SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 18, 2011, by and among
Cereplast, Inc., a Nevada corporation with headquarters located at 000 X. Xxxxxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xx Xxxxxxx, Xxxxxxxxxx 00000 (the “Company”), and each investor identified on the
signature pages hereto (individually, an “Investor” and collectively, the “Investors”).
BACKGROUND
A. The Company and each Investor are executing and delivering this Agreement in reliance upon
the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the Securities Act.
B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, such principal amount of the
Company’s 7% Senior Subordinated Convertible Notes due June 1, 2016 (the “Notes”) set forth on
such Investor’s signature page to this Agreement (which aggregate amount for all Investors together
shall be an aggregate amount of up to $15,000,000). The Notes will be issued pursuant to an
Indenture, as supplemented by a supplemental indenture to be dated as of the Closing Date (defined
below) (collectively, the “Indenture”) between the Company and Xxxxx Fargo Bank, National
Association, as trustee (the “Trustee”). Securities issued via Deposit/Withdrawal At Custodian will
be issued to Cede & Co., as nominee of The Depository Trust Company (“DTC”) pursuant to a letter of
representations (the “DTC Agreement”), between the Company and DTC. The Notes are convertible into
shares (the “Conversion Shares”) of the common stock, $0.001 par value per share (the “Common
Stock”), of the Company, in accordance with the terms of the Notes and the Indenture, at the
initial conversion rate specified in the Indenture and the Notes, under the circumstances and
subject to adjustment as set forth in the Indenture. The Notes and the Conversion Shares are
collectively referred to herein as the “Securities.”
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Investors agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated:
“Additional Interest” has the meaning set forth in Section 6.1 hereof.
“Additional Interest Accrual Period” has the meaning set forth in Section 6.1 hereof.
“Additional Interest Amount” has the meaning set forth in Section 6.1 hereof.
“Additional Interest Payment Date” means each of June 1 or December 1.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144 under the Securities Act.
“Agreement” has the meaning set forth in the Preamble.
“Best Efforts” means the efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved as expeditiously as practical;
provided, however, that an obligation to use Best Efforts under this Agreement does not require the
Company to dispose of or make any change to its business, expend any material funds or incur any
other material burden.
“Business Day” means any day other than Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions in The State of New
York are authorized or required by law or other governmental action to close.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing Date” means the date and time of the Closing and shall be on such date and time as is
mutually agreed to by the Company and each Investor.
“Company” has the meaning set forth in the Preamble.
“Company Counsel” means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, counsel to the Company.
“Common Stock” has the meaning set forth in the Preamble.
“Common Stock Equivalents” means any securities of the Company or any Subsidiary which would
entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, right, option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.
“Contingent Obligation” has the meaning set forth in Section 3.1(aa).
“Convertible Securities” means any stock or securities (other than Options) convertible into
or exercisable or exchangeable for Common Stock.
“Conversion Shares” has the meaning set forth in the Preamble.
“Debt Repayment Triggering Event” has the meaning set forth in Section 3.1(f).
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“Disclosure Materials” has the meaning set forth in Section 3.1(h).
“Effective Date” means the date that the Registration Statement is first declared effective by
the SEC.
“Effectiveness Period” means the period commencing on the date the Registration Statement is
declared effective and ending on the date that all Notes and Underlying Shares have ceased to be
Registrable Securities.
“8-K Filing” has the meaning set forth in Section 4.5.
“Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin
Board.
“Environmental Laws” has the meaning set forth in Section 3.1(ee).
“Event” has the meaning set forth in Section 6.1(d).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Events” has the meaning set forth in Section 6.1(d)(iii).
“Excluded Investors” means Lazard Capital Markets LLC, Xxxx Capital Partners and Ardour
Capital Investments LLC, and each of its and their Affiliates.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly adopted for such
purpose, by a majority of the non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for such purpose, (b) shares of Common
Stock issued to employees, officers or directors of the Company in lieu of cash compensation for
services rendered to the Company, (c) securities issued upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable
for or convertible into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price, exchange price or
conversion price of such securities, and (d) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors of the Company,
provided that any such issuance shall only be to a Person (or to the equityholders of a Person)
which is, itself or through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the Company additional
benefits in addition to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.
“Filing Date” means the date that is thirty (30) days after the Closing Date or, if such date
is not a Business Day, the next date that is a Business Day.
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“GAAP” has the meaning set forth in Section 3.1(h).
“Hazardous Materials” has the meaning set forth in Section 3.1(ee).
“Holder” means a Person who owns, beneficially or otherwise, Registrable Securities.
“Indebtedness” has the meaning set forth in Section 3.1(bb).
“Indemnified Party” has the meaning set forth in Section 6.4(c).
“Indemnifying Party” has the meaning set forth in Section 6.4(c).
“Indenture” has the meaning set forth in the Preamble.
“Insolvent” has the meaning set forth in Section 3.1(i).
“Intellectual Property Rights” has the meaning set forth in Section 3.1(u).
“Investor” has the meaning set forth in the Preamble.
“Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.
“Losses” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, reasonable attorneys’ fees.
“Material Adverse Effect” means (i) a material adverse effect on the results of operations,
assets, business, prospects or financial condition of the Company and the Subsidiaries taken as a
whole on a consolidated basis or (ii) material and adverse impairment of the Company’s ability to
perform its obligations under any of the Transaction Documents, provided, that none of the
following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) a
change in the market price or trading volume of the Common Stock or (ii) changes in general
economic conditions or changes affecting the industry in which the Company operates generally (as
opposed to Company-specific changes) so long as such changes do not have a disproportionate effect
on the Company and its Subsidiaries taken as a whole.
“Material Permits” has the meaning set forth in Section 3.1(w).
“Notes” has the meaning set forth in the Preamble.
“Options” means any outstanding rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
“Person” has the meaning set forth in Section 3.1(bb).
“Placement Agents” has the meaning set forth in Section 3.1(m).
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“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, a partial proceeding, such as a deposition), whether commenced or threatened in
writing.
“Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
“Questionnaires” has the meaning set forth in Section 6.2(m).
“Record Holder” means with respect to any Additional Interest Payment Date relating to any
Notes as to which any Additional Interest Amount has accrued, the registered holder of such Note on
the May 15 immediately preceding an Additional Interest Payment Date occurring on a June 1, and on
the November 15 immediately preceding an Additional Interest Payment Date occurring on a December
1.
“Registrable Securities” means the Notes and the Underlying Shares issuable pursuant to the
Transaction Documents, together with any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect to the foregoing,
until the earliest of (i) the effective registration under the Securities Act and the resale of the
Registrable Securities in accordance with the Registration Statement or pursuant to Rule 144 or any
similar provision then in force; (ii) the date on which the Registrable Security is distributed to
the public pursuant to Rule 144 or may be sold or transferred by a person who is not our affiliate
pursuant to Rule 144 (or any other similar provision then in force) without any volume or manner of
sale restrictions thereunder; and (iii) the date on which the Registrable Securities cease to be
outstanding.
“Registration Statement” means each registration statement required to be filed under Article
VI, including (in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by reference in such
registration statement.
“Regulation D” has the meaning set forth in the Preamble.
“Required Effectiveness Date” means (i) if the Registration Statement does not become subject
to review by the SEC, the date which is the earliest of (a) ninety (90) days after the Closing Date
or (b) three (3) Trading Days after the Company receives notification from the SEC that the
Registration Statement will not become subject to review, or (ii) if the Registration Statement
becomes subject to review by the SEC, the date which is the earliest of (a) one hundred and fifty
(150) days after the Closing Date or (b) three (3) Trading Days after the Company receives
notification from the SEC that the SEC has no further comment to the Registration Statement.
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“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to
time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
“SEC” has the meaning set forth in the Preamble.
“SEC Reports” has the meaning set forth in Section 3.1(h).
“Securities” has the meaning set forth in the Preamble.
“Securities Act” has the meaning set forth in the Preamble.
“Shares” means shares of the Company’s Common Stock.
“Short Sales” has the meaning set forth in Section 3.2(i).
“Subsidiary” means any direct or indirect subsidiary of the Company.
“Subscription Amount” means, as to each Investor, the aggregate amount to be paid for the
Notes purchased hereunder as specified below such Investor’s name on the signature page of this
Agreement, in United States dollars and in immediately available funds.
“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other
than the OTC Bulletin Board), or (ii) if the Common Stock is not listed or quoted on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not
listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency
succeeding to its functions of reporting prices); provided, that in the event that the Common Stock
is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.
“Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.
“Transaction” has the meaning set forth in Section 3.2(i).
“Transaction Documents” means this Agreement, the Notes and the schedules and exhibits
attached hereto.
“Transfer Agent” means Computershare, Inc, or any successor transfer agent for the Company.
“Trustee” has the meaning set forth in the Preamble.
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“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or
redemption of the Notes.
ARTICLE II
PURCHASE AND SALE
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and
not jointly, purchase from the Company, such aggregate principal amount of the Notes set forth on
such Investor’s signature page to this Agreement. The date and time of the Closing and shall be
11:00 a.m., New York City Time, on the Closing Date. The Closing shall take place at the offices
of the Company’s Counsel.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the
following:
(i) a Note with a principal amount equal to such Purchaser’s Subscription Amount, registered
in the name of such Purchase;
(ii) the Indenture duly executed by the Company and the Trustee;
(iii) a legal opinion of Company Counsel, in the form of Exhibit B, executed by such
counsel and delivered to the Investors and the Placement Agents;
(iv) a legal opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, in the form of Exhibit
C, executed by such counsel and delivered to the Investors and the Placement Agents;
(iv) a certificate of the Secretary of the Company, dated as of the Closing Date, (a)
certifying the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents and the issuance of
the Securities, (b) certifying the current versions of the certificate of incorporation, as amended
and by-laws of the Company and (c) certifying as to the signatures and authority of persons signing
the Transaction Documents and related documents on behalf of the Company; and
(v) a certificate of the Chief Executive Officer or Chief Financial Officer of the Company,
dated as of the Closing Date, certifying to the fulfillment of the conditions specified in
Section 5.1(a) and (b).
(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company
such Investor’s Subscription Amount by wire transfer to an account designated in writing to such
Investor by the Company for such purpose.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors and the Placement Agents as follows (which representations and warranties
shall be deemed to apply, where appropriate, to each Subsidiary of the Company):
(a) Subsidiaries. The Company owns or controls, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary free and clear of any Lien, and
all issued and outstanding shares of capital stock or comparable equity interest of each
Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights; and the Company owns or controls, directly or indirectly, only the following
corporations, partnerships, limited liability partnerships, limited liability companies,
associations or other entities: Cereplast International, S.A., a Luxembourg company, Cereplast
Europe S.A.S, a French Company and Cereplast Italia SpA, a company formed under the laws of
Italy, both of which are wholly owned subsidiaries of Cereplast International, S.A., (each, a
“Subsidiary”).
(b) Organization and Qualification. The Company and each Subsidiary is an entity
duly organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the requisite legal authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. The Company and each Subsidiary is duly
qualified to do business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so qualified or in good standing,
as the case may be, would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the corporate power and authority
to enter into this Agreement, the Indenture and the Notes, and to perform and to discharge its
obligations hereunder and thereunder; including, without limitation, the full right, power and
authority to issue, sell and deliver the Notes and the Conversion Shares; and each of this
Agreement has been duly authorized, executed and delivered by the Company, and constitutes a
valid and binding obligation of the Company enforceable against the Company in accordance with
its terms; and the Indenture, when executed and delivered by each of the Trustee and the
Company, and the Notes when executed and delivered by the Company, will have been duly
authorized, and will constitute a valid and binding obligation of the Company enforceable
against the Company in accordance with their terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.
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(d) Authorization of Securities. Upon issuance and delivery of the Notes in
accordance with this Agreement, and the Indenture, the Notes will be convertible at the option
of
the holder thereof for the Conversion Shares in accordance with the terms of the Notes and
the Indenture; the Notes have been duly authorized, and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for by the Investors,
will have been duly executed and delivered by the Company and (assuming the due authorization,
execution and delivery of the Indenture by the Trustee) will constitute the legal, valid and
binding obligations of the Company entitled to the benefits of the Indenture; the Conversion
Shares issuable upon conversion of the Notes have been duly authorized and reserved for issuance
and, when issued upon conversion of the Notes in accordance with the terms of the Notes and the
Indenture, will be validly issued, fully paid and non-assessable and will conform to the
description thereof in the documents furnished to the Investors; and the issuance of any of the
Securities will not be subject to any pre-emptive or similar rights.
(e) Authorization of Indenture. The Indenture will be duly authorized by the
Company and will be duly qualified under the Trust Indenture Act of 1939, as amended (the “Trust
Indenture Act”) on the Closing Date and, when duly executed and delivered by the Company and the
Trustee, will constitute a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting enforcement of creditors’
rights generally and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at law).
(f) No Conflicts. The execution, delivery and performance of this Agreement, the
Indenture, the Securities and the DTC Agreement by the Company, the issuance and sale of the
Securities by the Company and the consummation of the transactions contemplated hereby and
thereby will not (with or without notice or lapse of time or both) conflict with or result in a
breach or violation of any of the terms or provisions of, constitute a default or Debt Repayment
Triggering Event (as defined below) under, give rise to any right of termination or other right
or the cancellation or acceleration of any right or obligation or loss of a benefit under, or
give rise to the creation or imposition of any lien, encumbrance, security interest, claim or
charge upon any property or assets of the Company or any subsidiary pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound
or to which, to the Company’s knowledge, any of the property or assets of the Company or any of
its subsidiaries is subject (except where such breach, violation, default, right or encumbrance
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect), nor will such actions result in any violation of the provisions of the charter or
by-laws (or analogous governing instruments, as applicable) of the Company or any of its
subsidiaries or any law, statute, rule, regulation, judgment, order or decree of any court or
governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or any of their properties or assets. A “Debt Repayment Triggering Event” means
any event or condition that gives, or with the giving of notice or lapse of time would give the
holder of any note, debenture or other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the Company or any of its subsidiaries.
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(g) Capitalization. The aggregate number of shares and type of all authorized,
issued and outstanding classes of capital stock, options and other securities of the Company
(whether or not presently convertible into or exercisable or exchangeable for shares of capital
stock of the Company) is set forth in Schedule 3.1(g) hereto. All outstanding shares of
capital stock are duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance in all material respects with all applicable securities laws. Except as
disclosed in Schedule 3.1(g) hereto, the Company did not have outstanding at December
31, 2010 any other Options, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or exercisable or
exchangeable for, or entered into any agreement giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. Except as set forth on Schedule 3.1(g) hereto, and except for
customary adjustments as a result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) and the issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Investors) and will not result in a right of any holder of securities
to adjust the exercise, conversion, exchange or reset price under such securities. To the
knowledge of the Company, except as disclosed in the SEC Reports and any Schedules 13D or 13G
filed with the SEC pursuant to Rule 13d-1 of the Exchange Act by reporting persons or in
Schedule 3.1(g) hereto, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial ownership of in excess of
5% of the outstanding Common Stock.
(h) SEC Reports; Financial Statements. Except as set forth on Schedule
3.1(h), the Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the 12 months
preceding the date hereof on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension and has
filed all reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof. Such reports
required to be filed by the Company under the Exchange Act, including pursuant to Section 13(a)
or 15(d) thereof, together with any materials filed or furnished by the Company under the
Exchange Act, whether or not any such reports were required being collectively referred to
herein as the “SEC Reports” and, together with this Agreement and the Schedules to this
Agreement, the “Disclosure Materials”. As of their respective dates (or, if amended or
superseded by a filing prior to the Closing Date, then on the date of such filing), the SEC
Reports filed by the Company complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Reports, when filed (or, if amended or superseded by a filing
prior to the Closing Date, then on the date of such filing) by the Company, 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 the light of the circumstances under
which they were made, not misleading. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto as in
effect at the time of filing (or, if amended or superseded by a filing prior to the Closing
Date, then on the date of such filing). Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements, the notes thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP or may be condensed or summary statements, and fairly
present in all material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a
party or to which the property or assets of the Company or any Subsidiary are subject are
included as part of or identified in the SEC Reports, to the extent such agreements are required
to be included or identified pursuant to the rules and regulations of the SEC.
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(i) Material Changes; Undisclosed Events, Liabilities or Developments; Solvency.
Since the date of the latest audited financial statements included within the SEC Reports,
except as disclosed in the SEC Reports or in Schedule 3.1(i) hereto, (i) there has been
no event, occurrence or development that, individually or in the aggregate, has had or that
would result in a Material Adverse Effect, (ii) the Company has not incurred any material
liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required to be reflected in
the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made
with the SEC, (iii) the Company has not altered its method of accounting or changed its
auditors, except as disclosed in its SEC Reports, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders, in their capacities as
such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its
capital stock, and (v) the Company has not issued any equity securities to any officer, director
or Affiliate, except pursuant to existing Company stock-based plans. The Company has not taken
any steps to seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company is not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the applicable Closing, will not be Insolvent (as defined
below). For purposes of this Section 3.1(i), “Insolvent” means (i) the present fair
saleable value of the Company’s assets is less than the amount required to pay the Company’s
total Indebtedness (as defined in Section 3.1(bb)), (ii) the Company is unable to pay
its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities
become absolute and matured, (iii) the Company intends to incur or believes that it will incur
debts that would be beyond its ability to pay as such debts mature or (iv) the Company has
unreasonably small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted.
(j) Absence of Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, claim, or Proceeding, or, to the Company’s knowledge, 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, threatened against or affecting the Company or any
Subsidiary that could, individually or in the aggregate, to have a Material Adverse Effect.
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(k) Compliance. Except as would not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect, (i) neither the Company nor any
Subsidiary is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim
that it is in default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been waived), (ii) neither
the Company nor any Subsidiary is in violation of any order of any court, arbitrator or
governmental body, or (iii) neither the Company nor any Subsidiary is or has been in violation
of any statute, rule or regulation of any governmental authority.
(l) Title to Assets. Neither the Company nor any Subsidiary owns real property.
The Company and each Subsidiary has good and marketable title in all personal property owned by
them that is material to the business of the Company and each Subsidiary, in each case free and
clear of all Liens, except for Liens that do not, individually or in the aggregate, have or
result in a Material Adverse Effect. Any real property and facilities held under lease by the
Company or any Subsidiary is held by it under valid, subsisting and enforceable leases of which
the Company and each Subsidiary is in material compliance.
(m) No General Solicitation; Placement Agents’ Fees. 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) in connection
with the offer or sale of the Securities. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for
persons engaged by any Investor or its investment advisor) relating to or arising out of the
issuance of the Securities pursuant to this Agreement. The Company shall pay, and hold each
Investor harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim
for fees arising out of the issuance of the Securities pursuant to this Agreement. The Company
acknowledges that is has engaged Lazard Capital Markets LLC as its lead placement agent with
Xxxx Capital Partners and Ardour Capital Investments, LLC as co-placement agents (the “Placement
Agents”) in connection with the sale of the Securities. Other than the Placement Agents, the
Company has not engaged any placement agent or other agent in connection with the sale of the
Securities.
(n) Private Placement; Investment Company; U.S. Real Property Holding Corporation.
Neither the Company nor any of its Affiliates nor, any Person acting on the Company’s behalf
has, directly or indirectly, at any time within the past six months, made any offer or sale of
any security or solicitation of any offer to buy any security under circumstances that would (i)
eliminate the availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without limitation, under the
rules and regulations of any Trading Market. Assuming the accuracy of the representations and
warranties of the Investors set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the Company to the
Investors as contemplated hereby. The sale and issuance of the Securities hereunder does not
contravene the rules and regulations of any Trading Market on which the Common Stock is listed
or quoted. The Company is not required to be registered as, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended. The
Company is not required to be registered as a United States real property holding corporation
within the meaning of the Foreign Investment in Real Property Tax Act of 1980.
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(o) Form S-3 Eligibility. The Company is eligible to register the Securities for
resale by the Investors using Form S-3 promulgated under the Securities Act.
(p) Listing and Maintenance Requirements. The Company has not, in the twelve
months preceding the date hereof, received notice (written or oral) from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.
(q) Registration Rights. The Company has not granted or agreed to grant to any
Person any rights (including “piggy-back” registration rights) to have any securities of the
Company registered with the SEC or any other governmental authority that have not expired or
been satisfied or waived.
(r) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s charter documents or the laws of its state
of incorporation that is or could become applicable to any of the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the Company’s issuance of
the Securities and the Investors’ ownership of the Securities.
(s) Disclosure. The Company confirms that neither it nor any officers, directors
or Affiliates, has provided any of the Investors (other than Excluded Investors [or those
certain investors who signed a confidentiality agreement with the Company]) or their agents or
counsel with any information that constitutes or might constitute material, nonpublic
information (other than the existence and terms of the issuance of Securities, as contemplated
by this Agreement). The Company understands and confirms that each of the Investors (other than
Excluded Investors [or those certain investors who signed a confidentiality agreement with the
Company]) will rely on the foregoing representations in effecting transactions in securities of
the Company. All disclosure provided by the Company to the Investors regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to this Agreement
furnished by or on behalf of the Company, are true and correct in all material respects and do
not contain any untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances under which they
were made,
not misleading. To the Company’s knowledge, except for the transactions contemplated by
this Agreement, no event or circumstance has occurred or information exists with respect to the
Company or any Subsidiary or their businesses, properties, operations or financial condition,
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. The Company acknowledges
and agrees that no Investor (other than Excluded Investors) makes or has made any
representations or warranties with respect to the transactions contemplated hereby other than
those set forth in the Transaction Documents.
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(t) Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges and agrees that
each of the Investors (other than Excluded Investors) is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that no Investor (other than
Excluded Investors) is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions contemplated hereby and
any advice given by any Investor (other than Excluded Investors) or any of their respective
representatives or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investors’ purchase of the
Securities. The Company further represents to each Investor that the Company’s decision to
enter into this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its advisors and representatives.
(u) Patents and Trademarks. The Company and each Subsidiary owns, or possesses
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 other intellectual property rights
(“Intellectual Property Rights”) necessary to conduct their respective businesses as now
conducted. None of the Company’s or any Subsidiary’s Intellectual Property Rights have expired
or terminated, or are expected to expire or terminate within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the Company or any
Subsidiary of Intellectual Property Rights of others. Except as disclosed in the SEC Reports,
there is no claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or any Subsidiary regarding its Intellectual
Property Rights.
(v) Insurance. The Company and each Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses and locations in which the Company and each Subsidiary
is engaged.
(w) Regulatory Permits. The Company and each Subsidiary possesses all
certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as presently
conducted and described in the SEC Reports (“Material Permits”), except where the failure to
possess
such permits does not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any
written notice of proceedings relating to the revocation or modification of any Material Permit.
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(x) Transactions With Affiliates and Employees. Except as set forth or
incorporated by reference in the Company’s SEC Reports, none of the officers, directors or
employees of the Company is presently a party to any transaction with the Company that would be
required to be reported on Form 10-K (other than for ordinary course services as employees,
officers or 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 such officer, director or employee or, to the
Company’s knowledge, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer, director, trustee or
partner.
(y) Internal Accounting Controls. The Company and each Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in
conformity with 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.
(z) Xxxxxxxx-Xxxxx Act. The Company is in compliance in all material respects with
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and regulations
promulgated by the SEC thereunder, except where such noncompliance would not have, individually
or in the aggregate, a Material Adverse Effect.
(aa) Foreign Corrupt Practices. Neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any director, officer, agent, employee or other Person acting on
behalf of the Company or any Subsidiary has, in the course of its actions for, or on behalf of,
the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee or to any foreign or
domestic political parties or campaigns from corporate funds; (iii) violated or is in violation
in any material respect of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
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(bb) Indebtedness. Except as disclosed in the SEC Reports, neither the Company nor
any Subsidiary (i) has any outstanding Indebtedness (as defined below), (ii) is in violation of
any term of or is in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, and (iii) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect. For purposes
of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with respect to
letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all indebtedness created
or arising under any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with the proceeds of
such indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in connection with
generally accepted accounting principles, consistently applied for the periods covered thereby,
is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; and (z) “Person” means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a government or any department or agency thereof and any other legal entity.
(cc) Employee Relations. Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement or employs any member of a union. The Company believes that its
relations with its employees are as disclosed in the SEC Reports. Except as disclosed in the
SEC Reports, during the period covered by the SEC Reports, no executive officer of the Company
or any Subsidiary has notified the Company or any Subsidiary that such officer intends to leave
the Company or a Subsidiary, as applicable, or otherwise terminate such officer’s employment
with the Company or a Subsidiary, as applicable. To the knowledge of the Company or any
Subsidiary, no executive officer of the Company or any Subsidiary is in violation of any
material term of any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not subject the
Company or any Subsidiary to any liability with respect to any of the foregoing matters.
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(dd) Labor Matters. The Company and each Subsidiary is in compliance in all
material respects with all federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices and benefits, terms and conditions of employment and
wages and hours, except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(ee) Environmental Laws. The Company and each Subsidiary (i) is in compliance in
all material respects with any and all Environmental Laws (as hereinafter defined), (ii) has
received all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) is in compliance in all
material respects with all terms and conditions of any such permit, license or approval where,
in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. 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.
(ff) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(gg) Tax Status. The Company and each Subsidiary (i) has made or filed all
foreign, federal and state income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) 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 (iii) 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.
-17-
3.2 Representations and Warranties of the Investors. Each Investor hereby, as to
itself only and for no other Investor, represents and warrants to the Company as follows:
(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Investor of the Securities
hereunder has been duly authorized by all necessary corporate, partnership or other action on
the part of such Investor. This Agreement has been duly executed and delivered by such Investor
and constitutes the valid and binding obligation of such Investor, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.
(b) No Public Sale or Distribution. Such Investor is acquiring the Securities and
the Conversion Shares upon conversion of the Notes, in the ordinary course of business for its
own account and not with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered under the Securities Act or under an
exemption from such registration and in compliance with applicable federal and state securities
laws, and such Investor does not have a present arrangement to effect any distribution of the
Notes to or through any person or entity; provided, however, that by making the
representations herein, such Investor does not agree to hold any of the 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 Securities
Act.
(c) Investor Status. At the time such Investor was offered the Notes, it was, at
the date hereof it is a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act. Such Investor is not a registered broker dealer registered under Section 15(a)
of the Exchange Act, or a member of FINRA, Inc. or an entity engaged in the business of being a
broker dealer. Except as otherwise disclosed in writing to the Company on Exhibit A-2
(attached hereto) on or prior to the date of this Agreement, such Investor is not affiliated
with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of FINRA
Inc. or an entity engaged in the business of being a broker dealer.
(d) General Solicitation. Such Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media, broadcast over television or radio,
disseminated over the Internet or presented at any seminar or any other general solicitation or
general advertisement.
(e) Experience of Such Investor. Such Investor, either alone or together with its
representatives has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in
the Securities, and has so evaluated the merits and risks of such investment. Such Investor
understands that it must bear the economic risk of this investment in the Securities
indefinitely, and is able to bear such risk and is able to afford a complete loss of such
investment.
-18-
(f) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning
the terms and conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information (other than material non-public
information [for those certain investors who did not enter into a confidentiality agreement with
the Company]) about the Company and each Subsidiary and their respective financial condition,
results of operations, business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that is necessary to
make an informed investment decision with respect to the investment. Neither such inquiries nor
any other investigation conducted by or on behalf of such Investor or its representatives or
counsel shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company’s representations and warranties
contained in the Transaction Documents. Such Investor acknowledges receipt of copies of the SEC
Reports.
(g) No Governmental Review. Such Investor 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 Securities 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 Securities.
(h) No Conflicts. The execution, delivery and performance by such Investor of this
Agreement and the consummation by such Investor of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents of such Investor 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 agreement, indenture or instrument to which such Investor is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Investor, except in the case of clauses
(ii) and (iii) above, for such that are not material and do not otherwise affect the ability of
such Investor to consummate the transactions contemplated hereby.
(i) Prohibited Transactions; Confidentiality. No Investor, directly or indirectly,
and no Person acting on behalf of or pursuant to any understanding with any Investor, has
engaged in any purchases or sales in the securities, including derivatives, of the Company
(including, without limitation, any Short Sales (a “Transaction”) involving any of the Company’s
securities) since the time that such Investor was first contacted by the Company, any of the
Placement Agents or any other Person regarding an investment in the Company. Such Investor
covenants that neither it nor any Person acting on its behalf or pursuant to any understanding
with such Investor will engage, directly or indirectly, in any Transactions in the securities of
the Company (including Short Sales) prior to the time the transactions contemplated by this
Agreement are publicly disclosed. “Short Sales” include, without limitation, all “short sales”
as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of
direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales,
swaps, derivatives and similar arrangements (including on a total return basis), and sales and
other transactions through non-U.S. broker-dealers or foreign regulated brokers.
-19-
(j) Restricted Securities. The Investors understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold without registration
under the Securities Act only in certain limited circumstances.
(k) Legends. It is understood that, except as provided in Section 4.1(b) of
this Agreement, certificates evidencing such Securities may bear the legend set forth in
Section 4.1(b).
(l) No Legal, Tax or Investment Advice. Such Investor understands that nothing in
this Agreement or any other materials presented by or on behalf of the Company to the Investor
in connection with the purchase of the Securities constitutes legal, tax or investment advice.
Such Investor has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase of the
Securities. Such Investor understands that the Placement Agents have acted solely as the agents
of the Company in this placement of the Securities, and that the Placement Agents make no
representation or warranty with regard to the merits of this transaction or as to the accuracy
of any information such Investor may have received in connection therewith. Such Investor
acknowledges that he has not relied on any information or advice furnished by or on behalf of
the Placement Agents.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Investors covenant that the Securities will only be disposed of pursuant to an
effective registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration requirements of the
Securities Act, and in compliance with any applicable state securities laws. In connection with
any transfer of the Securities other than pursuant to an effective registration statement or to
the Company, or pursuant to Rule 144, the Company may require the transferor to provide to the
Company an opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does
not require registration under the Securities Act. Notwithstanding the foregoing, the Company
hereby consents to and agrees to register on the books of the Company and with its Transfer
Agent, without any such legal opinion, except to the extent that the transfer agent requests
such legal opinion, any transfer of Securities by an Investor to an Affiliate of such Investor,
provided that the transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and provided that such Affiliate does not
request any removal of any existing legends on any certificate evidencing the Securities.
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(b) The Investors agree to the imprinting, until no longer required by this Section
4.1(b), of the following legend on any certificate evidencing any of the Securities:
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
Certificates evidencing the Underlying Shares shall not be required to contain such legend or
any other legend (i) while a registration statement (including the Registration Statement)
covering the resale of the Underlying Shares and is effective under the Securities Act, (ii)
following any sale of any such Underlying Shares pursuant to Rule 144 if the holder provides
the Company with a legal opinion (and the documents upon which the legal opinion is based)
reasonably acceptable to the Company to the effect that the Underlying Shares can be sold under
Rule 144, (iii) if the Underlying Shares are eligible for sale under Rule 144, or (iv) if the
holder provides the Company with a legal opinion (and the documents upon which the legal
opinion is based) reasonably acceptable to the Company to the effect that the legend is not
required under applicable requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the Staff of the SEC). Following the Effective
Date and provided the registration statement referred to in clause (i) above is then in effect,
or at such earlier time as a legend is no longer required for certain Securities, the Company
will no later than three Trading Days following the delivery by an Investor to the Company or
the Transfer Agent (if delivery is made to the Transfer Agent a copy shall be contemporaneously
delivered to the Company) of (i) a legended certificate representing such Securities (and, in
the case of a requested transfer, endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect transfer), and (ii) an opinion of counsel
to the extent required by Section 4.1(a), deliver or cause to be delivered to such
Investor a certificate representing such Securities that is free from all restrictive and other
legends. The Company may not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth in this Section.
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If within three Trading Days after receipt by the Company or its Transfer Agent of a
legended certificate and the other documents as specified in Clauses (i) and (ii) of the
paragraph immediately above, the Company shall fail to cause to be issued and delivered to such
Investor a certificate representing such Underlying Shares that is free from all restrictive
and other legends,
and if on or after such Trading Day the Investor purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of
shares of Common Stock that the Investor anticipated receiving from the Company without any
restrictive legend (the “Covering Shares”), then the Company shall, within three Trading Days
after the Investor’s request, pay cash to the Investor in an amount equal to the excess (if
any) of the Investor’s total purchase price (including brokerage commissions, if any) for the
Covering Shares, over the product of (A) the number of Covering Shares, times (B) the closing
bid price on the date of delivery of such certificate and the other documents as specified in
Clauses (i) and (ii) of the paragraph immediately above.
(c) The Company will not object to and shall permit (except as prohibited by law) an Investor
to pledge or grant a security interest in some or all of the Securities in connection with a bona
fide margin agreement with a registered broker-dealer or grant a security interest in some or all
of the Securities to a financial institution that is an “accredited investor” as defined in Rule
501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement, and
if required under the terms of such arrangement, the Company will not object to and shall permit
(except as prohibited by law) such Investor to transfer pledged or secured Securities to the
pledgees or secured parties. Except as required by law, such a pledge or transfer would not be
subject to approval of the Company, no legal opinion of the pledgee, secured party or pledgor shall
be required in connection therewith (but such legal opinion shall be required in connection with a
subsequent transfer or foreclosure following default by the Purchaser transferee of the pledge),
and no notice shall be required of such pledge. Each Investor acknowledges that the Company shall
not be responsible for any pledges relating to, or the grant of any security interest in, any of
the Securities or for any agreement, understanding or arrangement between any Investor and its
pledgee or secured party. At the appropriate Investor’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably
request in connection with a pledge or transfer of the Securities, including the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of selling
securityholders thereunder. Provided that the Company is in compliance with the terms of this
Section 4.1(c), the Company’s indemnification obligations pursuant to Section 6.4
shall not extend to any Proceeding or Losses arising out of or related to this Section
4.1(c).
4.2 Furnishing of Information. Until the date that any Investor owning the Underlying
Shares may sell all of them under Rule 144 of the Securities Act (or any successor provision), the
Company covenants to use its commercially reasonable efforts to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. The Company further covenants that
it will take such further action as any holder of Securities may reasonably request to satisfy the
provisions of this Section 4.2.
4.3 Integration. The Company shall not, and shall use its commercially reasonable
efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that would require the
registration under the Securities
Act of the sale of the Securities to the Investors or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any Trading Market.
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4.4 Reservation of Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations to issue the Underlying Shares under the Transaction
Documents. In the event that at any time the then authorized shares of Common Stock are
insufficient for the Company to satisfy its obligations to issue such Underlying Shares under the
Transaction Documents, the Company shall promptly take such actions as may be required to increase
the number of authorized shares.
4.5 Securities Laws Disclosure; Publicity. The Company shall, at or before 9:00 a.m.,
New York time, on the first Trading Day following execution of this Agreement, issue a press
release disclosing all material terms of the transactions contemplated hereby. On the Closing
Date, the Company shall file a Current Report on Form 8-K with the SEC (the “8-K Filing”)
describing the terms of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K the Transaction Documents (including the schedules and
the names, and addresses of the Investors and the amount(s) of Notes respectively purchased), in
the form required by the Exchange Act. Thereafter, the Company shall timely file any filings and
notices required by the SEC or applicable law with respect to the transactions contemplated hereby
and provide copies thereof to the Investors promptly after filing. Except as herein provided,
neither the Company nor any Subsidiary shall publicly disclose the name of any Investor, or include
the name of any Investor in any press release without the prior written consent of such Investor
(which consent shall not be unreasonably withheld or delayed), unless otherwise required by law,
regulatory authority or Trading Market. Neither the Company nor any Subsidiary shall, nor shall
any of their respective officers, directors, employees and agents, provide any Investor with any
material nonpublic information regarding the Company or any Subsidiary from and after the issuance
of the above referenced press release without the express written consent of such Investor.
4.6 Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Securities for working capital and general corporate purposes. The Company also may use a portion
of the net proceeds, currently intended for general corporate purposes, to acquire or invest in
technologies, products or services that complement its business, although the Company has no
present plans or commitments and is not currently engaged in any material negotiations with respect
to these types of transactions. Pending these uses, the Company intends to invest the net proceeds
from this offering in short-term, interest-bearing, investment-grade securities, or as otherwise
pursuant to the Company’s customary investment policies.
4.7 Subsequent Equity Sales.
(a) From the date hereof until the later of (i) 90 days after the Closing Date or (ii) 30 days
after the Registration Statement (or in the event the Company is required to file more than one
registration statements pursuant to Section 6.1(a), the initial Registration Statement that is
filed) is declared effective, neither the Company nor any Subsidiary shall issue, enter into any
agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or
Common Stock Equivalents.
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(b) From the date hereof until such time as no Investor holds any of the Notes, the Company
shall be prohibited from effecting or entering into an agreement to effect any issuance by the
Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash
consideration (or a combination of units hereof) involving a Variable Rate Transaction.
“Variable Rate Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a conversion price,
exercise price or exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for the shares of Common Stock at any time after the initial issuance of
such debt or equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly or indirectly related to
the business of the Company or the market for the Common Stock or (ii) enters into any agreement,
including, but not limited to, an equity line of credit, whereby the Company may sell securities at
a future determined price. Any Investor shall be entitled to obtain injunctive relief against the
Company to preclude any such issuance, which remedy shall be in addition to any right to collect
damages.
(c) Notwithstanding the foregoing, this Section 4.7 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.
ARTICLE V
CONDITIONS
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Investors. The obligation of each
Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such
Investor, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing as though made on and as of such date; and
(b) Performance. The Company and each other Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing.
(c) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock
shall not have been suspended by the SEC or any Trading Market (except for any suspensions of
trading of not more than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this Agreement, and the Common
Stock shall have been at all times since such date listed for trading on a Trading Market.
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(d) Absence of Litigation. No action, suit or proceeding by or before any court or
any governmental body or authority, against the Company or any Subsidiary or pertaining to the
transactions contemplated by this Agreement or their consummation, shall have been instituted on
or before the Closing Date, which action, suit or proceeding would, if determined adversely,
have a Material Adverse Effect.
5.2 Conditions Precedent to the Obligations of the Company. The obligation of the
Company to sell the Securities at the Closing is subject to the satisfaction or waiver by the
Company, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of the
Investors contained herein shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made on and as of such date; and
(b) Performance. The Investors shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investors at or prior to the
Closing.
ARTICLE VI
REGISTRATION RIGHTS
REGISTRATION RIGHTS
6.1 Registration Statement.
(a) As promptly as possible, and in any event on or prior to the Filing Date, the Company
shall prepare and file with the SEC a Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415;
provided, however, that if at any time the SEC takes the position that the offering of some or
all of the Registrable Shares in a Registration Statement is not eligible to be made on a
delayed or continuous basis under the provisions of Rule 415 as a result of a characterization
by the SEC of the transaction described by the Registration Statement as a primary offering by
the Company, the Company shall use its Best Efforts to persuade the SEC that the offering
contemplated by the Registration Statement is a valid secondary offering and not an offering “by
or on behalf of the issuer” as defined in Rule 415. In the event that, despite the Company’s
Best Efforts and compliance with the terms of this Section 6.1(a) the SEC refuses to
alter its position, the Company shall, upon obtaining consent of the Investors, (i) remove from
the Registration Statement such portion of the Registrable Shares (the “Cut Back Shares”) and/or
(ii) agree to such restrictions and limitations on the registration and resale of the
Registrable Shares as the SEC may require to assure the Company’s compliance with the
requirements of Rule 415. Any Registrable Shares not able to be included in the Registration
Statement shall reduce the number of Registrable Shares of each Investor covered by such
Registration Statement on a pro-rata basis based on the number of Registrable Shares purchased
by each Investor and the Company shall have no liability to any Investor pursuant to Section
6.1(d) or otherwise as a result of the Registration Statement covering less than all of the
Registrable Shares under the circumstances described in this proviso. Within nine (9) months,
or such earlier time as permitted by the SEC, of the initial registration filed hereunder being
declared effective, the Company shall file an
additional registration statement containing the Cut Back Shares. With regard to the new
Registration Statement, all of the provisions of this Section 6.1 shall again be
applicable to the Cut Back Shares. The Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in accordance with the
Securities Act and the Exchange Act) and shall contain (except if otherwise directed by the
Investors or requested by the SEC) the “Plan of Distribution” section in substantially the form
attached hereto as Exhibit C.
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(b) The Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after the filing thereof,
but in any event prior to the Required Effectiveness Date, and shall use its commercially
reasonable efforts to keep the Registration Statement continuously effective during the
Effectiveness Period; provided that, upon notification by the SEC that a Registration Statement
will not be reviewed or is no longer subject to further review and comments, the Company shall
request acceleration of such Registration Statement within five (5) Trading Days after receipt
of such notice and request that it become effective on 4:00 p.m. New York City time on the
Effective Date and file a prospectus supplement for any Registration Statement, whether or not
required under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day after the
Effective Date.
(c) The Company shall notify the Investors in writing promptly (and in any event within two
Trading Days) after receiving notification from the SEC that the Registration Statement has been
declared effective.
(d) Subject to Section 6.1(a) above, commencing on (and including) any date that an
Event (as defined below) has begun and ending on (but excluding) the next date on which there
are no Events that have occurred and are continuing (an “Additional Interest Accrual Period”),
the Company shall pay, as additional interest (“Additional Interest) and not as a penalty to the
Record Holders of Registrable Securities that are Notes an amount (the “Additional Interest
Amount”) accruing, for each day in the Additional Interest Accrual Period, in respect of any
Note at a rate per annum equal to 0.25% of the outstanding principal amount thereof for the
first 90 days after the occurrence of the Event and 0.50% of the outstanding principal amount
thereof after the first 90 days; provided that, subject to DTC requirements for book-entry
procedures, such Additional Interest Amount shall be paid only to the Holders (as set forth in
the succeeding paragraph) that have delivered Questionnaires to the Company and only with
respect to such Holder’s Registrable Securities. Notwithstanding the foregoing, no Additional
Interest Amount shall accrue as to any Registrable Security from and after the earlier of (x)
the date such security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Additional Interest Amount with respect to any
period shall not exceed the rate provided for in this paragraph notwithstanding the occurrence
of multiple concurrent Events.
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The Additional Interest Amount shall accrue from the first day of the applicable Additional
Interest Accrual Period, and shall be payable on each Additional Interest Payment Date during
the Additional Interest Accrual Period (and, without duplication, on the Additional
Interest Payment Date next succeeding the end of the Additional Interest Accrual Period if
the Additional Interest Accrual Period does not end on an Additional Interest Payment Date) to
the Record Holders of the Registrable Securities that are Notes entitled thereto; provided that
any Additional Interest Amount accrued with respect to any Note or portion thereof redeemed by
the Company on a redemption date or purchased by the Company on a repurchase date prior to the
Additional Interest Payment Date, shall, in any such event, be paid instead to the Holder who
submitted such Note or portion thereof for redemption or repurchase on the applicable redemption
date or repurchase date, as the case may be, on such date; provided further, that, subject to
DTC requirements for book-entry procedures, such Additional Interest Amount shall be paid only
to the Holders entitled thereto that have delivered Questionnaires to the Company, by check
mailed to the address set forth in the Questionnaire delivered by such Holder. If a Holder has
converted some or all of its Notes, the Holder will not be entitled to receive any Additional
Interest Amount with respect to any Underlying Shares received upon conversion or the principal
amount of the Notes that have been so converted. In addition, in no event will any Additional
Interest Amount be payable in connection with an Event relating to a failure to register the
Underlying Shares, if any, deliverable upon conversion of the Notes. For avoidance of doubt, if
the Company fails to register both the Notes and the Underlying Shares deliverable upon
conversion of the Notes, then any Additional Interest Amount will be payable in connection with
the Event relating to the failure to register the Notes. The Trustee shall be entitled, on
behalf of Holders of Notes or Underlying Shares, to seek any available remedy for the
enforcement of this Agreement, including, with respect to the Notes, for the payment of such
Additional Interest Amount. Notwithstanding the foregoing, the parties agree that the sole
damages payable for a violation of the terms of this Agreement with respect to which an
Additional Interest Amount is expressly provided shall be such Additional Interest Amount.
Nothing shall preclude any Holder from pursuing or obtaining specific performance or other
equitable relief with respect to this Agreement.
All of the Company’s obligations set forth in this Section 6.2 that are outstanding with
respect to any Registrable Security at the time such security ceases to be a Registrable
Security shall survive until such time as all such obligations with respect to such security
have been satisfied in full.
The parties hereto agree that the Additional Interest Amount provided for in this Section
6.1 constitutes a reasonable estimate of the damages that may be incurred by Holders of Notes by
reason of the failure of the Registration Statement to be filed or declared effective or
available for effecting resales of Notes in accordance with the provisions hereof.
For such purposes, each of the following shall constitute an “Event”:
(i) the Registration Statement is not filed on or prior to the Filing Date;
(ii) the Registration Statement is not declared effective on or prior to the Required
Effectiveness Date; and
(iii) except as provided for in Section 6.1(e) (the “Excluded Events”), after the
Effective Date and during the Effectiveness Period, an Investor is not permitted to sell
Registrable Securities under the Registration Statement (or a subsequent Registration
Statement filed in replacement thereof) for any reason (other than the fault of such Investor)
for an aggregate of thirty (30) days for all suspensions in any three-month period or an
aggregate of ninety (90) days for all suspensions in any 12-month period.
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(e) Notwithstanding anything in this Agreement to the contrary, after 60 consecutive
Trading Days of continuous effectiveness of the initial Registration Statement filed and
declared effective pursuant to this Agreement, the Company may, by written notice to the
Investors, suspend sales under a Registration Statement after the Effective Date thereof and/or
require that the Investors immediately cease the sale of shares of Common Stock pursuant thereto
and/or defer the filing of any subsequent Registration Statement if the Company is engaged in a
material merger, acquisition or sale and the Board of Directors determines in good faith, by
appropriate resolutions, that, as a result of such activity, (A) it would be materially
detrimental to the Company (other than as relating solely to the price of the Common Stock) to
maintain a Registration Statement at such time or (B) it is in the best interests of the Company
to suspend sales under such registration at such time. Upon receipt of such notice, each
Investor shall immediately discontinue any sales of Registrable Securities pursuant to such
registration until such Investor is advised in writing by the Company that the current
Prospectus or amended Prospectus, as applicable, may be used. In no event, however, shall this
right be exercised to suspend sales beyond the period during which (in the good faith
determination of the Company’s Board of Directors) the failure to require such suspension would
be materially detrimental to the Company. The Company’s rights under this Section 6(e)
may be exercised for a period of up to sixty (60) days at a time in any three month period,
without such suspension being considered as part of an Additional Interest determination.
Immediately after the end of any suspension period under this Section 6(e), the Company
shall take all necessary actions (including filing any required supplemental prospectus) to
restore the effectiveness of the applicable Registration Statement and the ability of the
Investors to publicly resell their Registrable Securities pursuant to such effective
Registration Statement.
(f) The Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement relating to an
offering for its own account or the account of others under the Securities Act of any of its
equity securities, other than any registration statement or post-effective amendment to a
registration statement (or supplement thereto) relating to the Company’s employee benefit plans
registered on Form S-8.
6.2 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:
(a) Give notice to all Holders of the filing and effectiveness of the Registration
Statement by issuing a press release through Business Wire or PR Newswire. In addition, the
Company may at its option prior to the filing of a Registration Statement or any related
Prospectus or any amendment or supplement thereto, furnish via email to those Investors who have
supplied the Company with email addresses copies of all such documents proposed to be filed,
which documents (other than any document that is incorporated or deemed to be incorporated by
reference therein) will be subject to the review of such Investors. The Company
shall reflect in each such document when so filed with the SEC such comments regarding the
Investors and the plan of distribution as the Investors may reasonably and promptly propose no
later than two Trading Days after the Investors have been so furnished with copies of such
documents as aforesaid.
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(b) (i) Subject to Section 6.1(e), prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep the Registration Statement continuously
effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare
and file with the SEC such additional Registration Statements in order to register for resale
under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to
be amended or supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible, and
in any event within twelve (12) Trading Days (except to the extent that the Company reasonably
requires additional time to respond to accounting comments), to any comments received from the
SEC with respect to the Registration Statement or any amendment thereto; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the Investors
thereof set forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Investors as promptly as reasonably possible, and (if requested by the
Investors confirm such notice in writing no later than two Trading Days thereafter, of any of
the following events: (i) the SEC notifies the Company whether there will be a “review” of any
Registration Statement; (ii) the SEC comments in writing on any Registration Statement; (iii)
any Registration Statement or any post-effective amendment is declared effective; (iv) the SEC
or any other Federal or state governmental authority requests any amendment or supplement to any
Registration Statement or Prospectus or requests additional information related thereto; (v) the
SEC issues any stop order suspending the effectiveness of any Registration Statement or
initiates any Proceedings for that purpose; (vi) the Company receives notice of any suspension
of the qualification or exemption from qualification of any Registrable Securities for sale in
any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii) the
financial statements included in any Registration Statement become ineligible for inclusion
therein or any Registration Statement or Prospectus or other document contains any untrue
statement of a material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its commercially reasonable efforts to avoid the issuance of or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or
(ii) any suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, as soon as possible.
(e) If requested by an Investor, provide such Investor without charge, at least one
conformed copy of each Registration Statement and each amendment thereto, including financial
statements and schedules, and all exhibits to the extent requested by such Person (including
those
previously furnished or incorporated by reference) promptly after the filing of such
documents with the SEC.
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(f) Promptly deliver to each Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto to the extent permitted by federal and state securities laws and regulations.
(g) (i) In the time and manner required by each Trading Market, prepare and file with such
Trading Market an additional shares listing application covering all of the Registrable
Securities; (ii) take all steps necessary to cause such Underlying Shares to be approved for
listing on each Trading Market as soon as possible thereafter; (iii) provide to each Investor
evidence of such listing; and (iv) except as a result of the Excluded Events, during the
Effectiveness Period, maintain the listing of such Underlying Shares on each such Trading Market
or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its Best Efforts to
register or qualify or cooperate with the selling Investors in connection with the registration
or qualification (or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within
the United States as any Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective for so long as required, but not to exceed the
duration of the Effectiveness Period, and to do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of process or to qualify
as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
(i) Cooperate with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent permitted by this
Agreement and under law, of all restrictive legends, and to enable such certificates to be in
such denominations and registered in such names as any such Investors may reasonably request.
(j) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly
as reasonably possible, prepare a supplement or amendment, including a post-effective amendment,
to the Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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(k) Cooperate with any reasonable due diligence investigation undertaken by the Investors
in connection with the sale of Registrable Securities, including, without limitation, by making
available documents and information; provided that the Company will not deliver or make
available to any Investor material, nonpublic information unless such Investor requests in
advance in writing to receive material, nonpublic information and agrees to keep such
information confidential.
(l) Comply with all rules and regulations of the SEC applicable to the registration of the
Securities.
(m) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of any
particular Investor or to make any payment of Additional Interests set forth in Section
6.1(c) to such Investor that such Investor furnish to the Company the information specified
in Exhibits X-0, X-0 and A-3 (the “Questionaires”) hereto and such other information regarding
itself, the Registrable Securities and other shares of Common Stock held by it and the intended
method of disposition of the Registrable Securities held by it (if different from the Plan of
Distribution set forth on Exhibit C hereto) as shall be reasonably required to effect
the registration of such Registrable Securities and shall complete and execute such documents in
connection with such registration as the Company may reasonably request.
(n) The Company shall comply with all applicable rules and regulations of the SEC under the
Securities Act and the Exchange Act, including, without limitation, Rule 172 under the
Securities Act, file any final Prospectus, including any supplement or amendment thereof, with
the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Investors in writing
if, at any time during the Effectiveness Period, the Company does not satisfy the conditions
specified in Rule 172 and, as a result thereof, the Investors are required to make available a
Prospectus in connection with any disposition of Registrable Securities and take such other
actions as may be reasonably necessary to facilitate the registration of the Registrable
Securities hereunder.
6.3 Registration Expenses. The Company shall pay all fees and expenses incident to
the performance of or compliance with Article VI of this Agreement by the Company, including
without limitation (a) all registration and filing fees and expenses, including without limitation
those related to filings with the SEC, any Trading Market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions contemplated by
this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market.
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6.4 Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the officers,
directors, partners, members, agents and employees of each of them, each Person who controls
any such Investor (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, partners, members, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to (i) any misrepresentation or breach
of any representation or warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby, (iii) any cause of
action, suit or claim brought or made against such Indemnified Party (as defined in Section
6.4(c) below) by a third party (including for these purposes a derivative action brought on
behalf of the Company), arising out of or resulting from (x) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (y) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (z)
the status of Indemnified Party as holder of the Securities (unless, and only to the extent
that, such action, suit or claim is based, including in part, upon a breach of such Investor’s
representations, warranties or covenants under the Transaction Documents or any conduct by such
Investor that constitutes fraud, gross negligence or willful misconduct) or (iv) any untrue or
alleged untrue statement of a material fact contained in the Registration Statement, any
Prospectus or any form of Company prospectus or in any amendment or supplement thereto or in any
Company preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light
of the circumstances under which they were made) not misleading, except to the extent, but only
to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Investor furnished in writing to the
Company by such Investor for use therein, or to the extent that such information relates to
such Investor or such Investor’s proposed method of distribution of Registrable Securities and
was reviewed and expressly approved by such Investor in writing expressly for use in the
Registration Statement, or (B) with respect to any prospectus, if the untrue statement or
omission of material fact contained in such prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, if such corrected prospectus was timely made
available by the Company to the Investor, and the Investor seeking indemnity hereunder was
advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.
(b) Indemnification by Investors. Each Investor shall, severally and not jointly,
indemnify and hold harmless the Company and its directors, officers, agents and employees to the
fullest extent permitted by applicable law, from and against all Losses (as determined by a
court of competent jurisdiction in a final judgment not subject to appeal or review) arising
solely out of any untrue statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising
out of or relating to any omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were made) not
misleading, but only to the extent that (i) such untrue statements or omissions are based solely
upon information regarding such Investor furnished to the Company by such Investor in writing
expressly for use therein, or
to the extent that such information relates to such Investor or such Investor’s proposed
method of distribution of Registrable Securities and was reviewed and expressly approved in
writing by such Investor expressly for use in the Registration Statement (it being understood
that the information provided by the Investor to the Company in Exhibits X-0,
X-0 xxx X-0 and the Plan of Distribution set forth on Exhibit C, as the
same may be modified by such Investor and other information provided by the Investor to the
Company in or pursuant to the Transaction Documents constitutes information reviewed and
expressly approved by such Investor in writing expressly for use in the Registration Statement),
such Prospectus or such form of prospectus or in any amendment or supplement thereto. In no
event shall the liability of any selling Investor hereunder be greater in amount than the dollar
amount of the net proceeds received by such Investor upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
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(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of
its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that
it shall be finally determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory
to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of separate counsel shall be at the expense of the
Indemnifying Party). It shall be understood, however, that the Indemnifying Party shall not, in
connection with any one such Proceeding (including separate Proceedings that have been or will
be consolidated before a single judge) be liable for the fees and expenses of more than one
separate firm of attorneys at any time for all Indemnified Parties, which firm shall be
appointed by a majority of the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent, which consent
shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified
Party is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
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All reasonable fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6.4(a) or
(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute
to the amount paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken or made by, or
relates to information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set forth in Section
6.4(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this Section was available to such
party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant
to this Section 6.4(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d),
no Investor shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceed the amount of any damages that such
Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.
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6.5 Dispositions. Each Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement and shall sell its Registrable
Securities in accordance with the Plan of Distribution set forth in the Prospectus. Each Investor
further agrees that, upon receipt of a notice from the Company of the occurrence of any event of
the kind described in Sections 6.2(c)(v), (vi) or (vii), such Investor will
discontinue disposition of such Registrable Securities under the Registration Statement until such
Investor is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be resumed. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. Each Investor, severally and not jointly with the other
Investors, agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance that
the Investor will comply with the provisions of this subsection. Both the Company and the Transfer
Agent, and their respective directors, officers, employees and agents, may rely on this subsection.
6.6 No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Investors in such capacity pursuant hereto and the Excluded Investors) may
include securities of the Company in the Registration Statement other than the Registrable
Securities.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness Period there is
not an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Investor not then eligible to
sell all of their Registrable Securities under Rule 144 in a three-month period, written notice of
such determination and if, within ten days after receipt of such notice, any such Investor shall so
request in writing, the Company shall include in such registration statement all or any part of
such Registrable Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may
be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or
other factors dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which such Investor has requested inclusion hereunder as
the underwriter shall permit; provided, however, that (i) the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities in such
Registration Statement or are not contractually entitled to pro rata inclusion with the Registrable
Securities and (ii) after giving effect to the immediately preceding proviso, any such exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to include Registrable
Securities and the holders of other securities having the contractual right to inclusion of their
securities in such Registration Statement by reason of demand registration rights, in proportion to
the number of Registrable Securities or other securities, as applicable, sought to be included by
each such Investor or other holder. If an offering in connection with which an Investor is
entitled to
registration under this Section 6.7 is an underwritten offering, then each Investor
whose Registrable Securities are included in such Registration Statement shall, unless otherwise
agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using
the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such underwritten offering and
shall enter into an underwriting agreement in a form and substance reasonably satisfactory to the
Company and the underwriter or underwriters. Upon the effectiveness the registration statement for
which piggy-back registration has been provided in this Section 6.7, any Additional
Interests payable to an Investor whose Securities are included in such registration statement shall
terminate and no longer be payable.
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ARTICLE VII
MISCELLANEOUS
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any Investor, by
written notice to the other parties, if the Closing has not been consummated by the third Trading
Day following the date of this Agreement; provided that no such termination will affect the right
of any party to xxx for any breach by the other party (or parties).
7.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and
issuance of the applicable Securities.
7.3 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile or email at the facsimile number or email address specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section on a day that is not a Trading Day or later than
6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses, facsimile numbers and email
addresses for such notices and communications are those set forth on the signature pages hereof, or
such other address or facsimile number as may be designated in writing hereafter, in the same
manner, by any such Person.
-36-
7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and each of the
Investors or, in the case of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the exercise of any such
right. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of Investors under Article
VI may be given by Investors holding at least a majority of the Registrable Securities to which
such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, (iv) such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Investors” and (v) such transfer shall have been made in accordance with the
applicable requirements of this Agreement and with all laws applicable thereto.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except that (a) each Indemnified
Party is an intended third party beneficiary of Section 6.4 and (in each case) may enforce
the provisions of such Section directly against the parties with obligations thereunder, and (b)
each of the Placement Agents is an intended third party beneficiary of the closing deliveries
required by Sections 2.2(a)(iii) and (iv), and the representations and warranties of the Company
in Article II.
-37-
7.9 Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY
IRREVOCABLY SUBMIT 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 BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND
AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT 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 VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH
PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED
HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY
LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
7.10 Survival. The representations and warranties, agreements and covenants contained
herein shall survive the Closing.
7.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or email attachment, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or email-attached signature page were an original
thereof.
7.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Investor exercises a right, election, demand or option owed to such Investor by the Company
under a Transaction Document and the Company does not timely perform its related obligations within
the periods therein provided, then, prior to the performance by the Company of the Company’s
related obligation, such Investor may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for
any losses in connection therewith. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.
-38-
7.15 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to seek specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation (other than in connection with any action for a
temporary restraining order) the defense that a remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Investor hereunder or any Investor enforces or exercises its rights hereunder, 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 by 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.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or other securities or
rights convertible into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof, each reference in any Transaction Document to a number of shares or a price per share shall
be amended to appropriately account for such event.
-39-
7.18 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Documents. The decision of each Investor to purchase
Securities pursuant to this Agreement has been made by such Investor independently of any other
Investor and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or given by any other
Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any other Investor (or any other person) relating to or
arising from any such information, materials, statements or opinions. Nothing contained herein or
in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to such
obligations or the transactions contemplated by the Transaction Document. Each Investor
acknowledges that no other Investor has acted as agent for such Investor in connection with making
its investment hereunder and that no other Investor will be acting as agent of such Investor in
connection with monitoring its investment hereunder. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the rights arising out
of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any
other Investor to be joined as an additional party in any Proceeding for such purpose.
[SIGNATURE PAGES TO FOLLOW]
-40-
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.
| CEREPLAST, INC. |
||||
| By: | /s/ Xxxxxxxx Xxxxxx | |||
| Name: | Xxxxxxxx Xxxxxx | |||
| Title: | Chief Executive Officer | |||
Address for Notice:
000 X. Xxxxxxxxxxx Xxxx.
Xxxxx 000
Xx Xxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx Xxxxxxx, CFO
Xxxxx 000
Xx Xxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx Xxxxxxx, CFO
With a copy to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
00 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx Xxxxxxxxx, Esq.
00 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx Xxxxxxxxx, Esq.
COMPANY SIGNATURE PAGE
Investor Signature Page
By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
May 18, 2011 (the “Purchase Agreement”) by and among Cereplast, Inc. and the Investors (as defined
therein), as to the principal dollar amount of Notes set forth below, and authorizes this signature
page to be attached to the Purchase Agreement or counterparts thereof.
| Name of Investor: | ||
By: |
||
| Name: | ||
| Title: | ||
Address: |
||
Telephone No.: |
||
Facsimile No.: |
||
Email Address: |
||
Principal Amount of Notes: |
||
Prime Broker: |
||
DTC Participant No.: |
||
Delivery Instructions (if different than above):
c/o: |
||
Address: |
||
Telephone No.: |
||
Facsimile No.: |
||
Other Special Instructions: |
||
Exhibits:
| A |
Instruction Sheet for Investors |
|
| B |
Opinion of Company Corporate Counsel |
|
| C |
Plan of Distribution |
-2-
Exhibit A
INSTRUCTION SHEET FOR INVESTOR
(to be read in conjunction with the entire Securities Purchase Agreement)
| A. | Complete the following items in the Securities Purchase Agreement: |
| 1. | Complete and execute the Investor Signature Page. The Agreement must be
executed by an individual authorized to bind the Investor. |
||
| 2. | Exhibit A-1 — Note Certificate Questionnaire: |
Provide the information requested by the Note Certificate Questionnaire;
| 3. | Exhibit A-2 — Registration Statement Questionnaire: |
Provide the information requested by the Registration Statement Questionnaire.
| 4. | Exhibit A-3 — Investor Certificate: |
Provide the information requested by the Investor Certificate.
| 5. | Return, via facsimile, the signed Securities Purchase Agreement including the
properly completed Exhibits A-1 through A-3, to: |
Facsimile:
Telephone:
Attn:
Telephone:
Attn:
| 6. | After completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits A-1 through
A-3 to: |
Address:
| B. | Instructions regarding the wire transfer of funds for the purchase of the Securities will be
telecopied to the Investor by the Company at a later date. |
Exhibit A-1
Cereplast, Inc.
NOTE CERTIFICATE QUESTIONNAIRE
| Please provide us with the following information: | ||||
1.
|
The exact name that the Securities are to be registered in (this is the name that will appear on the Note(s)). You may use a nominee name if appropriate: | |||
2.
|
The relationship between the Investor of the Securities and the Registered Holder listed in response to item 1 above: | |||
3.
|
The mailing address, telephone and telecopy number and email address of the Registered Holder listed in response to item 1 above: | |||
4.
|
The Tax Identification Number of the Registered Holder listed in response to item 1 above: | |||
Exhibit A-2
Cereplast, Inc.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the Registration Statement, please provide us with the following
information regarding the Investor.
1. Please state your organization’s name exactly as it should appear in the Registration
Statement:
Except as set forth below, your organization does not hold any equity securities of the
Company on behalf of another person or entity.
State any exceptions here:
If the Investor is not a natural person, please identify the natural person or persons who
will have voting and investment control over the Securities owned by the Investor:
2. Address of your organization:
| Telephone: | ||||||
| Fax: | ||||||
| Contact Person: | ||||||
3. Have you or your organization had any position, office or other material relationship within
the past three years with the Company or its affiliates? (Include any relationships involving you
or any
of your affiliates, officers, directors, or principal equity holders (5% or more) that has held any
position or office or has had any other material relationship with the Company (or its predecessors
or affiliates) during the past three years.)
o Yes o No
If yes, please indicate the nature of any such relationship below:
4. Are you the beneficial owner of any other securities of the Company? (Include any equity
securities that you beneficially own or have a right to acquire within 60 days after the date
hereof, and as to which you have sole voting power, shared voting power, sole investment power or
shared investment power.)
o Yes o No
If yes, please describe the nature and amount of such ownership as of a recent date.
5. Except as set forth below, you wish that all the Registrable Securities beneficially owned by
you or that you have the right to acquire from the Company be offered for your account in the
Registration Statement.
State any exceptions here:
6. Have you made or are you aware of any arrangements relating to the distribution of the
Registrable Securities of the Company pursuant to the Registration Statement?
o Yes o No
If yes, please describe the nature and amount of such arrangements.
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7. FINRA Matters
(a) State below whether (i) you or any associate or affiliate of yours are a member of FINRA,
a controlling shareholder of a FINRA member, a person associated with a member, a direct or
indirect affiliate of a member, or an underwriter or related person with respect to the proposed
offering; (ii) you or any associate or affiliate of yours owns any stock or other securities of any
FINRA member not purchased in the open market; or (iii) you or any associate or affiliate of yours
has made any outstanding subordinated loans to any FINRA member. If you are a general or limited
partnership, a no answer asserts that no such relationship exists for you as well as for each of
your general or limited partners.
| Yes: o | No: o |
If “yes,” please identify the FINRA member and describe your relationship, including, in the
case of a general or limited partner, the name of the partner:
If you answer “no” to Question 7(a), you need not respond to Question 7(b).
(b) State below whether you or any associate or affiliate of yours has been an underwriter,
or a controlling person or member of any investment banking or brokerage firm which has been or
might be an underwriter for securities of the Corporation or any affiliate thereof including,
but not limited to, the common stock now being registered.
| Yes: o | No: o |
If “yes,” please identify the FINRA member and describe your relationship, including, in the
case of a general or limited partner, the name of the partner.
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ACKNOWLEDGEMENT
The undersigned hereby agrees to notify the Company promptly of any changes in the foregoing
information which should be made as a result of any developments, including the passage of time.
The undersigned also agrees to provide the Company and the Company’s counsel any and all such
further information regarding the undersigned promptly upon request in connection with the
preparation, filing, amending, and supplementing of the Registration Statement (or any prospectus
contained therein). The undersigned hereby consents to the use of all such information in the
Registration Statement.
The undersigned understands and acknowledges that the Company will rely on the information set
forth herein for purposes of the preparation and filing of the Registration Statement.
The undersigned understands that the undersigned may be subject to serious civil and criminal
liabilities if the Registration Statement, when it becomes effective, either contains an untrue
statement of a material fact or omits to state a material fact required to be stated in the
Registration Statement or necessary to make the statements in the Registration Statement not
misleading. The undersigned represents and warrants that all information it provides to the
Company and its counsel is currently accurate and complete and will be accurate and complete at the
time the Registration Statement becomes effective and at all times subsequent thereto, and agrees
during the Effectiveness Period and any additional period in which the undersigned is making sales
of Registrable Securities under and pursuant to the Registration Statement, and agrees during such
periods to notify the Company immediately of any misstatement of a material fact in the
Registration Statement, and of the omission of any material fact necessary to make the statements
contained therein not misleading.
Dated:
_____
| Name | ||||
| Signature | ||||
| Name and Title of Signatory |
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Exhibit A-3
Cereplast, Inc.
CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY COMPANY,
TRUST, FOUNDATION AND JOINT INVESTORS
TRUST, FOUNDATION AND JOINT INVESTORS
If the Investor is a corporation, partnership, limited liability company, trust, pension plan,
foundation, joint Investor (other than a married couple) or other entity, an authorized officer,
partner, or trustee must complete, date and sign this Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below are true and accurate:
(a) The Investor has been duly formed and is validly existing and has full power and authority
to invest in the Company. The person signing on behalf of the undersigned has the authority to
execute and deliver the Securities Purchase Agreement on behalf of the Investor and to take other
actions with respect thereto.
(b) Indicate the form of entity of the undersigned:
_____
Limited Partnership
_____
General Partnership
_____
Limited Liability Company
_____
Corporation
_____
Revocable Trust (identify each grantor and indicate under what circumstances the trust is
revocable by the grantor):
_____
Other type of Trust (indicate type of trust and, for trusts other than pension trusts,
name the grantors and beneficiaries):
_____
Other form of organization (indicate form of organization (
| ). | ||||
(c) Indicate the approximate date the undersigned entity was formed:
_____.
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(d) In order for the Company to offer and sell the Securities in conformance with state and
federal securities laws, the following information must be obtained regarding your investor status.
Please initial each category applicable to you as an investor in the Company.
| ___ | 1. A bank as defined in Section 3(a)(2) of the Securities Act, or any savings
and loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity; |
||
| ___ | 2. A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; |
||
| ___ | 3. An insurance company as defined in Section 2(13) of the Securities Act; |
||
| ___ | 4. An investment company registered under the Investment Company Act of 1940 or
a business development company as defined in Section 2(a)(48) of that Act; |
||
| ___ | 5. A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act of
1958; |
||
| ___ | 6. A plan established and maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its political subdivisions, for the benefit
of its employees, if such plan has total assets in excess of $5,000,000; |
||
| ___ | 7. An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors; |
||
| ___ | 8. A private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940; |
||
| ___ | 9. Any partnership or corporation or any organization described in Section
501(c)(3) of the Internal Revenue Code or similar business trust, not formed for the
specific purpose of acquiring the Shares, with total assets in excess of $5,000,000; |
||
| ___ | 10. A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of the Exchange Act; |
||
| ___ | 11. An entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list the
equity owners of the undersigned, and the investor category which each such equity
owner satisfies:
_____________________
|
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Please set forth in the space provided below the (i) states, if any, in the U.S. in which you
maintained your principal office during the past two years and the dates during which you
maintained your office in each state, (ii) state(s), if any, in which you are incorporated or
otherwise organized and (iii) state(s), if any, in which you pay income taxes.
Dated:__________________________, 2011
Print Name of Investor
|
||
Name: |
||
Title: |
||
(Signature and title of authorized officer, partner or trustee) |
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Exhibit B
OPINION OF COMPANY COUNSEL
[To be addressed to Investors and Placement Agents]
EXHIBIT A
Officers’ Certificate of the Company
Exhibit C
PLAN OF DISTRIBUTION
The selling securityholders may, from time to time, sell any or all of their shares of common stock
on any stock exchange, market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The selling securityholders may
use any one or more of the following methods when selling shares:
| • | ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers; |
| • | block trades in which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the transaction; |
| • | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| • | an exchange distribution in accordance with the rules of the applicable exchange; |
| • | privately negotiated transactions; |
| • | short sales; |
| • | broker-dealers may agree with the selling securityholders to sell a specified number of
such shares at a stipulated price per share; |
| • | a combination of any such methods of sale; and |
| • | any other method permitted pursuant to applicable law. |
The selling securityholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers engaged by the selling securityholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
securityholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling securityholders do not expect these
commissions and discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as principal might be
deemed to be underwriting discounts or commissions under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, attributable to the sale of shares
will be borne by a selling securityholder. The selling securityholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales of the shares if
liabilities are imposed on that person under the Securities Act.
The selling securityholders may from time to time pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling securityholders to include the pledgee, transferee or other successors
in interest as selling securityholders under this prospectus.
The selling securityholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus and may sell the shares of common stock
from time to time under this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling securityholders to include the pledgee, transferee or other successors
in interest as selling securityholders under this prospectus.
The selling securityholders and any broker-dealers or agents that are involved in selling the
shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the shares of
common stock. We have agreed to indemnify the selling securityholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act.
The selling securityholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding the sale of their
shares of common stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by any selling securityholder. If we are notified
by any selling securityholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file a supplement to
this prospectus. If the selling securityholders use this prospectus for any sale of the shares of
common stock, they will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may
apply to sales of our common stock and activities of the selling securityholders.
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Schedule 3.1(g)
CAPITALIZATION
The Company is authorized to issue (i) 495,000,000 shares of common stock of which 15,757,305 are
presently issued and outstanding, and (ii) 5,000,000 shares of preferred stock of which 0 are
presently issued and outstanding.
As of the date hereof, the Company has warrants and options outstanding to purchase 1,887,078 and
371,250 shares of common stock of the Company, respectively.
Xxxxxxxx Xxxxxx beneficially owns 2,903,784 or 18.4% of the outstanding shares of common Stock of
the Company jointly with his wife, Xxxxxxxx Xxxxxx and through the Xxxxxxxx and Xxxxxxxx Xxxxxx
Foundation.
Schedule 3.1(h)
SEC REPORTS
None
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Schedule 3.1(i)
MATERIAL CHANGES
None
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Schedule 3.1(q)
REGISTRATION RIGHTS
None
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