SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT
(the
"Agreement"),
dated
as of February 28, 2008, by and among TXCO Resources Inc., a Delaware
corporation, with headquarters located at 000
X.
Xxxxxxxx Xxxx., Xxxxx 000, Xxx Xxxxxxx, Xxxxx 00000 (the "Company"),
and
the investors listed on the Schedule of Buyers attached hereto (individually,
a
"Buyer"
and
collectively, the "Buyers").
WHEREAS:
A. On
November 20, 2007, the Company and the Buyers entered into (i) that certain
Securities Purchase Agreement (the "Existing
Securities Purchase Agreement"),
pursuant to which the Company issued to the Existing Holders shares of the
Company's Series C Convertible Preferred Stock, par value $0.01 per share (the
"Existing
Preferred Shares")
convertible into the Company's common stock (the "Common
Stock"),
par
value $0.01 per share (the "Existing
Conversion Shares")
and
(y) that certain Registration Rights Agreement (the "Existing
Registration Rights Agreement"),
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Existing Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "1933
Act").
B. The
Company has authorized a new series of convertible preferred stock of the
Company designated as Series D Convertible Preferred Stock, the terms of which
are set forth in the certificate of designation for such series of preferred
stock (the "Series
D Certificate of Designations")
in the
form attached hereto as Exhibit
A-1,
which
Series D Convertible Preferred Stock shall be convertible into Common Stock,
in
accordance with the terms of the Series D Certificate of
Designations.
C. The
Company has also authorized a new series of convertible preferred stock of
the
Company designated as Series
E
Convertible Preferred Stock,
the
terms of which are set forth in the certificate of designation for such series
of preferred stock (the "Series
E Certificate of Designations",
and
together with Series D Certificate of Designations, the "Certificates
of Designations")
in the
form attached hereto as Exhibit
A-2,
which
Series E Convertible Preferred Stock shall be convertible into Common Stock,
in
accordance with the terms of the Series E Certificate of Designations.
D. The
Company and the Buyers desire to enter into this Agreement, pursuant to which,
among other things, upon the terms and conditions stated in this Agreement,
at
the Initial Closing (as defined below), (i) the Company and each Buyer shall
exchange such Buyer's Existing Preferred Shares for that aggregate number of
shares of Series D Convertible Preferred Stock set forth opposite such Buyer's
name in column (3) on the Schedule of Buyers (which aggregate number for all
Buyers shall be 55,000) (the "Exchanged
Preferred Shares")
(as
converted, collectively, the "Exchanged
Conversion Shares")
and
(ii) each Buyer wishes to purchase, and the Company wishes to sell, that
aggregate number of shares of Series E Convertible Preferred Stock set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (which
aggregate number for all Buyers shall be 20,000) (the "Initial
Preferred Shares")
(as
converted, collectively, the "Initial
Conversion Shares").
E. Subject
to the terms and conditions set forth in this Agreement, the Buyers shall have
the right to participate in Additional Closings (as defined below) in order
to
purchase, and require the Company to sell up to that aggregate number of shares
of Series D Preferred Stock set forth opposite such Buyer's name in column
(5)
on the Schedule of Buyers (which aggregate number for all Buyers shall not
exceed 30,000) (the "Additional
Preferred Shares",
together with the Initial Preferred Shares and the Exchanged Preferred Shares,
the "Preferred
Shares")
(as
converted, collectively, the "Additional
Conversion Shares",
together with the Initial Conversion Shares and the Exchanged Conversion Shares,
the "Conversion
Shares").
F. Contemporaneously
with the Initial Closing, the parties hereto are executing and delivering a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit
B
(the
"Registration
Rights Agreement"),
pursuant to which the Company has agreed 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.
G. The
Preferred Shares may be entitled to dividends, which at the option of the
Company, subject to certain conditions, may be paid in shares of Common Stock
(the "Dividend
Shares").
H. The
Preferred Shares, the Conversion Shares and the Dividend Shares are collectively
referred to herein as the "Securities".
I. The
Company and each Buyer is executing and delivering this Agreement (i) with
respect to the issuance of the Initial Preferred Shares and Additional Preferred
Shares, in reliance upon the exemption from securities registration afforded
by
Section 4(2) of 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 and (ii) with respect to the exchange of the Existing Preferred
Shares for the Exchanged Preferred Shares, in reliance upon the exemption from
registration provided by Section 3(a)(9) of the 1933 Act.
NOW,
THEREFORE,
the
Company and each Buyer hereby agree as follows:
| 1. |
PURCHASE
AND SALE OF PREFERRED
SHARES.
|
(a) Purchase
of Preferred Shares.
(i) Initial
Preferred Shares; Exchange.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6(a)
and
7(a) below, (x) each Buyer shall surrender to the Company its Existing Preferred
Shares and the Company shall issue and deliver to the Buyers the number of
Exchanged Preferred Shares set forth opposite such Buyer's name in column (3)
on
the Schedule of Buyers and (y) the Company shall issue and sell to each Buyer,
and each Buyer severally, but not jointly, agrees to purchase from the Company
on the Initial Closing Date (as defined below), the number of Initial Preferred
Shares as is set forth opposite such Buyer's name in column (4) on the Schedule
of Buyers (the "Initial
Closing").
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(ii) Additional
Preferred Shares.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 1(c),
6(b) and 7(b) below, the Company shall issue and sell to each Buyer electing
to
participate in such Additional Closing pursuant to Section 1(c) below, and
each
such Buyer severally, but not jointly, agrees to purchase from the Company
on
such Additional Closing Date (as defined below), up to the number of Additional
Preferred Shares as is set forth opposite such Buyer's name in column (5) on
the
Schedule of Buyers (each, an "Additional
Closing").
(iii) Closing.
The
Initial Closing and the Additional Closings are each referred to in this
Agreement as a "Closing".
Each
Closing shall occur on the applicable Closing Date at the offices of Xxxxxxx
Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(iv) Purchase
Price.
The
purchase price for each Buyer of the Initial Preferred Shares to be purchased
by
each such Buyer at the Initial Closing shall be the amount set forth opposite
such Buyer's name in column (6) of the Schedule of Buyers (the "Initial
Purchase Price").
Each
Buyer shall pay $1,000 for each Additional Preferred Share to be purchased
by
such Buyer at each Additional Closing (the "Additional
Purchase Price",
and
together with the Initial Purchase Price, the "Purchase
Price").
(b) Initial
Closing Date.
The
date and time of the Initial Closing (the "Initial
Closing Date")
shall
be 10:00 a.m., New York City Time, on the date hereof after notification of
satisfaction (or waiver) of the conditions to the Initial Closing set forth
in
Sections 6(a) and 7(a) below (or such later date as is mutually agreed to by
the
Company and each Buyer).
(c) Additional
Closing Date.
The
date and time of the Additional Closings (each an "Additional
Closing Date,"
and
together with the Initial Closing Date, each a "Closing
Date"
and
collectively, the "Closing
Dates")
shall
be 10:00 a.m., New York City time, on the date specified in the applicable
Additional Closing Notice (as defined below), subject to satisfaction (or
waiver) of the conditions to Additional Closing set forth in Sections 6(b)
and
7(b) and the conditions contained in this Section 1(c) (or such later date
as is
mutually agreed to by the Company and the applicable Buyer). Subject to the
requirements of Sections 6(b) and 7(b) and the conditions contained in this
Section 1(c), each Buyer may purchase (provided that such Buyer was a Buyer
under this Agreement on the date hereof and such Buyer holds all of the
Preferred Shares purchased hereunder at the time of such Additional Closing),
at
such Buyer's option, Additional Preferred Shares by delivering written notice
to
the Company (an "Additional
Closing Notice")
at any
time during the period beginning after the date hereof and ending on March
20,
2008 (the "Additional
Closing Expiration Date"),
which
Additional Closing Expiration Date may be extended at the option of the Company
to a date not later than May 20, 2008.
The
Additional Closing Notice shall be delivered at least ten (10) Business Days
prior to the applicable Additional Closing Date set forth in such Additional
Closing Notice. An Additional Closing Notice shall set forth (i) the number
of
Additional Preferred Shares to be purchased by such Buyer at the Additional
Closing, which number of shares shall not exceed the number of Additional
Preferred Shares as is set forth opposite such Buyer's name in column (4) on
the
Schedule of Buyers, (ii) the aggregate Additional Purchase Price for the
Additional Preferred Shares to be purchased and (iii) the proposed Additional
Closing Date. 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.
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(d) Form
of Payment.
On the
Initial Closing Date, each Buyer shall pay the Initial Purchase Price to the
Company for the Initial Preferred Shares to be issued and sold to such Buyer
at
the Initial Closing by wire transfer of immediately available funds for such
Initial Purchase Price in accordance with the Company's written wire
instructions (less, in the case of Capital Ventures International ("Capital
Ventures"),
a
Buyer, the amounts withheld pursuant to Section 4(g)). On each Additional
Closing Date, each Buyer shall pay the Additional Purchase Price to the Company
for the Additional Preferred Shares to be issued and sold to such Buyer at
such
Additional Closing by wire transfer of immediately available funds for such
Additional Purchase Price in accordance with the Company's written wire
instructions. At each Closing, the Company shall deliver to each Buyer the
Preferred Shares (in such numbers as such Buyer shall request) which such Buyer
is then purchasing or receiving in exchange for Existing Preferred Shares,
as
applicable, duly executed on behalf of the Company and registered in the name
of
such Buyer or its designee.
(e) Consents
and Waivers.
Each of
the Buyers, in its capacity as a holder of Existing Preferred Shares, hereby
(x)
consents to the transactions contemplated hereby, including, without limitation,
the exchange of the Existing Preferred Shares for the Exchanged Preferred
Shares, the issuance of the Preferred Shares, the reservation for issuance
and
the issuance of the Conversion Shares issuable upon conversion of the Preferred
Shares and the reservation for issuance and the issuance of the Dividend Shares
issuable with respect to the Preferred Shares, (y) waives any rights with
respect to the transactions contemplated hereby set forth in Section 4(o) of
the
Existing Securities Purchase Agreement, including, without limitation, the
notice periods set forth therein, and (z) in its capacity as a holder of Series
D Preferred Stock, hereby consents to the creation and issuance of the Series
E
Preferred Stock as a class of stock that is pari passu with the Series D
Preferred Stock as to rights to payment of dividends and receipt of liquidation
preferences, all as set forth in the Series E Certificate of
Designations.
(f) Holding
Period.
For the
purposes of Rule 144, the Company acknowledges that the holding period of the
Existing Preferred Shares (including the corresponding Existing Conversion
Shares) may be tacked onto the holding period of the Exchanged Preferred Shares
(including the corresponding Exchanged Conversion Shares). The Company agrees
not to take a position contrary to this Section 3(f). The Company agrees to
take
all actions, including, without limitation, the issuance by its legal counsel
of
any necessary legal opinions, necessary to issue to the Exchanged Conversion
Shares that are freely tradable on an Eligible Market without restriction and
not containing any restrictive legend without the need for any action by the
Investor.
(g) Existing
Securities Purchase Agreement; Existing Registration Rights
Agreement.
As of
the Initial Closing Date, to the extent any covenants of the Company or any
Buyer or agreements to issue additional securities of the Company under the
Existing Securities Purchase Agreement remain in effect, those covenants and
agreements are hereby superseded by the terms of this Agreement. As of the
Initial Closing Date, to the extent any covenants of the Company or any Buyer
or
agreements to register securities of the Company under the 1933 Act under the
Existing Registration Rights Agreement remain in effect, those covenants and
agreements are hereby superseded by the terms of the Registration Rights
Agreement.
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| 2. |
BUYER'S
REPRESENTATIONS AND WARRANTIES.
|
Each
Buyer represents and warrants with respect to only itself that:
(a) Organization;
Authority.
Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by
the
Transaction Documents (as defined below) to which it is a party and otherwise
to
carry out its obligations hereunder and thereunder.
(b) No
Public Sale or Distribution.
Such
Buyer is (i) acquiring the Preferred Shares, (ii) upon conversion of the
Preferred Shares will acquire the Conversion Shares and (iii) will acquire
the
Dividend Shares in each case, in the ordinary course of business for its own
account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act and such Buyer does not have a present arrangement
to effect any distribution of the Securities to or through any person or entity;
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. 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.
(c) Accredited
Investor Status.
Such
Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D.
(d) 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.
(e) 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 which have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the opportunity to
ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on
the
Company's representations and warranties contained herein. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice from Persons
other than the Company as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities. In
addition, such Buyer acknowledges that, in connection with the Closing, the
Company is entering into the transactions set forth in Schedule
2(e)
and that
the Buyer has been afforded the opportunity to ask questions of the Company
regarding the same.
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(f) 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.
(g) 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. 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 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(g).
(h) Legends.
Such
Buyer understands that the certificates or other instruments representing the
Preferred Shares and, until such time as the resale of the Conversion Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Conversion 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):
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[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] 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 GENERALLY
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 PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER THE 1933 ACT IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company ("DTC"),
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 counsel, in a generally 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. The Company shall be responsible
for the fees of its transfer agent and all DTC fees associated with such
issuance.
(i) Validity;
Enforcement.
This
Agreement and the Registration Rights Agreement 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.
(j) No
Conflicts.
The
execution, delivery and performance by such Buyer of this Agreement and the
Registration Rights Agreement 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 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.
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(k) Residency.
Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
(l) Certain
Trading Activities.
Other
than with respect to this Agreement and the transactions contemplated herein,
since the time that such Buyer was first contacted by the Company, the Agents
(as defined below) or any other Person regarding this investment in the Company,
neither the Buyer nor any Affiliate (as defined by Rule 405 promulgated pursuant
to the 0000 Xxx) of such Buyer which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Buyer's
investments or trading or information concerning such Buyer's investments and
(z) is subject to such Buyer's review or input concerning such Affiliate's
investments or trading (collectively, "Trading
Affiliates")
has
directly or indirectly, nor has any Person acting on behalf of or pursuant
to
any understanding with such Buyer or Trading Affiliate, effected or agreed
to
effect any transactions in the securities of the Company. Such Buyer hereby
covenants and agrees not to, and shall cause its Trading Affiliates not to,
engage, directly or indirectly, in any transactions in the securities of the
Company or involving the Company's securities during the period from the date
hereof until such time as (i) the transactions contemplated by this Agreement
are first publicly announced as described in Section 4(i) hereof or (ii) this
Agreement is terminated in full pursuant to Section 8 hereof.
(m) Placement
Agents’ Fees.
Such
Buyer is not paying or receiving any fees, commission or other payments to
any
Person in connection with the exchange of such Buyer’s Existing Preferred Shares
for the Exchange Preferred Shares.
| 3. |
REPRESENTATIONS
AND WARRANTIES OF THE
COMPANY.
|
The
Company represents and warrants to each of the Buyers that:
(a) Organization
and Qualification.
Each of
the Company and its Subsidiaries (as defined below) are entities duly organized
and validly existing and 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 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) of the Company or
its
Subsidiaries taken as a whole on a consolidated basis, 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. The Company has no significant subsidiaries (as such
term
is defined in Rule 1-02 of Regulation S-X promulgated by the SEC) other than
those listed on Schedule
3(a)
(collectively, the "Subsidiaries").
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(b) Authorization;
Enforcement; Validity.
The
Company has the requisite power and authority to enter into and perform its
obligations under this Agreement, the Certificates of Designations, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions
(as
defined in Section 5(b)), each of the Lock-Up Agreements 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 Preferred Shares and the
reservation for issuance and the issuance of the Conversion Shares issuable
upon
conversion of the Preferred Shares and the reservation for issuance and the
issuance of the Dividend Shares issuable with respect to the Preferred Shares,
have been duly authorized by the Company's board of directors and (other than
the filing with the SEC of a Form D and one or more Registration Statements
in
accordance with the requirements of the Registration Rights Agreement and any
other filings as may be required by any state securities agencies or by the
Principal Market (as defined below)), 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. The Series D Certificate of Designations in the form attached hereto
as Exhibit
A-1
has been
filed with the Secretary of State of the State of Delaware and is in full force
and effect, enforceable against the Company in accordance with its terms and
has
not been amended. The Series E Certificate of Designations in the form attached
hereto as Exhibit
A-2
has been
filed with the Secretary of State of the State of Delaware and is in full force
and effect, enforceable against the Company in accordance with its terms and
has
not been amended.
(c) Issuance
of Securities.
The
Preferred Shares 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, and the Preferred Shares shall be
entitled to the rights and preferences set forth in the applicable Certificate
of Designations. As of the applicable Closing, a number of shares of Common
Stock shall have been duly authorized and reserved for issuance which equals
110% of the sum of (i) the maximum number of shares of Common Stock issuable
upon conversion of the Preferred Shares and (ii) the maximum number of Dividend
Shares issuable pursuant to the terms of the Certificates of Designations,
issuable at such Closing and issued at any prior Closing (assuming for purposes
hereof, that the Preferred Shares are convertible at the Conversion Price and
without taking into account any limitations on the conversion of the Preferred
Shares set forth in the Certificates of Designations and that all dividends
will
be issued in the form of Dividend Shares for a period of three (3) years at
an
assumed value of the Weighted Average Price as of the Initial Closing Date).
Upon issuance or conversion in accordance with the Certificates of Designations,
the Conversion Shares and the Dividend Shares 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. Subject to the accuracy
of
the representations and warranties of the Buyers in this Agreement, the offer
and issuance by the Company of the Securities is exempt from registration under
the 1933 Act.
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(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 Preferred Shares
and
the Dividend Shares and reservation for issuance of the Conversion Shares and
the Dividend Shares) will not (i) result in a violation of the Certificate
of
Incorporation (as defined in Section 3(r)) of the Company or any certificate
of
incorporation, certificate of formation, any certificate of designations or
other constituent document of any of its Subsidiaries, any capital stock of
the
Company or Bylaws (as defined in Section 3(r)) or any of its Subsidiaries bylaws
or (ii) conflict with, or constitute a default (or an event which with notice
or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
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 federal and state securities
laws and regulations and the rules and regulations of The NASDAQ Global Select
Market (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, which
with
regard to subsections (ii) and (iii) would reasonably be expected to cause
a
Material Adverse Effect.
(e) Consents.
The
Company is not required to obtain any consent, authorization or order of, or
make any filing or 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. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the Closing Date, and the Company and its
Subsidiaries are unaware of any facts or circumstances which 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 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.
(f) Acknowledgment
Regarding Buyer's Purchase of Securities.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of 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) to the knowledge of the Company, 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.
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(g) No
General Solicitation; Placement Agents' 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. 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
Lazard Freres & Co. LLC, BMO Capital Markets and Scotia Capital Inc. as
placement agents (the "Agents")
in
connection with the sale of the Securities (other than the issuance of the
Exchanged Preferred Shares). Other than the Agents, the Company has not engaged
any placement agent or other agent in connection with the sale of the
Securities. No fees, commissions or other payments to any Person shall be made
by the Company in connection with the exchange of the Buyer’s Existing Preferred
Shares for the Exchanged Preferred Shares or the issuance of the Exchanged
Preferred Shares.
(h) No
Integrated Offering.
Except
as set forth on Schedule 3(h), 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 any
of
the Securities under the 1933 Act or cause this offering of the Securities
to be
integrated with prior offerings by the Company for purposes of the 1933 Act
or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system
on
which any of the securities of the Company are listed or designated. 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 any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other
offerings.
(i) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Preferred Shares will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred Shares and the Dividend
Shares in accordance with this Agreement and the Certificates of Designations
is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the
Company.
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(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
or any certificates of designations or the laws of the jurisdiction of its
formation or 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. Except as disclosed in the SEC Documents and Schedule 3(j),
the Company has not adopted a 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.
Except
as disclosed on Schedule 3(k), during the two (2) years prior to the date
hereof, the Company has timely 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
Documents").
The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of each of the SEC Documents not available on the
XXXXX system that have been requested by each Buyer. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they
were filed with the SEC, contained any untrue statement of a material fact
or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied
as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as in effect
as
of the time of filing. 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).
(l) Absence
of Certain Changes.
Except
as disclosed in the SEC Documents, since December 31, 2006 there has been no
Material Adverse Effect. 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
which 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) 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.
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(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 its Subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation, the Certificates of Designations, any
other certificate of designation, preferences or rights of any other outstanding
series of preferred stock of the Company or Bylaws or their organizational
charter or certificate of incorporation 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 in all cases
for possible violations which would 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 or its predecessor,
(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 material 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 disclosed in the SEC Documents, none of the officers or directors 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 or director or, to the actual 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)
100,000,000 shares of Common Stock, of which as of the date hereof, 33,998,442
are issued and outstanding and 1,986,257 shares are reserved for issuance
pursuant to securities granted or that may be granted that are (other than
the
Preferred Shares) exercisable or exchangeable for, or convertible into, shares
of Common Stock and (ii) 10,000,000 shares of Preferred Stock of which, as
of
the date hereof, 55,000 Existing Preferred 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 set forth on 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) except as disclosed in the SEC Documents, 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 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); (iv) there are no outstanding securities or 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; (v) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (vi) except as
disclosed in the SEC Documents, the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement;
and (vii) 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. Included in
the
SEC Documents are 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.
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(s) Indebtedness
and Other Contracts.
Except
as disclosed in the SEC Documents, neither the Company nor any of its
Subsidiaries (i) has any outstanding Indebtedness (as defined below) involving
payment obligations of the Company in excess of $1,000,000 (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. 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 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.
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(t) Absence
of Litigation.
Except
as disclosed in the SEC Documents, 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, which if determined adversely to the Company or any of its
Subsidiaries would, or would reasonably be expected to, have a Material Adverse
Effect.
(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.
(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.
Except
as would not, or would not reasonably be expected to, have a Material Adverse
Effect or is otherwise disclosed in the SEC Documents, the Company and its
Subsidiaries have defensible title to all real property and good and marketable
title to all personal property owned by them, in each case free and clear of
all
liens, encumbrances and defects. Except as would not, or would not reasonable
be
expected to, have a Material Adverse Effect or is otherwise disclosed in the
SEC
Documents, 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.
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(x) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, original works of authorship, trade secrets and
other intellectual property rights and all applications related thereto
("Intellectual
Property Rights")
necessary to conduct their respective businesses as now conducted. None of
the
Company's or its Subsidiaries' Intellectual Property Rights have expired,
terminated or been abandoned, or are expected to expire, terminate or be
abandoned, within one year from the date of this Agreement. The Company does
not
have any knowledge of any infringement by the Company or any of 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, against the Company or any of its Subsidiaries regarding its
Intellectual Property Rights. The Company is unaware 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.
(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) Subsidiary
Rights.
Except
as disclosed in Schedule 3(z), the Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(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.
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(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) 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 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 has 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) 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.
(dd) 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.
(ee) 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.
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18
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(ff) Acknowledgement
Regarding Buyers' Trading Activity.
It is
understood and acknowledged by the Company (i) that none of the Buyers have
been
asked by the 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 any Buyer, and counterparties 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 (iii) that each Buyer shall not be
deemed to have any affiliation with or control over any arm's length
counterparty in any "derivative" transaction. The Company further understands
and acknowledges that 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 Dividend 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
Certificates of Designations or any of the documents executed in connection
herewith.
(gg) 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 designed to cause or to 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) 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.
(hh) U.S.
Real Property Holding Corporation.
The
Company is not, has never been, and so long as any Preferred Shares remain
outstanding, shall not become, 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.
(ii)
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 percent (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.
(jj)
Form
S-3 Eligibility.
The
Company is eligible to register the Conversion Shares for resale by the Buyers
using Form S-3 promulgated under the 1933 Act.
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(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 disclosures provided by the Company to the Buyers in the
Transaction Documents and the Schedules to this Agreement regarding the Company
and its Subsidiaries, their business and the transactions contemplated hereby,
are true and correct and do not contain any untrue statement of a material
fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not
misleading. Each press release issued by the Company or 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 light of the circumstances under which they are made,
not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or either of their respective
businesses, 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.
| 4. |
COVENANTS.
|
(a) Reasonable
Best Efforts.
Each
party shall use its reasonable best efforts timely to satisfy each of the
covenants and conditions to be satisfied by it as provided in Sections 4, 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 Buyers shall have sold all the Conversion Shares and
the
Dividend Shares and none of the Preferred Shares is outstanding (the
"Reporting
Period"),
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 Act (except to the extent that the
Company has complied with its obligations under the Certificates of Designations
in connection with (i) a reorganization of the Company or a merger or
consolidation of the Company with or into another entity or (ii) an event that
is deemed a "liquidation event" pursuant to the Certificates of Designations)
even if the 1934 Act or the rules and regulations thereunder would no longer
require or otherwise permit such termination.
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(d) Use
of
Proceeds.
The
Company shall use the proceeds from the sale of the Securities for general
corporate and for working capital purposes, but not for (A) except as set forth
in Schedule 4(d), repayment of any outstanding Indebtedness of the Company
or
any of its Subsidiaries or (B) redemption or repurchase of any of its or its
Subsidiaries' equity securities.
(e) Financial
Information.
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) within four (4) Business Days of the release thereof,
facsimile or e-mail copies of all press releases issued by the Company or any
of
its Subsidiaries, unless the same are filed with the SEC through XXXXX and
available to the public through XXXXX within such time, and (iii) copies of
any
notices and other information made available or given to the stockholders of
the
Company generally, within four (4) Business Days of the making available or
giving thereof to the stockholders, unless such notice and other information
is
filed with the SEC through XXXXX and available to the public through XXXXX
within such time.
(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 use its
reasonable best efforts to maintain such listing of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents. The
Company shall use its reasonable best efforts to maintain the Common Stock's
authorization for quotation on an Eligible 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 an Eligible Market.
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees.
The
Company shall reimburse Capital Ventures, 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
expenses in connection therewith), in an amount not to exceed $50,000, which
amount may be withheld by such Buyer from its Initial Purchase Price at the
Initial Closing or paid by the Company upon termination of this Agreement.
The
Company shall be responsible for the payment of any placement agent's fees
or
commissions, financial advisory fees, or broker's commissions (other than for
Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agents. 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. Except as otherwise set forth
in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the
Buyers.
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21
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(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. 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. As
soon as practicable on the first Business Day following the date of this
Agreement, the Company shall issue a press release disclosing all of the
material terms of the Transactions Documents. On or before 5:30 p.m., New York
City time, on the first Business Day following the date of this Agreement,
the
Company shall 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 Certificates of Designations and the form of the Registration Rights
Agreement) as exhibits to such filing (including all attachments, the
"Initial
8-K Filing").
On or
before 9:30 a.m., New York City Time, on the first Business Day following each
Additional Closing Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the transaction consummated on such date (the
"Additional
8-K Filing,"
and
together with the Initial 8-K Filing, the "8-K
Filings").
From
and after the filing of the Initial 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 its respective officers, directors, employees
or agents, that is not disclosed in the Initial 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 Initial 8-K Filing with the SEC
without the express written consent of such Buyer or as may be required under
the terms of the Transaction Documents. If a Buyer has, or believes it has,
received any such material, nonpublic information regarding the Company or
any
of its Subsidiaries from the Company or any Subsidiary, it may provide the
Company with written notice thereof. If the Company agrees, in its reasonable
determination, that such information is material and nonpublic, the Company
shall, within five (5) Trading Days (as defined in the Certificates of
Designations) of receipt of such notice, make public disclosure of such
material, nonpublic information. 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 Filings 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, unless such
disclosure is required by law, regulation or the Principal Market (except to
the
extent that such names appear in this Agreement or the other Transaction
Documents or the Registration Statement required to be filed with the
SEC).
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(j) Additional
Preferred Shares; Variable Securities; Dilutive Issuances.
So long as any Buyer or Buyers beneficially owns in the aggregate more
than 10% of the Preferred Shares purchased pursuant to this Agreement, the
Company will not, without the prior written consent of Buyers holding at least
two-thirds of the Preferred Shares, issue any shares of Preferred Shares (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 Certificates
of
Designations. For so long as any Preferred Shares 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 conversion, exchange
or exercise price which varies or may vary after issuance 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 Certificate
of
Designations) with respect to the Common Stock into which any Preferred Shares
are convertible. For so long as any Preferred Shares remain outstanding, the
Company shall not, in any manner, enter into or affect any Dilutive Issuance
(as
such term is defined in the Certificates of Designations) if the effect of
such
Dilutive Issuance is to cause the Company to be required to issue upon
conversion of any Preferred Shares any shares of Common Stock in excess of
that
number of shares of Common Stock which the Company may issue upon conversion
of
the Preferred Shares without breaching the Company's obligations under the
rules
or regulations of the Principal Market (without giving effect to the Exchange
Cap provisions set forth in the Certificates of Designations). Notwithstanding
anything to the contrary in this section, the Company shall be permitted to
enter into the transactions described in Schedule
2(e).
(k) Corporate
Existence.
So long
as any Buyer beneficially owns any Securities, the Company shall maintain its
corporate existence and shall not sell all or substantially all of the Company's
assets and shall not be party to any Fundamental Transaction (as defined in
the
Certificates of Designations) unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the
Certificates of Designations.
(l) 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 110% of the sum of (i) the
maximum number of shares of Common Stock issuable upon conversion of the
Preferred Shares (assuming for purposes hereof, that the Preferred Shares are
convertible at the Conversion Price and without taking into account any
limitations on the conversion of the Preferred Shares set forth in the
Certificates of Designations) and (ii) the maximum number of Dividend Shares
issuable pursuant to the terms of the Certificates of Designations.
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(m) 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.
(n) Additional
Registration Statements.
Except
as set forth on Schedule
4(n),
until
the date that is forty-five (45) calendar days after the earlier of (i) the
Effective Date and (ii) the last day of the Registration Period (each as defined
in the Registration Rights Agreement) (the "Trigger
Date"),
the
Company shall not file a registration statement (other than with respect to
an
Approved Stock Plan (as defined in the Certificates of Designations)) under
the
1933 Act relating to securities that are not the Securities.
(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 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 Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent
Placement");
provided that the foregoing shall not apply to any Subsequent Placement which
does not have the right to have any of its securities registered for resale.
(iii) From
the
date hereof until the earlier of (i) the second anniversary of the Initial
Closing and (ii) the time that no Preferred Shares are outstanding, the Company
will not, directly or indirectly, effect any Subsequent Placement unless the
Company shall have first complied with this Section 4(o)(iii).
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(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 (subject to the Buyer's prior agreement to maintain
confidentiality of such Offer Notice), which Offer Notice shall (w) identify
and
describe the Offered Securities, (x) describe the price (which price may be
expressed as a formula) 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 (except with respect to an underwritten offering of Offered
Securities or a similar offering in which the price of such Offered Securities
is determined on or about the Closing Date of such offering, in which case
the
Company may provide the underwriter's proposed range of prices in satisfaction
of this clause (x) in the Offer Notice) (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 50% of the Offered Securities, allocated among such
Buyers (a) based on such Buyer's pro rata portion of the aggregate number of
Preferred Shares 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 it deems reasonably necessary.
(3) The
Company shall have fifteen (15) Business Days from the expiration of the Offer
Period above 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"),
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.
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(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, 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,
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 in form and substance as agreed between the Company
and
the third party purchasers of the Offered Securities.
(6) Any
Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(o)(iii)(2) above may not be issued, sold or exchanged until
they
are again offered to the Buyers under the procedures specified in this
Agreement.
(7) 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 fifteenth
(15th)
Business Day 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. Each Buyer expressly agrees that the Company's compliance with
this Section 4(o)(iii) shall not be deemed a breach of Section 4(i) of this
Agreement by the Company.
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(8) 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 Certificates of Designations) or in connection with the issuance of
the
securities listed on Schedule
4(o).
(p) Restriction
on Redemption and Cash Dividends.
So long
as any Preferred Shares 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
Preferred Shares representing not less than two-thirds of the aggregate number
of the then outstanding Preferred Shares. Notwithstanding the foregoing, no
consent of the holders of Preferred Shares shall be required in connection
with
(i) the repurchase by the Company of its capital stock deemed to occur upon
the
cashless exercise of stock options or warrants if such repurchased capital
stock
represents a portion of the exercise price of such options or warrants, (ii)
the
repurchase by the Company of its capital stock necessary to enable the Company
to pay withholding taxes incurred by an employee upon the vesting of restricted
capital stock granted to such employee in connection with a stock incentive
plan, (iii) the exchange of the each Buyer’s Existing Preferred Shares for
Exchange Preferred Shares, or (iv) the Company for the repurchase, retirement
or
other acquisition or retirement for value of capital stock of the Company held
by any future, present or former director, officer, member of management,
employee or consultant of the Company or the Subsidiaries (or the estate, family
members, spouse or former spouse of any of the foregoing); provided, however,
that the aggregate amount of payments made under clause (iii) does not exceed
in
any calendar year $250,000 (with unused amounts in any calendar year being
carried over to the two succeeding calendar years) and no payments shall be
permitted pursuant to clause (iii) if a Triggering Event under the Certificates
of Designations has occurred and the Company has not satisfied its obligations
to the holders of Preferred Shares under the Certificates of Designations in
connection therewith.
(q) No
Waiver of Lock-Up Agreements.
The
Company shall not amend, waive or modify any provision of any of the Lock-Up
Agreements (as defined below).
(r) [RESERVED].
(s) Consolidated
Leverage Ratio.
So long
as any Preferred Shares remain outstanding, the Company shall not incur any
Indebtedness that could cause the Consolidated Leverage Ratio (as defined in
the
Senior Indebtedness Agreements (as defined in the Certificates of Designations)
as in effect as of the date hereof) to exceed 3.65 to 1.00.
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27
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(t) Compliance
With Existing Agreements.
So long
as any Preferred Shares remain outstanding, the Company shall not permit to
exist any default under, redemption of or acceleration prior to maturity of
any
secured Indebtedness of the Company or any of its Subsidiaries. The Company
shall use its reasonable best efforts to obtain the waiver and consent of the
lenders under the Senior Indebtedness Agreements to the transactions
contemplated hereby and pursuant to the other Transaction Documents within
thirty (30) calendar days of the Initial Closing Date.
| 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 Preferred Shares in which the Company shall
record the name and address of the Person in whose name the Preferred Shares
have been issued (including the name and address of each transferee), the number
of Preferred Shares held by such Person, the number of Conversion Shares
issuable upon conversion of the Preferred Shares and the number of Dividend
Shares issuable with respect to the Preferred Shares 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 DTC, registered in the name of each Buyer or
its
respective nominee(s), for the Conversion Shares in such amounts as specified
from time to time by each Buyer to the Company upon conversion of the Preferred
Shares in the form of Exhibit
C
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 with respect to the Securities, and that the Securities shall otherwise
be
freely transferable on the books and records of the Company, as applicable,
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(g), 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 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.
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28
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| 6. |
CONDITIONS
TO THE COMPANY'S OBLIGATION TO
SELL.
|
(a) Initial
Closing Date.
The
obligation of the Company hereunder to issue and sell the Initial Preferred
Shares to
each
Buyer at the Initial Closing is subject to the satisfaction, at or before the
Initial 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:
(i) Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
(ii) Such
Buyer and each other Buyer shall have delivered to the Company the Existing
Preferred Share stock certificates (or such evidence reasonably satisfactory
to
the Company that such Existing Preferred Share stock certificate is lost or
destroyed)
(iii) Such
Buyer and each other Buyer shall have delivered to the Company the Initial
Purchase Price (less, in the case of Capital Ventures, the amounts withheld
pursuant to Section 4(g)) for the Initial Preferred Shares being purchased
by
such Buyer at the Initial Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iv) The
representations and warranties of such Buyer shall be true and correct in all
respects as of the date when made and as of the Initial 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
such Buyer shall have performed, satisfied and complied in all 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 Initial Closing
Date.
(b) Additional
Closing Date.
The
obligation of the Company hereunder to issue and sell the Additional Preferred
Shares to
each
Buyer at the Additional Closing is subject to the satisfaction, at or before
the
Additional 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:
(i) Such
Buyer and each other Buyer shall have delivered to the Company the Additional
Purchase Price for the Additional Preferred Shares being purchased by such
Buyer
at such Additional Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(ii) The
representations and warranties of such Buyer shall be true and correct in all
respects as of the date when made and as of the Additional 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 such Buyer shall have performed, satisfied and complied in all
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 Additional Closing Date.
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29
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| 7. |
CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
|
(a) Initial
Closing Date.
The
obligation of each Buyer hereunder to purchase the Initial Preferred
Shares at
the
Initial Closing is subject to the satisfaction, at or before the Initial 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:
(i) The
Company shall have duly executed and delivered to such Buyer (A) each of the
Transaction Documents, (B) the Exchanged Preferred Shares (in such numbers
as is
set forth across from such Buyer's name in column (3) of the Schedule of
Buyers) being
exchanged by such Buyer at the Initial Closing pursuant to this
Agreement and
(B)
the Initial Preferred Shares (in such numbers as is set forth across from such
Buyer's name in column (4) of the Schedule of Buyers) being
purchased by such Buyer at the Initial Closing pursuant to this
Agreement.
(ii) Such
Buyer shall have received the opinion of Fulbright & Xxxxxxxx L.L.P., the
Company's outside counsel, dated as of the Initial Closing Date, in
substantially the form of Exhibit
D
attached
hereto.
(iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit
C
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(iv) 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 Initial 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 Initial Closing Date. Such Buyer shall have received
a certificate, executed by the Chief Executive Officer of the Company, dated
as
of the Initial 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
E.
(v) 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 Initial Closing Date.
(vi) 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 Initial 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 Initial Closing Date, either (A) in writing by the SEC or the Principal
Market or (B) by falling below the minimum maintenance requirements of the
Principal Market.
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30
-
(vii) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(viii) The
Series D Certificate of Designations in the form attached hereto as Exhibit
A-1
shall
have been filed with the Secretary of State of the State of Delaware and shall
be in full force and effect, enforceable against the Company in accordance
with
its terms and shall not have been amended.
(ix) The
Series E Certificate of Designations in the form attached hereto as Exhibit
A-2
shall
have been filed with the Secretary of State of the State of Delaware and shall
be in full force and effect, enforceable against the Company in accordance
with
its terms and shall not have been amended.
(x) Such
Buyer shall have received lock-up agreements in the form attached hereto as
Exhibit
F
(the
"Lock-Up
Agreements"),
duly
executed and delivered by each of Xxxxx X. Xxxxxx, Xxxx Xxxxxxx, Xxxxxx X.
Xxxxxx, M. Xxxxx Xxxxxxx, Xxxx Xxxxxxxxxxx, P. Xxxx Xxxxx and the Company.
Each
Buyer acknowledges the prior receipt of each of the Lock-Up
Agreements.
(b) Additional
Closing Date.
The
obligation of each Buyer hereunder to purchase the Additional Preferred
Shares at
the
Additional Closing is subject to the satisfaction, at or before the Additional
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:
(i) The
Company shall have duly executed and delivered to such Buyer the Additional
Preferred Shares (in such numbers as such Buyer shall request) being
purchased by such Buyer at the Additional Closing pursuant to this
Agreement.
(ii) 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 Additional
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 Additional Closing Date. Such Buyer
shall
have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Additional Closing Date, to the foregoing effect and
in
the form attached hereto as Exhibit
E.
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31
-
(iii) 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 Additional 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 Additional Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum maintenance requirements
of
the Principal Market.
(iv) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(v) Such
Buyer shall have received the opinion of Fulbright & Xxxxxxxx L.L.P., the
Company's outside counsel, dated as of the Additional Closing Date, in
substantially the form of Exhibit
D
attached
hereto.
(vi) The
Series D Certificate of Designations in the form attached hereto as Exhibit
A-1
shall
have been filed with the Secretary of State of the State of Delaware and shall
be in full force and effect, enforceable against the Company in accordance
with
its terms and shall not have been amended.
| 8. |
TERMINATION.
|
In
the
event that the Initial 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,
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 process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof by certified mail to each 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.
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32
-
(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.
Except
as set forth on Schedule
9(e),
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 two-thirds of the Preferred Shares
issued and issuable hereunder, and any amendment to this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding 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 Preferred Shares then
outstanding, except with the express written consent of each holder so excluded.
Except as set forth on Schedule 9(e), 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 holders of Preferred Shares. Except as set forth on Schedule
9(e), 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.
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33
-
(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:
000
X.
Xxxxxxxx Xxxx., Xxxxx 000
Xxx
Xxxxxxx, Xxxxx 00000
| Telephone: |
(000)
000-0000
|
| Facsimile: |
(000)
000-0000
|
| Attention: |
M.
Xxxxx Xxxxxxx, Vice President and General
Counsel
|
With
a
copy (for informational purposes only) to:
Fulbright
& Xxxxxxxx L.L.P.
Convent
Street, Suite 2200
Xxx
Xxxxxxx, Xxxxx 00000
| Telephone: |
(000)
000-0000
|
| Facsimile: |
(000)
000-0000
|
| Attention: |
Xxxxx
Xxxxxxxx, Xx.
|
If
to the
Transfer Agent:
American
Stock Transfer & Trust Co.
00
Xxxxxx
Xxxx
Xxx
Xxxx,
XX 00000
| Telephone: |
(000)
000-0000
|
| Facsimile: |
(000)
000-0000
|
| Attention: |
Xxxxxx
Xxxxx, Vice President
|
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34
-
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.
|
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 the Buyers of the Preferred
Shares. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the holders of at least
two-thirds of the aggregate number of Registrable Securities issued and issuable
hereunder, including by way of a Fundamental Transaction (unless the Company
is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Certificates of Designations). A Buyer may assign some or
all
of its rights hereunder in connection with transfer of any of its Securities
as
is otherwise permitted by this Agreement 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 conversion of Securities, as applicable. Each Buyer shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(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.
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35
-
(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"),
as
incurred, 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, (b) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents 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, or (iii) 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 which 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
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.
-
36
-
(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 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 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 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, and the
Company will not assert any such claim, with respect to such obligations or
the
transactions contemplated by the Transaction Documents. 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 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:
|
||
|
By:
|
/s/ Xxxxx X. Xxxxxx | |
|
Name: Xxxxx
X. Xxxxxx
Title: President
|
||
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:
|
||
|
CAPITAL
VENTURES INTERNATIONAL
|
||
|
BY: HEIGHTS
CAPITAL MANAGEMENT,
INC., its
authorized agent
|
||
|
By:
|
/s/ Xxxxxx Kibinger | |
|
Name: Xxxxxx
Kibinger
Title: Investment
Manager
|
||
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.
|
OTHER
BUYERS:
|
||
|
UBS
X'XXXXXX LLC F/B/O: X'XXXXXX
PIPES
CORPORATE STRATEGIES MASTER
LTD
|
||
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx | |
|
Name: Xxxxxxxx
Xxxxxxxx
Title: Managing
Director
|
||
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.
|
UBS
X'XXXXXX LLC F/B/O: X'XXXXXX
GLOBAL
CONVERTIBLE ARBITRAGE
MASTER
LTD
|
||
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx | |
|
Name: Xxxxxxxx
Xxxxxxxx
Title: Managing
Director
|
||
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.
|
UBS
X'XXXXXX LLC F/B/O: X'XXXXXX
GLOBAL
CONVERTIBLE ARBITRAGE II
MASTER
LTD
|
||
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx | |
|
Name: Xxxxxxxx
Xxxxxxxx
Title: Managing
Director
|
||
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.
|
RADCLIFFE
SPC, LTD. FOR AND ON
BEHALF
OF THE CLASS A SEGREGATED
PORTFOLIO
|
||
|
By:
|
/s/ Xxxxxx X. Xxxxxxxxxx | |
|
Name: Xxxxxx
X. Xxxxxxxxxx
Title: Managing
Director
|
||
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.
|
WHITEBOX
CONVERTIBLE ARBITRAGE
PARTNERS,
LP
|
||
| By: | Whitebox Convertible Arbitrage Advisors LLC | |
| By: | Whitebox Advisors LLC | |
|
By:
|
/s/ Xxxxxx Xxxxxxx | |
|
Name: Xxxxxx
Xxxxxxx
Title:
Managing Member of the General
Partner
|
||
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.
|
GUGGENHEIM
PORTFOLIO COMPANY
XXXI,
LLC
|
||
| By: |
Guggenheim
Advisors, LLC
|
|
| By: | Whitebox Advisors LLC | |
|
By:
|
/s/ Xxxxxx Xxxxxxx | |
|
Name:
Xxxxxx Xxxxxxx
Title: Managing
Member of the General Partner
|
||
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.
|
WHITEBOX
INTERMARKET PARTNERS, LP
|
||
| By: | Whitebox Intermarket Advisors LLC | |
| By: | Whitebox Advisors LLC | |
|
By:
|
/s/ Xxxxxx Xxxxxxx | |
|
Name: Xxxxxx
Xxxxxxx
Title: Managing
Member of the General Partner
|
||
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.
|
WHITEBOX
SPECIAL OPPORTUNITIES
PARTNERS,
SERIES B, LP
|
||
| By: | Whitebox Special Opportunities Advisors LLC | |
| By: | Whitebox Advisors LLC | |
|
By:
|
/s/ Xxxxxx Xxxxxxx | |
|
Name: Xxxxxx
Xxxxxxx
Title: Director
|
||
SCHEDULE
OF BUYERS
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
||||||
|
Buyer
|
Address and Facsimile Number
|
Exchanged
Preferred
Shares
|
Aggregate
Number of
Initial
Preferred
Shares
|
Aggregate
Number of
Additional
Preferred
Shares
|
Initial Purchase
Price
|
Legal Representative's
Address and Facsimile Number
|
||||||
|
Capital
Ventures International
|
c/o
Heights Capital Management, Inc.
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
Attention:
Xxxxxx Xxxxxxxx
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
Residence:
Cayman Islands
|
25,500
|
15,000
|
13,909
|
$ 15,000,000
|
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
||||||
|
Whitebox
Convertible Arbitrage Partners, LP
|
c/o
Whitebox Advisors, LLC
0000
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
Attention:
Xxxxxxxx Xxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
British Virgin Islands
|
8,500
|
3,542
|
4,637
|
$ 3,542,000
|
N/A
|
||||||
|
Guggenheim
Portfolio Company XXXI, LLC
|
c/o
Whitebox Advisors, LLC
0000
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
Attention:
Xxxxxxxx Xxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
British Virgin Islands
|
800
|
333
|
437
|
$ 333,000
|
N/A
|
|
Whitebox
Intermarket Partners, LP
|
c/o
Whitebox Advisors, LLC
0000
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
Attention:
Xxxxxxxx Xxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
British Virgin Islands
|
1,200
|
500
|
655
|
$ 500,000
|
N/A
|
||||||
|
Whitebox
Special Opportunities Partners, Series B, LP
|
c/o
Whitebox Advisors, LLC
0000
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
Attention:
Xxxxxxxx Xxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
British Virgin Islands
|
1,500
|
625
|
818
|
$ 625,
000
|
N/A
|
||||||
|
Radcliffe
SPC, Ltd. For and on behalf of the Class A Convertible Crossover
Segregated Portfolio
|
c/o
RG Capital Management, LP
0
Xxxx Xxxxx-Xxxx, Xxxxx 000
Xxxx
Xxxxxx, XX 00000
Attention:
Xxxxxx X. Xxxxxxxxxx
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
Residence:
Cayman Islands
|
10,000
|
0
|
5,454
|
0
|
N/A
|
||||||
|
UBS
X’Xxxxxx LLC fbo X’Xxxxxx Global Convertible Arbitrage Master
Limited
|
UBS
X’Xxxxxx LLC
Xxx
Xxxxx Xxxxxx Xx., 00xx Xxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
Cayman Islands
|
5,520
|
0
|
3,011
|
0
|
N/A
|
||||||
|
UBS
X’Xxxxxx LLC fbo X’Xxxxxx Global Convertible Arbitrage II Master
Limited
|
UBS
X’Xxxxxx LLC
Xxx
Xxxxx Xxxxxx Xx., 00xx Xxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
Cayman Islands
|
480
|
0
|
262
|
0
|
N/A
|
|
UBS
X’Xxxxxx LLC fbo X’Xxxxxx Pipes Corporate Strategies Master
Limited
|
UBS
X’Xxxxxx LLC
Xxx
Xxxxx Xxxxxx Xx. 00xx Xxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
Cayman Islands
|
1,500
|
0
|
818
|
0
|
N/A
|
||||||
|
TOTAL
|
55,000
|
20,000
|
30,000
|
$ 20,000,000
|
EXHIBITS
|
Exhibit
A-1
|
Form
of Series D Certificate of Designations
|
|
Exhibit
A-2
|
Form
of Series E Certificate of Designations
|
|
Exhibit
B
|
Form
of Registration Rights Agreement
|
|
Exhibit
C
|
Form
of Irrevocable Transfer Agent Instructions
|
|
Exhibit
D
|
Form
of Outside Company Counsel Opinion
|
|
Exhibit
E
|
Form
of Officer's Certificate
|
|
Exhibit
F
|
Form
of Lock-Up Agreement
|
SCHEDULES
Schedule
2(e) - Information
Schedule
3(a) - List of Subsidiaries
Schedule
3(h) - No Integrated Offering
Schedule
3(j) - Stockholder Rights Plan
Schedule
3(k) - SEC Documents
Schedule
3(r) - Equity Capitalization
Schedule
3(z) - Subsidiary Rights
Schedule
4(d) - Use of Proceeds
Schedule
4(n) - Additional Registration Statements
Schedule
4(o) - Additional Issuances of Securities
Schedule
9(e) - Entire Agreement; Amendments
