SOCKET COMMUNICATIONS, INC.
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
November __, 1998
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock and Warrants 1
1.1 Issuance of Series D Convertible Preferred Stock and Investor
Warrant 1
1.2 Consulting Agreement with Global Holdings 1
1.3 Closing Date 1
1.4 Delivery 1
2. Representations and Warranties of the Company 2
2.1 Organization, Good Standing and Qualification 2
2.2 Capitalization 2
2.3 Subsidiaries 2
2.4 Authorization 2
2.5 Valid Issuance of Preferred and Common Stock 3
2.6 Governmental Consents 3
2.7 Litigation 4
2.8 Patents and Trademarks 4
2.9 Compliance with Other Instruments 4
2.10 Permits 5
2.11 Disclosure 5
2.12 Title to Property and Assets 5
2.13 Company Financial Statements 5
2.14 Taxes and Tax Returns 5
2.15 Brokers or Finders 6
3. Representations and Warranties of the Investor 6
3.1 Experience 6
3.2 Investment 6
3.3 Rule 144 6
3.4 Access to Data 6
3.5 Authorization 7
3.6 High Degree of Risk 7
4. Conditions of Investor's Obligations at Closing 7
4.1 Representations and Warranties 7
4.2 Performance 7
4.3 Compliance Certificate 8
4.4 Blue Sky 8
4.5 Issuance of Investor Warrant 8
4.6 Consulting Agreement with Global Holdings 8
4.7 Opinion of Counsel 8
5. Conditions of the Company's Obligations at Closing 8
5.1 Representations and Warranties 8
5.2 Payment of Purchase Price 8
5.3 Blue Sky 8
5.4 Proceedings and Documents 8
6. Registration Rights; Restrictions on Transfer 8
6.1 Certain Definitions 8
6.2 Restrictions on Transferability 10
6.3 Restrictive Legend 10
6.4 Notice of Proposed Transfers 10
6.5 Company Registration 11
6.6 Registration on Form S-3 12
6.7 Expenses of Registration 13
6.8 Indemnification 13
6.9 Information by Holder 15
6.10 Transfer or Assignment of Rights 15
6.13 "Lock-Up" Agreement 16
7. Preemptive Rights 16
8. Observer Rights 17
10. Miscellaneous 18
10.1 Governing Law 18
10.2 Survival 18
10.3 Successors and Assigns 18
10.4 Entire Agreement; Amendment 18
10.5 Notices, etc 18
10.6 Delays or Omissions 18
10.7 California Corporate Securities Law 19
10.8 Expenses 19
10.9 Finder's Fee 19
10.10 Counterparts 19
10.11 Severability 19
Exhibit A Certificate of Designations, Preferences and Rights of
Series B Preferred Stock
Exhibit B Form of Warrant To Investor
Exhibit C Form of Warrant To Global Holdings, L.P.
Exhibit D Form of Consulting Agreement
Exhibit E Schedule of Exceptions
Exhibit F Form of Opinion of Counsel
SOCKET COMMUNICATIONS, INC.
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Series D Convertible Preferred Stock Purchase Agreement is
made as of November 9, 1998, by and between Socket Communications, Inc.,
a Delaware corporation (the "Company"), The Harmat Organization, Inc.,
a Delaware corporation (the "Investor") and Global Holdings, L.P., a
Delaware limited partnership ("Global Holdings").
The parties hereby agree as follows:
1. Purchase and Sale of Stock and Warrants1. Purchase and Sale
of Stock and Warrants. Purchase and Sale of Stock and Warrants tc \l 11
". Purchase and Sale of Stock and Warrants" .
1.1 Issuance of Series D Convertible Preferred Stock and
Investor Warrant1.1 Issuance of Series D Convertible Preferred Stock
and Investor Warrant.1 Issuance of Series D Convertible Preferred Stock
and Investor Warrant tc \x 00 ".0 Xxxxxxxx of Series D Convertible
Preferred Stock and Investor Warrant" .
(a) The Board of Directors of the Company shall adopt
and file with the Secretary of State of Delaware, on or before the
Closing (as defined below), the Certificate of Designations of
Preferences and Rights of Series D Convertible Preferred Stock (the
"Certificate of Designations") in the form attached hereto as
Exhibit A.
(b) Subject to the terms and conditions of this
Agreement, the Investor agrees to purchase from the Company at the
Closing, and the Company agrees to sell and issue to the Investor at the
Closing, 130,179 shares of Series D Convertible Preferred Stock (the
"Shares") and a warrant to purchase 435,729 shares of Common Stock in
the form attached hereto as Exhibit B (the "Investor Warrant") for an
aggregate purchase price of $750,000.
1.2 Consulting Agreement with Global Holdings1.2
Consulting Agreement with Global Holdings.2 Consulting
Agreement with Global Holdings tc \l 21 ".2 Consulting Agreement with
Global Holdings" . The Company agrees to pay to Global Holdings $50,000
in cash at the Closing and to issue to Global Holdings at the Closing a
warrant to purchase 60,000 shares of Common Stock in the form attached
hereto as Exhibit C (the "Global Holdings Warrant") pursuant to the
terms of a Consulting Agreement in the form attached hereto as Exhibit D
(the "Consulting Agreement").
1.3 Closing Date1.3 Closing Date.3 Closing Date tc \l
21 ".3 Closing Date" . The closing of the purchase and sale of the
Shares hereunder (the "Closing") shall be held at 10:00 a.m.
(California time) on such date that the Company and the Investor mutually
agree but no later than November __,1998 (the date of such Closing being
referred to as the "Closing Date"). The place of the Closing
(including the place of delivery to the Investor by the Company of the
certificate evidencing the Shares and the Investor Warrant being
purchased and the place of payment to the Company by the Investor of the
purchase price therefor) shall be at the offices of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000,
or at such other location as the Company and the Investor may agree.
1.4 Delivery1.4 Delivery.4 Delivery tc \l 21 ".4
Delivery" . At the Closing, the Company will deliver to the
Investor a certificate representing the Shares and the Investor Warrant
against payment of the purchase price therefor, by check or wire transfer
in immediately available funds, in the amount of $750,000. At the
Closing, the Company will also deliver to Global Holdings the $50,000
cash payment referred to in Section 1.2 above and the Global Holdings
Warrant pursuant to the terms of the Consulting Agreement.
2. Representations and Warranties of the Company2.
Representations and Warranties of the Company. Representations and
Warranties of the Company tc \l 12 ". Representations and Warranties
of the Company" . Except as set forth in (i) the Company's Form 10-K for
the year ended December 31, 1997 and Form 10-Q for the quarter ended June
30, 1998, copies of which have been provided to the Investor, or (ii) the
Schedule of Exceptions attached hereto as Exhibit E, the Company hereby
represents and warrants to the Investor as follows:
2.1 Organization, Good Standing and Qualification2.1
Organization, Good Standing and Qualification.1 Organization, Good
Standing and Qualification tc \l 22 ".1 Organization, Good Standing and
Qualification" . The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to carry on its business
as currently conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its
business or properties. True and accurate copies of the Company's
Amended and Restated Certificate of Incorporation and Bylaws, each as
amended and in effect at the Closing, have been delivered to the
Investor.
2.2 Capitalization2.2 Capitalization.2 Capitalization tc
\x 00 ".0 Xxxxxxxxxxxxxx" . The authorized capital stock of the
Company consists of 15,000,000 shares of Common Stock, $0.001 par value
("Common Stock"), of which 7,365,914 shares are issued and outstanding
as of November 2, 1998, and 3,000,000 shares of Preferred Stock
("Preferred Stock"), of which 37,500 shares are designated Series B
Convertible Preferred Stock, 12,500 of which are issued and outstanding,
8,850 shares are designated Series B-1 Convertible Preferred Stock, all
of which are issued and outstanding, 8,715 shares are designated Series
B-2 Convertible Preferred Stock, all of which are issued and outstanding,
95,037 shares are designated Series C Convertible Preferred Stock, all of
which are issued and outstanding, 51,574 shares are designated Series C-1
Convertible Preferred Stock, all of which are issued and outstanding, and
16,857 shares are designated Series C-2 Convertible Preferred Stock, all
of which are issued and outstanding. All such issued and outstanding
shares have been duly authorized and validly issued and are fully paid
and nonassessable. An aggregate of 1,918,508 shares of Common Stock are
reserved for issuance under the Company's 1993 Stock Option Plan/Stock
Issuance Plan and the Company's 1995 Stock Plan. Except as set forth on
Schedule 2.2 of Exhibit E, there are no outstanding rights, options,
warrants, preemptive rights, rights of first refusal or similar rights
for the purchase or acquisition from the Company of any securities of the
Company.
2.3 Subsidiaries2.3 Subsidiaries.3 Subsidiaries tc \l
22 ".3 Subsidiaries" . The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant
in any joint venture, partnership, or similar arrangement.
2.4 Authorization2.4 Authorization.4 Authorization tc
\l 22 ".4 Authorization" . Except as set forth in Schedule 2.4 of
Exhibit E, all corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of the
Company hereunder and thereunder, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Shares, the Investor
Warrant and the Global Holdings Warrant (together, the "Warrants")
being sold hereunder, and the Common Stock issuable upon conversion of
the Shares and upon exercise of the Warrants, has been taken or will be
taken prior to the Closing, and this Agreement constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with
its terms, subject to: (i) judicial principles limiting the availability
of specific performance, injunctive relief, and other equitable remedies;
and (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or
affecting creditors' rights.
2.5 Valid Issuance of Preferred and Common Stock2.5 Valid
Issuance of Preferred and Common Stock.5 Valid Issuance of Preferred and
Common Stock tc \x 00 ".0 Xxxxx Xxxxxxxx of Preferred and Common
Stock" . The Shares and the Investor Warrant being purchased by the
Investor hereunder, when issued, sold and delivered in accordance with
the terms of this Agreement for the consideration expressed herein, and
the Global Holdings Warrant, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration
expressed in Section 1.2 hereof, will be duly and validly issued, fully
paid, and nonassessable, and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement, such Warrants
and applicable state and federal securities laws. Except as set forth in
Schedule 2.5 of Exhibit E, the Common Stock issuable upon conversion of
the Series D Convertible Preferred Stock and the Common Stock issuable
upon exercise of the Warrants has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the
Certificate of Designations and the Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") or upon issuance in
accordance with the terms of such Warrants, as the case may be, will be
duly and validly issued, fully paid, and nonassessable and will be free
of restrictions on transfer other than restrictions on transfer under
this Agreement, such Warrants and applicable state and federal securities
laws. So long as the number of shares of Common Stock of the Company
outstanding on a fully-diluted, as-converted basis exceeds the number of
authorized Common Stock of the Company, at the 1999 Annual Meeting of
Stockholders (which shall be held prior to June 30, 1999) the Company
shall seek stockholder approval of an amendment to its Certificate of
Incorporation to increase its authorized Common Stock so that the number
of authorized shares of Common Stock will thereafter exceed the number of
shares outstanding on a fully-diluted, as-converted basis, and the
Company shall use its reasonable best efforts to obtain such stockholder
approval.
2.6 Governmental Consents2.6 Governmental Consents.6
Governmental Consents tc \l 22 ".6 Governmental Consents" . No
consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal,
state or local governmental authority on the part of the Company is
required in connection with the offer, sale or issuance of the Shares
(and the Common Stock issuable upon conversion of the Shares) or the
Warrants (and the Common Stock issuable upon exercise of the Warrants)
(together with the Shares and the Common Stock issuable upon conversion
thereof, the "Securities") or the consummation of any other transaction
contemplated hereby, except for the following: (i) the filing of the
Certificate of Designations in the office of the Secretary of State of
the State of Delaware, which shall be filed by the Company on or prior to
the Closing; (ii) the filing of such notices as may be required under the
Securities Act of 1933, as amended (the "Securities Act"); and
(iii) the filing of any notices required under applicable state
securities laws (the "Applicable Blue Sky Law"). Based in part on the
representations of the Investor set forth in Section 3 below and of
Global Holdings set forth in the Global Holdings Warrant, the offer, sale
and issuance of the Shares and the Warrants in conformity with the terms
of this Agreement are exempt from the registration requirements of
Section 5 of the Securities Act and from the qualification requirements
of Applicable Blue Sky Law.
2.7 Litigation2.7 Litigation.7 Litigation tc \l
22 ".7 Litigation" . There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge,
currently threatened before any court, administrative agency or other
governmental body against the Company which questions the validity of
this Agreement and the Investor Rights Agreement or the right of the
Company to enter into it, or to consummate the transactions contemplated
hereby or thereby, or which could result, either individually or in the
aggregate, in any material adverse change in the condition (financial or
otherwise), business, property, assets or liabilities of the Company.
The foregoing includes, without limitation, actions, suits, proceedings
or investigations pending or threatened (or any basis therefor known to
the Company) involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to, and none of its
assets is bound by, the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality.
2.8 Patents and Trademarks2.8 Patents and Trademarks.8
Patents and Trademarks tc \l 22 ".8 Patents and Trademarks" .
The Company has sufficient title and ownership of all patents,
trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes (collectively,
"Intellectual Property") necessary for its business as now conducted
without any conflict with or infringement of the rights of others. There
are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the Intellectual
Property of any other person or entity. Except as set forth in Schedule
2.8 of Exhibit E, the Company has not received any communications
alleging that any material Intellectual Property of the Company has
violated or would violate any of the Intellectual Property of any other
person or entity.
2.9 Compliance with Other Instruments2.9 Compliance
with Other Instruments.9 Compliance with Other Instruments tc \l 22
".9 Compliance with Other Instruments" . Except as set forth in
Schedule 2.9 of Exhibit E, the Company is not in violation or default of
any provision of its Certificate of Incorporation or Bylaws, each as
amended and in effect on and as of the Closing. Except as set forth in
Schedule 2.9 of Exhibit E, the Company is not in violation or default of
any material provision of any instrument, mortgage, deed of trust, loan,
contract, commitment, judgment, decree, order or obligation to which it
is a party or by which it or any of its properties or assets are bound
or, to the best of its knowledge, of any provision of any federal, state
or local statute, rule or governmental regulation, except for such
violations or defaults which would not materially adversely affect the
Company's business or properties. The execution, delivery and
performance of and compliance with this Agreement, and the issuance and
sale of the Shares and the Warrants, will not result in any such
violation, be in conflict with or constitute, with or without the passage
of time or giving of notice, a default under any such provision, require
any consent or waiver under any such provision (other than any consents
or waivers that have been obtained), or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company pursuant to any such provision.
2.10 Permits2.10 Permits.10 Permits tc \x 00 ".00
Xxxxxxx" . The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now
being conducted by it, the lack of which could materially and adversely
affect the Company's business or properties, and the Company believes it
can obtain, without undue burden or expense, any similar authority for
the conduct of its business as planned to be conducted. The Company is
not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
2.11 Disclosure2.11 Disclosure.11 Disclosure tc \x
00 ".00 Xxxxxxxxxx" . No representation, warranty or statement by
the Company in this Agreement, or in any written statement or certificate
furnished to the Investor pursuant to this Agreement or the transactions
contemplated hereby, contains any untrue statement of a material fact or,
when taken together, omits to state a material fact necessary to make the
statements made herein or therein, in light of the circumstances under
which they were made, not misleading.
2.12 Title to Property and Assets2.12 Title to Property
and Assets.12 Title to Property and Assets tc \x 00 ".00 Xxxxx
to Property and Assets" . Except as set forth in Schedule 2.12 of
Exhibit E, the Company has good and marketable title to all of its
properties and assets free and clear of all mortgages, liens and
encumbrances, except liens for current taxes and assessments not yet due
and possible minor liens and encumbrances which do not, in any case, in
the aggregate, materially detract from the value of the property subject
thereto or materially impair the operations of the Company. With respect
to the property and assets it leases, the Company is in compliance with
such leases and, to the best of its knowledge, holds a valid leasehold
interest free of all liens, claims or encumbrances.
2.13 Company Financial Statements2.13 Company Financial
Statements.13 Company Financial Statements tc \x 00 ".00 Xxxxxxx
Financial Statements" . The Company's audited balance sheets as of
December 31, 1997, and the related audited statements of income and cash
flow for the twelve-month period ended December 31, 1997, included in the
Company's Form 10-K for the year ended December 31, 1997, and the
Company's unaudited balance sheets as of June 30, 1998 and the related
unaudited statements of income and cash flow for the six-month period
ended June 30, 1998 included in the Company's Form 10-Q for the quarter
ended June 30, 1998 (collectively the "Company Financials"), are
correct in all material respects and have been prepared in accordance
with U.S. generally accepted accounting principles consistent with the
reporting practices and principles ("GAAP"), applied on a basis
consistent throughout the periods indicated and consistent with each
other. The Company Financials present fairly the financial condition,
operating results and cash flows of the Company as of the dates and
during the periods indicated therein.
2.14 Taxes and Tax Returns2.14 Taxes and Tax Returns.14
Taxes and Tax Returns tc \x 00 ".00 Xxxxx and Tax Returns" .
The Company has accurately prepared all United States income tax returns
and all state and municipal tax returns required to be filed by it, if
any, has paid all taxes, assessments, fees and charges when and as due
under such returns and has made adequate provision for the payment of all
other taxes, assessments, fees and charges shown on such returns or on
assessments received by the Company. To the best of the Company's
knowledge, no deficiency assessment or proposed adjustment of the
Company's United States income tax or state or municipal taxes is
pending. The Company has withheld or collected from each payment made to
each of its employees, the amount of all taxes, including, but not
limited to, federal income taxes, Federal Insurance Contribution Act
taxes and Federal Unemployment Tax Act taxes, required to be withheld or
collected therefrom, and have paid the same to the proper tax receiving
officers or authorized depositaries.
2.15 Brokers or Finders2.15 Brokers or Finders.15 Brokers
or Finders tc \x 00 ".00 Xxxxxxx or Finders" . Except as
specifically provided in this Agreement, the Company has not agreed to
incur, directly or indirectly, any liability for brokerage or finders'
fees, agents' commissions or other similar charges in connection with
this Agreement or any of the transactions contemplated hereby.
3. Representations and Warranties of the Investor3.
Representations and Warranties of the Investor. Representations and
Warranties of the Investor tc \l 13 ". Representations and Warranties
of the Investor" . The Investor hereby represents and warrants that:
3.1 Experience3.1 Experience.1 Experience tc \l
23 ".1 Experience" . Such Investor is experienced in evaluating
companies such as the Company, is able to fend for itself in transactions
such as the one contemplated by this Agreement, has such knowledge and
experience in financial and business matters that Investor is capable of
evaluating the merits and risks of Investor's prospective investment in
the Company, and has the ability to bear the economic risks of the
investment.
3.2 Investment3.2 Investment.2 Investment tc \l
23 ".2 Investment" . Such Investor is acquiring the Securities for
investment for such Investor's own account and not with the view to, or
for resale in connection with, any distribution thereof. Such Investor
understands that the Securities have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things,
the bona fide nature of the investment intent as expressed herein. Such
Investor further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer
or grant participation to any third person with respect to any of the
Securities. Such Investor understands and acknowledges that the offering
of the Securities pursuant to this Agreement will not, and any issuance
of Common Stock on conversion may not, be registered under the Securities
Act on the ground that the sale provided for in this Agreement and the
issuance of securities hereunder is exempt from the registration
requirements of the Securities Act.
3.3 Rule 1443.3 Rule 144.3 Rule 144 tc \l 23 ".3
Rule 144" . Such Investor acknowledges that the Securities must be
held for at least one (1) year pursuant to Rule 144 promulgated under the
Securities Act unless subsequently registered under the Securities Act or
an exemption from such registration is available. Such Investor is aware
of the provisions of Rule 144, which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Such Investor covenants that, in the absence of an effective
registration statement covering the stock in question, such Investor will
sell, transfer, or otherwise dispose of the Securities only in a manner
consistent with such Investor's representations and covenants set forth
in this Section 3. In connection therewith, such Investor acknowledges
that the Company will make a notation on its stock books regarding the
restrictions on transfers set forth in this Section 3 and will transfer
securities on the books of the Company only to the extent not
inconsistent therewith.
3.4 Access to Data3.4 Access to Data.4 Access to Data tc
\x 00 ".0 Xxxxxx to Data" . Such Investor has received and reviewed
information about the Company and has had an opportunity to discuss the
Company's business, management and financial affairs with its management
and to review the Company's facilities. Such Investor understands that
such discussions, as well as any written information issued by the
Company, were intended to describe the aspects of the Company's business
and prospects which the Company believes to be material, but were not
necessarily a thorough or exhaustive description. The foregoing,
however, does not limit or modify the representations and warranties of
the Company in Section 2 of this Agreement or the right of the Investor
to rely thereon.
3.5 Authorization3.5 Authorization.5 Authorization tc
\x 00 ".0 Xxxxxxxxxxxxx" . This Agreement when executed and delivered
by such Investor will constitute a valid and legally binding obligation
of such Investor, enforceable in accordance with its terms, subject to:
(i) judicial principles respecting election of remedies or limiting the
availability of specific performance, injunctive relief, and other
equitable remedies; and (ii) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect generally
relating to or affecting creditors' rights.
3.6 High Degree of Risk3.6 High Degree of Risk.6 High
Degree of Risk tc \x 00 ".0 Xxxx Xxxxxx of Risk" . Such Investor is
aware that the securities offered hereby involve a high degree of risk
and that Investor may suffer a total loss of its investment. The
Investor has been provided with, among other things, the Company's
periodic reports filed with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended, including the Company's
most recently filed Annual Report on Form 10-K and Quarterly Report on
Form 10-Q. Such Investor has read the information in such reports,
including the information under the caption "Risk Factors" included in
the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section. Such Investor is further aware that
following the investment contemplated herein, the Company may need to
raise additional capital to maintain continued listing of its Common
Stock on the Pacific Exchange. Should the Company's Common Stock be
delisted from the Pacific Exchange, such Investor understands that it
would find it more difficult to dispose of, or obtain accurate quotations
as to the price of, the Company's securities, and that the ability or
willingness of broker-dealers to sell or make a market in the Company's
Common Stock, and therefore such Investor understands that its ability to
sell the Company's Common Stock in the secondary market would be
materially adversely affected.
4. Conditions of Investor's Obligations at Closing4.
Conditions of Investor's Obligations at Closing. Conditions of
Investor's Obligations at Closing tc \l 14 ". Conditions of Investor's
Obligations at Closing" . The obligations of the Investor under
subsection 1.1(b) of this Agreement are subject to the fulfillment on or
before each Closing of each of the following conditions, the waiver of
which shall not be effective against any Investor who does not consent in
writing thereto:
4.1 Representations and Warranties4.1 Representations and
Warranties.1 Representations and Warranties tc \x 00 ".0
Xxxxxxxxxxxxxxx and Warranties" . The representations and
warranties of the Company contained in Section 2 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
4.2 Performance4.2 Performance.2 Performance tc \l
24 ".2 Performance" . The Company shall have performed and complied
with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or
before the Closing.
4.3 Compliance Certificate4.3 Compliance Certificate.3
Compliance Certificate tc \x 00 ".0 Xxxxxxxxxx Xxxxxxxxxxx" .
The President of the Company shall deliver to the Investor at the
Closing a certificate stating that the conditions specified in
Sections 4.1 and 4.2 have been fulfilled.
4.4 Blue Sky4.4 Blue Sky.4 Blue Sky tc \l 24 ".4 Blue
Sky" . The Company shall have obtained all necessary permits and
qualifications, if any, or secured an exemption therefrom, required by
any state or country prior to the offer and sale of the Shares.
4.5 Issuance of Investor Warrant4.5 Issuance of
Investor Warrant.5 Issuance of Investor Warrant tc \x 00 ".0
Xxxxxxxx of Investor Warrant" . Upon the Closing, the Company
shall have delivered to the Investor the Investor Warrant.
4.6 Consulting Agreement with Global Holdings4.6
Consulting Agreement with Global Holdings.6 Consulting
Agreement with Global Holdings tc \l 24 ".6 Consulting Agreement with
Global Holdings" . At the Closing, the Company shall have delivered to
Global Holdings the Consulting Agreement and shall have paid to Global
Holdings in cash a consulting fee of $50,000 and shall have delivered to
Global Holdings the Global Holdings Warrant in accordance with the
Consulting Agreement.
4.7 Opinion of Counsel4.7 Opinion of Counsel.7 Opinion
of Counsel tc \l 24 ".7 Opinion of Counsel" . At the closing,
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., counsel to the Company, shall
have delivered to the Investor an opinion in the form attached hereto as
Exhibit F.
5. Conditions of the Company's Obligations at Closing5.
Conditions of the Company's Obligations at Closing. Conditions of
the Company's Obligations at Closing tc \l 15 ". Conditions of the
Company's Obligations at Closing" . The obligations of the Company to
the Investor under this Agreement are subject to the fulfillment on or
before each Closing of each of the following conditions by that Investor:
5.1 Representations and Warranties5.1 Representations and
Warranties.1 Representations and Warranties tc \x 00 ".0
Xxxxxxxxxxxxxxx and Warranties" . The representations and
warranties of the Investor contained in Section 3 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.2 Payment of Purchase Price5.2 Payment of Purchase
Price.2 Payment of Purchase Price tc \l 25 ".2 Payment of Purchase
Price" . The Investor shall have delivered the purchase price specified
in Section 1.1 against delivery of the Shares.
5.3 Blue Sky5.3 Blue Sky.3 Blue Sky tc \l 25 ".3 Blue
Sky" . The Company shall have obtained all necessary permits and
qualifications, if any, or secured an exemption therefrom, required by
any state or country for the offer and sale of the Shares.
5.4 Proceedings and Documents5.4 Proceedings and
Documents.4 Proceedings and Documents tc \x 00 ".0 Xxxxxxxxxxx and
Documents" . All corporate and other proceedings in connection with the
transactions contemplated at the Closing hereby, and all documents and
instruments incident to these transactions, shall be reasonably
satisfactory in substance to the Company and its counsel.
6. Registration Rights; Restrictions on Transfer6. Registration
Rights; Restrictions on Transfer. Registration Rights; Restrictions on
Transfer tc \l 16 ". Registration Rights; Restrictions on Transfer" .
6.1 Certain Definitions.1 Certain Definitions.1 Certain
Definitions tc \l 26 ".1 Certain Definitions" . As used in
Sections 6 and 7 hereof, the following terms shall have the following
respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other Federal agency at the time administering the
Securities Act.
"Common Stock" shall mean all shares of Common Stock of the
Company.
"Conversion Stock" shall mean the Common Stock issued or
issuable upon conversion of shares of Series D Preferred.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules
and regulations thereunder, all as the same shall be in effect from time
to time.
"Holders" shall mean the Investor and any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in compliance with Sections 6.2 and 6.10
hereof.
"Preferred Stock" shall mean all shares of all Series of
Preferred Stock of the Company.
"Registrable Securities" shall mean (i) Common Stock held
by the Investor or issued or issuable upon conversion of the Series D
Preferred, (ii) the Warrant Stock or (iii) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the stock referenced in (i) or (ii) above.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration or
ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 6.5 and 6.6 hereof, including,
without limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel for the Company which shall include any
fees and disbursements for legal services provided by counsel for the
Company on behalf of the Holders up to a maximum of $10,000 of fees and
disbursements, blue sky fees and expenses for state qualifications or
registrations.
"Restricted Securities" shall mean the securities of the
Company required to bear or bearing the legend set forth in Section 3
hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and expense allowances applicable to the sale of
Registrable Securities and all fees and disbursements of counsel for any
Holder (other than the fees and disbursements of the Company's counsel
included in Registration Expenses).
"Warrant Stock" shall mean the Common Stock issued or
issuable upon exercise of the Warrants.
6.2 Restrictions on Transferability6.2 Restrictions on
Transferability.2 Restrictions on Transferability tc \l 26 ".2
Restrictions on Transferability" . The Series D Preferred, the
Conversion Stock, the Warrant Stock and any other securities issued in
respect of the foregoing upon any stock split, stock dividend,
recapitalization, merger, consolidation, or similar event, shall not be
transferred except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Any transferee of such securities shall take and hold
such securities subject to the provisions and upon the conditions
specified in this Agreement.
6.3 Restrictive Legend.3 Restrictive Legend.3
Restrictive Legend tc \x 00 ".0 Xxxxxxxxxxx Legend" . Each
certificate representing the Series D Preferred, the Conversion Stock,
the Warrant Stock and any other securities issued in respect of the
foregoing upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted or
unless the securities evidenced by such certificate shall have been
registered under the Securities Act) be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO, AND MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH, THAT
CERTAIN STOCK PURCHASE AGREEMENT AMONG THE HOLDER OF THESE
SECURITIES AND CERTAIN OTHER HOLDERS OF THE COMPANY'S STOCK,
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
ISSUER.
Upon request of a holder of such a certificate, the Company
shall remove the foregoing legend from the certificate or issue to such
holder a new certificate therefor free of any transfer legend, if, with
such request, the Company shall have received either the opinion referred
to in Section 6.4(i) or the "no-action" letter referred to in
Section 6.4(ii) to the effect that any transfer by such holder of the
securities evidenced by such certificate will not violate the Securities
Act and applicable state securities laws, unless any such transfer legend
may be removed pursuant to Rule 144(k) or any successor rule, in which
case no such opinion or "no-action" letter shall be required.
6.4 Notice of Proposed Transfers6.4 Notice of Proposed
Transfers.4 Notice of Proposed Transfers tc \x 00 ".0 Xxxxxx of
Proposed Transfers" . The holder of each certificate representing
Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 6.4. Prior to any proposed
transfer of any Restricted Securities (other than under circumstances
described in Section 6.5 and 6.6 hereof), the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer. Each such notice shall describe the manner and circumstances
of the proposed transfer in sufficient detail, and shall be accompanied
by either (i) if required, a written opinion of legal counsel to the
holder who shall be reasonably satisfactory to the Company, addressed to
the Company, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Securities Act
or (ii) a "no-action" letter from the Commission to the effect that the
distribution of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with
respect thereto, whereupon the holder of such Restricted Securities shall
be entitled to transfer such Restricted Securities in accordance with the
terms of the notice delivered by such holder to the Company. The Company
will not require such a legal opinion or "no action" letter (i) in any
transaction in compliance with Rule 144 promulgated under the Securities
Act, (ii) in any transaction in which the Investor distributes Restricted
Securities solely to its stockholders on a pro rata basis for no
consideration, or (iii) in any transaction in which a holder which is a
partnership distributes Restricted Securities solely to partners thereof
on a pro rata basis for no consideration; provided that each transferee
agrees in writing to be subject to the terms of the section 4. Each
certificate evidencing the Restricted Securities transferred as above
provided shall bear the restrictive legend set forth in Section 3 above.
6.5 Company Registration.5 Company Registration.5 Company
Registration tc \l 26 ".5 Company Registration"
(i) If at any time, the Company shall determine to
register any of its securities either for its own account or the account
of a holder or holders of its securities (other than Holders of
Registrable Securities) exercising their respective demand registration
rights, other than (i) a registration relating solely to employee benefit
plans, (ii) a registration relating solely to a Commission Rule 145
transaction, the Company will:
(1) promptly give to each Holder written notice
thereof; and
(2) include in such registration (and any
related qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all of the Registrable Securities
specified in a written request or requests made by any Holder within 30
days after receipt of the written notice from the Company, except as set
forth in Section 6.5(ii) below. Such written request may specify all or
a part of a Holder's Registrable Securities.(2) include in such
registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all of the
Registrable Securities specified in a written request or requests made by
any Holder within 30 days after receipt of the written notice from the
Company, except as set forth in Section 6.5(ii) below. Such written
request may specify all or a part of a Holder's Registrable
Securities.(2) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all of the Registrable Securities
specified in a written request or requests made by any Holder within 30
days after receipt of the written notice from the Company, except as set
forth in Section 6.5(ii) below. Such written request may specify all or
a part of a Holder's Registrable Securities. tc \l 4 "(2) include in
such registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all of the
Registrable Securities specified in a written request or requests made by
any Holder within 30 days after receipt of the written notice from the
Company, except as set forth in Section 6.5(ii) below. Such written
request may specify all or a part of a Holder's Registrable Securities."
(ii) If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6.5(i)(1). In such event the right of any Holder
registration pursuant to this Section 6.5 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other
provision of this Section 6.5, if the managing underwriters of the
offering advise the Company in writing that marketing factors require a
limitation on the number of shares to be underwritten, the Company may
limit the number of Registrable Securities to be included in the
registration and underwriting. In such event, the Company shall so
advise all Holders requesting registration and the number of Registrable
Securities that are entitled to be included in the registration and
underwriting shall be reduced to the extent required by the underwriters'
limitation, in proportion, as nearly as practicable, to the number of
Registrable Securities held by each Holder. If any Holder disapproves of
the terms of any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration.(ii) If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to Section
6.5(i)(1). In such event the right of any Holder registration pursuant
to this Section 6.5 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
by the Company. Notwithstanding any other provision of this Section 6.5,
if the managing underwriters of the offering advise the Company in
writing that marketing factors require a limitation on the number of
shares to be underwritten, the Company may limit the number of
Registrable Securities to be included in the registration and
underwriting. In such event, the Company shall so advise all Holders
requesting registration and the number of Registrable Securities that are
entitled to be included in the registration and underwriting shall be
reduced to the extent required by the underwriters' limitation, in
proportion, as nearly as practicable, to the number of Registrable
Securities held by each Holder. If any Holder disapproves of the terms
of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.(ii) If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to Section
6.5(i)(1). In such event the right of any Holder registration pursuant
to this Section 6.5 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
by the Company. Notwithstanding any other provision of this Section 6.5,
if the managing underwriters of the offering advise the Company in
writing that marketing factors require a limitation on the number of
shares to be underwritten, the Company may limit the number of
Registrable Securities to be included in the registration and
underwriting. In such event, the Company shall so advise all Holders
requesting registration and the number of Registrable Securities that are
entitled to be included in the registration and underwriting shall be
reduced to the extent required by the underwriters' limitation, in
proportion, as nearly as practicable, to the number of Registrable
Securities held by each Holder. If any Holder disapproves of the terms
of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. tc \l 3 "(ii)
If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to
Section 6.5(i)(1). In such event the right of any Holder registration
pursuant to this Section 6.5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
by the Company. Notwithstanding any other provision of this Section 6.5,
if the managing underwriters of the offering advise the Company in
writing that marketing factors require a limitation on the number of
shares to be underwritten, the Company may limit the number of
Registrable Securities to be included in the registration and
underwriting. In such event, the Company shall so advise all Holders
requesting registration and the number of Registrable Securities that are
entitled to be included in the registration and underwriting shall be
reduced to the extent required by the underwriters' limitation, in
proportion, as nearly as practicable, to the number of Registrable
Securities held by each Holder. If any Holder disapproves of the terms
of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration."
6.6 Registration on Form S-3.6 Registration on Form S-
3.6 Registration on Form S-3 tc \x 00 ".0 Xxxxxxxxxxxx on Form S-
3" .
(i) The Company shall file a Registration Statement
on Form S-3 or other appropriate registration document under the
Securities Act of 1933, as amended, for resale of the Registrable
Securities and shall maintain the shelf registration effective for as
long as a registration statement is required for resale of the Common
Stock (it being agreed that such a registration statement shall be
required so long as a Holder is subject to the volume limitations of Rule
144(e) under the Securities Act). The Company shall use reasonable
efforts to file such Registration Statement within ninety (90) days of a
request by a Holder.
(ii) Notwithstanding the foregoing, the Company shall
not be obligated to take any action pursuant to this Section 6.6:
(1) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act;
(2) if the Company, within ten (10) days of the
receipt of the request of the Investor or the holders of a majority of
the Registrable Securities, as the case may be, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within sixty (60) days of receipt of such request (other than
a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan);
(3) during the period starting with the date of
filing of, and ending on the date 90 days immediately following the
effective date of, any registration statement pertaining to securities of
the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that
the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective; or
(4) if the Company shall furnish to the
Investor or Global Holdins, as the case may be, a certificate signed by
the President of the Company stating that in the good faith judgment of
the Board of Directors it would be seriously detrimental to the Company
or its stockholders for registration statements to be filed in the near
future, in which case the Company's obligation to use its best efforts to
file a registration statement shall be deferred for a period not to
exceed ninety (90) days from the receipt of the request to file such
registration by the Investor, provided that the Company may not exercise
this deferral right more than once per twelve-month period.
(iii) In the event that the Company fails to perform
any of its obligations under this Section 6.6 and such failure to perform
remains uncured, the Company shall not have the right to call the
Investor Warrant, notwithstanding any provision in such warrant to the
contrary, for so long as such failure to perform remains uncured.
6.7 Expenses of Registration6.7 Expenses of
Registration.7 Expenses of Xxxxxxxxxxxx xx \x 00 ".7 Expenses of
Registration" . The Company shall bear all Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to this Agreement and all underwriting discounts, selling
commissions and expense allowances applicable to the sale of any
securities by the Company for its own account in any registration. All
Selling Expenses shall be borne by the Holders, if any, whose securities
are included in such registration pro rata on the basis of the number of
their Registrable Securities so registered.
6.8 Indemnification6.8 Indemnification.8
Indemnification tc \x 00 ".0 Xxxxxxxxxxxxxxx" .
(i) The Company will indemnify each Holder, each of
its officers, directors, agents, employees and partners, and each person
controlling such Holder, with respect to each registration, qualification
or compliance effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls any underwriter, and their
respective counsel against all claims, losses, damages and liabilities
(or actions, proceedings or settlements in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other
document prepared by the Company (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of
its officers, directors, agents, employees and partners, and each person
controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses as
they are reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided
that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement (or alleged untrue statement) or omission
(or alleged omissions) based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for
use therein.
(ii) Each Holder whose Registrable Securities are
included in any registration, qualification or compliance effected
pursuant to this Agreement will indemnify the Company, each of its
directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such
Holder and each of their officers, directors and partners, and each
person controlling such Holder, and their respective counsel against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, directors,
officers, partners, persons, underwriters or control persons for any
legal or any other expenses as they are reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability
or action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with
written information furnished to the Company by such Holder and stated to
be specifically for use therein; provided, however, that the obligations
of such Holders hereunder shall be limited to an amount equal to the net
proceeds to each such Holder sold under such registration statement,
prospectus, offering circular or other document as contemplated herein.
(iii) Each party entitled to indemnification under this
Section 6.8 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting therefrom,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in
such defense at such party's expense; and provided further that if any
Indemnified Party reasonably concludes that there may be one or more
legal defenses available to it that are not available to the Indemnifying
Party, or that such claim or litigation involves or could have an effect
on matters beyond the scope of this Agreement, then the Indemnified Party
may retain its own counsel at the expense of the Indemnifying Party; and
provided further that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement unless and only to the extent that such
failure to give notice results in material prejudice to the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(iv) If the indemnification provided for in this
Section 6.8 is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any loss, liability,
claim, damage or expense referred to herein, then the Indemnifying Party,
in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in
such loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
6.9 Information by Holder6.9 Information by Holder.9
Information by Holder tc \l 26 ".9 Information by Holder" . Each
Holder of Registrable Securities to be included in a registration
referred to in this agreement shall furnish to the Company such
information regarding such Holder, the securities to be offered and sold
and the intended plan of distribution of the securities by such Holder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement and shall promptly advise the Company in
writing of any material changes to such information while the
registration is in effect.
6.10 Transfer or Assignment of Rights.10 Transfer or
Assignment of Rights.10 Transfer or Assignment of Rights tc \x 00 ".00
Xxxxxxxx or Assignment of Rights" . The rights to cause the Company
to register a Holder's securities granted by the Company under this
Agreement may be transferred or assigned by a Holder to a transferee or
assignee of any of the Restricted Securities, provided that the Company
is given written notice prior to the time that such right is exercised,
stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights
are being transferred or assigned; provided further that the transferee
or assignee of such rights assumes in writing the obligations of the
Holder under this Agreement.
6.11 Registration Procedures. In the case of each
registration effected by the Company pursuant to this Section 6, the
Company will keep each Holder who is entitled to registration rights
hereunder advised in writing as to the initiation of each registration
and as to the completion thereof. At its expense, the Company will:
(a) Prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with
respect to the disposition of securities covered by such registration
statement;
(b) Furnish such number of prospectuses and other
documents incident thereto, including supplements and amendments, as a
Holder may reasonably request; and
(c) Furnish to each selling Holder a copy of all
documents filed with and all correspondence from or to the Commission in
connection with any such offering other than nonsubstantive cover letters
and the like.
6.12 Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the Commission which may
permit the sale of the Restricted Securities to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act; and
(b) Use its reasonable best efforts to file with the
Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act.
6.13 "Lock-Up" Agreement6.13 Lock-Up Agreement.13
Lock-Up Agreement tc \x 00 ".00 Xxxx-Xx Agreement" . The
Holders agree, if requested by the Company in connection with a public
offering of the company's securities, not to sell or otherwise transfer
or dispose of any securities of the Company held by such Holders during a
period of time determined by the Company and its underwriters (not to
exceed 90 days) following the effective date of the registration
statement of the Company filed under the Securities Act relating to such
public offering.
Such agreement shall be in writing in a form reasonably
satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the Shares (or securities)
subject to the foregoing restriction until the end of said period.
70 Preemptive Rights70 Preemptive Rights Preemptive
Rights tc \l 270 " Preemptive Rights" . The Company hereby grants
to the Investor a right (the "Preemptive Right") to purchase all or any
part of the Investor's pro rata share of any "New Securities" (as
defined in this section 7) that the Company may, from time to time,
propose to sell and issue solely for cash. Such pro rata share, for
purposes of this Preemptive Right, is the ratio of (x) the sum of the
number of shares of Common Stock then held by the Investor immediately
prior to the issuance of the New Securities, assuming the full conversion
of any Series D Preferred and full exercise of the Warrants, to (y) the
total number of shares of Common Stock held by all stockholders of the
Company immediately prior to the issuance of the New Securities (after
giving effect to the exercise and/or conversion, as the case may be, of
all shares of Preferred Stock and of all outstanding options and warrants
to purchase Common Stock or any other securities convertible into Common
Stock). This Preemptive Right shall be subject to the following
provisions:
(1) "New Securities" shall mean any Common
Stock or Preferred Stock of the Company, whether or not authorized on the
date hereof, and rights, options or warrants to purchase Common Stock or
Preferred Stock and securities of any type whatsoever that are, or may
become, convertible into Common Stock or Preferred Stock; provided,
however, that "New Securities" does not include the following:
(a) shares of capital stock of the
Company issuable upon conversion or exercise of any currently outstanding
securities or any New Securities issued in accordance with this
Agreement;
(b) shares, options or warrants granted
to officers, directors and employees of, and consultants to, the Company
which are approved by the Board of Directors; or
(c) shares of Common Stock or Preferred
Stock issued in connection with any pro rata stock split, stock dividend
or recapitalization by the Company (in which case, all numbers of shares
and per share amounts referenced in this Section 7(1) will be adjusted
accordingly); or
(d) shares issued in a registered public
offering.
(2) In the event that the Company proposes to
undertake an issuance of New Securities for cash, it shall give the
Investor written notice (the "Notice") of its intention, describing the
type of New Securities, the price, and the general terms upon which the
Company proposes to issue the same. The Investor shall have twenty (20)
business days after receipt of such notice to agree to purchase all or
any portion of their respective pro rata shares of such New Securities at
the price and upon the terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities
to be purchased.
(3) In the event that any New Securities
subject to the Preemptive Right are not purchased by the Investor within
the twenty (20) business day period specified above, the Company shall
have ninety (90) days thereafter to sell (or enter into an agreement
pursuant to which the sale of New Securities that had been subject to the
Preemptive Right shall be closed, if at all, within sixty (60) days from
the date of said agreement) the New Securities with respect to which the
rights of the Investor were not exercised at a price and upon terms,
including manner of payment, no more favorable to the purchasers thereof
than specified in the Notice. In the event the Company has not sold all
offered New Securities within such ninety (90) day period (or sold and
issued New Securities in accordance with the foregoing within sixty (60)
days from the date of such agreement), the Company shall not thereafter
issue or sell any New Securities, without first again offering such New
Securities to the Investor in the manner provided above.
(4) This Preemptive Right is nonassignable by
the Investor.
(5) This Preemptive Right shall terminate as to
the Investor at such time as such Investor ceases to own any Series D
Preferred, Registrable Securities or the Investor Warrant.
(6) This Preemptive Right shall terminate, in
any case, after three years from the date hereof.
80 Observer Rights80 Observer Rights Observer Rights tc
\l 280 " Observer Rights" . The Company shall permit Xxxxxxx
Xxxxxxxxxx, so long as he and the Investor in the aggregate own no less
than five percent (5%) of the total number of shares of Common Stock
outstanding on an as-converted basis, to attend all meetings of the Board
of Directors, and the Company agrees to provide to Xx. Xxxxxxxxxx copies
of written materials provided to all members of the Board of Directors at
the same time and in the same manner that such materials are provided to
the members of the Board of Directors.
90 Confidentiality. Each party hereto agrees that, except
with the prior written permission of the other parties or as required by
applicable law, it shall at all times keep confidential and not divulge,
furnish or make accessible to anyone any confidential information,
knowledge or data concerning or relating to the business or financial
affairs of the other parties to which such party has been or shall become
privy by reason of this Agreement. The parties hereto further agree that
there shall be no press release or other public statement issued by
either party relating to this Agreement or the transactions contemplated
hereby, unless the parties otherwise agree in writing the applicable law
requires.
100 Miscellaneous100 Miscellaneous Miscellaneous tc
\l 1100 " Miscellaneous" .
10.1 Governing Law10.1 Governing Law.1 Governing Law tc
\l 210 ".1 Governing Law" . This Agreement shall be governed in all
respects by the laws of the State of Delaware, without regard to any
provisions thereof relating to conflicts of laws among different
jurisdictions.
10.2 Survival10.2 Survival.2 Survival tc \l 210 ".2
Survival" . The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the
Investor and the closing of the transactions contemplated hereby. All
statements as to factual matters contained in any certificate or exhibit
delivered by or on behalf of the Company pursuant hereto shall be deemed
to be the representations and warranties of the Company hereunder as of
such date of such certificate or exhibit.
10.3 Successors and Assigns10.3 Successors and Assigns.3
Successors and Assigns tc \l 210 ".3 Successors and Assigns" . Except as
otherwise provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
10.4 Entire Agreement; Amendment10.4 Entire Agreement;
Amendment.4 Entire Agreement; Amendment tc \l 210 ".4 Entire
Agreement; Amendment" . This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and
thereof. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
10.5 Notices, etc10.5 Notices, etc.5 Notices, etc tc \l
210 ".5 Notices, etc" . All notices and other communications
required or permitted hereunder shall be in writing and shall be deemed
effectively given upon delivery to the party to be notified in person or
by courier service or five days after deposit with the United States
mail, by First Class mail, postage prepaid, addressed (a) if to the
Investor, at the Investor's address, or (b) if to Global Holdings, at
Global Holdings address, or (c) if to any other holder of any securities,
at such address as such holder shall have furnished the other parties
hereto in writing, or, until any such holder so furnishes an address to
the Company, then to and at the address of the last holder of such Shares
who has so furnished an address to the Company, or (d) if to the Company,
to Socket Communications, Inc. 00000 Xxxxxxx Xxxxx Xxxxxx, XX 00000, and
addressed to the attention of the President, or at such other address as
the Company shall have furnished to the Investor. If notice is provided
by mail, notice shall be deemed to be given three (3) business days after
proper deposit in the U.S. Mail.
10.6 Delays or Omissions10.6 Delays or Omissions.6 Delays
or Omissions tc \l 210 ".6 Delays or Omissions" . No delay or
omission to exercise any right, power or remedy accruing to any holder of
any Shares upon any breach or default of the Company under this Agreement
shall impair any such right, power or remedy of such holder, nor shall it
be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any
kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing or
as provided in this Agreement. All remedies, either under this Agreement
or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
10.7 California Corporate Securities Law.7 California
Corporate Securities Law.7 California Corporate Securities Law tc \l
210 ".7 California Corporate Securities Law" . THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS
THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100,
25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
10.8 Expenses10.8 Expenses.8 Expenses tc \l 210 ".8
Expenses" . The Company and the Investor shall bear their own
expenses and legal fees incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby.
10.9 Finder's Fee10.9 Finder's Fee.9 Finder's Fee tc \l
210 ".9 Finder's Fee" . The Company and the Investor shall each
indemnify and hold the other harmless from any liability for any
commission or compensation in the nature of a finder's fee (including the
costs, expenses and legal fees of defending against such liability) for
which the Company or the Investor, or any of their respective partners,
employees, or representatives, as the case may be, is responsible.
10.10 Counterparts10.10 Counterparts.10 Counterparts tc \x
000 ".00 Xxxxxxxxxxxx" . This Agreement may be executed in any number
of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument.
10.11 Severability10.11 Severability.11 Severability tc \x
000 ".00 Xxxxxxxxxxxx" . In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Agreement shall continue in full
force and effect without said provision; provided that no such
severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
SOCKET COMMUNICATIONS, INC. THE HARMAT ORGANIZATION, INC.
By: By:
Name: Xxxxx Xxxxxx, Name:
Title: Vice President, Finance and Administration, Title:
and Chief Financial Officer
GLOBAL HOLDINGS, L.P.
By:
Name:
Title:
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES D CONVERTIBLE PREFERRED STOCK
EXHIBIT B
WARRANT TO INVESTOR
EXHIBIT C
WARRANT TO GLOBAL HOLDINGS, L.P.
EXHIBIT D
CONSULTING AGREEMENT
EXHIBIT E
SCHEDULE OF EXCEPTIONS
EXHIBIT F
FORM OF OPINION OF COUNSEL
