to limitations on
conversion or exercise.
ix. The Irrevocable Transfer Agent Instructions, in
the form of EXHIBIT D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
x. The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each subsidiary representing more than 5% of the 1999 revenue of the Company in
the state of such corporation's state of incorporation issued by the Secretary
of State of such state of incorporation as of a date within 7 days of such
Closing Date.
xi. The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) copies of its
Articles of Incorporation and (C) By-laws, each as in effect at the C-1 Closing.
xii. The Company shall have delivered to such Buyer a
certified copy of its Articles of Incorporation as certified by the Secretary of
State of the State of Missouri as of a date within 5 business days after the C-1
Closing Date.
xiii. The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
xiv. The transactions contemplated hereby shall not
violate any law, regulation or order then in effect and applicable to Buyers or
the Company.
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xv. The Company shall not be in default of the Credit
Facility (as such term is defined in the Certificate of Designation).
xvi. The Company shall have delivered to such Buyer a
signed copy of the Credit Facility.
xvii. The Company shall have delivered written notice
to the Buyers specifying whether dividends shall be paid in cash, additional
Preferred Stock or a specified combination thereof.
b. C-2 CLOSING DATES. The obligation of each Buyer hereunder
to purchase the Series C-2 Preferred Stock at the C-2 Closing is subject to the
satisfaction, at or before the C-2 Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
i. The Certificate of Designation for the Preferred
Stock shall be in full force and effect and such certificate shall not have been
amended since the most recent Closing Date, and a copy of such Certificate
certified by the Secretary of State of the State of Missouri shall have been
delivered to such Buyer.
ii. The Common Stock shall be authorized for trading
on one of the Exchanges, trading in the Common Stock shall not have been
suspended by the SEC or such Exchange since the C-1 Closing Date and all of the
Registrable Securities shall be listed upon such Exchange.
iii. The representations and warranties of the
Company shall be true and correct in all material respects (except to the extent
that any of such representations and warranties is already qualified as to
materiality in Section 3, in which case such representations and warranties
shall be true and correct without further qualification) as of the date when
made and as of the C-2 Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement, the
Registration Rights Agreement, the Warrant or the Certificate of Designation to
be performed, satisfied or complied with by the Company at or prior to the C-2
Closing Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the C-2 Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, without limitation, an update as of the C-2 Closing Date
regarding the representation contained in Section 3(c) above.
iv. Such Buyer shall have received the opinion of the
Company's counsel dated as of the C-2 Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of EXHIBIT E
attached hereto.
v. The Company shall have executed and delivered to
such Buyer the Stock Certificates (in such denominations as such Buyer shall
request) for the Series C-2 Preferred Stock being purchased by such Buyer and
the Warrants being given at the C-2 Closing.
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vi. The Board of Directors of the Company shall not
have amended the Resolutions or shall have delivered updated Resolutions in a
form acceptable to such Buyer.
vii. As of the C-2 Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Stock and the exercise of
the Warrants, a number of shares of Common Stock equal, without regard to
limitations on conversion or exercise, to an aggregate of (i) at least 200% of
the number of Conversion Shares then issuable upon conversion of all of the
outstanding Series C-2 Preferred Stock, including for such purposes the Series
C-2 Preferred Stock to be issued at the C-2 Closing; (ii) 150% of the number of
Conversion Shares then issuable upon conversion of the then outstanding
Preferred Stock; and (iii) the number of Warrant Shares issuable upon exercise
of all of the outstanding Warrants including for such purposes the Warrants to
be issued at the C-2 Closing.
viii. The Irrevocable Transfer Agent Instructions,
substantially identical to the form of EXHIBIT D, attached hereto, shall have
been delivered to and acknowledged in writing by the Company's transfer agent.
ix. The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each subsidiary representing more than 5% of the revenue of the Company for the
most recently completed fiscal year in the state of such corporation's state of
incorporation issued by the Secretary of State of such state of incorporation as
of a date within ten days of the C-2 Closing Date.
x. The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) copies of its
Articles of Incorporation and (C) By-laws, each as in effect at the C-2 Closing.
xi. The Company shall have delivered to such Buyer a
certified copy of its Articles of Incorporation as certified by the Secretary of
State of the State of Missouri within ten days of the C-2 Closing Date.
xii. The Company shall have delivered to such Buyer a
letter from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five days of the C-2 Closing Date.
xiii. The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
xiv. The transactions contemplated hereby shall not
violate any law, regulation or order then in effect and applicable to Buyers or
the Company.
8. INDEMNIFICATION.
In consideration of each Buyer's execution and delivery of
this Agreement and acquiring the Securities hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company shall defend,
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protect, indemnify and hold harmless each Buyer and each other holder of
Securities and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "BUYER
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "BUYER INDEMNIFIED
LIABILITIES"), incurred by any Buyer Indemnitee (and shall advance the same) as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Certificate of Designation, the Warrants, the Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement, the Certificate of Designation, the Warrants or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Buyer Indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by any of
the Buyer Indemnitees, any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the Preferred
Stock and Warrants or the status of such Buyer or holder of any of the
Securities as an investor in the Company. Promptly after receipt by a Buyer
Indemnitee of notice of the commencement of any action or proceeding (including
any governmental action or proceeding) involving the Buyer Indemnified
Liabilities , such Buyer Indemnitee shall deliver to the Company a written
notice of the commencement thereof, and the Company shall have the right to
participate in, and, to the extent it so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel selected by the Company and reasonably satisfactory to the Buyer
Indemnitee; provided, however, that a Buyer Indemnitee shall have the right to
retain its own counsel with the fees and expenses to be paid by the Company, if,
in the reasonable opinion of counsel retained by the Company, the representation
by such counsel of the Buyer Indemnitee and the Company would be inappropriate
due to actual differing interests between such Buyer Indemnitee and any other
party represented by such counsel in such proceeding. The Buyer Indemnitee shall
cooperate fully with the Company in connection with any negotiation or defense
of any such action or claim by the Company and shall furnish to the Company all
information reasonably available to the Buyer Indemnitee which relates to such
action or claim. The Company shall keep the Buyer Indemnitee fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. The Company shall not be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided,
however, that the Company shall not unreasonably withhold, delay or condition
its consent. The Company shall not, without the consent of the Buyer Indemnitee,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Buyer Indemnitee of a release from all
liability in respect to such claim or litigation. Following indemnification as
provided for hereunder, the Company shall be subrogated to all rights of the
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Buyer Indemnitee with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the Company within a reasonable time of the
commencement of any such action shall not relieve it of any liability to the
Buyer Indemnitee, except to the extent that the Company is prejudiced in its
ability to defend such action. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Buyer
Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party, PROVIDED THAT a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
documents referred to herein, supersede all other prior or contemporaneous oral
or written agreements between or among the Buyers, the Company, their affiliates
and persons acting on their behalf with respect to the matters discussed herein,
and this Agreement 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 any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the Company
and the holders of at least 2/3 of the then outstanding Preferred Stock, but any
such waiver or amendment shall bind all Buyers and holders. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of this Agreement, the Registration Rights
Agreement, the Warrants or the Certificate of Designation unless the same
consideration also is offered to all of the parties to this Agreement, the
Registration Rights Agreement, the Warrants or holders of Preferred Stock, as
the case may be.
f. NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
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(iii) three (3) business days after being sent by U.S. certified mail, return
receipt requested, or (iv) one (1) business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
if to the Company:
Applied Digital Solutions, Inc.
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
if to the Transfer Agent (until a New Transfer Agent,
if different, is appointed):
Florida Atlantic Stock Transfer, Inc.
0000 Xxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
If to a Buyer, to its address and facsimile number on the
Schedule of Buyers, with copies to such Buyer's counsel as set forth on the
Schedule of Buyers. Each party shall provide five (5) days' prior written notice
to the other party of any change in address or facsimile number.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Securities. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of 2/3 of the Preferred Stock then outstanding. A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, PROVIDED, HOWEVER, that (i) any such assignment shall not release such
Buyer from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption, which
consent shall not be unreasonably withheld; (ii) no Buyer may assign its
purchase or other rights hereunder in a manner that would cause the offering of
Securities hereunder to be required to be registered under the 1933 Act; (iii)
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no Buyer may assign its purchase or other rights with respect to the Series C-2
Preferred Stock except for an assignment to (x) an affiliate of such Buyer, (y)
to another Buyer or (z) to an affiliate of another Buyer; and (iv) no Buyer may
assign its rights hereunder to an entity that in the good faith judgment of the
Board of Directors of the Company is competitive with a core business of the
Company; PROVIDED, FURTHER, that the restrictions on assignments included in
clauses (iii) and (iv) herein shall not apply if the Company is in default of
any of its material obligations under this Agreement or any of the other
agreements referred to herein or if a Triggering Event (as defined in the
Certificate of Designation) has occurred.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. SURVIVAL. The representations and warranties of the Company
and the Buyers contained in Sections 3 and 2, respectively, shall survive the
applicable Closing until three years after the Closing Date, including, without
limitation, all financial statements thereto. The agreements and covenants set
forth in Sections 4, 5 and 9, and the indemnification provisions set forth in
Section 8, shall survive each Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
j. PUBLICITY. Without the prior written consent of the subject
Buyer or Buyers, the Company will not, and will use reasonable efforts to ensure
that its officers, directors, employees and agents do not disclose the name of
any Buyer; provided, however, that the Company shall be entitled, without the
prior approval of any Buyer, to make any press release or other public
disclosure with respect to such transactions as is required by applicable law
and regulations (although each Buyer shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof), but only to the extent
required by such law or regulation.
k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
m. GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(other than Section 5-1401 of the New York General Obligations Law and whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
Each party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting in The City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
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waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
n. REMEDIES. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in this Agreement, the Registration
Rights Agreement, the Warrants and the Certificate of Designation and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
o. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to the Registration
Rights Agreement, the Certificate of Designation or the Warrants or the Buyers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
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IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
written above.
COMPANY: BUYERS:
APPLIED DIGITAL SOLUTIONS, INC. PECONIC FUND, LTD.
By: /s/ XXXXX X. XXXXXXX By: /s/ XXXXXX OLGILVIE
---------------------------- ---------------------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxxx Xxxxxxx
Title: Vice President and Title: General Counsel of Ramius
General Counsel Capital Group, LLC, its
Investment Advisor
XXXXXXXX L.P.
BY: XXXXXX, XXXXXX & CO., L.P.,
ITS GENERAL PARTNER
By: /s/ XXXX XXXXXX
---------------------------------
Name: Xxxx Xxxxxx
Title: Chief Financial Officer
XXXXXXX ASSOCIATES, L.P.
BY: XXXXXXX CAPITAL ADVISORS, L.P., AS GENERAL PARTNER
BY: XXXXXXX ASSOCIATES, INC., AS GENERAL PARTNER
By: /s/ XXXXXX XXXXXXXXX
---------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President
WESTGATE INTERNATIONAL, L.P.
BY: XXXXXXX INTERNATIONAL CAPITAL ADVISORS INC.,
AS ATTORNEY-IN-FACT
By: /s/ XXXXXX XXXXXXXXX
---------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President
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SCHEDULE OF BUYERS
NUMBER OF SHARES OF
INVESTOR ADDRESS AND PREFERRED STOCK AND INVESTOR'S ADVISORS AND
INVESTOR NAME FACSIMILE NUMBER WARRANTS LEGAL COUNSEL ADDRESS
------------- ---------------- --------------------- ---------------------
Peconic Fund, Ltd. 000 Xxxxx Xxxxxx Preferred Stock: Xxxxxxx Xxxxx, Esq.
26th Floor 8,666.67 Xxxxxxx Xxxx & Xxxxx LLP
Xxx Xxxx, XX 00000 000 Xxxxx Xxxxxx
Xxxxxxxx: Xxx Xxxx, XX 00000
Fax: (000) 000-0000 266,667 Phone: (000) 000-0000
Fax: (000) 000-0000
Xxxxxxxx L.P. 000 Xxxx Xxxxxx Preferred Stock: Xxxxxxx Xxxxx, Esq.
26th Floor 8,666.67 Xxxxxxx Xxxx & Xxxxx LLP
Xxx Xxxx, XX 00000 000 Xxxxx Xxxxxx
Ph: (212) 692-2035 Warrants: Xxx Xxxx, XX 00000
Fax: (000) 000-0000 266,667 Phone: (000) 000-0000
Fax: (000) 000-0000
Attention:
Xxx X. Xxxxxx
Xxxx X. Chill
Xxxxxxx Associates, L.P. 000 Xxxxx Xxxxxx Preferred Stock: Xxxxxxx Xxxxx, Esq.
36th Floor 4,333.33 Xxxxxxx Xxxx & Xxxxx LLP
Xxx Xxxx, XX 00000 000 Xxxxx Xxxxxx
Xxxxxxxx: Xxx Xxxx, XX 00000
Fax: (000) 000-0000 133,334 Phone: (000) 000-0000
Fax: (000) 000-0000
Westgate International, L.P. 000 Xxxxx Xxxxxx Preferred Stock: Xxxxxxx Xxxxx, Esq.
36th Floor 4,333.33 Xxxxxxx Xxxx & Xxxxx LLP
Xxx Xxxx, XX 00000 000 Xxxxx Xxxxxx
Xxxxxxxx: Xxx Xxxx, XX 00000
Fax: (000) 000-0000 133,333 Phone: (000) 000-0000
Fax: (000) 000-0000
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