EXCHANGE AGREEMENT
Exhibit
10.1
This
EXCHANGE AGREEMENT
(the
“Agreement”),
dated
as of August 29, 2008, is being entered into by and between Workstream Inc.,
a
corporation existing pursuant to the Canada Business Corporations Act, with
offices located at 000 Xxxxx Xxxx, Xxxxxx, Xxxxxxx, Xxxxxx X0X-0X0 (the
“Company”),
and
_______________________ (the “Holder”).
RECITALS
A. The
Company, the Holder and various others entered into that certain Transaction
Agreement, dated as July 25, 2007 (as amended and modified by this Agreement
and
the Other Exchange Agreements (as defined below), the “Transaction
Agreement”).
B.Simultaneously
with the consummation of the transactions contemplated by the Transaction
Agreement, (i) the Company, the Holder and various others entered into that
certain Registration Rights Agreement dated as of August 3, 2007 (the
“Registration
Rights Agreement”)
and
(ii) the Company issued and sold to the Holder for $_________ a special warrant
initially convertible into _________ of the Company’s common shares, no par
value (the “Common
Shares”)
(the
“Special
Warrant”)
and a
warrant initially exercisable for _________ Common Shares (the “2007 Warrant”).
C. Since
the
issuance of the Special Warrant, various Triggering Events (as defined in
the
Special Warrant) have occurred thereunder.
D. In
exchange for the Special Warrant, the Company has authorized the issuance
to the
Holder of a senior secured note, in the form attached hereto as Exhibit
A
(including all senior secured notes issued in exchange therefor or replacement
thereof, the “Note”).
E. In
exchange for the 2007 Warrant, the Company has authorized the issuance to
the
Holder of a warrant, in the form attached hereto as Exhibit
B
(including all warrants issued in exchange therefor or replacement thereof,
the
“Warrant”),
which
Warrant shall be exercisable for Common Shares (as exercised, the “Warrant
Shares”),
in
accordance with the terms thereof.
F. The
Note,
the Warrant and the Warrant Shares are collectively referred to herein as
the
“Securities.”
G. The
exchange of the Special Warrant and the 2007 Warrant for the Note and Warrant
is
being made in reliance upon the exemption from registration provided by
Section 3(a)(9) of the Securities Act of 1933, as amended (the
“1933
Act”).
H. As
additional consideration for the transactions contemplated hereby, (i) each
of
the Subsidiaries (as defined below) will execute a guaranty in favor of the
Holder in the form attached hereto as Exhibit
C
(the
“Guaranty”
and
collectively the “Guaranties”)
pursuant to which it guarantees the obligations of the Company under the
Note
and (ii) the
Note
will be secured by a first priority perfected security interest in all of
the
assets of the Company and the Subsidiaries as evidenced by the security
agreement in the form attached hereto as Exhibit
D
(the
”Security
Agreement”
and,
together with the other security documents and agreements entered into in
connection with this Agreement, as each may be amended or modified from time
to
time, collectively, the “Security
Documents”).
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Holder
hereby
agree as follows:
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1.
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EXCHANGE
OF SPECIAL WARRANT AND 2007
WARRANT.
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(a)
Special
Warrant and 2007 Warrant.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections
6
and
7
below,
the Company shall, pursuant to Section 3(a)(9) of the 1933 Act, exchange
(i) the
Special Warrant for the Note and (ii) the 2007 Warrant for the
Warrant.
(b) Closing.
The
closing (the “Closing”)
of the
exchange of the Special Warrant and the 2007 Warrant shall occur at the offices
of Xxxxxxxxx Xxxxxxx, LLP, 00 X. Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx
00000. The date and time of the Closing (the “Closing
Date”)
shall
be 10:00 a.m., Chicago Time, on the first (1st)
Business Day on which the conditions to the Closing set forth in Sections
6
and
7
below
are satisfied or waived (or such later date as is mutually agreed to by the
Company and the Holder). As used herein “Business
Day”
means
any day other than a Saturday, Sunday or other day on which commercial banks
in
Chicago, Illinois are authorized or required by law to remain
closed.
(c) Delivery.
On the
Closing Date, (i) the Holder shall deliver the Special Warrant and the 2007
Warrant to the Company and (ii) the Company shall exchange and deliver to
the Holder (A) the Note for the Special Warrant and (B) the Warrant for the
2007
Warrant, in all cases duly executed on behalf of the Company and registered
in
the name of the Holder or its designee.
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2.
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HOLDER’S
REPRESENTATIONS AND
WARRANTIES.
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The
Holder represents and warrants to the Company:
(a) Organization;
Authority.
The
Holder 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
Exchange Documents (as defined below) to which it is a party and otherwise
to
carry out its obligations thereunder.
For
purposes of this Agreement, “Exchange Documents”
means
this Agreement, the Note, the Warrant, the Security Documents, the Guaranties,
the Amended Registration Rights Agreement (as defined below), the Irrevocable
Transfer Agent Instructions (as defined below), and each of the other agreements
and instruments entered into by the parties hereto in connection with the
transactions contemplated hereby and thereby.
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(b) No
Public Sale or Distribution.
The
Holder is (i) acquiring the Note and the Warrant and (ii) upon exercise of
the Warrant will acquire the Warrant Shares issuable upon exercise thereof,
in
each case, for its own account and not with a view towards, or for resale
in
connection with, the public sale or distribution thereof, except pursuant
to
sales registered or exempted under the 1933 Act; provided,
however,
that by
making the representations herein, the Holder does not agree, or make any
representation or warranty 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 0000 Xxx. The Holder is not a broker-dealer registered, or required
to
be registered, with the United States Securities and Exchange Commission
(the
“SEC”)
under
the 1934 Act (as defined below). The Holder is acquiring the Securities
hereunder in the ordinary course of its business. The Holder does not presently
have any agreement or understanding, directly or indirectly, with any Person
to
distribute any of the Securities.
(c) Accredited
Investor Status.
The
Holder is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.
(d) Reliance
on Exemptions.
The
Holder understands that the Securities are being offered and issued 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 the Holder’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Holder set forth herein in order to determine the availability of such
exemptions and the eligibility of the Holder to acquire the
Securities.
(e) Information.
The
Holder 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 issuance of the Securities which have been requested by
the
Holder. The Holder 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 the Holder or its advisors, if any,
or its
representatives shall modify, amend or affect the Holder’s right to rely on the
Company’s representations and warranties contained herein or any representations
and warranties contained in any other Exchange Document or any other document
or
instrument executed and/or delivered in connection with this Agreement or
the
consummation of the transaction contemplated hereby. The Holder understands
that
its acquisition of the Securities involves a high degree of risk. The Holder
has
sought such accounting, legal and tax advice as it has considered necessary
to
make an informed investment decision with respect to its acquisition of the
Securities.
(f) No
Governmental Review.
The
Holder 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 acquisition
of the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
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(i) Validity;
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on
behalf
of the Holder and shall constitute the legal, valid and binding obligations
of
the Holder enforceable against the Holder in accordance with its 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 the Holder of this Agreement and the
consummation by the Holder of the transactions contemplated hereby will not
(i)
result in a violation of the organizational documents of the Holder 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 Holder 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 the Holder, 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 the Holder to
perform its obligations hereunder.
(k) Residency.
The
Holder is a resident of that jurisdiction specified in its address on the
Schedule of Buyers attached to the Transaction Agreement.
(l) General
Solicitation.
The
Holder is not acquiring the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published
in any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar.
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3.
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REPRESENTATIONS
AND WARRANTIES OF THE
COMPANY.
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The
Company represents and warrants to the Holder that:
(a) Organization
and Qualification.
The
Company and each Subsidiary (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 and
as
presently proposed to be conducted. Each of the Company and each of the
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
have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect”
means
any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial
or
otherwise) or prospects of the Company or any Subsidiary, individually or
taken
as a whole, (ii) the transactions contemplated hereby or in the other Exchange
Documents or (iii) the authority or ability of the Company or any of the
Subsidiaries to perform their respective obligations under any of the
Transaction Documents (as defined in the Transaction Agreement) or any of
the
Exchange Documents. Other than the Subsidiaries, there is no Person in which
the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest. For purposes of this Agreement, Workstream USA, Inc., a
Delaware corporation, Xxxxx Xxxxx Holdings, Inc., a Florida corporation,
The
Omni Partners, Inc., a Florida corporation, 0XxxxxxXxxx.xxx, Inc., a Delaware
corporation, and Workstream
Merger Sub Inc., a Delaware corporation,
are
collectively referred to herein as the “Subsidiaries”
and
each individually as a “Subsidiary.”
(b) Authorization;
Enforcement; Validity.
The
Company has the requisite power and authority to enter into and perform its
obligations under the Exchange Documents to which it is a party and to issue
the
Securities in accordance with the terms thereof. Each Subsidiary has the
requisite power and authority to enter into and perform its obligations under
the Exchange Documents to which it is a party. The execution and delivery
by the
Company of this Agreement and the other Exchange Documents to which it is
a
party, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Warrant
and the reservation for issuance and issuance of the Warrant Shares issuable
upon exercise of the Warrant) have been duly authorized by the Company’s board
of directors, and (other than the filing with the SEC of one or more
Registration Statements (as defined in the Amended Registration Rights
Agreement) in accordance with the requirements of the Amended Registration
Rights Agreement and any other filings as may be required by any state
securities agencies) no further filing, consent or authorization is required
by
the Company, its board of directors or its shareholders. The execution and
delivery by each Subsidiary of the Exchange Documents to which it is a party,
and the consummation by such Subsidiary of the transactions contemplated
thereby
have been duly authorized by the board of directors of such Subsidiary, and
no
further filing, consent or authorization is required by such Subsidiary,
its
board of directors or its stockholders. This Agreement and the other Exchange
Documents to which it is a party 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 and except as rights to indemnification and to
contribution may be limited by federal or state securities law. The Exchange
Documents to which it is a party have been duly executed and delivered by
each
Subsidiary, and constitute the legal, valid and binding obligations of such
Subsidiary, enforceable against such Subsidiary 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 and except as rights to
indemnification and to contribution may be limited by federal or state
securities law.
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(c) Issuance
of Securities.
The
issuance of the Note and the Warrant has been duly authorized and, upon issuance
in accordance with the terms of the Exchange Documents, the Note and the
Warrant
shall be validly issued, fully paid and non-assessable and free from all
taxes,
liens, charges and other encumbrances with respect to the issue thereof.
As of
the Closing, the Company shall have reserved from its duly authorized capital
stock not less than 110% of the maximum number of Warrant Shares issuable
upon
exercise of the Warrant (without regard to any limitations on the exercise
of
the Warrant set forth therein). Upon exercise in accordance with the Warrant,
the Warrant Shares, when issued, will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Shares.
Subject to the accuracy of the representations and warranties of the Holder
in
this Agreement, the offer and issuance by the Company of the Securities is
exempt from registration under the 1933 Act. The offer and issuance of the
Note
and the Warrant is exempt from registration under the 1933 Act pursuant to
the
exemption provided by Section 3(a)(9) thereof.
(d) No
Conflicts.
The
execution, delivery and performance by the Company of the Exchange Documents
to
which it is party and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance
of
the Note, the Warrant, the Warrant Shares and the reservation for issuance
of
the Warrant Shares) will not (i) result in a violation of the Articles of
Incorporation (as defined below) or other organizational documents of the
Company or any of the Subsidiaries, any capital stock of the Company or any
of
the Subsidiaries or Bylaws (as defined below) of the Company or bylaws of
any of
the Subsidiaries, (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 the
Subsidiaries is a party or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations and the rules and regulations of The
Nasdaq Capital Market
and the
Boston Stock Exchange (together, the “Principal
Market”)
and
including all applicable Canadian and Ontario laws, rules and regulations)
applicable to the Company or any of the Subsidiaries or by which any property
or
asset of the Company or any of the Subsidiaries is bound or affected except,
in
the case of clause (ii) or (iii) above, to the extent such conflict, default,
termination rights or violations, as the case may be, could not reasonably
be
expected to have a Material Adverse Effect. The execution, delivery and
performance by each Subsidiary of the Exchange Documents to which it is party
and the consummation by such Subsidiary of the transactions contemplated
thereby
will not (i) result in a violation of the Articles of Incorporation or other
organizational documents of the Company or any of the Subsidiaries, any capital
stock of the Company or any of the Subsidiaries or Bylaws of the Company
or
bylaws of any of the Subsidiaries, (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 the 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 Principal
Market and including all applicable Canadian laws, rules and regulations)
applicable to the Company or any of the Subsidiaries or by which any property
or
asset of the Company or any of the Subsidiaries is bound or affected except,
in
the case of clause (ii) or (iii) above, to the extent such conflict, default,
termination rights or violations, as the case may be, could not reasonably
be
expected to have a Material Adverse Effect.
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(e) Consents.
Neither
the Company nor any Subsidiary is 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 respective obligations under
or
contemplated by the Exchange Documents to which it is a party, in each case,
in
accordance with the terms hereof and thereof. All consents, authorizations,
orders, filings and registrations which the Company or any Subsidiary is
required to obtain pursuant to the preceding sentence have been obtained
or
effected on or prior to the Closing Date, and neither the Company nor any
Subsidiary is aware of any facts or circumstances which might prevent the
Company or any Subsidiary 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 or circumstances which could reasonably lead to delisting or
suspension of the Common Shares in the foreseeable future.
(f) Acknowledgment
Regarding the Holder’s Acquisition of Securities.
The
Company acknowledges and agrees that the Holder is acting solely in the capacity
of an arm’s length party with respect to the Exchange Documents and the
transactions contemplated hereby and thereby and that the Holder is not (i)
an
officer or director of the Company or any of the Subsidiaries, (ii) an
“affiliate” (as defined in Rule 144) of the Company or any of the Subsidiaries
or (iii) to its knowledge, a “beneficial owner” of more than 10% of the Common
Shares (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 the Holder is not acting as a financial
advisor or fiduciary of the Company or any of the Subsidiaries (or in any
similar capacity) with respect to the Exchange Documents and the transactions
contemplated hereby and thereby, and any advice given by the Holder or any
of
its representatives or agents in connection with the Exchange Documents and
the
transactions contemplated hereby and thereby is merely incidental to the
Holder’s acquisition of the Securities. The Company further represents to the
Holder that the Company’s and each Subsidiary’s decision to enter into the
Exchange Documents has been based solely on the independent evaluation by
the
Company, each Subsidiary and their respective representatives.
(g)
No
General Solicitation; Placement Agent’s Fees.
Neither
the Company, nor any of the 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 promulgated by the SEC
under the
0000 Xxx) in connection with the offer or issuance 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 the Holder or its investment advisor) relating to or arising out of
the
transactions contemplated hereby. Neither the Company nor any of the
Subsidiaries has engaged any placement agent or other agent in connection
with
the offer or issuance of the Securities.
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(h) No
Integrated Offering.
None of
the Company, the Subsidiaries or any of their affiliates, nor any Person
acting
on its or their behalf has, directly or indirectly, made any offers or sales
of
any security or solicited any offers to buy any security, under circumstances
that would require registration of any of the Securities under the 1933 Act,
whether through integration with prior offerings or otherwise, or cause this
offering of Securities (together with any other offering under the Other
Exchange Agreements) to require approval of shareholders of the Company under
any applicable shareholder 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, the Subsidiaries, their affiliates nor 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 any of the Securities to be integrated with other
offerings.
(i) Dilutive
Effect.
The
Company understands and acknowledges that the number of Warrant Shares will
increase in certain circumstances. The Company further acknowledges that
its
obligation to issue the Warrant Shares upon exercise of the Warrant in
accordance with this Agreement and the Warrant is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
(j) Application
of Takeover Protections; Rights Agreement.
The
Company and its board of directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Articles of Incorporation
or
other organizational document or the laws of the jurisdiction of its
incorporation or otherwise which is or could become applicable to the Holder
as
a result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and the Holder’s ownership
of the Securities. The Company and its board of directors have taken all
necessary action, if any, in order to render inapplicable any stockholder
rights
plan or similar arrangement relating to accumulations of beneficial ownership
of
Common Shares or a change in control of the Company or any of the
Subsidiaries.
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(k) SEC
Documents; Financial Statements.
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 Holder or its representatives true, correct
and
complete copies of each of the SEC Documents not available on the XXXXX system.
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 which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company
to the
Holder which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(e)
of this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein not
misleading, in the light of the circumstance under which they are or were
made.
(l) Absence
of Certain Changes.
Since
the date of the Company’s most recent audited financial statements contained in
a Form 10-K, there has been no material adverse change and no material adverse
development in the business, assets, liabilities, properties, operations
(including results thereof), condition (financial or otherwise) or prospects
of
the Company or any of the Subsidiaries. Since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, neither the
Company nor any of the Subsidiaries has (i) declared or paid any dividends,
(ii)
sold any material assets outside of the ordinary course of business,
individually or in the aggregate,
or (iii)
made any material capital expenditures, individually or in the aggregate.
Neither the Company nor any of the Subsidiaries has taken any steps to seek
protection pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, liquidation or winding up, nor does the Company or any
Subsidiary have any knowledge or reason to believe that any of their respective
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 the 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,
(I) with respect to the Company and the Subsidiaries, on a consolidated basis,
(i) the present fair saleable value of the Company’s and the Subsidiaries’
assets is less than the amount required to pay the Company’s and the
Subsidiaries’ total Indebtedness (as defined below), (ii) the Company and the
Subsidiaries are unable to pay their debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured or (iii) the Company and the Subsidiaries intend to incur or believe
that they will incur debts that would be beyond their ability to pay as such
debts mature; and (II) with respect to the Company and each Subsidiary,
individually, (i) the present fair saleable value of the Company’s or any of the
Subsidiaries’ assets is less than the amount required to pay each of their
respective total Indebtedness, (ii) the Company or any of the Subsidiaries
are
unable to pay their respective debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and matured or
(iii)
the Company or any of the Subsidiaries intend to incur or believe that they
will
incur debts that would be beyond their respective ability to pay as such
debts
mature. Neither the Company nor any of the Subsidiaries has engaged in business
or in any transaction, and is not about to engage in business or in any
transaction, for which the Company’s or such Subsidiary’s remaining assets
constitute unreasonably small capital.
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(m) No
Undisclosed Events, Liabilities, Developments or Circumstances.
No
event, liability, development or circumstance has occurred or exists, or
is
reasonably expected to exist or occur with respect to the Company, any of
the
Subsidiaries or their respective business, properties, liabilities, prospects,
operations (including results thereof) or condition (financial or otherwise),
that (i) 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 Shares and
which
has not been publicly announced or (ii) could have a Material Adverse
Effect.
(n) Conduct
of Business; Regulatory Permits.
Neither
the Company nor any of the Subsidiaries is in violation of any term of or
in
default under its Articles of Incorporation, any certificate of designation,
preferences or rights of any other outstanding series of preferred stock
of the
Company or any of the Subsidiaries or Bylaws or their organizational charter,
certificate of formation or certificate of incorporation or bylaws,
respectively. Neither the Company nor any of the Subsidiaries is in violation
of
any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of the Subsidiaries, and neither the Company
nor any of the Subsidiaries will conduct its business in violation of any
of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, 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 Shares by the Principal Market in the foreseeable
future. Except as set forth on Schedule 3(n),
since
January 1, 2006, (i) the Common Shares have been designated for quotation
on the
Principal Market, (ii) trading in the Common Shares 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 Shares from the Principal Market.
The
Company and each of the 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 the Subsidiaries nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of the
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company
or any of the 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.
10
(p) Xxxxxxxx-Xxxxx
Act.
The
Company and each Subsidiary is in compliance in all material respects with
all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective
as
of the date hereof, and all applicable rules and regulations promulgated
by the
SEC thereunder that are effective as of the date hereof.
(q) Transactions
With Affiliates.
Other
than as set forth on Schedule 3(q),
none of
the officers, directors or employees of the Company or any of the Subsidiaries
is presently a party to any transaction with the Company or any of the
Subsidiaries (other than for ordinary course services as employees, officers
or
directors), including any contract, agreement or other arrangement providing
for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company or any
of the
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)
unlimited Common Shares, of which 52,551,119 shares
are issued and outstanding, no shares are held in treasury, and 2,738,534
shares
are reserved for issuance pursuant to securities (other than the Warrants)
exercisable or exchangeable for, or convertible into, Common Shares, and
(ii)
unlimited shares of preferred stock, none of which, as of the date hereof,
are
issued and outstanding. All of such outstanding shares are duly authorized
and
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. 11,915,911 shares of the Company’s issued and outstanding Common
Shares on the date hereof are owned by Persons who are “affiliates” (as defined
in Rule 405 of the 1933 Act and calculated based on the assumption that only
officers, directors and holders of at least 10% of
the
Company’s issued and outstanding Common Shares
are
“affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of the Subsidiaries.
To
the
Company’s knowledge, no Person owns 10% or more of the Company’s issued and
outstanding Common Shares (calculated based on the assumption that all
Equivalents, whether or not presently exercisable or convertible, have been
fully exercised or converted (as the case may be) but taking account
of any limitations on exercise or conversion (including “blockers”) contained
therein without conceding that such identified Person is a 10% stockholder
for
purposes of federal securities laws).
Except
as disclosed in Schedule 3(r):
(i)
none of the Company’s or any Subsidiary’s capital stock is subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered
or
permitted by the Company or any Subsidiary; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of
any
character whatsoever relating to, or securities or rights convertible into,
or
exercisable or exchangeable for, any capital stock of the Company or any
of the
Subsidiaries, or contracts, commitments, understandings or arrangements by
which
the Company or any of the Subsidiaries is or may become bound to issue
additional capital stock of the Company or any of the 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 the
Subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness (as defined below) of the Company or any of the
Subsidiaries or by which the Company or any of the Subsidiaries is or may
become
bound; (iv) there are no financing statements securing obligations in any
amounts filed in connection with the Company or any of the Subsidiaries;
(v)
there are no agreements or arrangements under which the Company or any of
the
Subsidiaries is obligated to register the sale of any of their securities
under
the 1933 Act (except pursuant to the Amended Registration Rights Agreement);
(vi) there are no outstanding securities or instruments of the Company or
any of
the Subsidiaries which contain any redemption or similar provisions, and
there
are no contracts, commitments, understandings or arrangements by which the
Company or any of the Subsidiaries is or may become bound to redeem a security
of the Company or any of the Subsidiaries; (vii) there are no securities
or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) neither the Company nor
any
Subsidiary has any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) neither the Company
nor
any of the Subsidiaries have any liabilities or obligations required to be
disclosed in the SEC Documents which are not so disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company’s or the
Subsidiaries’ respective businesses and which, individually or in the aggregate,
do not or could not have a Material Adverse Effect. The Company has furnished
to
the Holder true, correct and complete copies of the Company’s Articles of
Amendment, Articles of Incorporation, as amended and as in effect on the
date
hereof (the “Articles 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, Common Shares and the material rights of the holders thereof in respect
thereto.
11
(s) Indebtedness
and Other Contracts.
Except
as disclosed on Schedule 3(s),
neither
the Company nor any of the Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) is a party to any contract, agreement or instrument,
the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result
in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness,
except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of
which,
in the judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect. 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, any other entity and
a
government or any department or agency thereof.
12
(t) Absence
of Litigation.
Except
as set forth on Schedule 3(t),
there
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of the Subsidiaries, the Common Shares
or any of the Company’s or the Subsidiaries’ officers or directors which is
outside of the ordinary course of business or individually or in the aggregate
material to the Company or any of the Subsidiaries.
(u) Insurance.
The
Company and each of the 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 the 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 be unable 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.
Neither
the Company nor any of the Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and the Subsidiaries
believe that their relations with their employees are good. No executive
officer
(as defined in Rule 501(f) promulgated under the 0000 Xxx) or other key employee
of the Company or any of the Subsidiaries 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 or other key employee of the Company or
any of
the 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 or other key employee (as the case may be) does not subject
the Company or any of the Subsidiaries to any liability with respect to any
of
the foregoing matters. The Company and the 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.
13
(w) Title.
The
Company and the Subsidiaries have good and marketable title in fee simple
to all
real property and good and marketable title to all personal property owned
by
them, in each case, free and clear of all liens, encumbrances and defects
except
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company
and
any of the Subsidiaries. Any real property and facilities held under lease
by
the Company or any of the Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company or any of the Subsidiaries.
(x) Intellectual
Property Rights.
The
Company and the 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, original works, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights and all applications and registrations therefor (“Intellectual
Property Rights”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted. None of the Company’s or the Subsidiaries’
Intellectual Property Rights have expired, terminated or been abandoned,
or are
expected to expire, terminate or be abandoned, within three years from the
date
of this Agreement. The Company does not have any knowledge of any infringement
by the Company or any of the 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 or any of the Subsidiaries, being threatened, against
the Company or any of the Subsidiaries regarding their 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 each of the 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 the Subsidiaries (i) are in compliance with all Environmental
Laws
(as defined below), (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.
14
(z) Subsidiary
Rights.
The
Company or one of the 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 the Subsidiaries as owned by
the
Company or such Subsidiary.
(aa) Tax
Status.
The
Company and each of the Subsidiaries (i) has timely 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 timely 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 and the
Subsidiaries know of no basis for any such claim. The Company is not operated
in
such a manner as to qualify as a passive foreign investment company, as defined
in Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.
(bb) Internal
Accounting and Disclosure Controls.
The
Company maintains internal control over financial reporting (as such term
is
defined in Rule 13a-15(f) under the 0000 Xxx) that is effective to provide
reasonable assurance regarding the reliability of financial reporting and
the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, including 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-15(e) under the 0000 Xxx) that are reasonably
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. Neither the Company nor any of the Subsidiaries has received
any
notice or correspondence from any accountant or other Person relating to
any
potential material weakness or significant deficiency in any part of the
Company’s internal control over financial reporting.
(cc) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company
or any
of the Subsidiaries 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 could be reasonably likely to have a Material
Adverse Effect.
15
(dd) Investment
Company Status.
The
Company is not, and upon consummation of the exchange and issuance of the
Securities will not be, an “investment company,” an affiliate of 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) Acknowledgement
Regarding the Holder’s Trading Activity.
It is
understood and acknowledged by the Company (i) that, other than as contemplated
by Section 4(o) of the Transaction Agreement, the Holder has not been asked
by
the Company or any of the Subsidiaries to agree, nor has the Holder agreed
with
the Company or any of the 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 the Holder, and counter parties in “derivative” transactions to
which the Holder is a party, directly or indirectly, presently may have a
“short” position in the Common Shares which were established prior to the
Holder’s knowledge of the transactions contemplated by the Exchange Documents,
and (iii) that the Holder shall not be deemed to have any affiliation with
or
control over any arm’s length counter party in any “derivative” transaction. The
Company further understands and acknowledges that, except as set forth in
Section 4(o) of the Transaction Agreement, the Holder 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 Warrant Shares deliverable with respect to the Warrant 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.
Subject to the provisions of Section 4(o) of the Transaction Agreement, the
Company acknowledges that such aforementioned hedging and/or trading activities
do not constitute a breach of this Agreement or any other Exchange Document
or
any of the documents executed in connection herewith or therewith.
(ff) Manipulation
of Price.
Neither
the Company nor any of the Subsidiaries has, and to their knowledge no Person
acting on their 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 or any of the Subsidiaries 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 or any of the
Subsidiaries.
(gg) U.S.
Real Property Holding Corporation.
Neither
the Company nor any of the Subsidiaries is or has ever been a U.S. real property
holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company and each Subsidiary shall so certify
upon the Holder’s request. The Common Shares do not derive, and have not at
any time during the previous five years derived, directly or indirectly
more than 50% of its fair market value from one or any combination of: (i)
real
property situated in Canada, (ii) Canadian resource property and (iii) timber
resource properties (as such terms are defined for purposes of the Income
Tax Act (Canada).
16
(ii) Registration
Eligibility.
The
Company is eligible to register the Registrable Securities for resale by
the
Holder using Form S-3 promulgated under the 1933 Act.
(jj) Shell
Company Status.
The
Company is not, and has never been, an issuer identified in Rule
144(i)(1).
(kk)
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 issuance
of the
Securities to be acquired by the Holder 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.
(ll) 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.
(mm) Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided the Holder or any of its agents or counsel with any information
that
constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that the Holder will rely
on
the foregoing representations in effecting transactions in securities of
the
Company. All disclosure provided to the Holder regarding the Company and
the
Subsidiaries, their businesses and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company or any of the Subsidiaries is true and correct and does not contain
any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by
the
Company or any of the Subsidiaries during the twelve (12) months preceding
the
date of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. No
event
or circumstance has occurred or information exists with respect to the Company
or any of the Subsidiaries or its or their business, properties, liabilities,
prospects, operations (including results thereof) or conditions (financial
or
otherwise), which, under applicable law, rule or regulation, requires public
disclosure at or before the date hereof or announcement by the Company but
which
has not been so publicly announced or disclosed. The Company acknowledges
and
agrees that the Holder is not making and has not made any representations
or
warranties with respect to the transactions contemplated hereby other than
those
specifically set forth in Section 2.
(nn) Ranking
of Notes.
No
Indebtedness of the Company or any of the Subsidiaries, at the Closing, will
be
senior to, or pari
passu
with,
the Notes in right of payment, whether with respect to payment or redemptions,
interest, damages, upon liquidation or dissolution or otherwise.
17
|
4.
|
COVENANTS.
|
(a) Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the conditions
to be
satisfied by it as provided in Sections 6
and
7
of this
Agreement.
(b) Blue
Sky.
If
required by applicable law, 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 issuance to
the
Holder 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 Holder on or prior to the Closing Date. The Company shall make all
filings and reports relating to the offer and issuance of the Securities
required under applicable securities or “Blue Sky” laws of the states of the
United States
following the Closing Date.
(c) Listing.
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Amended Registration Rights Agreement) upon each national
securities exchange and automated quotation system, if any, upon which the
Common Shares are then listed (subject to official notice of issuance) and
shall
maintain such listing of all Registrable Securities from time to time issuable
under the terms of the Exchange Documents on such national securities exchange
or automated quotation system. The Company shall maintain the Common Shares’
authorization for quotation on the Principal Market, the New York Stock
Exchange, the Nasdaq Global Market or the Nasdaq Global Select Market (each,
an
“Eligible
Market”).
The
Company shall not take any action which could be reasonably expected to result
in the delisting or suspension of the Common Shares on an Eligible Market.
The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(c).
(d) Fees.
[For
Magnetar:
The
Company shall reimburse the Holder or its designee(s) (in addition to any
other
expense amounts paid to the Holder prior to the date of this Agreement) for
all
reasonable costs and expenses incurred by it or its affiliates in connection
with the transactions contemplated by the Exchange Documents (including,
without
limitation, all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Exchange Documents and due diligence in connection therewith), which amount
shall be paid by the Company by wire transfer of immediately available funds
at
the Closing or upon termination of this Agreement so long as such termination
did not occur as a result of a material breach by the Holder of any of its
obligations hereunder (as the case may be), provided that if the Closing
occurs,
up to $30,000 of such costs and expenses shall be paid by the Company in
cash
and the aggregate amount of any such costs and expenses in excess of $30,000
shall be added to the original principal amount of the Note issued to the
Holder. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or broker’s commissions (other than for
Persons engaged by the Holder) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold the Holder harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment.] [For
Other Investors:
Each of
the Company and the Holder shall bear its own costs and expenses incurred
in
connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, the Company shall be responsible for the payment
of any placement agent’s fees, financial advisory fees, or broker’s commissions
(other than for Persons engaged by the Holder) relating to or arising out
of the
transactions contemplated hereby, and the Company shall pay, and hold the
Holder
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment.]
18
(e) Pledge
of Securities.
Notwithstanding anything to the contrary contained in Section 2(g),
the
Company acknowledges and agrees that the Securities may be pledged by the
Holder
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 if the Holders effects a pledge of Securities it shall not 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 Exchange 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 the Holder.
(f) Disclosure
of Transactions and Other Material Information.
The
Company shall, on or before 8:30 a.m., New York time, on the first
(1st)
Business Day after the date of this Agreement, issue a press release (the
“Press
Release”)
reasonably acceptable to the Holder disclosing all the material terms of
the
transactions contemplated by the Exchange Documents. On
or
before 8:30 a.m., New York time, on the fourth (4th)
Business Day following the date of this Agreement, the Company shall file
a
Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Exchange Documents in the form required by the 1934 Act
and
attaching all the material Exchange Documents (including, without limitation,
this Agreement (and all schedules to this Agreement), the form of the Note,
the
form of Warrant and the Amended Registration Rights Agreement) (including
all
attachments, the “8-K
Filing”).
From
and after the issuance of the Press Release, the Company shall have disclosed
all material, nonpublic information delivered to the Holder by the Company
or
any of the Subsidiaries, or any of their respective officers, directors,
employees or agents (if any) in connection with the transactions contemplated
by
the Exchange Documents. The Company shall not, and the Company shall cause
each
of the Subsidiaries and each of its and their respective officers, directors,
employees and agents not to, provide the Holder with any material, nonpublic
information regarding the Company or any of the Subsidiaries from and after
the
issuance of the Press Release without the express prior written consent of
the
Holder. If the Holder has, or believes it has, received any material, nonpublic
information regarding the Company or any of its Subsidiaries in breach of
the
immediately preceding sentence, the Holder shall provide the Company with
written notice thereof in which case the Company shall, within two (2) Trading
Days (as defined below) of the receipt of such notice, make a public disclosure
of all such material, nonpublic information so provided. In the event of
a
breach of any of the foregoing covenants by the Company, any of the
Subsidiaries, or any of its or their respective officers, directors, employees
and agents (as determined in the reasonable good faith judgment of the Holder),
in addition to any other remedy provided herein or in the other Exchange
Documents, the Holder shall have the right to make a public disclosure, in
the
form of a press release, public advertisement or otherwise, of such material,
nonpublic information without the prior approval by the Company, any of the
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. The Holder shall not have any liability to the Company, any of
the
Subsidiaries, or any of its or their respective officers, directors, employees,
stockholders or agents, for any such disclosure. Subject to the foregoing,
neither the Company, the Subsidiaries nor the Holder 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 the Holder,
to make
any press release or other public disclosure with respect to such transactions
(i) in substantial conformity with the 8-K Filing and contemporaneously
therewith and (ii) as is required by applicable law and regulations
(provided
that in
the case of clause (i) the Holder 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 the Holder, the Company shall
not
(and shall cause each of the Subsidiaries to not) disclose the name of the
Holder in any filing, announcement, release or otherwise unless required
by
applicable law or regulations.
19
(g) Amendment
of Transaction Agreement.
From and
after the Closing:
(i) The
term
“Conversion Shares” in the Transaction Agreement is hereby deleted.
(ii) The
term
“Registration Rights Agreement” in the Transaction Agreement is hereby replaced
with the term “Amended Registration Rights Agreement.”
(iii) The
defined term “Securities” in the Transaction Agreement is hereby replaced with
the following: ““Securities”
means,
collectively, the Notes, the 2008 Warrants and the 2008 Warrant Shares.”
Notwithstanding anything in this Section 4(g)
to the
contrary, for purposes of Section 4(d) and 9(k) of the Transaction Agreement,
the terms “Securities” and “Transaction Documents” shall each have the meaning
ascribed to such terms prior to the amendment contemplated by this Agreement
and
the Other Exchange Agreements.
(iv) The
term
“Special Warrants” in the Transaction Agreement is hereby replaced with the term
“Notes.”
(v) The
term
“Warrants” in the Transaction Agreement is hereby replaced with the term “2008
Warrants.”
(vi) The
term
“Warrant Shares” in the Transaction Agreement is hereby replaced with the term
“2008 Warrant Shares.”
(vii) The
following terms are hereby added to the Transaction Agreement:
(1) “2008
Warrants”
means
all of the warrants issued by the Company in exchange for Warrants, and shall
include all warrants issued in exchange therefor or replacement
thereof.
20
(2) “2008
Warrant Shares”
means
all of the Common Shares issuable upon exercise of the 2008
Warrants.
(3) “Notes”
means
all of the senior secured notes issued by the Company in exchange for Special
Warrants, and shall include all senior secured notes issued in exchange therefor
or replacement thereof.
(4) “Special
Warrants”
means
all of the special warrants issued to the Buyers on the Closing
Date.
(5) “Warrants”
means
all of the warrants (other than Special Warrants) issued to the Buyers on
the
Closing Date.
(viii) Section
4(p)(i) of the Transaction Agreement is hereby replaced with the
following:
“The
Company shall deliver to each Buyer a written notice (the “Offer
Notice”)
of any
proposed or intended issuance or sale or exchange (the “Offer”)
of the
securities being offered (the “Offered
Securities”)
in a
Subsequent Placement, which Offer Notice shall (w) identify and describe
the
Offered Securities, (x) describe the price and other terms upon which they
are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the Persons (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 Buyer
in
accordance with the terms of the Offer at least 50% of the Offered Securities,
provided
that the
number of Offered Securities which such Buyer shall have the right to subscribe
for under this Section 4(p) shall be (a) based on such Buyer’s pro rata portion
of the aggregate principal amount of the Notes issued in exchange for the
Special Warrants acquired by all Buyers (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”).”
21
(ix) Except
as
otherwise expressly provided herein, (i) the Transaction Agreement and each
other Transaction Document is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects, except that
on and
after the Closing Date (A) all references in the Transaction Agreement to
the “Transaction Agreement,” “hereto,” “hereof,” “this Agreement,” “hereunder”
or words of like import referring to the Transaction Agreement shall mean
the
Transaction Agreement as amended by this Agreement and the Other Exchange
Agreements, and (B) all references in the other Transaction Documents to
the “Transaction Agreement,” “thereto,” “thereof,” “thereunder” or words of like
import referring to the Transaction Agreement shall mean the Transaction
Agreement as amended by this Agreement and the Other Exchange Agreements,
and
(ii) the execution, delivery and effectiveness of this Agreement shall not
operate as an amendment of any right, power or remedy of the Holder under
any
Transaction Document, nor constitute an amendment of any provision of any
Transaction Document and all of them shall continue in full force and effect,
as
amended or modified by this Agreement and the Other Exchange Agreements.
For
purposes of this Agreement, (1) “Other
Special Warrant Holders”
means,
collectively, the holders (other than the Holder) of special warrants acquired
pursuant to the Transaction Agreement; (2) “Other
Exchange Agreements”
means,
collectively, the separate exchange agreements, each dated as of August 29,
2008, entered into between the Company and each of the Other Special Warrant
Holders; (3) “Other
Notes”
means,
collectively, the senior secured notes issued pursuant to the Other Exchange
Agreements, and shall include all senior secured notes issued in exchange
therefor or replacement thereof; (4) “Notes”
means,
collectively, the Note and the Other Notes; (5) “Other
Warrants”
means,
collectively, the warrants issued pursuant to the Other Exchange Agreements,
and
shall include all warrants issued in exchange therefor or replacement thereof;
(6) “2008 Warrants”
means,
collectively, the Warrant and the Other Warrants; and (7) “Other
Exchange Documents”
means,
collectively, the Other Exchange Agreements, the Other Notes, the Other Warrants
and all other agreements, documents and instruments executed and delivered
in
connection with the transactions contemplated thereby.
(x) It
is
expressly understood and agreed that the Note (or any portion thereof) may
be
used by the Holder as purchase price to purchase any securities of the Company,
whether pursuant to Section 4(p)(i) of the Transaction Agreement or
otherwise.
(h) Rule
144.
The
Company expressly acknowledges and agrees that for purposes of Rule 144(d)
the
Holder shall be deemed to have acquired the Warrant on August 3, 2007 and
that
the holding period for it may be tacked onto the holding period of the 2007
Warrant. The Company agrees that it shall not (and shall cause each of its
officers, directors, employees and agents to not) take any action or omit
to
take any action inconsistent with the foregoing. The Company further agrees
to
take all actions necessary (including, without limitation, the issuance by
its
legal counsel of any necessary legal opinions) to issue to the Warrant Shares
so
that (subject
to the Company being compliant with Section 144(c)(1) only if the Holder
becomes
an affiliate of the Company after the date hereof) they
are
immediately freely tradable on an Eligible Market without restriction and
not
containing any restrictive legend, all without the need for any action by
the
Holder.
(i) Registration
Delay Payments.
Effective simultaneously with the Holder’s receipt of the Note and Warrant, the
Holder hereby waives (i) all Registration Delay Payments accrued and owing
to
the Holder under the Registration Rights Agreement and (ii) the Effectiveness
Failure (as defined in the Registration Rights Agreement) that occurred prior
to
the date hereof under Section 2(e) of the Registration Rights Agreement as
a
result of the failure of the Registration Statement (as defined in the
Registration Rights Agreement) initially filed by the Company with the SEC
on
September 11, 2007 to be declared effective by the SEC on or before the
Effectiveness Deadline (as defined in the Registration Rights Agreement)
for
such Registration Statement.
(j) Existing
Triggering Events;
Existing Payment Breach.
Effective simultaneously with the Holder’s receipt of the Note and Warrant, the
Holder hereby waives all Existing Trigger Events and the Existing Payment
Breach
(each as defined in that certain Forbearance Agreement, dated as of April
14,
2008, by and between the Company and the Holder). Without implication that
the
contrary would otherwise be true, it is expressly understood and agreed that
Sections 4(i)
and
4(j)
shall be
null and void ab initio and be of no force or effect if the Closing does
not
occur and this Agreement is terminated pursuant to Section 8
hereof.
22
(k)
Issuance
of Notes and 2008 Warrants.
Effective simultaneously with the Closing, the Holder hereby consents,
under
Sections 4(k) and 4(n) of the Transaction Agreement, to the issuance
of the
Notes and 2008 Warrants and the Common Shares issuable upon exercise
of the 2008
Warrants.
(l) Public
Information.
At any
time during the period commencing on the Closing Date and ending at such
time
that all of the Securities have been sold, if a registration statement is
not
available for the resale of all of the Securities and the Company shall fail
for
any reason to satisfy the current public information requirement under Rule
144(c)(1) and the Securities cannot then be sold without the requirement
for the
Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144 (a “Public
Information Failure”),
then,
as partial relief for the damages to any holder of Securities by reason of
any
such delay in or reduction of its ability to sell the Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity),
the
Company shall pay to each such holder an amount in cash equal to one percent
(1%) of the original principal amount of the Note on the day of a Public
Information Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) thereafter until the earlier of (i) the date such
Public Information Failure is cured and (ii) such time that such public
information is no longer required pursuant to Rule 144. The payments to which
a
holder shall be entitled pursuant to this Section 4(l)
are
referred to herein as “Public
Information Failure Payments.”
Following the initial Public Information Failure Payment for a Public
Information Failure (which shall be paid on the date of such Public Information
Failure, as set forth above), without limiting the foregoing, if a failure
giving rise to such Public Information Failure Payment is cured or such public
information is no longer required (as the case may be) prior to any thirtieth
(30th)
day
anniversary of such Public Information Failure, then such Public Information
Failure Payment shall be paid on the third (3rd)
Business Day after such cure or such public information is no longer required
(as the case may be).
23
(m) Shareholder
Approval.
To the
extent required by the rules and regulations of the Principal Market, the
Company shall provide each shareholder entitled to vote at a special or annual
meeting of shareholders of the Company (the “Shareholder
Meeting”),
which
shall be called and held not later than one hundred eighty (180) days after
the
Closing Date (the “Shareholder
Meeting Deadline”),
a
proxy statement, in the form which has been previously reviewed by the Holder
and its counsel, soliciting each such shareholder’s affirmative vote at the
Shareholder Meeting for approval of resolutions providing for the Company’s
issuance of all of the Securities as described in the Exchange Documents
in
accordance with
applicable law and the rules and regulations of Principal Market
(such
affirmative approval being referred to herein as the “Shareholder
Approval”
and
the
date of such Shareholder Approval shall be referred to as the “Shareholder
Approval Date”),
and
the Company shall use its commercially reasonable efforts to solicit its
shareholders’ approval of such resolutions (which efforts shall include, without
limitation, the requirement to hire a reputable proxy solicitor) and to cause
the board of directors of the Company to recommend to the shareholders that
they
approve such resolutions. If the Company shall be obligated to seek to obtain
the Shareholder Approval, then it shall do so by the Shareholder Meeting
Deadline. If, despite the Company’s commercially reasonable efforts the
Shareholder Approval is not obtained on or prior to the Shareholder Meeting
Deadline, the Company shall cause an additional Shareholder Meeting to be
held
each semi-annual period thereafter until such Shareholder Approval is obtained
or until such Shareholder Approval is no longer required under the rules
and
regulations of the Principal Market or is no longer required to eliminate
restrictions on the issuance of Common Shares pursuant to the 2008 Warrants.
The
Company shall not directly or indirectly take any action which would result
in a
Dilutive Issuance (as defined in the Warrant) below the Floor Price (as defined
in the Warrant) prior to the Shareholder Approval Date. The Company agrees
that
any such action and resulting Dilutive Issuance shall be null and void and
that
the Holder would be irreparably harmed to the extent that the Company takes
any such action.
|
5.
|
REGISTER;
TRANSFER AGENT INSTRUCTIONS;
LEGEND.
|
(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 Note and the Warrant in which the Company
shall
record the name and address of the Person in whose name the Note and the
Warrant have been issued (including the name and address of each transferee),
the principal amount of the Note held by such Person and the number of Warrant
Shares issuable upon exercise of the Warrant held by such Person. The Company
shall keep the register open and available at all times during business hours
for inspection of the Holder or its legal representatives.
(b) Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent and any
subsequent transfer agent in the form reasonably acceptable to the Holder
(the
“Irrevocable
Transfer Agent Instructions”)
to
issue certificates or credit shares to the applicable balance accounts at
The
Depository Trust Company (“DTC”),
registered in the name of the
Holder or its respective nominee(s),
for the
Warrant Shares in such amounts as specified from time to time by the Holder
to
the Company upon exercise of the Warrant. The Company represents and 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, to the extent provided in this Agreement
and the other Exchange Documents. If the Holder effects a sale, assignment
or
transfer of the Securities in accordance with Section 2(g)
hereof,
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
the Holder to effect such sale, transfer or assignment. In the event that
such
sale, assignment or transfer involves Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such shares to the Holder,
assignee or transferee (as the case may be) without any restrictive legend
in
accordance with Section 5(d)
below.
The Company acknowledges that a breach by it of its obligations hereunder
will
cause irreparable harm to the Holder. 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
the Holder 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. The Company shall cause its counsel
to
issue the legal opinion referred to in the Irrevocable Transfer Agent
Instructions to the Company’s transfer agent on the earlier of each Effective
Date (as defined in the Amended Registration Rights Agreement) or the date
on
which the Securities are eligible to be sold pursuant to Rule 144. Any fees
(with respect to the transfer agent, counsel to the Company or otherwise)
associated with the issuance of such opinion or the removal of any legends
on
any of the Securities shall be borne by the Company.
24
(c) Legends.
The
Holder understands that the certificates or other instruments representing
the
Warrant and, until such time as the resale of the Warrant Shares have been
registered under the 1933 Act as contemplated by the Amended Registration
Rights
Agreement or are eligible for sale pursuant to Rule 144, the stock certificates
representing the Warrant Shares, except as set forth below, shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I)
IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
25
(d)
Removal
of Legends.
Certificates evidencing the Warrant and Warrant Shares shall not be required
to
contain the legend set forth in Section 5(c)
above or
any other legend (i) while a registration statement (including the Registration
Statement) covering the resale of such Securities is effective under
the 1933
Act and the Holder indicates in its exercise notice that it intends to,
immediately following such exercise, sell the number of Warrant Shares
specified
in such notice under such Registration Statement, (ii) following any
sale of
such Securities pursuant to Rule 144 (assuming that the transferor is
not an
affiliate of the Company), (iii) if such Securities are eligible to be
sold,
assigned or transferred under Rule 144 (provided
that the
Holder provides the Company with reasonable assurances that such Securities
are
eligible for sale, assignment or transfer under Rule 144, which shall
not
include an opinion of counsel), (iv) in connection with a sale, assignment
or
other transfer (other than under Rule 144) provided
the
Holder provides the Company with an opinion of counsel to the Holder,
in a
generally acceptable form, to the effect that such sale, assignment or
transfer
of such Securities may be made without registration under the applicable
requirements of the 1933 Act or (v) if such legend is not required under
applicable requirements of the 1933 Act (including, without limitation,
controlling judicial interpretations and pronouncements issued by the
SEC). If a
legend is not required pursuant to the foregoing, the Company shall no
later
than two (2) Trading Days (as defined below) following the delivery by
the
Holder to the Company or the transfer agent (with notice to the Company)
of a
legended certificate representing such Securities (endorsed or with stock
powers
attached, signatures guaranteed, and otherwise in form necessary to affect
the
reissuance and/or transfer, if applicable), together with any other deliveries
from the Holder as may be required above in this Section 5(d),
as
directed by the Holder, either: (A) deliver (or cause to be delivered
to) the
Holder a certificate representing such Securities that is free from all
restrictive and other legends or (B) credit the balance account of the
Holder’s
or the Holder’s nominee with DTC with a number of Common Shares equal to the
number of Warrant Shares represented by the certificate or exercise notice
(as
the case may be) so delivered by the Holder (the date by which such certificate
is required to be delivered to the Holder or such credit is so required
to be
made to the balance account of the Holder’s or the Holder’s nominee with DTC
pursuant to the foregoing is referred to herein as the “Required
Delivery Date”).
(e) Failure
to Timely Deliver; Buy-In.
If the
Company fails to use its best efforts to (i) issue and deliver (or cause
to be
delivered) to the Holder by the Required Delivery Date a certificate
representing the Securities required to be so delivered by the Company to
the
Holder that is free from all restrictive and other legends or (ii) credit
the
balance account of the Holder’s or the Holder’s nominee with DTC for such number
of Warrant Shares required to be so delivered by the Company, then, in addition
to all other remedies available to the Holder, the Company shall pay in cash
to
the Holder on each day after the Required Delivery Date that the issuance
or
credit of such shares is not timely effected an amount equal to 1% of the
original principal amount of the Note. In addition to the foregoing, if the
Company fails to so properly deliver such unlegended certificates or so properly
credit the balance account of the Holder’s or the Holder’s nominee with DTC by
the Required Delivery Date, and if on or after the Required Delivery Date
the
Holder purchases (in an open market transaction or otherwise) Common Shares
to
deliver in satisfaction of a sale by the Holder of Common Shares that the
Holder
anticipated receiving from the Company without any restrictive legend (a
“Buy-In”),
then
the Company shall, within three (3) Trading Days after the Holder’s request and
in the Holder’s sole discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions, if
any) for the Common Shares so purchased (the “Buy-In
Price”),
at
which point the Company’s obligation to deliver such certificate or credit the
Holder’s balance account shall terminate and such shares shall be cancelled, or
(ii) promptly honor its obligation to deliver to the Holder a certificate
or
certificates or credit the Holder’s DTC account representing such number of
Common Shares that would have been issued if the Company timely complied
with
its obligations hereunder and pay cash to the Holder in an amount equal to
the
excess (if any) of the Buy-In Price over the product of (A) such number of
Warrant Shares that the Company was required to deliver to the Holder by
the
Required Delivery Date times (B) the average of the VWAP of the Common Shares
for the five (5) Trading Day period immediately preceding the Required Delivery
Date.
26
For
purposes of this Section 5(e),
“VWAP”
means,
for any security as of any date, the dollar volume-weighted average price
for
such security on the Principal Market (or, if the Principal Market is not
the
principal trading market for the Common Shares, then on the principal securities
exchange or securities market on which the Common Shares is then traded)
during
the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00
p.m.,
New York time, as reported by Bloomberg Financial Markets (“Bloomberg”)
through its “Volume at Price” function or, if the foregoing does not apply, the
dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New
York
time, as reported by Bloomberg, or, if no dollar volume-weighted average
price
is reported for such security by Bloomberg for such hours, the average of
the
highest closing bid price and the lowest closing ask price of any of the
market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If VWAP cannot be calculated
for
such security on such date on any of the foregoing bases, the VWAP of such
security on such date shall be the fair market value as mutually determined
by
the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then they shall agree in good
faith
on a reputable investment bank to make such determination of fair market
value,
whose determination shall be final and binding and whose fees and expenses
shall
be borne by the Company. All such determinations shall be appropriately adjusted
for any share dividend, share split or other similar transaction during such
period. “Trading
Day”
means
any day on which the Common Shares are traded on the Principal Market, or,
if
the Principal Market is not the principal trading market for the Common Shares,
then on the principal securities exchange or securities market on which the
Common Shares are then traded; provided that “Trading Day” shall not include any
day on which the Common Shares are scheduled to trade on such exchange or
market
for less than 4.5 hours or any day that the Common Shares are suspended from
trading during the final hour of trading on such exchange or market (or if
such
exchange or market does not designate in advance the closing time of trading
on
such exchange or market, then during the hour ending at 4:00:00 p.m., New
York
time).
|
6.
|
CONDITIONS
TO THE COMPANY’S OBLIGATION TO EXCHANGE AND
ISSUE.
|
(a) The
obligation of the Company hereunder to exchange and issue the Note and the
Warrant to the Holder at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided
that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Holder with prior
written notice thereof:
(i) The
Holder shall have executed each of the Exchange Documents to which it is
a party
and delivered the same to the Company.
(ii) The
Holder shall have delivered to the Company its Special Warrant and 2007
Warrant.
27
(iii) The
representations and warranties of the Holder shall be true and correct in
all
material respects as of the date when made and as of the Closing Date as
though
originally 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 date),
and the Holder shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Holder at or
prior
to the Closing Date.
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7.
|
CONDITIONS
TO HOLDER’S OBLIGATION TO EXCHANGE.
|
(a) The
obligation of the Holder hereunder to exchange its Special Warrant and
2007
Warrant at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided
that
these conditions are for the Holder’s sole benefit and may be waived by the
Holder 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 the Holder each of the
Exchange Documents to which it is a party, including the Note and the
Warrant.
(ii) Each
Subsidiary shall have duly executed and delivered to the Holder each of the
Exchange Documents to which it is a party.
(iii) The
Holder shall have received the opinion of Cozen X’Xxxxxx, the Company’s outside
U.S. counsel, and Xxxxxx-Xxxxxxxxx, Hill & XxXxxxxxx LLP, the Company’s
Canadian counsel, in each case dated as of the Closing Date, in forms reasonably
acceptable to the Holder.
(iv) The
Company shall have delivered to the Holder a copy of the Irrevocable Transfer
Agent Instructions, in form reasonably acceptable to the Holder, which
instructions shall have been delivered to and acknowledged in writing by
the
Company’s transfer agent.
(v) The
Company shall have delivered to the Holder a certificate evidencing the
formation and good standing of the Company and each Subsidiary in such entity’s
jurisdiction of formation issued by the Secretary of State (or equivalent)
of
such jurisdiction of formation as of a date within ten (10) days of the Closing
Date.
(vi) The
Company shall have delivered to the Holder a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business and is required to so qualify, as of a date within
ten
(10) days of the Closing Date.
(vii) The
Company shall have delivered to the Holder a certificate evidencing the
qualification of each Subsidiary as a foreign corporation and good standing
issued by the Secretary of State (or comparable office) of each jurisdiction
in
which each Subsidiary conducts business and is required to so qualify, as
of a
date within ten (10) days of the Closing Date.
(viii) The
Company shall have delivered to the Holder a certified copy of the Articles
of
Incorporation within ten (10) days of the Closing Date.
28
(ix) The
Company shall have delivered to the Holder a certificate, executed by the
Secretary of the Company and each Subsidiary and dated as of the Closing
Date,
as to (i) the resolutions consistent with Section 3(b)
as
adopted by the Company’s or such Subsidiary’s (as the case may be) board of
directors in a form reasonably acceptable to the Holder, (ii) the Articles
of
Incorporation or its other constituent documents (as the case may be) and
(iii)
the Bylaws or its bylaws (as the case may be), each as in effect at the Closing,
in form reasonably acceptable to the Holder.
(x) Each
and
every representation and warranty of the Company shall be true and correct
as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date,
which shall be true and correct as of such date) and the Company shall have
(and
the Company shall have caused each Subsidiary to have) performed, satisfied
and
complied in all respects with the covenants, agreements and conditions required
to be performed, satisfied or complied with by the Company or such Subsidiary
(as the case may be) at or prior to the Closing Date. The Holder shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by the Holder in form reasonably
acceptable to the Holder.
(xi) The
Company shall have delivered to the Holder a letter from the Company’s transfer
agent certifying the number of Common Shares outstanding on the Closing Date
immediately prior to the Closing.
(xii) The
Common Shares (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by
the
SEC or the Principal Market from trading on the Principal Market.
(xiii) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the issuance of the Securities, including
without limitation, those required by the Principal Market.
(xiv) No
statute, rule, regulation, executive order, decree, ruling or injunction
shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Exchange Documents.
(xv) Since
the
date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would have or result in a Material Adverse
Effect.
(xvi) The
Company shall have obtained approval of the Principal Market to list the
Conversion Shares and the Warrant Shares.
(xvii) The
Company shall have delivered to the Holder appropriate financing statements
on
Form UCC-1 or PPSA filings (as the case may be) to be duly filed in such
office
or offices as may be necessary or, in the opinion of the Holder, desirable
to
perfect the security interests purported to be created by each Security
Document.
29
(xviii) The
results of UCC searches, and searches for any tax or judgment lien filed
against
the Company or any of the Subsidiaries or any of its or their respective
property, shall not show any Liens (as
defined in the Note)
on any
of the Collateral (as defined in the Security Agreement).
(xix) Each
of
the Other Special Warrant Holders shall have (i) executed the Other
Exchange Agreements, (ii) satisfied or waived all conditions to the
closings contemplated by such agreements and (iii) surrendered their
Special Warrants and 2007 Warrants being exchanged at the Closing.
(xx) The
Company shall have amended the Registration Rights Agreement in the form
attached hereto as Exhibit
E
(the
“Amended
Registration Rights Agreement”).
(xxi) The
Company shall have delivered to the Holder such other documents relating
to the
transactions contemplated by this Agreement as the Holder or its counsel
may
reasonably request.
|
8.
|
TERMINATION.
|
In
the
event that the Closing shall not have occurred on or before twenty (20) days
from the date hereof due to the Company’s or the Holder’s failure to satisfy the
conditions set forth in Sections 6
and
7
above
(and a non-breaching party’s failure to waive such unsatisfied condition(s)),
any such non-breaching party at any time shall have the right to terminate
its
obligations under this Agreement with respect to such breaching party on
or
after the close of business on such date without liability of such non-breaching
party to any other party; provided,
however,
notwithstanding any such termination the Company shall remain obligated to
reimburse the Holder (if the Holder is a non-breaching party) in cash for
all
the expenses described in Section 4(d)
above.
Nothing contained in this Section 8
shall be
deemed to release any party from any liability for any breach by such party
of
the terms and provisions of this Agreement or the other Exchange Documents
or to
impair the right of any party to compel specific performance by any other
party
of its obligations under this Agreement or the other Exchange
Documents.
30
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9.
|
MISCELLANEOUS.
|
(a) Governing
Law; Jurisdiction; Jury Trial.
The
parties hereby agree that pursuant to 735 Illinois Compiled Statutes 105/5-5
they have chosen that all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Illinois, without giving effect to any choice
of
law or conflict of law provision or rule (whether of the State of Illinois
or
any other jurisdictions) that would cause the application of the laws of
any
jurisdictions other than the State of Illinois. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in
Chicago, Illinois, 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 to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be
deemed
to limit in any way any right to serve process in any manner permitted by
law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES
NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective
when
counterparts have been signed by each party and delivered to the other party.
In
the event that any signature is delivered by facsimile transmission or by
an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with
the
same force and effect as if such signature page were an original
thereof.
(c) Headings;
Gender.
The
headings of this Agreement are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include
the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,”
“includes,”
“include”
and
words of like import shall be construed broadly as if followed by the words
“without limitation.” The terms “herein,”
“hereunder,”
“hereof”
and
words of like import refer to this entire Agreement instead of just the
provision in which they are found. For purposes of this Agreement for the
Holder’s benefit, the word “state” or “states” includes any “province” or
“provinces” in Canada and the concept of “law, rules or regulations” includes
laws, rules and regulations under applicable law, rules and regulations in
Canada.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction
or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. Notwithstanding anything to the contrary contained in this
Agreement or any other Exchange Document (and without implication that the
following is required or applicable), it is the intention of the parties
that in
no event shall amounts and value paid by the Company and/or the Subsidiaries
(as
the case may be), or payable to or received by the Holder, under the Exchange
Documents, including without limitation, any amounts that would be characterized
as “interest” under applicable law (including, without limitation, any
applicable Canadian or Ontario law), exceed amounts permitted under any such
applicable law. Accordingly, if any obligation to pay, payment made to the
Holder, or collection by the Holder pursuant the Exchange Documents is finally
judicially determined to be contrary to any such applicable law, such obligation
to pay, payment or collection shall be deemed to have been made by mutual
mistake of the Holder, the Company and the Subsidiaries and such amount shall
be
deemed to have been adjusted with retroactive effect to the maximum amount
or
rate of interest, as the case may be, as would not be so prohibited by the
applicable law. Such adjustment shall be effected, to the extent necessary,
by
reducing or refunding, at the option of the Holder, the amount of interest
or
any other amounts which would constitute unlawful amounts required to be
paid or
actually paid to the Holder under the Exchange Documents. For greater certainty,
to the extent that any interest, charges, fees, expenses or other amounts
required to be paid to or received by the Holder under any of the Exchange
Documents or related thereto are held to be within the meaning of “interest” or
another applicable term to otherwise be violative of applicable law, such
amounts shall be pro-rated over the period of time to which they
relate.
31
(e) Entire
Agreement; Amendments.
This
Agreement, the other Exchange Documents and the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein supersede
all other prior oral or written agreements between the Holder, the Company,
their affiliates and Persons acting on their behalf with respect to the matters
contained herein and therein (provided that (i) except as expressly contemplated
elsewhere in this Agreement, the foregoing shall not have any effect on any
agreements the Holder has entered into with the Company or any of its
Subsidiaries prior to the date hereof, (ii) Section 4(c) hereof supersedes
Section 4(f) of the Transaction Agreement in its entirety, (iii) Section
4(e)
hereof supersedes Section 4(h) of the Transaction Agreement in its entirety
and
(iv) Section 5 hereof supersedes Section 5 of the Transaction Agreement in
its
entirety), and this Agreement, the other Exchange Documents, the schedules
and
exhibits attached hereto and thereto 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 the Holder makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be amended or waived other than by an instrument in writing
signed by the Company and the Holder, provided
that any
party may give a waiver in writing as to itself. 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 Other Exchange Documents unless the same
consideration also is offered to the Holder. [For
Other Investors:
Except
for the Company’s agreement to pay legal fees and expenses of an Other Special
Warrant Holder pursuant to the Other Exchange Agreement between the Company
and
such Other Special Warrant Holders, t] [For
Magnetar:
T]he
Company has not, directly or indirectly, made any agreements with any other
Person relating to the terms or conditions of the transactions contemplated
by
the Other Exchange Documents which differs in any respect from the terms
and
conditions set forth in the Exchange Documents. Without limiting the foregoing,
the Company confirms that the Holder has made not any commitment or promise
or
has any other obligation to provide any financing to the Company, any Subsidiary
or otherwise.
(f) Notices.
Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered in accordance with the provisions of Section 9(f) of
the
Transaction Agreement. A copy of all notices (for informational purposes
only)
sent to the Holder shall also be sent to:
|
____________________________________
|
|
|
____________________________________
|
|
|
____________________________________
|
|
|
Telephone:
|
________________________
|
|
Facsimile:
|
________________________
|
|
Attention:
|
________________________
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32
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of any
of the
Securities. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Holder,
including, without limitation, by way of a Fundamental Transaction (as defined
in the Note and the Warrant) (unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the
Note
and the Warrant). The Holder may assign some or all of its rights hereunder
in
connection with transfer of any of its Securities without the consent of
the
Company, in which event such assignee shall be deemed to be a Holder 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, other than the Indemnitees
referred to in Section 9(k).
(i) Survival.
Unless
this Agreement is terminated under Section 8
in
accordance with the terms thereof, the representations, warranties, agreements
and covenants shall survive the Closing.
(j) Further
Assurances.
Each
party shall (and the Company shall cause each Subsidiary to) do and perform,
or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments
and
documents, as any other party may reasonably request in order to carry out
the
intent and accomplish the purposes of this Agreement and the consummation
of the
transactions contemplated hereby.
(k) Indemnification.
In
consideration of the Holder’s execution and delivery of the Exchange Documents
to which it is a party and acquiring the Securities thereunder and in addition
to all of the Company’s and the Subsidiaries’ other obligations under the
Exchange Documents, the Company shall defend, protect, indemnify and hold
harmless the Holder and each affiliate of the Holder that holds any Securities
and all of their stockholders, partners, members, officers, directors, employees
and direct or indirect investors and any of the foregoing Persons’ agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses,
costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for
which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified
Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating
to (a)
any misrepresentation or breach of any representation or warranty made by
the
Company or any
Subsidiary in
any of
the Exchange Documents, (b) any breach of any covenant, agreement or obligation
of the Company or any Subsidiary contained in any of the Exchange 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 or any Subsidiary) and arising out of or resulting
from
(i) the execution, delivery, performance or enforcement of any of the Exchange
Documents, (ii) any transaction financed or to be financed in whole or in
part,
directly or indirectly, with the proceeds of the issuance of the Securities,
(iii) any disclosure properly made by the Holder pursuant to Section
4(f)
or (iv)
the status of the Holder or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the Exchange Documents,
except, with respect to clause (c) above, to the extent (but only to the
extent)
such Indemnified Liability arises from the Holder’s gross negligence or willful
misconduct. 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 Amended Registration Rights
Agreement.
33
(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.
The
Holder and each affiliate of the Holder that holds any Securities shall have
all
rights and remedies set forth in the Exchange 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 or any Subsidiary fails to perform,
observe, or discharge any or all of its or their obligations under any of
the
Exchange Documents, any remedy at law may prove to be inadequate relief to
the
Holder. The Company therefore agrees, on behalf of itself and each Subsidiary,
that the Holder shall be entitled to seek specific performance and/or temporary,
preliminary and permanent injunctive or other equitable relief from any court
of
competent jurisdiction in any such case without the necessity of proving
damages
and without posting a bond or other security.
(n) Withdrawal
Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Exchange Documents, whenever the Holder exercises
a
right, election, demand or option under an Exchange Document and the Company
or
any Subsidiary does not timely perform its related obligations within the
periods therein provided, then the Holder may rescind or withdraw, in its
sole
discretion from time to time upon written notice to the Company or such
Subsidiary (as the case may be), any relevant notice, demand or election
in
whole or in part without prejudice to its future actions and rights
34
(o) Payment
Set Aside.
To the
extent that the Company or any Subsidiary makes a payment or payments to
the
Holder hereunder or pursuant to any of the other Exchange Documents or the
Holder enforces or exercises its 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 or any Subsidiary, 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. Unless otherwise expressly indicated, all dollar amounts
referred to in this Agreement and the other Exchange Documents are in United
States Dollars (“US
Dollars”),
and
all amounts owing under this Agreement and all other Transaction Documents
shall
be paid in US Dollars. All amounts denominated in other currencies shall
be
converted in the US Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange
Rate” means,
in
relation to any amount of currency to be converted into US Dollars pursuant
to
this Agreement, the US Dollar exchange rate as published in the Wall Street
Journal on the relevant date of calculation.
(p) Independent
Nature of the Holder’s Obligations and Rights.
The
obligations of the Holder under the Exchange Documents are several and not
joint
with the obligations of any Other Special Warrant Holder under the Other
Exchange Documents, and the Holder shall not be responsible in any way for
the
performance of the obligations of any Other Special Warrant Holders under
any
Other Exchange Documents.
Nothing
contained herein or in any other Exchange Document, and no action taken by
the
Holder pursuant hereto or any Other Special Warrant Holder pursuant to any
Other
Exchange Documents, shall be deemed to constitute the Holder or any Other
Special Warrant Holder as, and the Company acknowledges that the Holder and
the
Other Special Warrant Holders do not so constitute, a partnership, an
association, a joint venture or any other kind of group or entity, or create
a
presumption that the Holder and any Other Special Warrant Holder are in any
way
acting in concert or as a group or entity with respect to such obligations
or
the transactions contemplated by the Exchange Documents, the Other Exchange
Documents or any matters, and the Company acknowledges that the Holder and
the
Other Special Warrant Holders are not acting in concert or as a group or
entity,
and the Company shall not assert any such claim, with respect to such
obligations or the transactions contemplated by the Exchange Documents and
the
Other Exchange Documents. The decision of the Holder to acquire the Securities
pursuant to the Exchange Documents has been made by the Holder independently
of
any Other Special Warrant Holder. The Holder acknowledges that no Other Special
Warrant Holder has acted as agent for the Holder in connection with the Holder
making its acquisition hereunder and that no Other Special Warrant Holder
will
be acting as agent of the Holder in connection with monitoring the Holder’s
Securities or enforcing its rights under the Exchange Documents. The Company
and
the Holder confirms that the Holder has independently participated with the
Company and the Subsidiaries in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. The Holder shall
be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any of the
other
Exchange Documents, and it shall not be necessary for any Other Special Warrant
Holder to be joined as an additional party in any proceeding for such
purpose.
To the
extent that any of the Other Special Warrant Holders and the Company enter
into
the same or similar documents, all such matters are solely in the control
of the
Company and the Subsidiaries, not the action or decision of the Holder, and
would be solely for the convenience of the Company and
the
Subsidiaries and not because it was required or requested to do so by
the
Holder or any Other Special Warrant Holder. For clarification purposes only
and
without implication that the contrary would otherwise be true, the transactions
contemplated by the Exchange Documents include only the transaction between
the
Company and the Holder and do not include any other transaction between the
Company and any Other Special Warrant Holder.
35
(q)
Delivery
of Securities.
Notwithstanding anything contained in this Agreement or any other Exchange
Document to the contrary, unless otherwise directed in writing by the
Holder or
if being credited to the applicable balance accounts at DTC, the Company
shall,
and shall cause its agents and representatives to, deliver all of the
Holder’s
securities acquired pursuant to this Agreement (and all securities which
are
issuable to the Holder pursuant to the terms of this Agreement or any
other
Exchange Document) to the address for delivery of securities set forth
on the
Holder’s signature page to this Agreement, and copies of the certificates
representing such securities shall be sent to the Holder to the address
of the
Holder as set forth on the Holder’s signature page to this
Agreement.
(r) Most
Favored Nation.
The
Company hereby represents and warrants as of the date hereof and covenants
and
agrees from and after the date hereof that none of the terms offered to any
Person with respect to any amendment or waiver (each an “Amendment”)
relating to the terms, conditions and transactions contemplated by any Exchange
Document or any Other Exchange Document is or will be more favorable to such
Person than those of the Holder, and, if they are or become more favorable
to
any other Person, this Agreement and the other Exchange Documents shall be,
without any further action by the Holder or the Company, deemed amended and
modified in an economically and legally equivalent manner such that the Holder
shall receive the benefit of the more favorable terms contained in such
Amendment. Notwithstanding the foregoing, the Company agrees, at its expense,
to
take such other actions (such as entering into amendments to the Exchange
Documents and the Transaction Documents) as the Holder may reasonably request
to
further effectuate the foregoing. Notwithstanding the foregoing, the foregoing
provisions shall not apply to any settlement with any Person that arises
from or
is entered into in connection with the settlement or disposition of a dispute
with or claim by such Person.
[signature
pages follow]
36
IN
WITNESS WHEREOF,
the
Holder and the Company have caused their respective signature page to this
Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
| WORKSTREAM INC. | ||
|
By:
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Name:
|
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Title:
|
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IN
WITNESS WHEREOF,
the
Holder and the Company have caused their respective signature page to this
Agreement to be duly executed as of the date first written above.
|
HOLDER:
|
|
|
|
|
|
|
|
|
By:
|
|
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Its:
|
EXHIBITS
| Exhibit A |
Form
of Note
|
| Exhibit B | Form of Warrant |
| Exhibit C | Form of Guaranty |
| Exhibit D | Form of Security Agreement |
| Exhibit E | Form of Amended Registration Rights Agreement |
