SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (this "Agreement"),
dated as of August 2, 2007, is made by and among Firepond, Inc. (formerly
known
as FP Technology, Inc.), a Delaware corporation, with headquarters located
at
000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxxxxx 00000
(the "Company"), and the investors listed on the Schedule
of Buyers attached hereto (individually, a "Buyer" and
collectively, the "Buyers").
WHEREAS:
A. The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2)
of the
Securities Act of 1933, as amended (the "1933 Act"), and Rule
506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC")
under the 1933 Act.
B. The
Company has authorized a new series of senior secured notes of the Company,
in
substantially the form attached hereto as Exhibit A (the
"Notes").
C. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and
conditions stated in this Agreement, (i) that aggregate principal amount
of
Notes set forth opposite such Buyer's name in column (3) on the Schedule
of
Buyers (which aggregate principal amount for all Buyers shall be Three Million
Three Hundred Thirty-Seven Thousand and Five Hundred Dollars ($3,337,500)),
and
(ii) that number of shares of the Company's common stock, par value $.001
per
share (the "Common Stock"), set forth opposite such Buyer's
name in column (4) of the Schedule of Buyers (which aggregate amount for
all
Buyers together shall be 125,000 shares of Common Stock and shall collectively
be referred to herein as the "Common Shares").
D. The
Notes
and the Common Shares collectively are referred to herein as the
"Securities".
E. Except
as
otherwise set forth in the Notes, the Notes will be senior to all outstanding
and future indebtedness of the Company, (ii) secured by a perfected security
interest in all of the assets of the Company and in all of the assets of
certain
subsidiaries of the Company, if any (the "Future Subsidiaries")
as evidenced by (and as defined in) the Security Agreement in favor of the
Collateral Agent (as defined below) for the Buyers hereto and for the other
holders of the Notes, in the form attached hereto as Exhibit B (as
amended or modified from time to time, the "Security
Agreement"), which security interest shall be senior to all other
security interests therein, (iii) secured by a pledge of the securities of
any
Future Subsidiaries of the Company, in the form attached hereto as Exhibit
C (as amended or modified from time to time, the "Pledge
Agreement") and (iv) guaranteed by the Guaranty of each of any Future
Subsidiaries, in the form attached hereto as Exhibit D (as amended or
modified from time to time, the "Guaranty," and together with
the Security Agreement and the Pledge Agreement, collectively, the
"Security Documents").
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NOW,
THEREFORE, the
Company and each Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF SECURITIES.
(a) Purchase
of Securities. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell
to each Buyer, and each Buyer severally, but not jointly, agrees to purchase
from the Company on the Closing Date (as defined below), (x) a principal
amount
of Notes as is set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers and (y) that number of Common Shares as is set forth opposite
such Buyer's name in column (4) on the Schedule of Buyers (the
"Closing").
(b) Closing. The
date and time of the Closing shall be 10:00 a.m., New York City Time, on
the
date hereof (or such later date as is mutually agreed to by the Company and
each
Buyer, the "Closing Date") after notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and
7 below
at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000.
(c) Purchase
Price. The aggregate purchase price for the Notes and the Common
Shares to be purchased by each Buyer at the Closing shall be the amount set
forth opposite such Buyer's name in column (5) of the Schedule of Buyers
(the
"Purchase Price"). The Buyers and the Company agree
that the Notes and the Common Shares constitute an "investment unit" for
purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"). On or prior to the Closing Date, the
Buyers may notify the Company of their determination of the allocation of
the
issue price of such investment unit between the Notes and the Common Shares
in
accordance with Section 1273(c)(2) of the Code and Treasury Regulation Section
1.1273-2(h), and neither the Buyers nor the Company shall take any position
inconsistent with such allocation in any tax return or in any judicial or
administrative proceeding in respect of taxes.
(d) Form
of Payment. On the Closing Date, (i) each Buyer shall pay its
Purchase Price to the Company for the Notes and the Common Shares to be issued
and sold to such Buyer at the Closing by wire transfer of immediately available
funds in accordance with the Company's written wire instructions and
(ii) the Company shall deliver or cause to be delivered to each Buyer (A)
the Notes (for the account of such Buyer as such Buyer shall instruct) which
such Buyer is then purchasing and (B) one or more stock certificates, free
and
clear of all restrictive and other legends (except as expressly provided
in
Section 2(g) hereof), evidencing the number of Common Shares such Buyer is
purchasing as is set forth opposite such Buyer's name in column (4) of the
Schedule of Buyers, in each case duly executed on behalf of the Company and
registered in the name of such Buyer or its designee.
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2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants in respect of only itself that:
(a) No
Public Sale or Distribution. Such Buyer is acquiring the Notes
and the Common Shares for its own account and not with a view towards, or
for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does
not
agree to hold any of the Securities for any minimum or other specific term
and
reserves the right to dispose of the Securities at any time in accordance
with
or pursuant to a registration statement or an exemption under the 1933
Act. Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business. Such Buyer does not presently have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
(b) Accredited
Investor Status. Such Buyer is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D and a "qualified institutional
buyer" within the meaning of Rule 144A under the 1933 Act.
(c) Reliance
on Exemptions. Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order
to
determine the availability of such exemptions and the eligibility of such
Buyer
to acquire the Securities.
(d) Information. Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such
Buyer. Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by such Buyer or its
advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision in respect of its acquisition of the
Securities.
(e) No
Governmental Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or
the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer
or Resale. Such Buyer understands that except as provided in
Section 4(m) hereof: (i) the Securities have not been and are not being
registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company
an
opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration,
or (C)
such Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A
promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "Rule 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms
of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the Person (as defined
in
Section 3(s)) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 0000 Xxx) may require compliance with some
other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other Person is under any obligation
to
register the Securities under the 1933 Act or any state securities laws or
to
comply with the terms and conditions of any exemption
thereunder. Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall
not be
deemed to be a transfer, sale or assignment of the Securities hereunder,
and no
Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document (as defined below),
including, without limitation, this Section 2(f).
(g) Legends. Such
Buyer understands that the certificates or other instruments representing
the
Notes and, until such time as the resale of the Common Shares have been
registered under the 1933 Act as contemplated by Section 4(m) hereof, the
stock
certificates representing the Common 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):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 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.
-3-
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped or, solely with respect to the Common Shares, issue to such holder
by
electronic delivery at the applicable balance account at The Depository Trust
Company ("DTC"), if, unless otherwise required by state
securities laws, (i) such Securities are registered for resale under the
1933
Act, (ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel in a form reasonably acceptable
to the Company, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable requirements
of
the 1933 Act, or (iii) such holder provides the Company with reasonable
assurance that the Securities can be sold, assigned or transferred pursuant
to
Rule 144(k). The Company shall be responsible for the fees of its
transfer agent and all DTC fees associated with such issuance.
(h) Validity;
Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and shall constitute the legal,
valid and binding obligations of such Buyer enforceable against such Buyer
in
accordance with their respective terms, except as such enforceability may
be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(i) No
Conflicts. The execution, delivery and performance by such Buyer
of this Agreement and the consummation by such Buyer of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Buyer or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default)
under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer
is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws)
applicable to such Buyer, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect
on
the ability of such Buyer to perform its obligations hereunder.
(j) Residency. Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers (which representations
and
warranties shall be deemed to apply to each subsidiary of the Company)
that:
(a) Organization
and Qualification. The Company is a corporation duly organized
and validly existing in good standing under the laws of the State of Delaware,
and has the requisite corporate power and authorization to own its properties
and to carry on its business as now being conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing
in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect. As used in
this Agreement, "Material Adverse Effect" means any material
adverse effect on the business, properties, assets, operations, results of
operations, condition (financial or otherwise) or prospects of the Company,
taken as a whole, or on the transactions contemplated hereby and the other
Transaction Documents or by the agreements and instruments to be entered
into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Transaction Documents to which it is
a
party. The Company has no "Subsidiaries" (which for
purposes of this Agreement means any entity in which the Company, directly
or
indirectly, owns capital stock or holds an equity or similar interest) as
of the
Closing Date.
(b) Authorization;
Enforcement; Validity. The Company has the requisite power and
authority to enter into and perform its obligations under this Agreement,
the
Notes, the Security Documents, the Irrevocable Transfer Agent Instructions
(as
defined in Section 5(b)), and each of the other agreements entered into by
the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction Documents") and to
issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Notes
and
the Common Shares have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders. This Agreement and the
other Transaction Documents have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity
or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(c) Issuance
of Securities. The issuance of the Notes and the Common Shares
are duly authorized and, upon issuance in accordance with the terms hereof,
shall be validly issued and free from all taxes, liens and charges in respect
of
the issue thereof and the Common Shares shall be fully paid and nonassessable
with the holders being entitled to all rights accorded to a holder of Common
Stock. Assuming the accuracy of the representations of the Buyers
contained in Section 2 hereof and their compliance with the agreements set
forth
therein, the offer and issuance by the Company of the Securities is exempt
from
registration under the 1933 Act.
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(d) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the
transactions contemplated hereby and thereby (including, without limitation,
the
issuance of the Notes and the Common Shares) will not (i) result in a violation
of the Certificate of Incorporation (as defined in Section 3(r)), any capital
stock of the Company or the Bylaws (as defined in Section 3(r)) of the Company
or (ii) conflict with, or constitute a default (or an event which with notice
or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company 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 Pink Sheets LLC or the OTC Bulletin Board (as applicable,
the
"InitialPrincipal Market")) applicable to the
Company or by which any property or asset of the Company is bound or
affected.
(e) Consents. The
Company is not required to obtain any consent, authorization or order of,
or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it
to
execute, deliver or perform any of its obligations under or contemplated
by the
Transaction Documents, in each case in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing Date,
and the
Company and is unaware of any facts or circumstances which might prevent
the
Company from obtaining or effecting any of the registration, application
or
filings pursuant to the preceding sentence. The Company is not in
violation of the listing requirements of the Initial Principal Market and
has no
knowledge of any facts which would reasonably lead to delisting or suspension
of
the Common Stock in the foreseeable future.
(f) Acknowledgment
Regarding Buyer's Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity
of
arm's length purchaser in respect of the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an
officer
or director of the Company, (ii) an "affiliate" of the Company (as defined
in
Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner"
of more
than 10% of the outstanding shares of Common Stock (as defined for purposes
of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "1934
Act")). The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) in respect of the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of
its
representatives or agents in connection with the Transaction Documents and
the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to
each Buyer that the Company's decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company and its
representatives.
(g) No
General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale
of the
Securities. The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or brokers' commissions
(other
than for Persons engaged by any Buyer) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim.
(h) No
Integrated Offering. Neither the Company nor any of its
affiliates, or any Person acting on its behalf has, directly or indirectly,
made
any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of any of the Securities
under the 1933 Act or cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation,
under
the rules and regulations of any exchange or automated quotation system on
which
any of the securities of the Company are listed or designated. None
of the Company, its affiliates or any Person acting on their behalf will
take
any action or steps referred to in the preceding sentence that would require
registration of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings.
-5-
(i) Trust
Indenture Act. Assuming the accuracy of the representations of
the Buyers contained in Section 2 hereof and their compliance with the
agreements set forth therein, it is not necessary in connection with the
offer,
sale and delivery of the Securities in the manner contemplated by this Agreement
to qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the
"TIA").
(j) Off
Balance Sheet Arrangements. There is no transaction, arrangement,
or other relationship between the Company and an unconsolidated or other
off
balance sheet entity that is required to be disclosed by the Company in its
Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(k) Application
of Takeover Protections; Rights Agreement. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws
of
the jurisdiction of its formation which is or could become applicable to
any
Buyer as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Securities and any Buyer's
ownership of the Securities. The Company has not adopted a
stockholder rights plan or similar arrangement relating to accumulations
of
beneficial ownership of Common Stock or a change in control of the
Company.
(l) SEC
Documents; Financial Statements. Except as set forth on
Schedule 3(l), 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 or prior to the date of the Closing and all exhibits included therein
and
financial statements, notes and schedules thereto and documents incorporated
by
reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Buyers or
their respective representatives true, correct and complete copies of 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 in respect
thereof. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or
may be
condensed or summary statements) and fairly present in all material respects
the
financial position of the Company as of the dates thereof and the results
of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is
not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement
of
a material fact or omits to state any material fact necessary in order to
make
the statements therein, in the light of the circumstance under which they
are or
were made, not misleading.
(m) Absence
of Certain Changes. Except as disclosed in Schedule
3(m)(A), since the date of the Company's most recent audited financial
statements contained in a Form 10-K or 10-KSB, there has been no material
adverse change and no material adverse development in the business, assets,
properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company, as applicable. Except as
disclosed in Schedule 3(m)(B), since the date of the Company's most
recent audited financial statements contained in a Form 10-K or 10-KSB the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $25,000 outside of the ordinary
course of business, (iii) had capital expenditures, individually or in the
aggregate, in excess of $100,000 or (iv) waived any material rights in respect
of any Indebtedness or other rights in excess of $25,000. The Company
has not taken any steps to seek protection pursuant to any bankruptcy law
nor
does the Company have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings or any actual knowledge
of
any fact which would reasonably lead a creditor to do so. The Company
is 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(n),
"Insolvent" means (i) the present fair saleable value of the
Company's assets is less than the amount required to pay the Company's total
Indebtedness (as defined in Section 3(v)), (ii) the Company is unable to
pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts
and
liabilities become absolute and matured, (iii) the Company intends to incur
or
believes that it will incur debts that would be beyond its ability to pay
as
such debts mature or (iv) the Company has unreasonably small capital with
which
to conduct the business in which it is engaged as such business is now conducted
or is proposed to be conducted.
(n) No
Undisclosed Events, Liabilities, Developments or
Circumstances. Except as disclosed on Schedule 3(n), no
event, liability, development or circumstance has occurred or exists, or
is
contemplated to occur in respect of the Company or its business, properties,
prospects, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement on Form S-1 filed with the SEC relating to an issuance and sale
by the
Company of its Common Stock and which has not been publicly
announced.
-6-
(o) Conduct
of Business; Regulatory Permits. Except as disclosed on
Schedule 3(o), the Company is not in violation of any term of or in
default under its Certificate of Incorporation or Bylaws. The Company
is not in violation of any judgment, decree or order or any statute, ordinance,
rule or regulation applicable to the Company, and the Company will not conduct
its business in violation of any of the foregoing, except for possible
violations which would 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 Initial Principal Market and has no knowledge of any facts or circumstances
that would reasonably lead to delisting or suspension of the Common Stock
by the
Initial Principal Market in the foreseeable future (other than a delisting
from
the OTC Bulletin Board upon securing a listing of such Common Stock on any
of
The New York Stock Exchange, Inc. (the "NYSE"), the American
Stock Exchange ("AMEX") or The Nasdaq Capital Market
("NASDAQ") -- each of the NYSE, AMEX and NASDAQ a
"Principal Market", and as to those markets upon which the
Common Stock has been designated for quotation, from time to time, the
"Principal Market" or "Principal Markets", as applicable). During the
two (2) years prior to the date hereof, (i) the Common Stock has been designated
for quotation or listed on one or the other of the Initial Principal Markets,
(ii) trading in the Common Stock has not been suspended by the SEC or either
Initial Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the either Initial Principal Market regarding
the suspension or delisting of the Common Stock from such Initial Principal
Market. The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and the Company
has
not received any notice of any proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(p) Foreign
Corrupt Practices. Neither the Company, nor any director,
officer, agent, employee or other Person acting on behalf of the Company
has, in
the course of its actions for, or on behalf of, the Company (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.
(q) Xxxxxxxx-Xxxxx
Act. There is and has been no failure on the part of the Company
or any of the Company's directors or officers, in their capacities as such,
to
comply in all material respects with any provision of the Xxxxxxxx-Xxxxx
Act of
2002, as in effect at the applicable time, and the rules and regulations
promulgated in connection therewith (the "Xxxxxxxx-Xxxxx Act"),
including Section 402 related to loans and Sections 302 and 906 related to
certifications.
(r) Internal
Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability,
(iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken in
respect of any difference. The Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-14 under the 0000 Xxx)
that
are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in
the
rules and forms of the SEC, including, without limitation, controls and
procedures designed in to ensure that information required to be disclosed
by
the Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company's management, including its
principal executive officer or officers and its principal financial officer
or
officers, as appropriate, to allow timely decisions regarding required
disclosure. During the twelve (12) months prior to the date hereof
the Company has not received any notice or correspondence from any accountant
relating to any potential material weakness in any part of the system of
internal accounting controls of the Company.
(s) Transactions
With Affiliates. Except as set forth in the SEC Documents filed
at least ten (10) days prior to the date hereof and other than the grant
of
restricted stock and options disclosed on Schedule 3(s), none of the
officers, directors or employees of the Company is presently a party to any
transaction with the Company (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, 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.
(t) Equity
Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 100,000,000 shares of Common Stock,
of
which as of the date hereof, 8,224,239 are issued and outstanding, 1,706,000
shares are reserved for issuance pursuant to the Company's stock option and
purchase plans and 2,585,713 shares are reserved for issuance pursuant to
securities (other than the Common Shares) exercisable or exchangeable for,
or
convertible into, shares of Common Stock and (ii)
5,000,000 shares of preferred stock, par value $0.001 per
share, of which as of the date hereof, no shares of preferred
stock are issued and outstanding. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully
paid
and nonassessable. Except as set forth above in this Section 3(t) or
on Schedule 3(t): (i) no shares of the Company's capital stock
are subject to preemptive rights or any other similar rights or any liens
or
encumbrances suffered or permitted by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of
any
character whatsoever relating to, or securities or rights convertible into,
or
exercisable or exchangeable for, any shares of capital stock of the Company,
or
contracts, commitments, understandings or arrangements by which the Company
is
or may become bound to issue additional shares of capital stock of the Company
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 shares of capital stock of the Company;
(iii) there are no outstanding debt securities, notes, credit agreements,
credit
facilities or other agreements, documents or instruments evidencing Indebtedness
(as defined in Section 3(v)) of the Company or by which the Company is or
may
become bound; (iv) there are no financing statements securing obligations
in any
material amounts, either singly or in the aggregate, filed in connection
with
the Company; (v) there are no agreements or arrangements under which the
Company
is obligated to register the sale of any of their securities under the 1933
Act
(except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of the Company which contain any redemption or
similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security
of
the Company; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement;
and
(ix) the Company has no liabilities or obligations required to be disclosed
in
the SEC Documents but not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company's business and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect. The Company has furnished or made available to the Buyer upon
such Buyer's request, true, correct and complete copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Company's Bylaws,
as amended and as in effect on the date hereof (the "Bylaws"),
and the terms of all securities convertible into, or exercisable or exchangeable
for, Common Stock and the material rights of the holders thereof in respect
thereto. Schedule 3(t) sets forth the shares of Common Stock
owned beneficially or of record and Common Stock Equivalents (as defined
below)
held by each director and executive officer.
-7-
(u) Indebtedness
and Other Contracts. Except as disclosed in Schedule 3(u),
the Company (i) has no outstanding Indebtedness (as defined below), (ii)
is not
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 would result in a Material Adverse Effect, (iii) is not 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 not 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 principals other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations in respect of 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 in respect
of 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 in
respect
of any indebtedness, lease, dividend or other obligation of another Person
if
the primary purpose or intent of the Person incurring such liability, or
the
primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will
be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(v) Absence
of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by either Initial 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,
the
Common Stock or any of the Company's officers or directors in their
capacities as such, except as set forth in Schedule 3(v).
(w) Insurance. The
Company is 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 is
engaged. The Company has not been refused any insurance coverage
sought or applied for and the Company has no reason to believe that it will
not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect.
(x) Employee
Relations. (i) The Company is not a party to any
collective bargaining agreement or employs any member of a union. The
Company believes that its relations with its employees are good. No
executive officer of the Company (as defined in Rule 501(f) of the 0000 Xxx)
has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company. No executive
officer of the Company, to the knowledge of the Company, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company to any liability in respect of any of the foregoing
matters.
(ii) The
Company is 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.
(y) Title. The
Company has good and marketable title in fee simple to all real property
and
good and marketable title to all personal property owned by it which is material
to the business of the Company, 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. Any real property and facilities
held under lease by the Company are held by it 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.
(z) Intellectual
Property Rights. The Company owns or possesses adequate rights or
licenses to use all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights ("Intellectual Property Rights")
necessary to conduct its business as now conducted. None of the
Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. The Company does not have any knowledge of any
infringement by the Company of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or
brought, or to the knowledge of the Company, being threatened, against the
Company regarding its Intellectual Property Rights. The Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
-8-
(aa) Environmental
Laws. The Company (i) is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental
Laws
to conduct its business and (iii) is 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. As
used in this Agreement, "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.
(bb) Tax
Status. The Company (i) has made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all taxes
and
other governmental assessments and charges that are material in amount, shown
or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no
basis
for any such claim.
(cc) Ranking
of Notes. Except as set forth on Schedule (cc), no
Indebtedness of the Company is senior to or ranks pari passu with the
Notes in right of payment, whether in respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.
(dd) Form
S-3 Eligibility. The Company is eligible to register the Common
Shares for resale by the Buyers using Form S-3 promulgated under the 1933
Act.
(ee) Investment
Company. The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds thereof,
will not become an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for an investment company, within the
meaning of the Investment Company Act of 1940, as amended.
(ff) Manipulation
of Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed
to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay
to any person any compensation for soliciting another to purchase any other
securities of the Company.
(gg) Transfer
Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Buyer hereunder
will be, or will have been, fully paid or provided for by the Company, and
all
laws imposing such taxes will be or will have been complied with.
(hh) U.S.
Real Property Holding Corporation. The Company is not, has never
been, and so long as any Securities remain outstanding, shall not become,
a U.S.
real property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify
upon
Buyer's request.
(ii) Disclosure. The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Buyers or their agents or counsel with any information
that
constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions
in
securities of the Company. All disclosure provided to the Buyers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company is true and correct and does not contain any untrue statement of
a
material fact or omit to state any material fact necessary in order to make
the
statements made therein, in the light of the circumstances under which they
were
made, not misleading. Each press release issued by the Company 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 in respect of the Company or its business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but
which
has not been so publicly announced or disclosed (assuming for this purpose
that
the Company's reports filed under the Exchange Act of 1934, as amended, are
being incorporated into an effective registration statement filed by the
Company
under the 1933 Act). The Company acknowledges and agrees that no
Buyer makes or has made any representations or warranties in respect of the
transactions contemplated hereby other than those specifically set forth
in
Section 2.
(jj) Acknowledgement
Regarding Buyers' Trading Activity. Anything in this Agreement or
elsewhere herein to the contrary notwithstanding, but subject to compliance
by
the Buyers with applicable law, it is understood and acknowledged by the
Company
(i) that none of the Buyers have been asked to agree, nor has any Buyer agreed,
to desist from purchasing or selling, long and/or short, securities of the
Company, or "derivative" securities based on securities issued by the Company
or
to hold the Securities for any specified term; (ii) that past or future open
market or other transactions by any Buyer, including, without limitation,
short
sales or "derivative" transactions, before or after the closing of this or
future private placement transactions, may negatively impact the market price
of
the Company's publicly-traded securities; (iii) that any Buyer, and counter
parties in "derivative" transactions to which any such Buyer is a party,
directly or indirectly, presently may have a "short" position in the Common
Stock, and (iv) that each Buyer shall not be deemed to have any affiliation
with
or control over any arm's length counter-party in any "derivative"
transaction. The Company further understands and acknowledges that
(a) one or more Buyers may engage in hedging activities at various times
during
the period that the Securities are outstanding, (b) such hedging activities
(if
any) could reduce the value of the existing stockholders' equity interests
in
the Company at and after the time that the hedging activities are being
conducted and (c) nothing contained herein shall preclude any Buyer from
having
taken or from taking any action in respect of the identification of the
availability of, or securing of, available shares to borrow in order to effect
short sales or similar transactions.
-9-
4. COVENANTS.
(a) Reasonable
Best Efforts. Each party shall use its reasonable best efforts
timely to satisfy each of the covenants and the conditions to be satisfied
by it
as provided in Sections 5, 6 and 7 of this Agreement.
(b) Form
D
and Blue Sky. The Company agrees to file a Form D in respect of
the Securities as required under Regulation D and to provide a copy thereof
to
each Buyer promptly after such filing. The Company, on or before the
Closing Date, shall take such action as the Company shall reasonably determine
is necessary in order to obtain an exemption for or to qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States
(or
to obtain an exemption from such qualification), and shall provide evidence
of
any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or
"Blue
Sky" laws of the states of the United States following the Closing
Date.
(c) Reporting
Status. Until the date on which the Investors shall have sold all
the Common Shares and none of the Common Shares is
outstanding] (the "Reporting Period"), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such
termination. "Investor" means a Buyer or any
transferee or assignee thereof to whom a Buyer assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement
in
accordance with Section 9(g) and any transferee or assignee thereof to whom
a
transferee or assignee assigns its rights under this Agreement and who agrees
to
become bound by the provisions of this Agreement in accordance with Section
9(g).
(d) Use
of
Proceeds. The Company will use the proceeds from the sale of the Securities
for general corporate purposes, including general and administrative expenses
and not for (i) except as set forth in Schedule 4(d), the repayment of
any outstanding Indebtedness of the Company or any of its Subsidiaries or
(ii)
the redemption or repurchase of any of its or its Subsidiaries' equity
securities.
(e) Financial
Information.
(i) The
Company agrees to send the following to each Investor during the Reporting
Period (A) unless the following are filed with the SEC through XXXXX and
are
available to the public through the XXXXX system, within one (1) Business
Day
after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K
or 10-KSB, any interim reports or any consolidated balance sheets, income
statements, stockholders' equity statements and/or cash flow statements for
any
period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act, (B) on the same day as the release thereof, facsimile or e-mailed copies
of
all press releases issued by the Company, and (C) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof
to the
stockholders. As used herein, "Business Day" means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
(ii) Notwithstanding
the foregoing, for so long as any Securities remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the 1933
Act,
the Company will, during any period in which it is not subject to Section
13 or
15(d) under the 1934 Act, also make available to the Buyer and any holder
of
Securities in connection with any sale thereof and any prospective purchaser
of
Securities and securities analysts, in each case upon request, the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the
1933
Act (or any successor thereto).
(f) Listing. The
Company shall promptly secure the listing of all of the Common Shares upon
each
national securities exchange and automated quotation system, if any, upon
which
the Common Stock is then listed (subject to official notice of issuance)
and
shall maintain such listing of all Common Shares from time to time issuable
under the terms of the Transaction Documents. The Company shall
maintain the Common Stocks' authorization for quotation on one of the Initial
Principal Markets, except upon securing listing or quotation of such Common
Stock on a Principal Market, after which time the Company shall maintain
such
listing or quotation on a Principal Market. The Company shall not
take any action which would be reasonably expected to result in the delisting
or
suspension of the Common Stock on the Initial Principal Market (except upon
securing listing or quotation of such Common Stock on a Principal Market)
or the
Principal Market(s), as applicable. The Company shall pay all fees
and expenses in connection with satisfying its obligations under this Section
4(f).
-10-
(g) Fees
and Expenses. Subject to Section 8 below, at the Closing and
subject to providing supporting documentation, the Company shall reimburse
the
fees and expenses in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereunder, of Radcliffe
SPC,
Ltd. for and on behalf of the Class A Segregated Portfolio (a Buyer) or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior
to
the date of this Agreement), which amount shall be withheld by such Buyer
from
its Purchase Price at the Closing. The Company shall be responsible
for the payment of any placement agent's fees, financial advisory fees, or
broker's commissions (other than for Persons engaged by any Buyer) relating
to
or arising out of the transactions contemplated hereby. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney's fees and out-of-pocket
expenses) arising in connection with any claim relating to any such
payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with
the
sale of the Securities to the Buyers.
(h) Pledge
of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company
with
any notice thereof or otherwise make any delivery to the Company pursuant
to
this Agreement or any other Transaction Document, including, without limitation,
Section 2(f) hereof. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request
in
connection with a pledge of the Securities to such pledgee by an
Investor.
(i) Disclosure
of Transactions and Other Material Information. On or before 8:30
a.m., New York City Time, on the third Business Day
following the Closing Date, the Company shall file a Current Report on Form
8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act, and attaching the material
Transaction Documents (including, without limitation, this Agreement (and
all
schedules to this Agreement), the form of Notes and the Security Documents)
as
exhibits to such filing (including all attachments, the "8-K
Filing"). From and after the filing of the 8-K Filing with
the SEC, no Buyer shall be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 8-K
Filing. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Buyer with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing
of
the 8-K Filing with the SEC without the express written consent of such
Buyer. In the event of a breach of the foregoing covenant by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided
herein
or in the Transaction Documents, a Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to
the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such
disclosure. Subject to the foregoing, neither the Company nor any
Buyer shall issue any press releases or any other public statements in respect
of the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to
make
any press release or other public disclosure in respect of such transactions
(i)
in substantial conformity with the 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that
in the
case of clause (i) each Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its
release). Without the prior written consent of any applicable Buyer
and other than as required by applicable law, neither the Company, its
Subsidiaries or anyone acting on their behalf shall disclose the name of
any
Buyer in any filing, amendment or otherwise.
(j) Restriction
on Redemption and Cash Dividends. Except as set forth on
Schedule 4(j), so long as any Notes are outstanding, the Company shall
not, directly or indirectly, redeem, or declare or pay any cash dividend
or
distribution on, the Common Stock without the prior express written consent
of
the holders of Notes representing not less than a majority of the aggregate
principal amount of the then outstanding Notes.
(k) Notes. For
so long as any Notes remain outstanding, the Company will not issue any Notes
other than to the Buyers as contemplated hereby and the Company shall not
issue
any other securities that would cause a breach or default under the
Notes.
(l) Corporate
Existence. So long as any Buyer beneficially owns any Securities,
the Company shall maintain its corporate existence and shall not sell all
or
substantially all of the Company's assets, except upon the terms set forth
in
the Notes.
-11-
(m) Piggy-Back
Registrations. If at any time during the two (2) year period
following the Closing Date there is not an effective registration statement
covering all of the Common Shares and any securities issued or issuable upon
any
stock split, dividend or other distribution, recapitalization or similar
event
in respect of the foregoing (collectively, the "Registrable
Securities") and the Company shall determine to prepare and file with
the SEC a registration statement relating to an offering for its own account
or
the account of others under the Securities Act of any of its equity securities,
other than (x) on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued
solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans or (y) on Form SB-2, Form S-3 or such other applicable form pursuant
to a
bona fide firm commitment underwritten public offering with a nationally
recognized underwriter which generates gross proceeds to the Company in excess
of $5,000,000 (other than an "at the market" offering as defined in Rule
415(a)(4) under the 1933 Act, and "equity lines"), then the Company shall
send
to each Buyer written notice of such determination and if, within fifteen
(15)
days after receipt of such notice, any such Buyer shall so request in writing,
the Company shall include in such registration statement all or any part
of such
Registrable Securities such Buyer requests to be registered.
(n) Conduct
of Business. So long as any Buyer beneficially owns any
Securities, the business of the Company shall not be conducted in violation
of
any law, ordinance or regulation of any governmental entity, except where
such
violations would not result, either individually or in the aggregate, in
a
Material Adverse Effect.
(o) Sales
by Officers and Directors. Until 120 days after the Closing Date,
the Company shall use its reasonable best efforts to not, directly or
indirectly, permit any officer or director of the Company or any of its
Subsidiaries to sell any Common Stock.
(p) Blue
Sky. The Company shall endeavor to qualify the Securities for
offer and sale under the securities or Blue Sky laws of such jurisdictions
as
the Buyers shall reasonably request and to continue such qualification in
effect
so long as reasonably required for distribution of the Securities and to
pay all
related fees and expenses reasonably incurred in connection with such
qualification and in connection with the determination of the eligibility
of the
Securities for investment under the laws of such jurisdictions as the Buyers
may
designate; provided that the Company shall not be required to file a general
consent to service of process in any jurisdiction or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to subject
itself to taxation in any such jurisdiction if it is not otherwise so
subject.
(q) Regulation
M. The Company will not take any action prohibited by Regulation
M under the 1934 Act, in connection with the distribution of the Securities
contemplated hereby.
(r) General
Solicitation. None of the Company, any of its affiliates (as
defined in Rule 501(b) under the 0000 Xxx) or any person acting on behalf
of the
Company or such affiliate will solicit any offer to buy or offer or sell
the
Securities by means of any form of general solicitation or general advertising
within the meaning of Regulation D, including: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or radio;
and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(s) Integration. None
of the Company, any of its affiliates (as defined in Rule 501(b) under the
0000
Xxx) or any person acting on behalf of the Company or such affiliate will
sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect
of any
security (as defined in the 1933 Act) which will be integrated with the sale
of
the Securities in a manner which would require the registration under the
1933
Act of the Securities or require stockholder approval under the rules and
regulations of the Initial Principal Market or Principal Market, as applicable
and the Company will take all action that is appropriate or necessary to
assure
that its offerings of other securities (other than the Securities) will not
be
integrated for purposes of the 1933 Act or the rules and regulations of the
Initial Principal Market or Principal Market, as applicable with the issuance
of
Securities contemplated hereby.
(t) Lien
Searches. Prior to the Closing Date, the Company shall have
delivered or caused to be delivered to each Buyer certified copies of UCC
financing statement search results listing any and all effective financing
statements filed within five years prior to such date in any applicable
jurisdiction that name the Company as a debtor to perfect an interest in
any of
the assets thereof, together with copies of such financing statements, none
of
which financing statements, except for any financing statements filed in
respect
of the Senior Indebtedness (as defined in that certain Intercreditor and
Subordination Agreement dated as of the date hereof made by Trident Growth
Fund,
L.P., the Company and Merger Target, in favor of the holders of the Notes
and
The Bank of New York, as collateral agent for the holders of the Notes) and
as
otherwise agreed to in writing by the Buyers, shall cover any of the
"Collateral" (as defined in the Security Documents), and the results of searches
for any effective tax liens and judgment liens filed against any such Person
or
its property in any applicable jurisdiction, which results, except as otherwise
agreed to in writing by the Buyers, shall not show any such effective tax
liens
and judgment liens; and (B) a perfection certificate, duly completed and
executed by the Company and each of its Subsidiaries, in form and substance
satisfactory to the Buyers.
-12-
(u) Future
Guaranties and Pledges. In addition, if the Company shall
hereafter own, create or acquire any Subsidiary that is not a party to a
Guaranty, then the Company or such other Grantor shall promptly notify the
Collateral Agent thereof and, upon the Collateral Agent's request, the Company
or such other Grantor shall cause such Subsidiary to become a party to a
Guaranty and a party to the Pledge Agreement and the Security Agreement and
to
duly execute and/or deliver such opinions of counsel and other documents,
in
form and substance reasonably acceptable to the Collateral Agent.
(v) Collateral
Agent. Each Buyer hereby (a) appoints the Radcliffe SPC, Ltd. for
and on behalf of the Class A Segregated Portfolio, as the collateral agent
hereunder and under the other Security Documents (in such capacity, the
"Collateral Agent"), and (b) authorizes the Collateral Agent
(and its officers, directors, employees and agents) to take such action on
such
Buyer's behalf in accordance with the terms hereof and thereof. The
Collateral Agent shall not have, by reason hereof or any of the other Security
Documents, a fiduciary relationship in respect of any Buyer. Neither
the Collateral Agent nor any of its officers, directors, employees and agents
shall have any liability to any Buyer for any action taken or omitted to
be
taken in connection hereof or any other Security Document except to the extent
caused by its own gross negligence or willful misconduct, and each Buyer
agrees
to defend, protect, indemnify and hold harmless the Collateral Agent and
all of
its officers, directors, employees and agents (collectively, the
"Indemnitees") from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs
and
expenses (including, without limitation, reasonable attorneys' fees, costs
and
expenses) incurred by such Indemnitee, whether direct, indirect or
consequential, arising from or in connection with the performance by such
Indemnitee of the duties and obligations of Collateral Agent pursuant hereto
or
any of the Security Documents. The Collateral Agent shall not be
required to exercise any discretion or take any action, but shall be required
to
act or to refrain from acting (and shall be fully protected in so acting
or
refraining from acting) upon the instructions of the holders of a majority
in
principal amount of the Notes then outstanding, and such instructions shall
be
binding upon all holders of Notes; provided, however, that the
Collateral Agent shall not be required to take any action which, in the
reasonable opinion of the Collateral Agent, exposes the Collateral Agent
to
liability or which is contrary to this Agreement or any other Transaction
Document or applicable law. The Collateral Agent shall be entitled to
rely upon any written notices, statements, certificates, orders or other
documents or any telephone message believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person, and
with
respect to all matters pertaining to this Agreement or any of the other
Transaction Documents and its duties hereunder or thereunder, upon advice
of
counsel selected by it.
(w) Successor
Collateral Agent .
(i) The
Collateral Agent may resign from the performance of all its functions and
duties
hereunder and under the other Security Documents at any time by giving at
least
thirty (30) Business Days' prior written notice to the Company and each holder
of Notes. Such resignation shall take effect upon the acceptance by a
successor Collateral Agent of appointment pursuant to clauses (ii) and (i)
below
or as otherwise provided below.
(ii) Upon
any
such notice of resignation, the holders of two-thirds in principal amount
of the
Notes then outstanding shall appoint a successor collateral
agent. Upon the acceptance of any appointment as collateral agent
hereunder by a successor agent, such successor collateral agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties
of the collateral agent, and the Collateral Agent shall be discharged from
its
duties and obligations under this Agreement and the other Security
Documents. After the Collateral Agent's resignation hereunder as the
collateral agent, the provisions of this Section 4(w) shall inure to its
benefit
as to any actions taken or omitted to be taken by it while it was the Collateral
Agent under this Agreement and the other Security Documents.
(iii) If
a
successor collateral agent shall not have been so appointed within said thirty
(30) Business Day period, the Collateral Agent shall then appoint a successor
collateral agent who shall serve as the collateral agent until such time,
if
any, as the holders of a majority in principal amount of the Notes then
outstanding appoint a successor collateral agent as provided above.
5. REGISTERS;
TRANSFER AGENT INSTRUCTIONS.
(a) Registers. The
Company shall maintain at its principal executive offices (or such other
office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes and the Common Shares in which the
Company
shall record the name and address of the Person in whose name the Notes
and the Common Shares have been issued (including the name
and address of each transferee), the principal amount of Notes held by such
Person and the number of Common Shares held by such Person. The
Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.
(b) Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to
issue
certificates or credit shares to the applicable balance accounts at the DTC,
registered in the name of each Buyer or its respective nominee(s), for Common
Shares issued at the Closing in the form of Exhibit E attached hereto
(the "Irrevocable Transfer Agent Instructions"). The
Company warrants that no instruction other than the Irrevocable Transfer
Agent
Instructions referred to in this Section 5(b), and stop transfer instructions
to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent in respect of the Securities, and that the Securities shall otherwise
be
freely transferable on the books and records of the Company as and to the
extent
provided in this Agreement and the other Transaction Documents. If a
Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f), the Company shall permit the transfer and shall promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by such Buyer to effect such sale, transfer or
assignment. In the event that such sale, assignment or transfer
involves Common Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall
issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to
a
Buyer. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5(b) will be inadequate
and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in addition
to
all other available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity
of
showing economic loss and without any bond or other security being
required.
-13-
6. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Notes and the related
Common Shares to each Buyer at the Closing is subject to the satisfaction,
at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by
the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
(i) Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
(ii) Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price (less, in the case of Radcliffe SPC, Ltd. for and on behalf of the
Class A
Segregated Portfolio, the amounts withheld pursuant to Section 4(g)) for
the
Notes and the related Common Shares being purchased by such Buyer at the
Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true
and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that
speak
as of a specific date, which shall remain true and correct as of such specific
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required
by this
Agreement to be performed, satisfied or complied with by such Buyer at or
prior
to the Closing Date.
7. CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the
Notes and the related Common Shares at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's
sole
benefit and may be waived by such Buyer at any time in its sole discretion
by
providing the Company with prior written notice thereof:
(i) The
Company shall have executed and delivered to such Buyer (A) each of the
Transaction Documents, (B) the Notes (in such principal amounts as such Buyer
shall request) being purchased by such Buyer at the Closing pursuant to this
Agreement, and (C) the Common Shares (in such amounts as such Buyer shall
request) being purchased by such Buyer at the Closing pursuant to this
Agreement.
(ii) The
Company shall have delivered to such Buyer a copy of the Perfection Certificate
and lien searches.
(iii) The
Company shall have delivered to the Collateral Agent, appropriate financing
statements on Form UCC-1 in form for filing under the Uniform Commercial
Code or
other applicable local law of each jurisdiction in which the filing of a
financing statement or giving of notice may be required, or reasonably requested
by the Collateral Agent, to perfect the security interests intended to be
created by the Security Documents.
(iv) Such
Buyer shall have received the opinion of Vorys, Xxxxx, Xxxxxxx and Xxxxx
LLP the
Company's outside counsel, dated as of the Closing Date, in substantially
the
form of Exhibit F attached hereto.
-14-
(v) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit E attached hereto, which
instructions shall have been delivered to and acknowledged in writing by
the
Company's transfer agent.
(vi) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company issued by the Secretary of State
of
the State of Delaware, as of a date within seven (7) days of the Closing
Date.
(vii) The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued
by the
Secretary of State (or comparable office) of each jurisdiction in which the
Company is qualified to do business as a foreign corporation, as of a date
within three (3) days of the Closing Date.
(viii) The
Common Stock (A) shall be designated for quotation or listed on an Initial
Principal Market (subject to notice of issuance) and (B) shall not have been
suspended, as of the Closing Date, by the SEC or such Initial Principal Market
(other than a suspension from Pink Sheets LLC upon securing the listing of
such
Common Stock on the OTC Bulletin Board) from trading on such Initial Principal
Market nor shall suspension by the SEC or such Initial Principal Market have
been threatened, as of the Closing Date, either (1) in writing by the SEC
or
such Initial Principal Market or (2) by falling below the minimum listing
maintenance requirements of such Initial Principal Market.
(ix) The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of Delaware
within ten (10) days of the Closing Date.
(x) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in
the
form attached hereto as Exhibit G.
(xi) The
representations and warranties of the Company shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true
and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that
speak
as of a specific date, which shall remain true and correct as of such specific
date) and the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Company
at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated
as of
the Closing Date, to the foregoing effect and as to such other matters as
may be
reasonably requested by such Buyer in the form attached hereto as Exhibit
H.
(xii) The
Company shall have delivered to such Buyer a letter from the Company's transfer
agent certifying the number of shares of Common Stock outstanding as of a
date
within seven (7) days of the Closing Date.
(xiii) Each
Buyer shall have duly executed and delivered a subordination agreements in
the
form attached hereto as Exhibits I-1 and I-2.
(xiv) The
Company shall have obtained the requisite consent from holders of the Senior
Indebtedness.
(xv) The
Company and the holders of the Senior Indebtedness shall have executed and
delivered the Supplemental Indenture in the form delivered and reviewed by
the
Buyers.
(xvi) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities, other than
notices required to be filed after the Closing Date.
(xvii) The
Company shall have delivered to such Buyer such other documents relating
to the
transactions contemplated by this Agreement as such Buyer or its counsel
may
reasonably request.
-15-
8. TERMINATION. In
the event that the Closing shall not have occurred in respect of a Buyer
on or
before five (5) Business Days from the date hereof due to the Company's or
such
Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement
in
respect of such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, this
if this Agreement is terminated pursuant to this Section 8, the Company shall
remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement
shall
be governed by the internal laws of the State of New York, without giving
effect
to any choice of law or conflict of law provision or rule (whether of the
State
of New York or any other jurisdictions) that would cause the application
of the
laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state
and
federal courts sitting in The City of New York, Borough of Manhattan, for
the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court,
that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address for such notices to it under this Agreement and
agrees
that such service shall constitute good and sufficient service of process
and
notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective
when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and
shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Agreement.
(d) Severability. If
any provision of this Agreement 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.
(e) Entire
Agreement; Amendments. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between the
Buyers, the Company, their affiliates and Persons acting on their behalf
in
respect of the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of the parties in respect of the matters covered
herein
and therein and, except as specifically set forth herein or therein, neither
the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking in respect of such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by
the
Company and the holders of at least a majority of the aggregate principal
amount
of Notes issued and issuable hereunder, and any amendment to this Agreement
made
in conformity with the provisions of this Section 9(e) shall be binding on
all
Buyers and holders of Securities, as applicable. No provision hereof
may be waived other than by an instrument in writing signed by the party
against
whom enforcement is sought. No such amendment shall be effective to
the extent that it applies to less than all of the holders of the applicable
Securities then outstanding. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration
also
is offered to all of the parties to the Transaction Documents, holders of
Notes
or holders of the Common Shares, as the case may be. The Company has
not, directly or indirectly, made any agreements with any Buyers relating
to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in
this
Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.
(f) Notices. Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications
shall be:
If
to the
Company:
000
Xxxxx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
Xxxxx, CEO
Copy
to:
Vorys,
Xxxxx, Xxxxxxx and Xxxxx LLP
2100
One
Cleveland Center
0000
Xxxx
Xxxxx Xxxxxx
Xxxxxxxxx,
XX 00000-0000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxx
X. Xxxxxxxx, Esq.
If
to the
Transfer Agent:
Corporate
Stock Transfer
Xxxxxx,
Xxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
Xxxx
-16-
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer's representatives as set forth on the Schedule
of
Buyers,
with
a
copy (for informational purposes only) to:
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxx, Esq.
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g) Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Common Shares. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the holders of at least a majority of
the
aggregate principal amount of Notes issued and issuable hereunder. A
Buyer may assign some or all of its rights hereunder without the consent
of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
in
respect of such assigned rights.
(h) No
Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and the Buyers contained in Sections 2 and 3 and the agreements
and covenants set forth in Sections 4, 5 and 9 shall survive the
Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Further
Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as any
other
party may reasonably request in order to carry out the intent and accomplish
the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k) Indemnification. In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all
of the
Company's other obligations under the Transaction Documents, the Company
shall
defend, protect, indemnify and hold harmless each Buyer and each other holder
of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation,
those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as
a result of, or arising out of, or relating to (x) any misrepresentation
or
breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (y) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby or (z) any cause of
action, suit or claim brought or made against such Indemnitee by a third
party
(including for these purposes a derivative action brought on behalf of the
Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii)
any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) the
status of such Buyer or holder of the Securities as an investor in the
Company. 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.
(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.
-17-
(m) Remedies. Each
Buyer and each holder of the Securities shall have all rights and remedies
set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled
to
enforce such rights specifically (without posting a bond or other security),
to
recover damages by reason of any breach of any provision of this Agreement
and
to exercise all other rights granted by law. Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge
any
or all of its obligations under the Transaction Documents, any remedy at
law may
prove to be inadequate relief to the Buyers. The Company therefore
agrees that the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.
(n) Rescission
and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its
related
obligations within the periods therein provided, then such Buyer may rescind
or
withdraw, in its sole discretion from time to time upon written notice to
the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
(o) Payment
Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation,
any
bankruptcy law, foreign, state or federal law, common law or equitable cause
of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued
in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
(p) Independent
Nature of Buyers' Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any
way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall
be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers
are
in any way acting in concert or as a group in respect of such obligations
or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group in respect
of such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated
in the negotiation of the transaction contemplated hereby with the advice
of its
own counsel and advisors. Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation,
the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.
[Signature
Page Follows]
-18-
IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
|
COMPANY:
|
|
By:
/s/ Xxxxxxx
Xxxxx
Name:
Xxxxxxx Xxxxx
Title: Chief
Financial Officer
|
-19-
IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
|
BUYERS:
|
|
RADCLIFFE
SPC, LTD. for and on behalf of the Class A Segregated
Portfolio,
By: RG
Capital Management, L.P.
By: RGC
Management Company, LLC
By:
/s/Xxxxxx X
Xxxxxxxxxx
Name: Xxxxxx
X. Xxxxxxxxxx
Title:
Managing
Director
|
-20-
IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
|
JMG
CAPITAL PARTNERS, LP
|
|
By: /s/Xxxx
Xxxxxx
Name:
Xxxx Xxxxxx
Title:
Analyst
|
|
JMG
TRITON OFFSHORE FUND, LTD.
|
|
By:
/s/Xxxx
Xxxxxx
Name:
Xxxx Xxxxxx
Title:
Analyst
|
-21-
IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
|
XX
XXXXXX SECURITIES, INC.
|
|
By: /s/Xxxx
X. Xxxxx
Name: Xxxx X. Xxxxx
Title:
Managing Director
|
-22-
IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
|
CONTEXT
ADVANTAGE MASTER FUND, LP
|
|
By: /s/Xxxxxxx
Xxxxx
Name: Xxxxxxx Xxxxx
Title:
Managing Member
|
-23-
IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
|
PLEXUS
FUND LIMITED
|
|
By:
/s/Xxxxxx Xxxxx
Name: Xxxxxx Xxxxx
Title:
|
-24-
IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
|
WOLVERINE
CONVERTIBLE ARBITRAGE FUND TRADING LIMITED
|
|
By:
/s/Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxx
Title:
Managing Director
|
-25-
SCHEDULE
OF BUYERS
|
BUYER
|
ADDRESS
|
PRINCIPAL
AMOUNT
|
COMMON
SHARES
|
PURCHASE
PRICE
|
|||||||||
|
Radcliffe
SPC, Ltd. for and on behalf of the Class A Segregated
Portfolio
|
c/o
RG Capital Management, L.P.
0
Xxxx Xxxxx - Xxxx, Xxxxx 000
Xxxx
Xxxxxx, XX 00000
Fax:
(000) 000-0000
|
$ |
1,501,875
|
56,250
|
$ |
1,350,000
|
|||||||
|
Wolverine
Convertible Arbitrage Fund Trading Limited
|
Wolverine
Assets Mgt. LLC
000
Xxxxxxx Xxxxxx, Xxxxx
000
Xxxxxxx,
XX 00000
|
$ |
667,500
|
25,000
|
$ |
600,000
|
|||||||
|
Context
Advantage Master Fund L.P.
|
Context
Capital Management, LLC 0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX
00000
Fax:
000 000 0000
|
$ |
278,125
|
10,417
|
$ |
250,000
|
|||||||
|
Plexus
Fund Limited
|
000
Xxxxx Xxxxxx 00xx Xxxxx
Xxx
Xxxx, XX 00000
|
$ |
166,875
|
6,250
|
$ |
150,000
|
|||||||
|
XX
Xxxxxx Securities, Inc.
|
000
Xxxx Xxxxxx 0xx Xxxxx
Xxx
Xxxx, XX 00000
|
$ |
278,125
|
10,417
|
$ |
250,000
|
|||||||
|
JMG
Capital Partners L.P.
|
00000
Xxxxxxxx Xxxx. Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
|
$ |
222,500
|
8,333
|
$ |
200,000
|
|||||||
|
JMG
Triton Offshore Fund, Ltd.
|
00000
Xxxxxxxx Xxxx. Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
|
$ |
222,500
|
8,333
|
$ |
200,000
|
|||||||
-26-
EXHIBITS
| Exhibit A | Form of Notes |
| Exhibit B | Form of Security Agreement |
| Exhibit C | Form of Pledge Agreement |
| Exhibit D | Form of Guaranty |
| Exhibit E | Irrevocable Transfer Agent Instructions |
| Exhibit F | Form of Outside Company Counsel Opinion |
| Exhibit G | Form of Secretary's Certificate |
| Exhibit H | Form of Officer's Certificate |
| Exhibit I-1 | Form of Indenture Subordination Agreement |
| Exhibit I-2 | Form of Trident Subordination Agreement |
SCHEDULES
| Schedule 3(l) | SEC Filings not Timely Made |
| Schedule 3(m) | Absence of Certain Changes |
| Schedule 3(n) | No Undisclosed Events, Liabilities, Developments or Circumstances |
| Schedule 3(o) | Conduct of Business; Regulatory Permits |
| Schedule 3(s) | Transactions with Affiliates |
| Schedule 3(t) | Equity Capitalization |
| Schedule 3(u) | Indebtedness and Other Contracts |
| Schedule 3(v) | Litigation |
| Schedule 3(cc) | Ranking of Notes |
| Schedule 4(d) | Use of Proceeds |
| Schedule 4(j) | Restriction on Redemption and Cash Dividends |
