SECURITIES PURCHASE AGREEMENT
Exhibit 99.1
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of November 13, 2007, by and among
US Dataworks, Inc., a Nevada corporation, with headquarters located at One Sugar Creek Center
Boulevard, Fifth Floor, Sugar Land, TX 77478 (the “Company”), and the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. The Company has authorized a new series of senior secured convertible notes of the Company,
in the form attached hereto as Exhibit A (the “Notes”), which Notes shall be convertible
into the Company’s common stock, par value $0.0001 per share (the “Common Stock”) (as converted,
the “Conversion Shares”), in accordance with the terms of the Notes.
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate principal amount of the Notes set forth
opposite such Buyer’s name in column (3) on the Schedule of Buyers attached hereto (which aggregate
amount for all Buyers shall be Four Million Dollars ($4,000,000)) and (ii) warrants, in
substantially the form attached hereto as Exhibit B (the “Warrants”), to acquire up to that
number of additional shares of Common Stock set forth opposite such Buyer’s name in column (4) of
the Schedule of Buyers (as exercised, collectively, the “Warrant Shares”).
D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the form attached hereto
as Exhibit C (the “Registration Rights Agreement”), pursuant to which the Company will
agree to provide certain registration rights with respect to the Registrable Securities (as defined
in the Registration Rights Agreement) under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. The Notes, the Conversion Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the “Securities”.
F. The Notes will rank senior to all outstanding and future indebtedness of the Company and
its Subsidiaries and will be secured by a perfected security interest (subject in priority to the
Senior Indebtedness only), in all of the assets of the Company, the stock of each of the Company’s
subsidiaries and the assets of each of the Company’s U.S. subsidiaries, as evidenced by a security
agreement, in the form attached hereto as Exhibit H (as amended or modified from time to
time in accordance with its terms, the “Security Agreement” and, together with the Collateral
Agency Agreement (as defined below) and any ancillary documents related thereto, collectively the
“Security Documents”).
G. The Buyers desire to appoint The Bank of New York as collateral agent with respect to the
Collateral (as defined in the Security Agreement) (in such capacity, the “Collateral Agent”)
pursuant to a Collateral Agency Agreement, in the form attached hereto as Exhibit K (as
amended or modified from time to time in accordance with its terms, the “Collateral Agency
Agreement”).
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants.
(i) Notes and Warrants. Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6 and 7 below, the Company agrees to issue and sell to each Buyer, and each Buyer
severally, but not jointly, shall purchase from the Company on the Closing Date (as defined below),
(x) a principal amount of Notes as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers and (y) Warrants to acquire up to that number of Warrant Shares as is set forth
opposite such Buyer’s name in column (4) on the Schedule of Buyers, (the “Closing”).
(ii) Closing. The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York City time, on the date hereof (or such later date as is mutually agreed to by the
Company and each Buyer) after notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 6 and 7 below at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(iii) Purchase Price.
(1) The aggregate purchase price for the Notes and the Warrants to be purchased by each such
Buyer at the Closing (the “Purchase Price”) shall be the amount set forth opposite each Buyer’s
name in column (5) of the Schedule of Buyers. Each Buyer shall pay $1,000 for each $1,000 of
principal amount of Notes and related Warrants to be purchased by such Buyer at the Closing.
(2) The Buyers and the Company agree that the Notes and the Warrants constitute an “investment
unit” for purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the
“Code”). The Buyers and the Company mutually agree that the allocation of the issue price of such
investment unit between the Notes and the Warrants in accordance with Section 1273(c)(2) of the
Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate amount of $10,000 allocated
to the Warrants and the balance of the Purchase Price allocated to the Notes, and neither the
Buyers nor the Company shall take any position inconsistent with such allocation in any tax return
or in any judicial or administrative proceeding in respect of taxes.
(b) Form of Payment. On the Closing Date, (i) each Buyer shall pay its
Purchase Price (less, in the case of Highbridge International LLC, the amounts withheld
pursuant to Section 4(g)) to the Company for the Notes and the Warrants to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately available
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funds in accordance with the Company’s written wire instructions and (ii) the Company
shall deliver to each Buyer the Notes (allocated in the principal amounts as such Buyer
shall request) which such Buyer is then purchasing hereunder along with the Warrants
(allocated in the amounts as such Buyer shall request) which such Buyer is purchasing, in
each case duly executed on behalf of the Company and registered in the name of such Buyer or
its designee.
2. BUYER’S REPRESENTATIONS AND WARRANTIES. Each Buyer, severally and not jointly,
represents and warrants with respect to only itself, as of the date hereof and as of the Closing
Date, that:
(a) No Sale or Distribution. Such Buyer is acquiring the Notes, and the
Warrants, and upon conversion of the Notes and exercise of the Warrants (other than pursuant
to a Cashless Exercise (as defined in the Warrants)) will acquire the Conversion Shares
issuable upon conversion of the Notes and the Warrant Shares issuable upon exercise of the
Warrants, 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 or exempted
under the 1933 Act; provided, however, that by making the representations herein, such Buyer
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 1933 Act and pursuant to the
applicable terms of the Transaction Documents (as defined in Section 3(b)). Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such Buyer does
not presently have any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities.
(b) Accredited Investor Status. Such Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the Company is
relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of such Buyer
set forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of
the Company. Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend or affect
such Buyer’s right to rely on the Company’s representations and warranties contained herein.
Such Buyer understands that its investment in the Securities involves a high degree of risk
and is able to afford a complete loss of such investment. Such Buyer has sought such
accounting, legal and tax advice as
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it has considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of the 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.
(f) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a generally acceptable form, to the
effect that such Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer provides the
Company with reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended (or a successor
rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance
on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 0000 Xxx) may require compliance with some
other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other Person is under any obligation to register the
Securities under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. The Securities may be pledged in connection with a
bona fide margin account or other loan or financing arrangement secured by the Securities
and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document (as defined in Section 3(b)),
including, without limitation, this Section 2(f).
(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Notes and the Warrants and, until such time as the resale of the Conversion
Shares and the Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the Conversion Shares and
the Warrant Shares, except as set forth below, shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
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[CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES WITH A REGISTERED
BROKER-DEALER OR A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
The legend set forth above shall be removed and the Company shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by
state securities laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the Company with an
opinion of a law firm reasonably acceptable to the Company (with Xxxxxxx Xxxx & Xxxxx LLP being
deemed acceptable), in a reasonably acceptable form, to the effect that such sale, assignment or
transfer of the Securities may be made without registration under the applicable requirements of
the 1933 Act, or (iii) such holder provides the Company with reasonable assurance that the
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A.
(h) Validity; Enforcement. This Agreement, the Registration Rights Agreement
and the Security Documents to which such Buyer is a party have been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute the legal,
valid and binding obligations of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
(i) No Conflicts. The execution, delivery and performance by such Buyer of
this Agreement, the Registration Rights Agreement and the Security Documents to which such
Buyer is a party and the consummation by such Buyer of the transactions contemplated hereby
and thereby will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which
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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 Buyer 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 Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on the ability of
such Buyer to perform its obligations hereunder.
(j) Residency. Such Buyer is a resident of that jurisdiction specified below
its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants
to each of the Buyers that, as of the date hereof and as of the Closing Date:
(a) Organization and Qualification. The Company and its “Subsidiaries” (which
for purposes of this Agreement means any joint venture or any entity in which the Company,
directly or indirectly, owns any of the capital stock or holds an equity or similar
interest) are entities duly organized and validly existing and, to the extent legally
applicable, in good standing under the laws of the jurisdiction in which they are formed,
and have the requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is duly qualified
as a foreign entity to do business and, to the extent legally applicable, is in good
standing in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any
material adverse effect on the business, properties, assets, operations, results of
operations, condition (financial or otherwise) or prospects of the Company and its
Subsidiaries, individually or taken as a whole, or on the transactions contemplated hereby
or in the other Transaction Documents or by the agreements and instruments to be entered
into in connection herewith or therewith, or on the authority or ability of the Company to
perform its obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries.
(b) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Registration Rights Agreement, the Security Documents, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the Warrants and each
of the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and
to issue the Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Notes and the Warrants, the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion of the
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Notes, the reservation for issuance and issuance of Warrant Shares issuable upon
exercise of the Warrants, and the granting of a security interest in the Collateral (as
defined in the Security Documents) have been duly authorized by the Company’s Board of
Directors and no further filing, consent, or authorization is required by the Company, its
Board of Directors or its stockholders. This Agreement and the other Transaction Documents
of even date herewith have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.
(c) Issuance of Securities. The issuance of the Notes and the Warrants are
duly authorized and upon issuance in accordance with the terms of the Transaction Documents
shall be free from all taxes, liens and charges with respect to the issue thereof. As of
the Closing, a number of shares of Common Stock shall have been duly authorized and reserved
for issuance which equals or exceeds 130% of the aggregate of the maximum number of shares
of Common Stock issuable (i) upon conversion of the Notes and (ii) upon exercise of the
Warrants. Upon conversion or exercise in accordance with the Notes or the Warrants, as the
case may be, the Conversion Shares and the Warrant Shares, respectively, will be validly
issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes,
liens and charges with respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of Common Stock. Assuming the accuracy of each of the
representations and warranties set forth in Section 2 of this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of the Notes
and Warrants and reservation for issuance and issuance of the Conversion Shares, and the
Warrant Shares) will not (i) result in a violation of any certificate of incorporation,
certificate of formation, any certificate of designations or other constituent documents of
the Company or any of its Subsidiaries, any capital stock of the Company or any of its
Subsidiaries or bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state securities laws
and regulations and the rules and regulations of The American Stock Exchange (the “Principal
Market”) applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.
(e) Consents. Neither the Company nor any of its Subsidiaries is required to
obtain any consent, authorization or order of, or make any filing or
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registration with, any court, governmental agency or any regulatory or self-regulatory
agency or any other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof, except for the following consents, authorizations, orders,
filings and registrations (none of which is required to be filed or obtained before the
Closing): (i) the filing with the SEC of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement and (ii) the filing of a listing
application for the Conversion Shares and Warrant Shares with the Principal Market, which
shall be done pursuant to the rules of the Principal Market. The Company and its
Subsidiaries are unaware of any facts or circumstances that might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant to the
preceding sentence. The Company is not in violation of the listing requirements of the
Principal Market and has no knowledge of any facts that would reasonably lead to delisting
or suspension of the Common Stock in the foreseeable future. The issuance by the Company of
the Securities shall not have the effect of delisting or suspending the Common Stock from
the Principal Market.
(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that each Buyer 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 and that no Buyer is (i) an officer or director of the Company, (ii) an
“affiliate” of the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) to
the knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common
Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to such Buyer’s purchase of the Securities. The Company
further represents to each Buyer that the Company’s decision to enter into the Transaction
Documents has been based solely on the independent evaluation by the Company and its
representatives.
(g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor
any of its Subsidiaries or 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’ commissions (other than for persons engaged by any Buyer or its investment advisor)
relating to or arising out of the transactions contemplated hereby, including, without
limitation, placement agent fees payable to The Shemano Group, Inc. as placement agent (the
“Agent”), in connection with the sale of the Securities. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without limitation,
attorney’s fees and out-of-pocket expenses) arising in connection with any such claim. The
Company acknowledges that it has engaged the Agent in connection with the sale of the
Securities. Other than the Agent, neither the
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Company nor any of its Subsidiaries has engaged any placement agent or other agent in
connection with the sale of the Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries, any of
their affiliates, and any Person acting on their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of the issuance of any of the Securities under
the 1933 Act, whether through integration with prior offerings or otherwise, or cause this
offering of the Securities to require approval of stockholders of the Company for purposes
of any applicable stockholder approval provisions, including, without limitation, under the
rules and regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated. None of the Company, its Subsidiaries,
their affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of the issuance of any
of the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings for purposes of any such applicable stockholder approval
provisions.
(i) Dilutive Effect. The Company understands and acknowledges that the number
of Conversion Shares issuable upon conversion of the Notes and the Warrant Shares issuable
upon exercise of the Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of the Notes in
accordance with this Agreement and the Notes and its obligation to issue the Warrant Shares
upon exercise of the Warrants in accordance with this Agreement and the Warrants is, in each
case, absolute and unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The Company and its
board of directors have taken all necessary action, if any, in order 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 Certificate of
Incorporation (as defined in Section 3(r)) or the laws of the state of its incorporation
which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The Company and its board of
directors have taken all necessary action, if any, in order to render inapplicable any
stockholder rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
(k) SEC Documents; Financial Statements. During the two (2) years prior to the
date hereof, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting requirements of
the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC
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Documents”). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of the SEC Documents not available on the
XXXXX system. As of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents,
at the time they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they were made,
not misleading. As of their respective filing dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its operations
and cash flows for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). No other information provided by or on behalf of the
Company to the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement or in any disclosure
schedules, contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the circumstance
under which they are or were made, not misleading.
(l) Absence of Certain Changes. Since March 31, 2007, there has been no
material adverse change and no material adverse development in the business, properties,
operations, condition (financial or otherwise), results of operations or prospects of the
Company or its Subsidiaries. Except as disclosed in Schedule 3(l), since March 31,
2007, the Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary course of
business or (iii) had capital expenditures, individually or in the aggregate, in excess of
$100,000. Neither the Company nor any of its Subsidiaries has 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 that would reasonably lead a creditor to do so. The Company
and its Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section 3(l),
“Insolvent” means, with respect to any Person (as defined in Section 3(s)), (i) the present
fair saleable value of such Person’s assets is less than the amount required to pay such
Person’s total Indebtedness (as defined in Section 3(s)), (ii) such Person is unable to pay
its debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or believes that
it will incur debts that would be beyond its ability to pay as such debts mature or (iv)
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such Person 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.
(m) No Undisclosed Events, Liabilities, Developments or Circumstances. No
event, liability, development or circumstance has occurred or exists, or is contemplated to
occur with respect to the Company, its Subsidiaries or their respective business,
properties, prospects, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration statement on
Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common
Stock and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Company nor any of
its Subsidiaries is in violation of any term of or in default under its Certificate of
Incorporation, any certificate of designations of any outstanding series of preferred stock
of the Company or the Bylaws or their organizational charter or bylaws, respectively.
Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business
in violation of any of the foregoing, except for possible violations which could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company is not in violation of any of
the rules, regulations or requirements of the Principal Market and has no knowledge of any
facts or circumstances that would reasonably lead to delisting or suspension of the Common
Stock by the Principal Market in the foreseeable future. During the two (2) years prior to
the date hereof, (i) the Common Stock has been designated for quotation on the Principal
Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written or oral, from the SEC or
the Principal Market regarding the suspension or delisting of the Common Stock from the
Principal Market. The Company and its Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates, authorizations
or permits would not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or permit.
(o) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries
nor any director, officer, agent, employee or other Person acting on behalf of the Company
or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the
Company or any of its Subsidiaries (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 from corporate funds; (iii) violated or is in violation 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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(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.
(q) Transactions With Affiliates. Except as set forth in the SEC Documents
filed at least ten (10) days prior to the date hereof and other than the grant of stock
options disclosed on Schedule 3(q), none of the officers, directors or employees of
the Company or any of its Subsidiaries is presently a party to any transaction with the
Company or any of its Subsidiaries (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 knowledge of the Company or any of its Subsidiaries, 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.
(r) Equity Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 90,000,000 shares of Common Stock, of which as of the date
hereof, 32,062,962 are issued and outstanding, 8,567,349 shares are reserved for issuance
pursuant to the Company’s stock option and purchase plans and 7,360,701 shares are reserved
for issuance pursuant to securities (other than the aforementioned options, the Notes and
the Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock,
(ii) no shares of Convertible Series A preferred stock, $0.0001 par value, none of which as
of the date hereof are issued and outstanding and (iii) 700,000 shares of Convertible Series
B preferred stock, $0.0001 par value, of which as of the date hereof 109,933 shares are
issued and outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in Schedule
3(r): (i) none of the Company’s capital stock is subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the Company or
any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments evidencing
Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements securing
obligations in any material amounts, either singly or in the aggregate, filed in connection
with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the sale of any
of their securities under the 1933 Act (except pursuant to the Registration Rights
Agreement); (vi) there are no outstanding securities or
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instruments of the Company or any of its Subsidiaries which contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or arrangements
by which the Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the issuance of the
Securities; (viii) the Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in the SEC
Documents but not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished to the Buyers true, correct and complete copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof (the
“Certificate of Incorporation”), and the Company’s Bylaws, as amended and as in effect on
the date hereof (the “Bylaws”), and the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the material rights of the
holders thereof in respect thereto.
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or instrument,
the violation of which, or default under which, by the other party(ies) to such contract,
agreement or instrument could reasonably be expected to result in a Material Adverse Effect,
(iii) is in violation of any term of or 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, or (iv) 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. Schedule 3(s) provides a detailed description of the material terms
of any such outstanding Indebtedness. 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 (including, without limitation, “capital leases” in accordance with generally
accepted accounting principles) (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
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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 and a government or any department or
agency thereof.
(t) Absence of Litigation. Except as set forth in Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by the Principal Market,
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 of its
Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any of the Company’s
or its Subsidiaries’ officers or directors.
(u) Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
(v) Employee Relations.
(i) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries believe that their
relations with their employees are good. No executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the 0000 Xxx) has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No executive officer
of the Company or any of its Subsidiaries is, or is now expected to be, 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 of its Subsidiaries to any liability with respect to any of the foregoing matters.
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(ii) The Company and its Subsidiaries are in compliance 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.
(w) Title. The Company and its Subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal property owned
by them which is material to the business of the Company and its Subsidiaries, in each case
free and clear of all liens, encumbrances and defects except such as do not materially
affect the value of such property and do not interfere with the use made and proposed to be
made of such property by the Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(x) Intellectual Property Rights.
(i) The Company and its Subsidiaries own or possess adequate rights or licenses to use all
trademarks, trade names, service marks and all applications and registrations therefor, patents,
patent rights, copyrights, original works of authorship (including computer software) and all
applications and registrations therefor, inventions, trade secrets and other intellectual property
rights (“Intellectual Property Rights”) necessary to conduct their respective businesses as now
conducted. Except as set forth on Schedule 3(x), none of the Company’s registered, or
applied for, Intellectual Property Rights have expired or terminated or have been abandoned, or are
expected to expire or terminate or expected to be abandoned, within three years from the date of
this Agreement. The Company does not have any knowledge of any infringement by the Company or its
Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company, being threatened, by or against the
Company or its Subsidiaries regarding the infringement, misappropriation or other violation of any
Intellectual Property Rights. Neither the Company nor any of its Subsidiaries is aware of any
facts or circumstances which might give rise to any of the foregoing infringements or claims,
actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.
(ii) All material computer software and systems that are used or held for use in the conduct
of the Company’s and its Subsidiaries’ respective businesses is in good working condition (normal
wear and tear excepted). There has not been any material malfunction with respect to such software
and systems since January 1, 2005 that has not been remedied or replaced in all material respects.
The Company does not use or hold for use in the conduct of the Company’s business any computer
hardware that is material to the Company’s business.
(iii) All material computer software that is used or held for use the conduct of the Company’s
and its Subsidiaries’ respective businesses (x) performs in accordance
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with the documentation or other written material used in connection with it, (y) is in machine
readable form and contains all current revisions, and (z) does not contain any viruses, worms or
other disabling devices. The source code for all computer software that is owned by the Company
and its Subsidiaries (A) will compile into object code or otherwise be capable of performing the
functions described in the documentation pertaining thereto, (B) is sufficiently documented to
enable a computer software developer of reasonable skill to understand, modify, repair, maintain,
compile and otherwise utilize all aspects of such computer software without reference to other
sources of information; and (C) constitutes trade secrets that are valid and protectable and are
not part of the public knowledge or literature.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in compliance
with any and all Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance 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 could 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.
(z) [RESERVED].
(aa) Tax Status. The Company and each of its Subsidiaries (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.
(bb) Internal Accounting and Disclosure Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted accounting
principles and to maintain asset and liability accountability, (iii)
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access to assets or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The Company
maintains disclosure controls and procedures (as such term is defined in Rule 13a-14 under
the 0000 Xxx) that are effective in ensuring that information required to be disclosed by
the Company in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the rules and forms
of the SEC, including, without limitation, controls and procedures designed in to ensure
that information required to be disclosed by the Company in the reports that it files or
submits under the 1934 Act is accumulated and communicated to the Company’s management,
including its principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required disclosure. During
the twelve months prior to the date hereof neither the Company nor any of its Subsidiaries
have received any notice or correspondence from any accountant relating to any potential
material weakness in any part of the system of internal accounting controls of the Company
or any of its Subsidiaries.
(cc) Ranking of Notes. Except as set forth on Schedule 3(cc), no
Indebtedness of the Company is senior to or ranks pari passu with the Notes in right of
payment, whether with respect of payment of redemptions, interest, damages or upon
liquidation or dissolution or otherwise.
(dd) Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.
(ee) Investment Company Status. The Company is not, and upon consummation of
the sale of the Securities will not be, an “investment company,” a company controlled by an
“investment company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company” as such terms are defined in the Investment Company Act of
1940, as amended.
(ff) Form S-3 Eligibility. The Company is eligible to register the Conversion
Shares and the Warrant Shares for resale by the Buyers using Form S-3 promulgated under the
1933 Act.
(gg) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection with the
sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such taxes will be or
will have been complied with.
(hh) Manipulation of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action
- 17 -
designed to cause or to result, or that could reasonably be expected to cause or
result, in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) other than the Agent, sold, bid
for, purchased, or paid any compensation for soliciting purchases of, any of the Securities
or (iii) paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(ii) U.S. Real Property Holding Corporation. The Company is not, nor has it
ever been, a U.S. real property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify upon any Buyer’s
request.
(jj) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to
regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).
Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of any class of voting
securities or twenty-five (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any
of its Subsidiaries or affiliates exercises a controlling influence over the management or
policies of a bank or any entity that is subject to the BHCA and to regulation by the
Federal Reserve.
(kk) Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Buyers or their agents or counsel with any
information that constitutes or could reasonably be expected to constitute material,
nonpublic information. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Buyers regarding the Company or any of its
Subsidiaries, their business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company is true and correct
and does 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. Each press release issued by the
Company or any of its Subsidiaries during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a material fact or
omit 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. No event or circumstance has occurred or information exists with respect to the
Company or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(ll) Acknowledgement Regarding Buyers’ Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding, it is understood and
acknowledged by the Company (i) that none of the Buyers have been asked by the
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Company or its Subsidiaries to agree, nor has any Buyer agreed with the Company or its
Subsidiaries, to desist from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) that past or future open market or other
transactions by any Buyer, including, without limitation, short sales or “derivative”
transactions, before or after the closing of this or future private placement transactions,
may negatively impact the market price of the Company’s publicly-traded securities; (iii)
that any Buyer, and counter parties in “derivative” transactions to which any such Buyer is
a party, directly or indirectly, presently may have a “short” position in the Common Stock,
and (iv) that each Buyer shall not be deemed to have any affiliation with or control over
any arm’s length counter-party in any “derivative” transaction. The Company further
understands and acknowledges that (a) one or more Buyers may engage in hedging and/or
trading activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Conversion Shares
and the Warrant Shares deliverable with respect to Securities are being determined and (b)
such hedging and/or trading activities, if any, can reduce the value of the existing
stockholders’ equity interest in the Company both at and after the time the hedging and/or
trading activities are being conducted. The Company acknowledges that such aforementioned
hedging and/or trading activities do not constitute a breach of this Agreement, the Notes,
the Warrants or any of the documents executed in connection herewith.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to satisfy each
of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to each Buyer
promptly after such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Securities for sale to the Buyers at the Closing pursuant to
this Agreement under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Buyers on or prior to the Closing Date. The Company shall
make all filings and reports relating to the offer and sale of the Securities required under
applicable securities or “Blue Sky” laws of the states of the United States following the
Closing Date.
(c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Conversion Shares and Warrant Shares
and/or none of the Notes or Warrants is outstanding (the “Reporting Period”), whether
pursuant to the applicable provisions governing Fundamental Transactions set forth in the
Notes and the Warrants or otherwise, the Company shall timely file all reports required to
be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934
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Act even if the 1934 Act or the rules and regulations thereunder would no longer
require or otherwise permit such termination, and the Company shall take all actions
necessary to maintain its eligibility to register the Conversion Shares and Warrant Shares
for resale by the Buyers on Form S-3.
(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for general corporate purposes, including general and administrative expenses and
not for the repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or the redemption or repurchase of any of its or its Subsidiaries’ equity
securities.
(e) Financial Information. As long as any Notes or Warrants are outstanding,
the Company agrees to send the following to each Investor (as defined in the Registration
Rights Agreement) during the Reporting Period (i) unless the following are filed with the
SEC through XXXXX and are available to the public through the XXXXX system, within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual Reports and
Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports or any
consolidated balance sheets, income statements, stockholders’ equity statements and/or cash
flow statements for any period other than annual, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act, (ii) on the same day as the release thereof, facsimile or e-mailed copies of all press
releases issued by the Company or any of its Subsidiaries, and (iii) copies of any notices
and other information made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the stockholders. As used
herein, “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to remain closed.
(f) Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon each national
securities exchange and automated quotation system, if any, upon which the Common Stock is
then listed (subject to official notice of issuance) and shall maintain, in accordance with
the Notes and Warrants, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall maintain the
Common Stocks’ authorization for quotation on the Principal Market. Neither the Company nor
any of its Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations under this
Section 4(f).
(g) Fees. Subject to Section 8 below, at Closing, the Company shall pay an
expense allowance to Highbridge International LLC (a Buyer) or its designee(s) (in addition
to any other expense amounts paid to any Buyer prior to the date of this Agreement) for all
reasonable costs and expenses incurred in connection with the transactions contemplated by
the Transaction Documents (including all reasonable legal fees and disbursements in
connection therewith, documentation and implementation of the transactions contemplated by
the Transaction Documents and due diligence in
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connection therewith), which amount shall be withheld by such Buyer from its Purchase
Price at the Closing. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or broker’s commissions relating to or arising out of
the transactions contemplated hereby, including, without limitation, any fees payable to the
Agent. The Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, reasonable attorney’s fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights Agreement)
in connection with a bona fide margin agreement or other loan or financing arrangement that
is secured by the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge
of Securities shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an Investor and
its pledgee shall be required to comply with the provisions of Section 2(f) hereof in order
to effect a sale, transfer or assignment of Securities to such pledgee. The Company hereby
agrees to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee by an
Investor.
(i) Disclosure of Transactions and Other Material Information. On or before
8:30 a.m., New York City time, on the first Business Day following the date of this
Agreement, the Company shall issue a press release and file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction Documents in the
form required by the 1934 Act and attaching the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement), the form of the
Notes, the form of Warrant, the form of Security Documents and the form of the Registration
Rights Agreement) as exhibits to such filing (including all attachments, the “8-K Filing”).
From and after the filing of the 8-K Filing with the SEC, no Buyer shall be in possession of
any material, nonpublic information received from the Company, any of its Subsidiaries or
any of their respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing. The Company shall not, and shall cause each of its Subsidiaries and its and
each of their respective officers, directors, employees and agents, not to, provide any
Buyer with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without the express
prior written consent of such Buyer. If a Buyer has, or believes it has, received any such
material, nonpublic information regarding the Company or any of its Subsidiaries, it shall
provide the Company with written notice thereof. The Company shall, within five (5) Trading
Days (as defined in the Notes) of receipt of such notice, make public disclosure of such
material, nonpublic information. In the event of a breach of the foregoing covenant by the
Company, any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the Transaction
Documents, a Buyer shall have the right to make a public disclosure, in the form of a press
release, public advertisement or otherwise, of
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such material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees or agents.
No Buyer shall have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any such disclosure.
Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue
any press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled, without the
prior approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and regulations
(provided that in the case of clause (i) each Buyer shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its release).
Without the prior written consent of any applicable Buyer, neither the Company nor any of
its Subsidiaries or affiliates shall disclose the name of such Buyer in any filing,
announcement, release or otherwise other than in connection with the Registration Statement,
as contemplated pursuant to the Registration Rights Agreement, except to the extent such
disclosure is required by law, regulation or the Principal Market.
(j) Restriction on Redemption and Cash Dividends. So long as any Notes are
outstanding, the Company shall not, directly or indirectly, redeem, or declare or pay any
cash dividend or distribution on, the Common Stock without the prior express written consent
of the holders of Notes representing not less than a majority of the aggregate principal
amount of the then outstanding Notes.
(k) Additional Notes; Variable Securities; Dilutive Issuances. So long as any
Buyer beneficially owns any Securities, the Company will not issue any Notes (other than to
the Buyers as contemplated hereby) and the Company shall not issue any other securities that
would cause a breach or default under the Notes. For so long as any Notes or Warrants
remain outstanding, the Company shall not, in any manner, issue or sell any rights, warrants
or options to subscribe for or purchase Common Stock or directly or indirectly convertible
into or exchangeable or exercisable for Common Stock at a price which varies or may vary
with the market price of the Common Stock, including by way of one or more reset(s) to any
fixed price unless the conversion, exchange or exercise price of any such security cannot be
less than the then applicable Conversion Price (as defined in the Notes) with respect to the
Common Stock into which any Note is convertible or the then applicable Exercise Price (as
defined in the Warrants) with respect to the Common Stock into which any Warrant is
exercisable. For so long as any Notes or Warrants remain outstanding, the Company shall
not, in any manner, enter into or affect any Dilutive Issuance (as defined in the Notes) if
the effect of such Dilutive Issuance is to cause, or but for the Securities Limitations (as
defined below) would cause, the Company to be required to issue upon conversion of any Note
or exercise of any Warrant any shares of Common Stock in excess of that number of shares of
Common Stock which the Company may issue upon conversion of the Notes and exercise of the
Warrants without breaching the Company’s obligations under the rules or regulations of the
Principal Market, in each case without giving effect to (y) the limitations on exercise
contained in the Warrants, and (z) the application of any Exercise Floor Price (as defined
in the Warrants) (the “Securities Limitations”). For so long as any Notes or Warrants are
- 22 -
outstanding, unless or until the Stockholder Approval (as defined below) has been
obtained, the Company shall not take any action if the effect of such action would be to
cause the Exercise Price to be reduced below the Exercise Floor Price, in each case without
giving effect to any Securities Limitations.
(l) Corporate Existence. So long as any Buyer beneficially owns any
Securities, the Company shall not be party to any Fundamental Transaction (as defined in the
Notes) unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants.
(m) Reservation of Shares. The Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less than 130% of
the sum of the number of shares of Common Stock issuable (i) upon conversion of the Notes
issued at the Closing and (ii) upon exercise of the Warrants issued at the Closing (without
taking into account any limitations on the Conversion of the Notes or exercise of the
Warrants set forth in the Notes and Warrants, respectively).
(n) Conduct of Business. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any governmental
entity, except where such violations would not result, either individually or in the
aggregate, in a Material Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following definitions shall apply.
(1) “Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for shares of Common Stock.
(2) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(3) “Common Stock Equivalents” means, collectively, Options and Convertible
Securities.
(ii) From the date hereof until the date that is thirty (30) Trading Days (as defined in the
Notes) following the Initial Effective Date (as defined in the Registration Rights Agreement) (the
“Trigger Date”), the Company will not, directly or indirectly, file any registration statement with
the SEC other than the Registration Statement (as defined in the Registration Rights Agreement).
From the date hereof until the Trigger Date, the Company will not, directly or indirectly, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or
any option to purchase or other disposition of) any of its or its Subsidiaries’ equity or equity
equivalent securities, including without limitation any debt, preferred stock or other instrument
or security that is, at any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or
- 23 -
Common Stock Equivalents (any such offer, sale, grant, disposition or announcement being
referred to as a “Subsequent Placement”).
(iii) From the Trigger Date until the eighteen month anniversary of the Closing Date, the
Company will not, directly or indirectly, effect any Subsequent Placement unless the Company shall
have first complied with this Section 4(o)(iii).
(1) The Company shall deliver to each Buyer an irrevocable written notice (the “Offer
Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of the
securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer
Notice shall (w) identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number or amount of
the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities
(if known) to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyers at least fifty
percent (50%) of the Offered Securities, allocated among such Buyers (a) based on such
Buyer’s pro rata portion of the aggregate principal amount of Notes purchased hereunder (the
“Basic Amount”), and (b) with respect to each Buyer that elects to purchase its Basic
Amount, any additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should the other
Buyers subscribe for less than their Basic Amounts (the “Undersubscription Amount”), which
process shall be repeated until the Buyers shall have an opportunity to subscribe for any
remaining Undersubscription Amount.
(2) To accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of the tenth (10th) Business Day after such
Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such
Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer
elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts
subscribed for by all Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total of all the
Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Buyer who has subscribed for any Undersubscription Amount shall be entitled
to purchase only that portion of the Available Undersubscription Amount as the Basic Amount
of such Buyer bears to the total Basic Amounts of all Buyers that have subscribed for
Undersubscription Amounts, subject to rounding by the Company to the extent its deems
reasonably necessary. Notwithstanding the foregoing, if the Company desires to modify or
amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the
Company may deliver to the Buyers a new Offer Notice and the Offer Period shall expire on
the third (3rd) Business Day after such Buyer’s receipt of such new Offer Notice.
- 24 -
(3) The Company shall have fifteen (15) Business Days from the expiration of the Offer
Period above (i) to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyers (the “Refused
Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”),
but only to the offerees described in the Offer Notice (if so described therein) and only
upon terms and conditions (including, without limitation, unit prices and interest rates)
that are not more favorable to the acquiring person or persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the
execution of such Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the termination of
such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report
on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein
filed as exhibits thereto.
(4) In the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section 4(o)(iii)(3)
above), then each Buyer may, at its sole option and in its sole discretion, reduce the
number or amount of the Offered Securities specified in its Notice of Acceptance to an
amount that shall be not less than the number or amount of the Offered Securities that such
Buyer elected to purchase pursuant to Section 4(o)(iii)(2) above multiplied by a fraction,
(i) the numerator of which shall be the number or amount of Offered Securities the Company
actually proposes to issue, sell or exchange (including Offered Securities to be issued or
sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such reduction) and (ii) the
denominator of which shall be the original amount of the Offered Securities. In the event
that any Buyer so elects to reduce the number or amount of Offered Securities specified in
its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(iii)(1) above.
(5) Upon the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, the Buyers shall acquire from the Company, and the Company shall issue
to the Buyers, the number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(o)(iii)(3) above if the Buyers have so elected,
upon the terms and conditions specified in the Offer. Notwithstanding anything to the
contrary contained in this Agreement, if the Company does not consummate the closing of the
issuance, sale or exchange of all or less than all of the Refused Securities, within fifteen
(15) Business Days of the expiration of the Offer Period, the Company shall issue to the
Buyers, the number or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4(o)(iii)(3) above if the Buyers have so elected, upon the
terms and conditions specified in the Offer. The purchase by the Buyers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by the Company
and the Buyers of a purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Buyers and their respective counsel.
- 25 -
(6) Any Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until they are again
offered to the Buyers under the procedures specified in this Agreement.
(7) The Company and the Buyers agree that if any Buyer elects to participate in the
Offer, (x) neither the Subsequent Placement Agreement with respect to such Offer nor any
other transaction documents related thereto (collectively, the “Subsequent Placement
Documents”) shall include any term or provisions whereby any Buyer shall be required to
agree to any restrictions in trading as to any securities of the Company owned by such Buyer
prior to such Subsequent Placement, and (y) any registration rights set forth in such
Subsequent Placement Documents shall be similar in all material respects to the registration
rights contained in the Registration Rights Agreement.
(8) Notwithstanding anything to the contrary in this Section 4(o) and unless otherwise
agreed to by the Buyers, the Company shall either confirm in writing to the Buyers that the
transaction with respect to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either case in such a manner such
that the Buyers will not be in possession of material non-public information, by the fifteen
(15th) Business Day following delivery of the Offer Notice. If by the fifteen
(15th) following delivery of the Offer Notice no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice regarding
the abandonment of such transaction has been received by the Buyers, such transaction shall
be deemed to have been abandoned and the Buyers shall not be deemed to be in possession of
any material, non-public information with respect to the Company. Should the Company decide
to pursue such transaction with respect to the Offered Securities, the Company shall provide
each Buyer with another Offer Notice and each Buyer will again have the right of
participation set forth in this Section 4(o)(iii). The Company shall not be permitted to
deliver more than one such Offer Notice to the Buyers in any 60 day period.
(9) The restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
not apply in connection with the issuance of any Excluded Securities (as defined in the
Notes).
(p) [Reserved]
(q) [Reserved]
(r) Stockholder Approval. The Company shall provide each stockholder entitled
to vote at either (x) the next annual meeting of stockholders of the Company or (y) a
special meeting of stockholder of the Company (the “Stockholder Meeting”), which shall be
promptly called and held not later than September 15, 2008 (the “Stockholder Meeting
Deadline”), a proxy statement, substantially in the form which has been previously reviewed
by the Buyers and a counsel of their choice, at the expense of the Company not to exceed
$10,000, soliciting each such stockholder’s
- 26 -
affirmative vote at the Stockholder Meeting for approval of resolutions (“Stockholder
Resolutions”) providing for the Company’s issuance of all of the Securities as described in
the Transaction Documents in accordance with applicable law and the rules and regulations of
the Principal Market (such affirmative approval being referred to herein as the “Stockholder
Approval”), and the Company shall use its best efforts to solicit its stockholders’ approval
of such resolutions and to cause the Board of Directors of the Company to recommend to the
stockholders that they approve such resolutions. The Company shall be obligated to seek to
obtain the Stockholder Approval by the Stockholder Meeting Deadline. If, despite the
Company’s reasonable best efforts the Stockholder Approval is not obtained on or prior to
the Stockholder Meeting Deadline, the Company shall cause an additional Stockholder Meeting
to be held each twelve month period thereafter until such Stockholder Approval is obtained,
provided that if the Board of Directors of the Company does not recommend to the
stockholders that they approve the Resolutions at any such Stockholder Meeting and the
Stockholder Approval is not obtained, or the Notes are no longer outstanding, the Company
shall cause an additional Stockholder Meeting to be held each calendar quarter thereafter
until such Stockholder Approval is obtained.
(s) Closing Documents. On or prior to fourteen (14) calendar days after the
Closing Date, the Company agrees to deliver, or cause to be delivered, to each Buyer and
Xxxxxxx Xxxx & Xxxxx LLP executed copies of the Transaction Documents, Securities and other
document required to be delivered to any party pursuant to Section 7 hereof.
(t) Voting Agreement; Fee Agreement. The Company shall not amend or waive any
provision of the Voting Agreement or the Put Grantor Fee Agreement, between the Company and
the parties thereto, in the form attached hereto as Exhibit L (the “Put Grantor Fee
Agreement”).
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to each holder
of Securities), a register for the Notes and the Warrants in which the Company shall record
the name and address of the Person in whose name the Notes and the Warrants have been issued
(including the name and address of each transferee), the principal amount of Notes held by
such Person, the number of Conversion Shares issuable upon conversion of the Notes and the
number of Warrant Shares issuable upon exercise of the Warrants held by such Person. The
Company shall keep the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares issued at the Closing or upon conversion of
- 27 -
the Notes or exercise of the Warrants in such amounts as specified from time to time by
each Buyer to the Company upon conversion of the Notes or exercise of the Warrants in the
form of Exhibit D attached hereto (the “Irrevocable Transfer Agent Instructions”).
The Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to give effect
to Section 2(g) hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of the Company as
and to the extent provided in this Agreement and the other Transaction Documents. If a
Buyer effects a sale, assignment or transfer of the Securities in accordance with Section
2(f), the Company shall permit the transfer and shall promptly instruct its transfer agent
to issue one or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer involves
Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue such
Securities to the Buyer, assignee or transferee, as the case may be, without any restrictive
legend. The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 5(b) will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and the related Warrants
to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the Company’s sole benefit and
may be waived by the Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
(a) Such Buyer and the Collateral Agent shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(b) Such Buyer and each other Buyer shall have delivered to the Company the Purchase
Price (less, in the case of Highbridge International LLC, the amounts withheld pursuant to
Section 4(g)) for the Notes and the related Warrants being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
(c) The representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as
of the date when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which shall be
- 28 -
true and correct as of such specified date), and such Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Notes and the related Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by
such Buyer at any time in its sole discretion by providing the Company with prior written notice
thereof:
(a) The Company shall have duly executed and delivered to such Buyer (i) each of the
Transaction Documents and (ii) the Notes (allocated in such principal amounts as such Buyer
shall request), being purchased by such Buyer at the Closing pursuant to this Agreement, and
(iii) the related Warrants (allocated in such amounts as such Buyer shall request) being
purchased by such Buyer at the Closing pursuant to this Agreement.
(b) Such Buyer shall have received the opinion of the Company’s general counsel, dated
as of the Closing Date, in substantially the form of Exhibit E attached hereto.
(c) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D attached hereto, which instructions
shall have been delivered to and acknowledged in writing by the Company’s transfer agent.
(d) The Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within ten (10) days of the Closing Date.
(e) The Company shall have delivered to such Buyer a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by the Secretary
of State (or comparable office) of each jurisdiction in which the Company conducts business,
as of a date within ten (10) days of the Closing Date.
(f) The Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of Nevada within ten
(10) days of the Closing Date.
(g) The Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions
consistent with Section 3(b) as adopted by the Company’s Board of Directors in a form
reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation and (iii) the
Bylaws, each as in effect at the Closing, in the form attached hereto as Exhibit F.
- 29 -
(h) The representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as
of the date when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which shall be true and
correct as of such specified date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such Buyer in the form
attached hereto as Exhibit G.
(i) The Company shall have delivered to such Buyer a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding as of a date within five
days of the Closing Date.
(j) The Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Closing Date, either (A) in writing by the
SEC or the Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
(k) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities.
(l) In accordance with the terms of the Security Documents, the Company shall have
delivered to the Collateral Agent (i) certificates representing the Subsidiaries’ shares of
capital stock, along with duly executed blank stock powers and (ii) appropriate financing
statements on Form UCC-1 to be duly filed in such office or offices as may be necessary or,
in the opinion of the Collateral Agent, desirable to perfect the security interests
purported to be created by each Security Document.
(m) Within two (2) Business Days prior to the Closing, the Company shall have delivered
or caused to be delivered to each Buyer (i) true copies of UCC search results, listing all
effective financing statements which name as debtor the Company or any of its Subsidiaries
filed in the prior five years to perfect an interest in any assets thereof, together with
copies of such financing statements, none of which, except as otherwise agreed in writing by
the Buyers, shall cover any of the Collateral (as defined in the Security Documents) and the
results of searches for any tax lien and judgment lien filed against such Person or its
property, which results, except as otherwise agreed to in writing by the Buyers shall not
show any such Liens (as defined in the Security Documents); and (ii) a perfection
certificate, duly completed and executed by the Company and each of its Subsidiaries, in
form and substance satisfactory to the Buyers.
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(n) A Voting Agreement, in the form attached hereto as Exhibit I, shall have
been executed and delivered to such Buyer by Xxxxxxx X. Xxxxx.
(o) A Put Agreement, in the form attached hereto as Exhibit J, shall have been
executed and delivered to such Buyer by each of Xxxxxxx X. Xxxxx and Xxxx X. Xxxxxxxxx.
(p) The Collateral Agent and each other Buyer shall have duly executed and delivered to
such Buyer the Collateral Agency Agreement.
(q) The Company shall have delivered to such Buyer an executed copy of that certain
promissory note, by and between the Company and Xxxxxxx Xxxxx, in the form attached hereto
as Exhibit M (the “Amended and Restated Xxxxx Note”).
(r) The Company shall have delivered to such Buyer evidence, satisfactory to the such
Buyer that the Purchase and Sale Agreement, dated September 27, 2006, by and between the
Company and Catalyst Finance, L.P. shall have been terminated.
(s) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably
request.
8. TERMINATION. In the event that the Closing shall not have occurred with respect to
a Buyer on or before five (5) Business Days from the date hereof due to the Company’s or such
Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the close of business on
such date without liability of any party to any other party; provided, however,
that if this Agreement is terminated pursuant to this Section 8, the Company shall remain obligated
to reimburse the non-breaching Buyers for the expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than
the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of
- 31 -
process and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding
upon the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent jurisdiction,
the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so modified continues to
express, without material change, the original intentions of the parties as to the subject
matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s)
in question does not substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the benefits that would otherwise
be conferred upon the parties. The parties will endeavor in good faith negotiations to
replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
(e) Entire Agreement; Amendments. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between the Buyers, the
Company, their affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the other Transaction Documents and the instruments
referenced herein and therein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and the holders of at least a
majority of the aggregate number of Registrable Securities issued and issuable hereunder and
under the Notes, and any amendment to this Agreement made in conformity with the provisions
of this Section 9(e) shall be binding
- 32 -
on all Buyers and holders of Securities as applicable. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom enforcement
is sought. No such amendment shall be effective to the extent that it applies to less than
all of the holders of the applicable Securities then outstanding. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration also is offered
to all of the parties to the Transaction Documents, holders of Notes or holders of the
Warrants, as the case may be. The Company has not, directly or indirectly, made any
agreements with any Buyers relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction Documents.
Without limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other obligation to
provide any financing to the Company or otherwise.
(f) Notices. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
US Dataworks, Inc.
One Xxxxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
One Xxxxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Copy to:
Pillsbury Xxxxxxxx Xxxx Xxxxxxx, LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000]
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000]
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
- 33 -
Telephone: (000) 000-0000
Facsimile:(000) 000-0000
Attention: Xxxxx Xxxxxxxxx/Xxxxx Xxxxxxx
Facsimile:(000) 000-0000
Attention: Xxxxx Xxxxxxxxx/Xxxxx Xxxxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns, including any
purchasers of the Notes or the Warrants. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the holders of at least
a majority of the aggregate number of Registrable Securities issued and issuable hereunder
and under the Notes, including by way of a Fundamental Transaction (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set forth in
the Notes and the Warrants). A Buyer may assign some or all of its rights hereunder without
the consent of the Company, in which event such assignee shall be deemed to be a Buyer
hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and 3
and the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing
and the delivery and exercise of Securities, as applicable. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants hereunder.
- 34 -
(j) Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and
the consummation of the transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer’s execution and delivery
of the Transaction Documents and acquiring the Securities thereunder and in addition to all
of the Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, partners, members, officers, directors, employees
and direct or indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and
against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether
any such Indemnitee is a party to the action for which indemnification hereunder is sought),
and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document contemplated
hereby or thereby or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance of the
Securities, (iii) any disclosure made by such Buyer pursuant to Section 4(i), or (iv) the
status of such Buyer or holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law. Except as otherwise set forth herein,
the mechanics and procedures with respect to the rights and obligations under this Section
9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.
(l) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
(m) Remedies. Each Buyer and each holder of the Securities shall have all
rights and remedies set forth in the Transaction Documents and all rights and remedies which
such holders have been granted at any time under any other agreement or contract
- 35 -
and all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any remedy at law
may prove to be inadequate relief to the Buyers. The Company therefore agrees that the
Buyers shall be entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or other
security.
(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods
therein provided, then such Buyer 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.
(o) Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction Documents or
the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause
of action), then to the extent of any such restoration of 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.
(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of
each Buyer under any Transaction Document are several and not joint with the obligations of
any other Buyer, and no Buyer shall be responsible in any way for the performance of the
obligations of any other Buyer under any Transaction Document. Nothing contained herein or
in any other Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that the
Buyers do not so constitute, a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Buyers are in any way acting in concert or
as a group, and the Company will not assert any such claim with respect to such obligations
or the transactions contemplated by the Transaction Documents and the Company acknowledges
that the Buyers are not acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. The Company acknowledges and
each Buyer confirms that it has independently participated in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including, without
limitation, the rights
- 36 -
arising out of this Agreement or out of any other Transaction Documents, and it shall
not be necessary for any other Buyer to be joined as an additional party in any proceeding
for such purpose.
[Signature Page Follows]
- 37 -
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| COMPANY: US DATAWORKS, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| BUYERS: HIGHBRIDGE INTERNATIONAL LLC |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| CASTLERIGG MASTER INVESTMENTS LTD. |
||||
| By: | Xxxxxxx Asset Management Corp. | |||
| By: | ||||
| Name: | ||||
| Title: | ||||
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| CRANSHIRE CAPITAL L.P. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
SCHEDULE OF BUYERS
| (3) | ||||||||||||||||
| Aggregate | ||||||||||||||||
| (2) | Principal | (4) | (6) | |||||||||||||
| (1) | Address and | Amount of | Number of | (5) | Legal Representative’s Address and | |||||||||||
| Buyer | Facsimile Number | Notes | Warrant Shares | Purchase Price | Facsimile Number | |||||||||||
Highbridge International LLC |
c/o Highbridge Capital Management, LLC | $ | 1,750,000 | 2,034,884 | $ | 1,750,000 | Xxxxxxx Xxxx & Xxxxx LLP | |||||||||
| 0 Xxxx 00xx Xx, 00xx Xxxxx | 000 Xxxxx Xxxxxx | |||||||||||||||
| Xxx Xxxx, XX 00000 | Xxx Xxxx, Xxx Xxxx 00000 | |||||||||||||||
| Attn: Xxx X. Xxxxxx / Xxxx X. Chill | Attention: Xxxxxxx Xxxxx, Esq. | |||||||||||||||
| Tel: 000-000-0000 | Facsimile: (000) 000-0000 | |||||||||||||||
| Fax: 000-000-0000 | Telephone: (000) 000-0000 | |||||||||||||||
| Residence: Cayman Islands | ||||||||||||||||
Castlerigg Master Investments Ltd. |
c/o Sandell Asset Management | $ | 2,000,000 | 2,325,581 | $ | 2,000,000 | N/A | |||||||||
| 00 Xxxx 00xx Xx | ||||||||||||||||
| 00xx Xxxxx | ||||||||||||||||
| Xxx Xxxx, XX 00000 | ||||||||||||||||
| Attention: Cem Hacioglu | ||||||||||||||||
| Xxxxxxx Xxxxxxx | ||||||||||||||||
| Facsimile: 000-000-0000 | ||||||||||||||||
| Telephone: 000-000-0000 | ||||||||||||||||
| Residence: British Virgin Islands | ||||||||||||||||
Cranshire Capital L.P. |
c/o Downsview Capital, Inc. | $ | 250,000 | 290,698 | $ | 250,000 | N/A | |||||||||
| The General Partner | ||||||||||||||||
| 0000 Xxxxxx Xxxx, | ||||||||||||||||
| Xxxxx 000 | ||||||||||||||||
| Xxxxxxxxxx, XX 00000 | ||||||||||||||||
| Attention: Xxxxxxxx X. Xxxxx | ||||||||||||||||
| Facsimile: (000) 000-0000 | ||||||||||||||||
| Telephone: (000) 000-0000 | ||||||||||||||||
| Residence: Illinois | ||||||||||||||||
SCHEDULES
Schedule 3(k)
|
Financial Reporting | |
Schedule 3(l)
|
Absence of Certain Changes | |
Schedule 3(q)
|
Transactions with Affiliates | |
Schedule 3(r)
|
Capitalization | |
Schedule 3(s)
|
Indebtedness and Other Contracts | |
Schedule 3(t)
|
Litigation | |
Schedule 3(x)
|
Intellectual Property | |
Schedule 3(cc)
|
Ranking of Notes | |
Schedule 3(kk)
|
Nondisclosure Agreement |
EXHIBITS
Exhibit A
|
Form of Notes | |
Exhibit B
|
Form of Warrants | |
Exhibit C
|
Registration Rights Agreement | |
Exhibit D
|
Irrevocable Transfer Agent Instructions | |
Exhibit E
|
Form of General Company Counsel Opinion | |
Exhibit F
|
Form of Secretary’s Certificate | |
Exhibit G
|
Form of Officer’s Certificate | |
Exhibit H
|
Form of Security Agreement | |
Exhibit I
|
Voting Agreement | |
Exhibit J
|
Put Agreement | |
Exhibit K
|
Collateral Agency Agreement | |
Exhibit L
|
Put Grantor Fee Agreement | |
Exhibit M
|
Amended and Restated Xxxxx Note |
