EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of July 30, 2004, is
entered into by and between AMEDIA NETWORKS, INC., a Delaware corporation with
headquarters located at 000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000
(the "Company"), and each individual or entity named on an executed counterpart
of signature page hereto (each such signatory is referred to as the "Buyer" or a
"Buyer") (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer [each, an
"Other Buyer"] under such agreement and the Transaction Agreements, as defined
below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, INTER ALIA, by Rule 506 under
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Company desires to sell and the Buyer wishes to purchase
from the Company, subject to and upon the terms and conditions set forth in this
Agreement and acceptance of this Agreement by the Company, shares of the Series
A 7% Convertible Preferred Stock, par value $.001 per share and having a Stated
Value of $100 per share (the "Stated Value"), of the Company (the "Designated
Preferred Stock") which will be convertible into shares of Common Stock, $.001
par value per share, of the Company (the "Common Stock"), upon the terms and
subject to the conditions of such Designated Preferred Stock, together with the
Warrants (as defined below) exercisable for the purchase of shares of Common
Stock;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE.
(i) Subject to the terms and conditions set forth in this Agreement
and the other Transaction Agreements, the undersigned hereby agrees to purchase
from the Company the number of shares of Designated Preferred Stock specified on
the Buyer's signature page of this Agreement (the "Purchased Shares") and the
Warrants (the Purchased Shares and the Warrants, collectively, the "Purchased
Securities") for the purchase price set forth on the Buyer's signature page of
this Agreement (the "Purchase Price").
(ii) The actual total Purchase Price of all Buyers (including Other
Buyers), which shall not be less than the Minimum Aggregate Purchase Price and
not more than the Maximum Aggregate Purchase Price (as those terms are defined
below), is referred to as the "Aggregate Purchase Price."
(iii) Each share of Designated Preferred Stock shall be convertible
into Common Stock at a conversion price (the "Conversion Price"), which shall
initially be the Fixed Conversion Price (as defined below), which price may be
adjusted from time to as provided in the Certificate of Designations (as defined
below) or in the other Transaction Agreements. The Designated Preferred Stock
shall otherwise have the terms and conditions set forth in the Certificate of
Designations of Rights and Preferences of the Series A 7% Convertible Preferred
Stock of the Company attached hereto as ANNEX I (the "Certificate of
Designations").
B. CERTAIN DEFINITIONS. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:
"Additional Closing Date" means, if there is more than one Closing Date,
the relevant Closing Date after the Initial Closing Date.
"Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
"Buyer's Closing Date" means, for each Buyer, the Closing Date for the
Purchased Securities purchased by and sold to such Buyer.
"Buyer Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Buyer pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).
"Buyer's Allocable Share" means the fraction, of which (i) the numerator
is the Buyer's Purchase Price and (ii) the denominator is the Aggregate Purchase
Price.
"Certificates" means the (x) the stock certificates represented the
Purchased Shares and (y) the Warrants, each duly executed by the Company and
issued in the name of the Buyer on the relevant Closing Date.
"Closing Date" means the date of the closing of the purchase and sale of
the Purchased Securities, as provided herein; provided, however, that, once
subscriptions for at least the Minimum Purchase Price have been received and
accepted and the Purchase Price for the Buyers whose subscriptions have been
accepted have been received in escrow as provided herein, there may be an
Initial Closing Date followed by one or more Additional Closing Dates, as
provided in Section 6 hereof; and provided, further, that no Closing Date shall
be later than the Latest Closing Date.
"Company Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Purchased Shares (including, if relevant, accrued dividends on
the Purchased Shares so converted).
"Disclosure Letter" means a letter and any modifications thereof, the
latest of which is dated at least two Trading Days prior to the Initial Closing
Date, from the Company to the Buyers; provided, however, that the Disclosure
Letter shall be arranged in sections corresponding to the identified Sections of
this Agreement, but the disclosure in any such section of the Disclosure Letter
shall qualify other provisions in this Agreement to the extent that it would be
readily apparent to an informed reader from a reading of such section of the
Disclosure Letter that it is also relevant to other provisions of this
Agreement.
"Effective Date" means the date the Registration Statement covering the
Registrable Securities is declared effective by the SEC.
"Escrow Agent" means the escrow agent identified in the Joint Escrow
Instructions attached hereto as ANNEX II (the "Joint Escrow Instructions").
"Escrow Funds" means the Purchase Price delivered to the Escrow Agent as
contemplated by Sections 1(c) and (d) hereof.
"Escrow Property" means the Escrow Funds and the Certificates delivered
to the Escrow Agent as contemplated by Section 1(c) hereof.
"Exercise Price" means the per share exercise price of the relevant
warrant.
"Finder" means Pentium Management Limited.
"Fixed Conversion Price" means $0.75 (as that amount may be adjusted as
provided in the Certificate of Designations or herein).
"Holder" means the Person holding the relevant Securities at the
relevant time.
"Initial Closing Date" means the Closing Date or, if there is more than
one Closing Date for the transactions contemplated by this Agreement, the
Closing Date for the first of such closings (which shall be for at least the
Minimum Purchase Price).
"Issue Date Conversion Share" means the number of shares of Common Stock
equal to (x) the Stated Value of the Purchased Shares, divided by (y) the
Conversion Price in effect on the Buyer's Closing Date.
"Last Audited Date" means December 31, 2003.
"Latest Closing Date" means the date which is the Trading Date
immediately before the Company files the Registration Statement or September 23,
2004, whichever is earlier.
"Majority in Interest of the Holders" means one or more Holders whose
respective Purchase Prices aggregate more than fifty percent (50%) of the
Aggregate Purchase Price.
"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (x) adversely
affect the legality, validity or enforceability of the Purchased Securities or
any of the Transaction Agreements, (y) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its material obligations
under any of the Transaction Agreements or the transactions contemplated
thereby.
"Maximum Aggregate Purchase Price" means Five Million Two Hundred Fifty
Thousand Dollars ($5,250,000).
"Minimum Aggregate Purchase Price" means One Million Seventy-five
Thousand Dollars ($1,075,000).
"New Common Stock" means shares of Common Stock and/or securities
convertible into, and/or other rights exercisable for, Common Stock, which are
offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or lender
(howsoever denominated) in a New Transaction.
"New Transaction" means the offer or sale of New Common Stock by or on
behalf of the Company to a New Investor in a transaction offered or consummated
after the date hereof; provided, however, that it is specifically understood
that the term "New Transaction" (1) includes, but is not limited to, a sale of
Common Stock or of a security convertible into Common Stock or an equity or
credit line transaction, but (2) does not include (a) the sale of the Purchased
Securities to the Buyer and the Other Buyers, (b) the issuance of Common Stock
upon the exercise or conversion of options, warrants or convertible securities
outstanding on the date hereof, or in respect of any other financing agreements
as in effect on the date hereof and identified in the Disclosure Letter
(provided the same is not amended after the date of the Disclosure Letter), (c)
the issuance of Common Stock pursuant to an Employee Stock Option Plan (an
"ESOP") of the Company, such ESOP having been properly approved by the
shareholders of the Company prior to the date of this Agreement, (d) the
issuance of Common Stock pursuant to a non-employee director or consultants'
stock option plan of the Company, as in effect on the Initial Closing Date, (e)
the issuance of Common Stock upon the exercise of any options or warrants
referred to in the preceding clauses of this paragraph (provided the same is not
amended after the date hereof), (f) the offer or sale of an equity line or
credit line transaction, provided that the terms thereof provide that under no
circumstances shall the Company sell any shares thereunder at a price per share
less than $1.00 (which amount is subject to adjustment subject to adjustment as
contemplated by Article VIII of the Certificate of Designations other than as a
result of the application of Section 4(g) hereof), or (g) to a Strategic
Partner.
"Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin Board or
such other market on which the Common Stock is principally traded at the
relevant time, but shall not include the "pink sheets."
"Registrable Securities" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form annexed hereto as ANNEX IV as executed by the Buyer and the Company
simultaneously with the execution of this Agreement.
"Registration Statement" means an effective registration statement
covering the Registrable Securities.
"Securities" means the Purchased Securities and the Shares.
"Shares" means the shares of Common Stock representing any or all of the
Conversion Shares and the Warrant Shares.
"State of Incorporation" means Delaware.
"Strategic Partner" means a third party unaffiliated with the Company as
of the date hereof, which party (i) is engaged in a business which is the
business in which the Company is engaged or a similar or related business, and
(ii) either (a) subsequently purchases equity securities of the Company (or
securities convertible into equity securities of the Company), or (b) enters
into an agreement for one or more of the following: the licensing by the Company
of all or any portion of its technology to such third party, the licensing by
such third party of all or any portion of its technology to the Company, or any
other coordination of all or a portion of their respective business activities
or operations by the Company and such third party.
"Trading Day" means any day during which the Principal Trading Market
shall be open for business.
"Transaction Agreements" means this Agreement, the Certificate of
Designations, the Joint Escrow Instructions, the Registration Rights Agreement,
and the Warrants, and includes all ancillary documents referred to in those
agreements.
"Transfer Agent" means, at any time, the transfer agent for the
Company's Common Stock.
"Warrants" means (i) the warrants referred to in Section 4 hereof and
(ii) the Additional Warrants, if any.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Warrants.
C. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars to the Escrow Agent no later than
the date prior to the Buyer's Closing Date.
(ii) (A) With respect to Initial Closing Date, the Company will
deliver the relevant Certificates to the Escrow Agent within three (3) Trading
Days after the Escrow Agent notifies the Company that the Escrow Agent has on
deposit cleared funds from or on behalf of one or more Buyers an aggregate
amount equal to at least the Minimum Purchase Price.
(B) If there is more than one Closing Date, then with
respect to each Closing Date after the Initial Closing Date, the Company will
deliver the relevant Certificates to the Escrow Agent within three (3) Trading
Days after the Escrow Agent notifies the Company that the Escrow Agent has on
deposit cleared funds equal to the Purchase Price for the relevant Other Buyers;
provided, however, that the aggregate Purchase Price of all Buyers on all
Closing Dates shall not exceed the Maximum Purchase Price.
(C) Such Certificates shall be held in escrow as provided in
the Joint Escrow Instructions.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
D. METHOD OF PAYMENT. Payment into escrow of the relevant Purchase
Price shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Buyer by
Xxxxxxx & Prager LLP]
Re: Amedia Transaction
For: [Name of Buyer]
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
A. Without limiting Buyer's right to sell the Securities pursuant
to an effective registration statement or otherwise in compliance with the 1933
Act, the Buyer is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
B. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act,
(ii) experienced in making investments of the kind described in this Agreement
and the other Transaction Agreements, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement and the other Transaction
Agreements, and to evaluate the merits and risks of an investment in the
Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
C. All subsequent offers and sales of the Securities by the Buyer
shall be made pursuant to registration of the relevant Securities under the 1933
Act or pursuant to an exemption from such registration.
D. The Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of the 1933 Act and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
E. The Buyer and its advisors, if any, have been furnished with or
have been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Purchased Securities which have been requested by the Buyer, including those set
forth on in any annex attached hereto. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Buyer has also had the
opportunity to obtain and to review the
Company's filings on XXXXX listed on ANNEX VI hereto (the documents listed on
such Annex VI, to the extent available on XXXXX or otherwise provided to the
Buyer as indicated on said Annex VI, collectively, the "Company's SEC
Documents").
F. The Buyer understands that its investment in the Securities
involves a high degree of risk.
G. In connection with its purchase of the Securities, the Buyer has
not relied on any statement or representation by the Company or the Finder or
any of their respective officers, directors and employees or any of their
respective attorneys or agents or the Finder, except as specifically set forth
herein. The Finder is a third party beneficiary of this provision.
H. The 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.
I. This Agreement and the other Transaction Agreements to which the
Buyer is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Buyer and are valid
and binding agreements of the Buyer enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
J. The Buyer understands that if there is more than one Closing
Date, the terms applicable on the Initial Closing Date (such as the Fixed
Conversion Price and the initial Exercise Price specified in the Warrants) will
apply to subsequent closings as well, although certain facts, such as market
prices for the Common Stock may vary from those in effect or applicable to the
Initial Closing Date. This representation applies to Closing Dates for all Other
Buyers, whether such Closing Dates were before or will be after the Buyer's
Closing Date.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer as of the date hereof and as of the relevant Closing Date
that, except as otherwise provided in the Disclosure Letter or in the Company's
SEC Documents:
A. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Purchased Securities or the Shares. No party other has a currently exercisable
right of first refusal which would be applicable to any or all of the
transactions contemplated by the Transaction Agreements.
B. STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.
C. AUTHORIZED SHARES.
(i) The authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock, $.001 par value per share, of which
approximately 16,440,630 are outstanding as of the date hereof, and (ii)
5,000,000 shares of Preferred Stock, $.001 par value, of which none have been
designated prior to the filing of the Certificate of Designations.
(ii) There are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future. If any such securities are listed on the Disclosure Letter, the number
or amount of each such outstanding convertible security and the conversion terms
are set forth in said Disclosure Letter.
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Shares on the Closing Date.
(iv) As of the Initial Closing Date and each Additional Closing Date,
the Shares shall have been duly authorized by all necessary corporate action on
the part of the Company, and, when issued on conversion of, or in payment of
dividends on, the Purchased Shares in accordance with the provisions of the
Certificate of Designations or upon exercise of the Warrants in accordance with
their terms, will have been duly and validly issued, fully paid and
non-assessable and will not subject the Holder thereof to personal liability by
reason of being such Holder.
D. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Company, this Agreement
has been duly executed and delivered by the Company and this Agreement is, and
the Certificate of Designations, the Warrants and each of the other Transaction
Agreements, when executed and delivered by the Company, will be, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
E. NON-CONTRAVENTION. The execution and delivery of this Agreement
and each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Certificate of Designations, the Warrants
and the other Transaction Agreements do not and will not conflict with or result
in a breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the certificate of incorporation or by-laws of the Company,
each as currently in effect, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound, including any listing
agreement for the Common Stock except as herein set forth, or (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.
F. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
G. FILINGS. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Since June 1, 2003, the Company has timely filed all
requisite forms, reports and exhibits thereto required to be filed by the
Company with the SEC.
H. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there
has been no material adverse change and no Material Adverse Effect, except as
disclosed in the Company's SEC Documents. Since the Last Audited Date, except as
provided in the Company's SEC Documents, the Company has not (i) incurred or
become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past
practices; (ii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other material tangible
assets, or canceled any material debts owed to the Company by any third party or
material claims of the Company against any third party, except in the ordinary
course of business consistent with past practices; (v) waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of existing business; (vi) made any increases in
employee compensation, except in the ordinary course of business consistent with
past practices; or (vii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment.
I. FULL DISCLOSURE. To the Company's knowledge, there is no fact
known to the Company (other than facts known to the public generally or as
disclosed in the Company's SEC Documents) that has not been disclosed in writing
to the Buyer that would reasonably be expected to have or result in a Material
Adverse Effect.
J. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company, threatened against or affecting the Company
before or by any governmental authority or non-governmental department,
commission, board, bureau, agency or instrumentality or any other person,
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, any of the
Transaction Agreements. The Company is not aware of any valid basis for any such
claim that (either individually or in the aggregate with all other such events
and circumstances) could reasonably be expected to have a Material Adverse
Effect. There are no outstanding or unsatisfied judgments, orders, decrees,
writs, injunctions or stipulations to which the Company is a party or by which
it or any of its properties is bound, that involve the transaction contemplated
herein or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.
K. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section
3(e) hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company or its subsidiary is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.
L. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR EVENTS. To
the Company's knowledge, none of the following has occurred during the past five
(5) years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general
partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other Person
regulated by the Commodity Futures Trading Commission ("CFTC")
or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting for
more than 60 days the right of such Company Control Person to engage in
any activity described in paragraph (3) of this item, or to be
associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently reversed,
suspended, or vacated.
M. NO UNDISCLOSED LIABILITIES OR EVENTS. To the Company's
knowledge, the Company has no liabilities or obligations other than those
disclosed in the Transaction Agreements or the Company's SEC Documents or those
incurred in the ordinary course of the Company's business since the Last Audited
Date, or which individually or in the aggregate, do not or would not have a
Material Adverse Effect. No event or circumstances has occurred or exists with
respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
N. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since December 1, 2003, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
O. DILUTION. The number of shares issuable on conversion of the
Purchased Shares and upon exercise of the Warrants may have a dilutive effect on
the ownership interests of the other shareholders (and Persons having the right
to become shareholders) of the Company. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have such a potential dilutive effect. The
board of directors of the Company has concluded, in its good faith business
judgment, that such issuance is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Conversion
Shares upon conversion of the Purchased Shares and the Warrant Shares upon
exercise of the Warrants is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company, and the Company will honor such obligations,
including honoring every Notice of Conversion (as contemplated by the
Certificate of Designations) and every Notice of Exercise (as contemplated by
the Warrants), unless the Company is subject to an injunction (which injunction
was not sought by the Company) prohibiting the Company from doing so.
P. FEES TO BROKERS, FINDERS AND OTHERS. Except for payment of the
fees to the Finder's Compensation (as defined below) to the Finder, payment of
which is the sole responsibility of the Company, the Company has taken no action
which would give rise to any claim by any Person for brokerage commission,
finder's fees or similar payments by Buyer relating to this Agreement or the
transactions contemplated hereby. Buyer shall have no obligation with respect to
such fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this paragraph that may be due in connection
with the transactions contemplated hereby. The Company shall indemnify and hold
harmless each of Buyer, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as and when
incurred. The term "Finder's Compensation" means, in connection with the
consummation of the transactions contemplated by this Agreement, the
consideration contemplated by the Joint Escrow Instructions.
Q. DISCLOSURE. All information relating to or concerning the
Company set forth in this Agreement, in the Company's public filings with the
SEC, or provided to the Buyer
in connection with the transactions contemplated hereby is true and correct in
all material respects and have not omitted to state any material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or exists
with respect to the Company or its business, properties, prospects, operations
or financial conditions, which under applicable law, rule or regulation,
requires public disclosure or announcement by the Company.
R. CONFIRMATION. The Company confirms that all statements of the
Company contained herein shall survive acceptance of this Agreement by the Buyer
for a period of three (3) years from the latest Closing Date. The Company agrees
that, if, to the knowledge of the Company, any events occur or circumstances
exist prior to the relevant Closing Date which would make any of the Company's
representations, warranties, agreements or other information set forth herein
materially untrue or materially inaccurate as of such date, the Company shall
immediately notify the Buyer (directly or through its counsel, if any) and the
Escrow Agent in writing prior to such date of such fact, specifying which
representation, warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS.
(i) The Buyer acknowledges that (1) the Securities have not been and
are not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement or otherwise included in an
effective registration statement, the Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
(ii) In addition to the foregoing, and not in lieu thereof, the Buyer
agrees that, without the express written consent of the Company in each
instance, it will not transfer any of the Purchased Securities to any Person
which is known to the Buyer to be in substantially the same business as the
Company or known to be a subsidiary or affiliate of such a Person.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that,
until such
time as the relevant Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Agreement, and sold in accordance with
an effective Registration Statement or otherwise in accordance with another
effective registration statement, or until such Shares can otherwise be sold
without restriction, whichever is earlier, the certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
C. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing. Reference is made to Section 4(j) below.
D. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Purchased Securities and for at least twenty (20) Trading Days thereafter,
the Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its
control to ensure that adequate current public information with respect to the
Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company will take all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it at least through the date which is sixty (60) days after the
later of the date on which (x) all of the Designated Preferred Stock have been
converted or (y) all of the Warrants have been exercised or have expired.
E. USE OF PROCEEDS. The Company will use the net proceeds received
hereunder (excluding amounts paid as contemplated by the Joint Escrow
Instructions) for general corporate purposes.
F. WARRANTS.
(i) The Company agrees to issue to the Buyer on the Buyer's Closing
Date two (2) separate transferable warrants (each, a "Warrant" and,
collectively, the "Warrants"), designated as Class 2004-A ("Class A") and Class
2004-B ("Class B") Warrants, respectively.
(ii) Each Warrant shall be for the purchase the a number of shares of
Common Stock equal to fifty percent (50%) of the Issue Date Conversion Shares,
or a total of 100% of the Issue Date Conversion Shares for all Warrants
combined.
(iii) Each Warrant shall have an exercise price (each, an "Exercise
Price") as follows: (i) Class A -$1.50; and (ii) Class B - $2.50; each such
Exercise Price will be subject to adjustment as provided in the Warrant.
(iv) Each of the Warrants shall be exercisable initially six (6)
months after the Buyer's Closing Date and shall expire on the date which is on
the last day of the calendar month in which the fifth annual anniversary of the
Buyer's Closing Date occurs. Each Warrant shall have cashless exercise rights as
provided in the Warrant. Except as specified above, each Warrant shall generally
be in the form annexed hereto as ANNEX V.
(v) The Warrant Shares shall be subject to the provisions of the
Registration Rights Agreement.
G. CERTAIN AGREEMENTS.
(i) (A) The term "Lower Price Transaction" means a New
Transaction offered or consummated during the period (the "New Transaction
Period") from the Initial Closing Date and continuing through and including the
Final Lock-up Date (as defined below), without the prior written consent of a
Majority in Interest of the Holders in each instance, where (I) either the
lowest purchase price of any shares of the New Common Stock contemplated in the
New Transaction or the lowest conversion price which would be applicable under
the terms of the New Transaction is, or under any circumstances could
subsequently be adjusted or revised to be, below the Fixed Conversion Price
(such purchase price or conversion price, in each case, subject to adjustment in
the same manner as the Fixed Conversion Price of the Designated Preferred Stock
is adjusted, other than as a result of the application of this Section 4(g))
and/or (II) the lowest Exercise Price of any New Transaction Warrants (as
defined below) is, or under any circumstances could subsequently be adjusted or
revised to be, lower than the initial Exercise Price of the Warrants (such
Exercise Price, in each case, subject to adjustment in the same manner as the
initial Exercise Price of the Warrant is adjusted, other than as a result of the
application of this Section 4(g)).
(B) The term "Final Lock-up Date" means the date which is
one hundred eighty (180) days after the Effective Date, but not counting for
such purposes the days, if any, during which sale of Registrable Securities was
suspended after the Effective Date.(1)
-----------------------------
1 By way of illustration: If the sale of Registrable Securities was suspended
for ten (10) days in the interim, the applicable Final Lock-up Date will be one
hundred ninety (190) days after the Effective Date. If on the 188th day after
the Effective Date, the sale of Registrable Securities was suspended again for
five (5) days, the Final Lock-up Date will be one hundred ninety-five (195) days
after the Effective Date.
(C) The term "Alternative Warrant Percentage" means (x) the
number of shares which are eligible to be purchased under the warrant, option or
other right (howsoever denominated) issued in the New Transaction ("New
Transaction Warrants"), divided by (y) the aggregate of the shares of New Common
Stock issued or issuable in such transaction (excluding the shares issuable on
exercise of the New Transaction Warrants).
(ii) The Company covenants and agrees that, if there is a Lower Price
Transaction during the New Transaction Period, then
(A) the Conversion Price on any Unconverted Preferred Stock (as
defined in the Certificate of Designations) shall be adjusted to an amount (the
"Adjusted Conversion Price") equal to the lower of (1) the lowest fixed purchase
price of any shares of the New Common Stock contemplated in the Lower Price
Transaction or (2) the lowest conversion price which would be applicable under
the terms of the Lower Price Transaction (and in each such case, if no minimum
purchase price or conversion price, as the case may be, is set, it shall be
assumed that such minimum purchase price or conversion price is $.01);
(B) the number of shares which may be purchased on exercise of the
outstanding Class A Warrants shall be adjusted to equal the higher of (1) the
then outstanding number of Warrant Shares which would then be issuable upon the
exercise in full of such Class A Warrants (without regard to any limitations
which may then restrict the Holder's full exercise of such Warrant at any time),
as in effect immediately prior to the relevant New Transaction (the "Outstanding
Warrant Shares" for that class), or (2) the number of shares determined by
(x) multiplying the fraction, of which the numerator is the
Outstanding Warrant Shares and the denominator is the original
number of Warrant Shares issuable on exercise of such Class A
Warrant on the Buyer's Closing Date (without regard to any
limitations which may then restrict the Holder's full exercise
of such Warrant at any time; the "Original Warrant Shares"for
that class), by
(y) the number which is equal to (I) the higher of (aa) fifty
percent (50%) or (bb) fifty percent (50%) of the Alternative
Warrant Percentage, multiplied by (II) the Purchase Price,
divided by the lower of (a) the Conversion Price or (b) the
Adjusted Conversion Price for the initial closing date of the
relevant New Transaction;
(C) the number of shares which may be purchased on exercise of the
outstanding Class B Warrants shall be adjusted to equal the higher of (1) the
then outstanding number of Warrant Shares which would then be issuable upon the
exercise in full of such Class B Warrants (without regard to any limitations
which may then restrict the Holder's full exercise of such Warrant at any time),
as in effect immediately prior to the relevant New Transaction (the "Outstanding
Warrant Shares" for that class), or (2) the number of shares determined by
(x) multiplying the fraction, of which the numerator is the
Outstanding Warrant Shares and the denominator is the original
number of Warrant Shares issuable on exercise of such Class B
Warrant on the Buyer's Closing Date (without regard to any
limitations which may then restrict the Holder's full exercise
of such Warrant at any time; the "Original Warrant Shares"for
that class), by
(y) the number which is equal to (I) the higher of (aa) fifty
percent (50%) or (bb) fifty percent (50%) of the Alternative
Warrant Percentage, multiplied by (II) the Purchase Price,
divided by the lower of (a) the Conversion Price or (b) the
Adjusted Conversion Price for the initial closing date of the
relevant New Transaction; and
(D) the Exercise Price on all unexercised Warrants shall be adjusted
to equal the lowest of (1) the then existing Exercise Price, (2) the lowest
Exercise Price applicable to the Lower Price Transaction, or (3) with respect to
the Class A Warrants, two hundred percent (200%) of the Adjusted Conversion
Price, and with respect to the Class B Warrants, three hundred thirty-three and
1/3 percent (333-1/3%) of the Adjusted Conversion Price.
(iii) Anything in the foregoing provisions of this Section
4(g) to the contrary notwithstanding, if, during the New Transaction Period, the
Company enters into a New Transaction, the following provisions shall apply:
(A) whether or not such New Transaction is a Lower Price
Transaction, if the provisions applicable to the convertible preferred stock,
convertible debenture or similar instrument (howsoever denominated), if any, of
the New Transaction are more beneficial to the holder of such instrument than
the corresponding terms applicable to the Designated Preferred Stock (in the
Certificate of Designations or otherwise) or in or to the Warrant, as the case
may be, or if the terms which are beneficial to the Company in the relevant
Transaction Agreements are not included in the corresponding instrument in the
New Transaction, then, unless waived by the Holder, the terms of the Transaction
Agreements applying to the then outstanding Purchased Shares or the Warrant, as
the case may be, shall be
modified to reflect similar terms (based, for the outstanding Purchased Shares,
on the original issue date of the Purchased Shares issued on the Initial Closing
Date, and for the Warrants, on the relevant Buyer's Closing Date, as the case
may be); provided, however, that nothing in this provision shall be read to mean
that the Purchased Securities shall be changed to any other form of security;
(B) if the New Transaction is other than a Lower Price Transaction,
then, if the Alternative Warrant Percentage is greater than one hundred percent
(100%), the Company shall issue to the Holder additional warrants ("Additional
Warrants") for the purchase of the number of shares equal to (1) (x) the
Alternative Warrant Percentage, multiplied by (y) the Purchase Price divided by
the lower of the Conversion Price or the Adjusted Conversion Price, if any,
multiplied by (2) a fraction, of which the numerator is the Outstanding Warrant
Shares for that class of Warrant and the denominator is Original Warrant Shares
for that class of Warrant; and the terms of such Additional Warrants (including,
but not limited, to term of exercisability, exercise price, manner and
limitations, if any, on exercise, registration rights) shall be the same as the
applicable New Transaction Warrants issued in such New Transaction.
(iv) Nothing in the foregoing provisions reflects either an
obligation on the part of any Buyer to participate in any New Transaction or a
limitation on any Buyer from participating in any New Transaction.
(v) Any of the foregoing provisions of this Section 4(g) or
any other provision of this Agreement or any of the other Transaction Agreements
to the contrary notwithstanding, the Company shall not engage in any offers,
sales or other transactions of its securities which would adversely affect the
exemption from registration available for the transactions contemplated by the
Transaction Agreements.
H. COMPANY PRINCIPAL AGREEMENTS. The Company hereby agrees
that, prior to the Initial Closing Date, the Company will cause each director or
principal officer of the Company (each, a "Company Principal") and certain
persons who are related to or controlled by such Company Principal, to execute
and deliver an agreement (each, a "Company Principal's Agreement") regarding
limitations on the sale or other disposition of such Company Principal's shares
of the Company's Common Stock (or instruments convertible into or exercisable
for such shares). Each Company Principal's Agreement shall be substantially in
the form set forth in ANNEX VII attached hereto.
I. SUBSEQUENT ISSUANCES OF PREFERRED STOCK. The Company
agrees that, except for the Purchased Shares issued to the Buyer and the Other
Buyers pursuant to this Agreement, (i) the Company will not issue any other
shares of the Designated Preferred Stock to any Person, and (ii) any other
series of Preferred Stock issued by the Company at any time shall be Junior
Securities (as that term is defined in the Certificate of Designations).
J. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties
agrees that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects. In furtherance of the foregoing, the
Company will provide to the Buyer drafts of the applicable text of any filing
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least three
(3) business days before such filing will be made) and will not include in such
filing any statement or statements or other material to which the other party
reasonably objects. Notwithstanding the foregoing, each of the parties hereby
consents to the inclusion of the text of the Transaction Agreements in filings
made with the SEC (but any descriptive text accompanying or part of such filing
shall be subject to the other provisions of this paragraph). Notwithstanding,
but subject to, the foregoing provisions of this Section 4(j), the Company will,
after the Initial Closing Date, promptly issue a press release and file a
Current Report on Form 8-K or, if appropriate, a quarterly or annual report on
the appropriate form, referring to the transactions contemplated by the
Transaction Agreements. K. INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS.
The obligations of each Buyer under the Transaction Agreements 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 one or more of the Transaction Agreements. The decision of each Buyer
or Other Buyer to purchase Purchased Securities pursuant to the Transaction
Agreements has been made by such Buyer independently of any Other Buyer. Nothing
contained herein or in any Transaction Agreement, and no action taken by any
Buyer pursuant thereto, shall be deemed to constitute any two or more 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 Agreements. Each Buyer acknowledges that no Other Buyer has acted as
agent for such Buyer in connection with making its investment hereunder and that
no Buyer will be acting as agent of such Other Buyer in connection with
monitoring its investment in the Purchased Securities or enforcing its rights
under the Transaction Agreements. 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 the other Transaction Agreements, and it shall
not be necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Buyers
has been provided with the same Transaction Agreements for the purpose of
closing a transaction with multiple Buyers and not because it was required or
requested to do so by any Buyer.
L. EQUAL TREATMENT OF BUYERS. 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 Agreements unless the same consideration
is also offered to all of the parties to the Transaction Agreements.
M. INDEPENDENT INVESTMENT DECISION. No Buyer has agreed to
act with any Other Buyer for the purpose of acquiring, holding, voting or
disposing of the Securities purchased hereunder for purposes of Section 13(d)
under the Exchange Act, and each Buyer is acting independently with respect to
its investment in the Securities. The decision of each Buyer to purchase
Purchased Securities pursuant to this Agreement has been made by such Buyer
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or its subsidiaries which may have made
or given by any Other Buyer or by any agent or employee of any Other Buyer, and
no Buyer or any of its agents or employees shall have any liability to any Other
Buyer (or any other person) relating to or arising from any such information,
materials, statements or opinions.
5. TRANSFER AGENT INSTRUCTIONS.
A. The Company warrants that, with respect to the
Securities, other than the stop transfer instructions to give effect to Section
4(a) hereof, it will give the Transfer Agent no instructions inconsistent with
instructions to issue Common Stock from time to time upon conversion of the
Purchased Shares in such amounts as specified from time to time by the Company
to the Transfer Agent, bearing the restrictive legend specified in Section 4(b)
of this Agreement prior to registration of the Shares under the 1933 Act,
registered in the name of the Buyer or its nominee and in such denominations to
be specified by the Holder in connection with each conversion of the Purchased
Shares. Except as so provided, the Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the other Transaction Agreements. Nothing in this Section shall
affect in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If the Buyer provides
the Company with an opinion of counsel reasonably satisfactory to the Company
that registration of a resale by the Buyer of any of the Securities in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Conversion Shares or of the Warrant Shares, promptly instruct
the Transfer Agent to issue one or more certificates for Common Stock without
legend in such name and in such denominations as specified by the Buyer.
B. Subject to the provisions of this Agreement, the Company
will permit the Buyer to exercise its right to convert the Purchased Shares in
the manner contemplated by the Certificate of Designations and to exercise the
Warrants in the manner contemplated by the Warrants.
C. The Company shall assume any fees or charges of the
Transfer Agent or Company counsel regarding (i) the removal of a legend or stop
transfer instructions with respect to Registrable Securities, and (ii) the
issuance of certificates or DTC registration to or in the
name of the Holder or the Holder's designee or to a transferee as contemplated
by an effective Registration Statement.
D. The Company will authorize the Transfer Agent to give
information relating to the Company directly to the Holder or the Holder's
representatives upon the request of the Buyer or any such representative, to the
extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Holder in connection with a Notice of
Conversion or a Notice of Exercise, or (ii) the aggregate number of outstanding
shares of Common Stock of all shareholders (as a group and not individually) as
of a current or other specified date. At the request of the Holder, the Company
will provide the Holder with a copy of the authorization so given to the
Transfer Agent.
6. CLOSING DATES.
A. The Initial Closing Date shall occur on the date which
is the first Trading Day after each of the conditions contemplated by Sections 7
and 8 hereof shall have either been satisfied or been waived by the party in
whose favor such conditions run; provided, however, that on the Initial Closing
Date, the aggregate subscriptions shall be for at least the Minimum Purchase
Price. If additional subscriptions and the related Purchase Price are received
after the Initial Closing Date, one or more additional Additional Closing Dates
may be held; provided that (i) for all Closing Dates, the aggregate Purchase
Price of all Buyers for all such Closing Dates shall not exceed the Maximum
Purchase Price, and (ii) no Closing Date shall be later than the Latest Closing
Date. B. Each closing of the purchase and issuance of Purchased Securities shall
occur on the Closing Date at the offices of the Escrow Agent. The closings on
Additional Closing Dates shall be conducted upon the same terms and conditions
as those applicable to the Initial Closing Date.
C. (i) If the Initial Closing Date does not occur by
the close of business on August 31, 2004, then at any time after that date and
prior to the date on which the Initial Closing Date occurs, the Buyer may, by
written notice to the Escrow Agent (a "Cancellation Notice") with a copy to the
Company, request the return by the Escrow Agent to the Buyer of the Purchase
Price. Upon the Escrow Agent's receipt of such Cancellation Notice, if the
Initial Closing Date has not occurred prior to 5 PM (Eastern Time) of the
Trading Day following such receipt by the Escrow Agent, the Buyer shall have no
further obligations under this Agreement, including, without limitation, the
obligation to pay any part of the Purchase Price, and the Escrow Agent shall
return the Buyer's Escrow Funds to the Buyer and the Certificates issued to the
Lender being held as part of the Escrow Property to the Company.
(ii) If the Escrow Agent receives a Cancellation
Notice from a Buyer, but the Initial Closing Date occurs prior to 5 PM (Eastern
Time) of Trading Day following the Escrow Agent's receipt of such Cancellation
Notice, the Cancellation Notice shall be deemed null and void ab initio.
(iii) If, as a result of effective Cancellation
Notices received from one or more Buyers (whether such Buyers constitute all
Buyers or less than all Buyers), the Aggregate Purchase Price of all remaining
Buyers is less than the Minimum Aggregate Purchase Price, then the Initial
Closing Date shall not occur until the subscription of the Buyer and any Other
Buyers who have not issued Cancellation Notices are for at least the Minimum
Aggregate Purchase Price. If, as of the Latest Closing Date, the Initial Closing
Date has not occurred, this Agreement shall be deemed canceled with respect to
all Buyers as if each of them had timely given a Cancellation Notice.
D. Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the Escrow Funds to the
Company and to others and to release the other Escrow Property on the relevant
Closing Date upon satisfaction of the conditions set forth in Sections 7 and 8
hereof and as provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
relevant Purchased Securities to the Buyer pursuant to this Agreement on the
relevant Closing Date is conditioned upon:
A. The execution and delivery of this Agreement by the
Buyer on or before the Buyer's Closing Date;
B. Delivery by the Buyer to the Escrow Agent by the Buyer's
Closing Date of good funds as payment in full of an amount equal to the Purchase
Price in accordance with this Agreement;
C. The accuracy on such Closing Date of the representations
and warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
D. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase
the relevant Purchased Securities on the relevant Closing Date is conditioned
upon:
A. The execution and delivery of this Agreement and the
other Transaction Agreements by the Company on or before the Buyer's Closing
Date;
B. The filing of the Certificate of Designations in the
State of Incorporation and in any other state where such filing is required
prior to the Initial Closing Date;
C. The delivery by the Company to the Escrow Agent of the
relevant Certificates in accordance with this Agreement;
D. Delivery by the Company to the Escrow Agent of the
executed Company Principal's Agreements from each Company Principal and the
related Principals (as defined in each Company Principal's Agreement) of such
Company Principal;
E. On such Closing Date, each of the Transaction Agreements
executed by the Company on or before such date shall be in full force and effect
and the Company shall not be in default thereunder;
F. The accuracy in all material respects on such Closing
Date of the representations and warranties of the Company contained in this
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date; and with respect to each Additional Closing
Date, (x) there shall have been no Material Adverse Effect from the Initial
Closing Date through and including the Additional Closing Date and (y) an
executive officer of the Company shall issue an Officer's Certificate
substantially in the form of ANNEX VIII hereto with respect thereto; provided,
however, that such Officer's Certificate may update certain information, such as
the number of shares of the Company's stock outstanding, included in Section 3);
G. On the Initial Closing Date, the Buyer shall have
received an opinion of counsel for the Company, dated such Closing Date, in
form, scope and substance reasonably satisfactory to the Buyer, substantially to
the effect set forth in ANNEX III attached hereto; and on any Additional Closing
Date, the Buyer purchasing Purchased Securities on such Closing Date shall have
received such an opinion or a statement from counsel to the Company that such
Buyer may rely on an opinion previously issued to Other Buyers;
H. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
I. From and after the date hereof to and including such
Closing Date, each of the following conditions will remain in effect: (i) the
trading of the Common Stock shall not have been suspended by the SEC or on the
Principal Trading Market; (ii) trading in securities generally on the Principal
Trading Market shall not have been suspended or limited; (iii), no minimum
prices shall been established for securities traded on the Principal Trading
Market; and (iv) there shall not have been any material adverse change in any
financial market.
9. INDEMNIFICATION.
A. (i) The Company agrees to indemnify and hold
harmless the Buyer and its officers, directors, employees, and agents, and each
Buyer Control Person from and against any losses, claims, damages, liabilities
or expenses incurred (collectively, "Damages"), joint or several, and any action
in respect thereof to which the Buyer, its partners, Affiliates, officers,
directors, employees, and duly authorized agents, and any such Buyer Control
Person becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Buyer's failure to perform any covenant or agreement contained in this
Agreement or the Buyer's or its officer's, director's, employee's, agent's or
Buyer Control Person's gross negligence, recklessness or bad faith in performing
its obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer,
other than by reason of its gross negligence or willful misconduct or by reason
of its trading of the Common Stock in a manner that is illegal under the federal
securities laws (in each case, as determined by a non-appealable judgment to
such effect), (x) becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of the Company, in connection with or
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or if the Buyer is impleaded in
any such action, proceeding or investigation by any Person, or (y) becomes
involved in any capacity in any action, proceeding or investigation brought by
the SEC, any self-regulatory organization or other body having jurisdiction,
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or (z) is impleaded in any such action, proceeding or
investigation by any Person, then in any such case, the Company shall indemnify,
defend and hold harmless the Buyer from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Buyer, directly or indirectly, and reimburse such Buyer for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition, the Company will reimburse the Buyer for reasonable internal and
overhead costs for the time of any officers or employees of the Buyer devoted to
appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearing, trials, and other proceedings relating to the subject matter of this
Agreement or the other Transaction Agreements. The indemnification and
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Buyer who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and Buyer Control Persons (if any), as the case may
be, of the Buyer and any such Affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Buyer, any such Affiliate and any such Person. The Company also
agrees that neither the Buyer nor any such Affiliate, partner, director, agent,
employee or Buyer Control Person shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company in connection
with or as a result of the consummation of this Agreement or the other
Transaction Agreements, except as may be expressly and specifically provided in
or contemplated by this Agreement.
B. All claims for indemnification by any Indemnified Party
(as defined below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of
which any Person claiming indemnification under any provision of this Section
(an "Indemnified Party") might seek indemnity under paragraph (a) of this
Section is asserted against or sought to be collected from such Indemnified
Party by a Person other than a party hereto or an Affiliate thereof (a "Third
Party Claim"), the Indemnified Party shall deliver a written notification,
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of this Section
against any Person (the "Indemnifying Party"), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by
such failure of the Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under this Section and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have
the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party shall
not be indemnified in full pursuant to paragraph (a) of this Section).
The Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this
subparagraph (x), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be
necessary or appropriate protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party will,
at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in contesting any Third
Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this subparagraph (x), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under paragraph (a) of this
Section with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to paragraph (b) of this Section, or if
the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within the
Dispute Period, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings
shall be prosecuted by the Indemnified Party in a reasonable manner and
in good faith or will be settled at the discretion of the Indemnified
Party (with the consent of the Indemnifying Party, which consent will
not be unreasonably withheld). The Indemnified Party will have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this subparagraph (y), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of its liability
hereunder to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying Party
in the manner provided in subparagraph(z) below, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this subparagraph (y) or of the Indemnifying
Party's participation therein at the Indemnified Party's request, and
the Indemnified Party shall reimburse the Indemnifying Party in full for
all reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this
subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under paragraph
(a) of this Section or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party with respect to
such Third Party Claim, the amount of Damages specified in the Claim
Notice shall be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate
a resolution of such dispute; provided, however, that it the dispute is
not resolved within thirty (30) days after the Claim Notice, the
Indemnifying Party shall be entitled to institute such legal action as
it deems appropriate.
(ii) In the event any Indemnified Party should have a
claim under paragraph (a) of this Section against the Indemnifying Party that
does not involve a Third Party Claim, the Indemnified Party shall deliver a
written notification of a claim for indemnity under paragraph (a) of this
Section specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "Indemnity Notice") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under paragraph (a) of this Section and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
C. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby
waive a trial by jury in any action, proceeding or counterclaim brought by
either of the Parties hereto against the other in respect of any matter arising
out or in connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
A. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on FORUM
NON CONVENIENS, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Buyer for
any reasonable legal fees and disbursements incurred by the Buyer in enforcement
of or protection of any of its rights under any of the Transaction Agreements.
B. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
C. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto.
D. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
E. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
F. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original.
G. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
H. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
I. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
J. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
12. NOTICES. Any notice required or permitted hereunder
shall be given in writing (unless otherwise specified herein) and shall be
deemed effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(b) the seventh business day after deposit, postage prepaid, in
the United States Postal Service by registered or certified
mail, or
(c) the third business day after mailing by domestic or
international express courier, with delivery costs and fees
prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Aboudi & Xxxxxxxxxx
Attn: Xxxxx Xxxxxx, Esq.
Rechov Gavish 3, POB 2432
Kfar Xxxx Xxxxxxxxxx Xxxx 00000 Xxxxxx
Telephone No.: (000-000-0) 000-0000
Telecopier No.: (000-000-0) 000-0000
BUYER: At the address set forth on the signature page of this
Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's and the Buyer's representations and warranties herein shall survive
the execution and delivery of this Agreement and the delivery of the
Certificates and the payment of the Purchase Price, for a period of three (3)
years after the Buyer's Closing Date and shall inure to the benefit of the Buyer
and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, with respect to the Purchased Shares and the
Purchase Price specified below, each the undersigned represents that the
foregoing statements made by it above are true and correct and that it has
caused this Agreement to be duly executed on its behalf (if an entity, by one of
its officers thereunto duly authorized) as of the date first above written.
PURCHASED SHARES _________________________
PURCHASE PRICE: $________________________
BUYER:
-------------------------------- ------------------------------------
Address Printed Name of Buyer
--------------------------------
By: _________________________________
Telecopier No. _________________ (Signature of Authorized Person)
-------------------------------------
______________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
COMPANY:
AMEDIA NETWORKS, INC.
By: /s/ Xxxxx Xxxxxxx
Title: Chief Executive Officer
