EXHIBIT 4.10
THE SECURITIES PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, TOGETHER WITH THE REGULATIONS PROMULGATED
THEREUNDER (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS SUBSCRIPTION
AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER
TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR
TRANSFERRED EXCEPT AS PERMITTED UNDER THE SECURITIES ACT PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), is dated as of June
4, 1998, by and among Storm Technology, Inc., a Delaware corporation, with
headquarters located at 0000 Xxxxxxxxxx Xxxx, Xxxxxxxx Xxxx, XX 00000 (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" or collectively "Buyers") (the "Schedule of Buyers").
RECITALS
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration pursuant to Section
4(2) and/or Regulation D ("Regulation D") as promulgated by the U.S. Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Securities Act");
B. The Company has authorized the following new series of its Preferred
Stock, $.001 par value per share (the "Preferred Stock"): the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock"), which shall be
convertible into shares of the Company's Common Stock, $.001 par value per share
(the "Common Stock") (as converted, the "Conversion Shares"), in accordance with
the terms of the Certificate of Designation of Series B Preferred Stock,
substantially in the form attached hereto as Exhibit A (the "Certificate of
Designation");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, (i) shares of Series B Preferred Stock in the respective amounts
and for the purchase price set forth opposite each Buyer's name on the Schedule
of Buyers annexed hereto; and (ii) up to US$12,000,000 of the Company's Common
Stock in the amounts set forth opposite each Buyer's name of the Schedule of
Buyers (such shares of Common Stock hereafter referred to as the "Drip Shares")
(the Series B Preferred Stock and the Drip Shares collectively referred to as
the "Securities");
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit B (the "Registration Rights Agreement")
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws and an Escrow Agreement in the form
attached hereto as Exhibit C (the "Escrow Agreement"); and
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
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(a) Purchase of Series B Preferred Stock. Subject to the satisfaction
(or waiver) of each of the conditions set forth in Sections 7 ("Conditions to
the Company's Obligation to Sell the Series B Preferred Stock") and 8
("Conditions to Buyers' Obligation to Purchase the Series B Preferred Stock"),
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company an aggregate amount of 20,000 shares of Series B Preferred
Stock for an aggregate purchase price of $2,000,000, in the respective amounts
and for the purchase price set forth opposite each Buyer's name on the Schedule
of Buyers.
(b) Purchase of Drip Shares. Subject to the satisfaction (or waiver)
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of each of the conditions set forth in Sections 9 ("Conditions to the Company's
Obligation to Sell the Drip Shares") and 10 ("Conditions to Buyers' Obligations
to Purchase the Drip Shares"), at any time during the eighteen (18) months
following the date the registration statement covering the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock (the "Underlying
Shares") and the Drip Shares (as set forth in the Registration Rights Agreement)
is declared effective (the "Effective Date") by the SEC (the "Commitment
Period"), the Company may, pursuant to the terms of this Section, make Calls for
Proceeds (as defined below) against each Buyer in the aggregate up to the
maximum amounts set forth in Section (1)(b)(ii) below against delivery of Drip
Shares to each such Buyer.
(i) The Company may deliver written notices to Buyer (each such
notice hereafter referred to as a "Call For Proceeds" and the date such a notice
is received by a Buyer hereafter called a "Call Date") stating a dollar amount
(the "Dollar Amount") the Company intends to draw upon during the thirty (30)
days following the Call Date (the "Call Period"). Notice constituting each Call
for Proceeds shall be given by the Company by telecopy after the Principal
Market has closed, but by no later than 5:30 p.m., New York time. For the
purposes of this Agreement, unless the parties mutually agree in writing to the
contrary, "Principal Market" shall refer to the Nasdaq National Market, the
Nasdaq Small-Cap Market, the American Stock Exchange or the New York Stock
Exchange, and any other applicable market in accordance with their requirements
(other than bulletin board markets or pink sheets). At any time during the Call
Period, and at Buyer's sole discretion, Buyer shall provide one or more written
notices to the Company (each a "Call Acceptance") that it will meet all or a
portion of the Call for Proceeds against delivery of Drip Shares as calculated
pursuant to subsection (ii) below. If the Company does not receive Call
Acceptances from Buyers equal to the total Dollar Amount (as permitted
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and limited hereunder) within the Call Period, a Call Acceptance shall be deemed
received by the Company as of the last trading day during the Call Period. The
closing for the sale of the Drip Shares shall take place on or before the third
day following receipt or deemed receipt of the Call Acceptance.
(ii) With respect to each Call for Proceeds, the Dollar Amount
shall be subject to each of the following limitations:
(A) Subject to Section (B) below, the aggregate Dollar
Amount among all Buyers may not be more than eight (8%) percent of the Company's
Trading Volume multiplied by the average closing bid price of the Common Stock
as reported by Bloomberg, L.P. from the three (3) trading days (such average
hereafter referred to as the "Current Average Price") preceding the Call Date.
For the purposes of this Agreement, "Trading Volume" shall mean the total number
of shares traded on the Principal Market for the twenty (20) trading days
preceding the Call Date.
(B) The aggregate Dollar Amount on each Call for Proceeds
among all Buyers may not be less than US$50,000 or more than US$1,000,000;
(C) When aggregated with the Series B Preferred Stock and
all other Drip Shares issued in connection with prior and concurrent Calls for
Proceeds, the issuance of Drip Shares for the then current Call for Proceeds
will not result in the Company issuing in the aggregate more than 19.99% of the
number of shares of Common Stock outstanding as of the Closing Date for the sale
of the Series B Preferred Stock unless the Company has first obtained the
approval of the Company's stockholders as required by Section 4460(i)(1)(D)(ii)
of the Nasdaq Marketplace Rules. The "Closing Date Stock" shall be defined as
the number of shares of Common Stock issued and outstanding as of the Closing
Date for the Series B Preferred Stock. The foregoing limitation shall be
accomplished by the following formula to calculate the Dollar Amount available
for a Call for Proceeds at any given point in time:
Current Average Price X [(19.99% X Closing Date Stock) - (Underlying Shares
issued to date + Drip Shares issued to date) - (RP/(Current Average Price
X .50 X (1 - DP)))]
Where:
RP = $2,000,000 less the purchase price of Series B Preferred Stock
converted to date
DP = 20% or, 18% if Effective Date occurs within 60 days after the Closing
Date for the sale of Series B Preferred Stock.
If the Dollar Amount resulting from the foregoing formula results in an
amount less than fifty thousand ($50,000) dollars, no Call for Proceeds may be
made by the Company.
(D) When aggregated with the Series B Preferred Stock and
all other Drip Shares issued in connection with prior and concurrent Calls for
Proceeds, Buyer shall not be required to purchase Drip Shares for the then
current Call for Proceeds if it would result in
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the Buyer beneficially owning more than 4.99% of the Closing Date Stock, as
determined in accordance herewith and Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(iii) Notwithstanding anything to the contrary contained herein or in
the Certificate of Designation for the Series B Preferred Stock, to the extent
that the Company is subject to Section 4460(i)(1)(D)(ii) of the Nasdaq
Marketplace Rules, the number of shares of Common Stock of the Company issued
pursuant to the Certificate of Designation for the Series B Preferred Stock
and/or the shares of Common Stock issued upon a Call for Proceeds shall not
exceed 19.99% of the Closing Date Stock. In the event the number of shares of
Common Stock of the Company issuable pursuant to the terms of the Certificate of
Designation for the Series B Preferred Stock, and/or upon a Call for Proceeds
exceeds 15% of the Closing Date Stock, the Company agrees that it shall
immediately call a stockholders meeting for the purpose of approving below
market price issuances of Common Stock to the Buyers in excess of 19.99% of the
Closing Date Stock as required by Section 4460(i)(1)(D)(ii) of the Nasdaq
Marketplace Rules. In the event that the aforementioned proposal is not ratified
by the stockholders and the number of shares issuable under the Certificate of
Designation for the Series B Preferred Stock pursuant to a Call for Proceeds
exceeds 19.99% of the Closing Date Stock, the Company will seek a waiver from
the Nasdaq Stock Market to permit such issuances. If the Company is unable to
obtain such a waiver within twenty (20) days of applying therefor, the Company
will, pay to the Buyers the Redemption Price in accordance with the Redemption
procedures as set forth in the Certificate of Designation for the Series B
Preferred Stock of that number of shares of Common Stock that would have been
issuable to the Subscribers in excess of 19.99% of the Closing Date Stock.
(iv) The number of Drip Shares to be sold at each Closing shall be
equal to the quotient obtained in dividing the Dollar Amount by eighty-five
percent (85%) of the Current Average Price preceding the date the Company
receives the Call Acceptance, rounding any fractional share up to a full share.
(d) Form of Payment. Buyer shall pay the purchase price of the
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Series B Preferred Stock (or the Dollar Amount for each Call for Proceeds
pursuant to a Call Acceptance) by delivering good funds in United States Dollars
by wire transfer to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP (the "Escrow Agent") in
accordance with the Escrow Agreement, against delivery of the original
certificates evidencing the Series B Preferred Stock (or the Drip Shares, as the
case may be) duly executed on behalf of the Company and registered in the name
of such Buyer or its designee (the "Certificates") (each such delivery hereafter
referred to as a "Closing" and the date of each such Closing hereafter referred
to as a "Closing Date").
(e) Wire Instructions. Wire Instructions for Xxxxxxxxx, Xxxxxxxxx &
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Xxxx, LLP are as follows:
Chase Manhattan Bank, N.A.
ABA #000000000
For the Account of:
United States Trust Company of New York
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Account No. 000-0-000000
In favor of:
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP Attorney Escrow Account
Account No. 59-01383
2. Representation and Warranties of the Buyer. Buyer acknowledges,
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represents, warrants and agrees as follows:
(a) Organization and Authorization. Buyer is duly incorporated or
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organized and validly existing in the jurisdiction of its incorporation or
organization and has all requisite power and authority to purchase and hold the
Securities. The decision to invest and the execution and delivery of this
Agreement by the Buyer, the performance by the Buyer of its obligations
hereunder and the consummation by the Buyer of the transactions contemplated
hereby have been duly authorized and requires no other proceedings on the part
of the Buyer. The undersigned signatory has all right, power and authority to
execute and deliver this Agreement on behalf of the Buyer. This Agreement has
been duly authorized, validly executed and delivered by the Buyer and, assuming
the execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and available
equitable remedies.
(b) Evaluation of Risks. Buyer has such knowledge and experience in
-------------------
financial and business matters as to be capable of evaluating the merits and
risks of, and bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this transaction. It
recognizes that its investment in the Company involves a high degree of risk and
the Buyer can afford the complete loss of Buyer's investment.
(c) Independent Counsel. Buyer acknowledges that it has been advised
-------------------
to consult with its own attorney regarding legal matters concerning the Company
and to consult with its tax advisor regarding the tax consequences of acquiring
the Securities.
(d) Disclosure Documentation. Buyer has received and reviewed copies
------------------------
of the Company's reports filed under the Exchange Act, together with the
regulations promulgated thereunder (the "1934 Act"), including the Company's
Form 10-K's, Form 10-Q's, and Form 8-K's filed by the Company for at least the
twelve month period preceding the Closing Date (collectively, the "SEC
Filings"). Buyer acknowledges that the Company has offered to make available any
additional public information that the Buyer may reasonably request, including
technical information, and other material information about the Company and
Buyer has been offered Company's full cooperation in making such information
available to Buyer and acknowledges that the Company has recommended that the
Buyer request and review such information prior to making an investment
decision. No oral or written representations have been made, or oral or written
information furnished to the undersigned or its advisors, if any, in connection
with the offering of the Securities which were or are in any way inconsistent
with the
5
SEC Filings.
(e) Opportunity to Ask Questions. Buyer has had a reasonable
----------------------------
opportunity to ask questions of and receive answers from the Company concerning
the Company and the offering, and all such questions, if any, have been answered
to the full satisfaction of Buyer.
(f) SEC Filings Constitute Sole Representations. Except as set forth
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in the SEC Filings, or this Agreement (including all Exhibits attached hereto),
no representations or warranties in connection with the offering of the
Securities have been made to Buyer by (i) the Company or any agent, employee or
affiliate of the Company, or (ii) any other person, and in entering into this
transaction Buyer is not relying upon any information, other than that contained
in the SEC Filings and the results of independent investigation by Buyer.
(g) Buyer is Accredited Investor. The undersigned represents and
----------------------------
warrants it is included within one or more of the following categories of
"Accredited Investors."
(i) Any bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan associated or other institution as defined in
Section 3(a)(5)A of the Securities Act whether acting in it individual or
fiduciary capacity; any broker or dealer registered pursuant to Section 15 of
the 1934 Act; any insurance company as defined in Section 2(13) of the
Securities Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business Act of
1958; any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivision, for the benefits of its employees if such plan has total assets in
excess of $5,000,000; and employee benefit plan within the meaning of Title I of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment advisor, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
(ii) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(iii) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(iv) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer;
(v) Any natural person whose individual net worth, or joint net
worth
6
with that person's spouse, at the time of his purchase exceeds $1,000,000;
(vi) Any natural person who had an individual income in excess
of $200,000 in each of the two (2) most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching that same income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Section
230.506(b)(2)(ii) of the regulations promulgated under the Securities Act;
(viii) Any entity in which all of the equity owners are
accredited investors; and
(ix) Any self-directed employee benefit plan with investment
decisions made solely by persons that are accredited investors within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act.
(h) No Registration, Review or Approval. Buyer acknowledges and
-----------------------------------
understands that the limited private offering and sale of Securities pursuant to
this Agreement has not been reviewed or approved by the SEC or by any state
securities commission, authority or agency, and is not registered under the
Securities Act or under the securities or "blue sky" laws, rules or regulations
of any state. Buyer acknowledges, understands and agrees that the Securities
are being offered and sold hereunder pursuant to (i) a private placement
exemption to the registration provisions of the Securities Act pursuant to
Section 3(b) or Section 4(2) of such Act and Regulation D promulgated under such
Act, and (ii) a similar exemption to the registration provisions of applicable
state securities laws. Buyer understands that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein in order to
determine the applicability of such exemptions and the suitability of Buyer to
acquire the Securities.
(i) Investment Intent. Without limiting its ability to resell the
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Securities pursuant to an effective registration statement, Buyer is acquiring
the Securities solely for its own account and not with a view to the
distribution, assignment or resale to others. Buyer understands and agrees that
it may bear the economic risk of its investment in the Securities for an
indefinite period of time.
(j) [Intentionally Left Blank]
(k) Transfer Restrictions Regarding Securities. Upon conversion of
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any part or all of the Series B Preferred Stock at any time after the Holding
Period, if the holder of the Series B Preferred Stock being converted makes the
certification, pursuant to a Notice of Conversion in the form attached hereto as
Exhibit D (a "Notice of Conversion"), that such holder has complied with all of
the requirements of Regulation D and such other requirements as set
7
forth herein, and the registration statement required to be filed by the Company
pursuant to the Registration Rights Agreement is effective or an exemption from
registration exists, then the Company shall cause the Company's transfer agent
(the "Transfer Agent") to deliver the Underlying Shares upon such conversion
without a restrictive legend or stop transfer instructions. Otherwise the
Underlying Shares shall be considered restricted securities and certificates
representing such Underlying Shares shall contain restrictive legends and stop
transfer instructions will be placed with the Transfer Agent regarding such
Underlying Shares, including without limitation the legend in substantially the
following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (TOGETHER WITH THE REGULATIONS
PROMULGATED THEREUNDER, THE "SECURITIES ACT"), AND MAY NOT BE SOLD, OFFERED
FOR SALE, OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
The certificates representing the Securities, and each certificate
issued in transfer thereof, will also bear any legend required under any
applicable state securities law.
(l) Registration Rights. The parties have entered into the
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Registration Rights Agreement.
(m) No Advertisements. The Buyer is not subscribing for the
-----------------
Securities as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
3. Representations and Warranties of the Company. The Company
---------------------------------------------
acknowledges, represents, warrants and agrees as follows, except to the extent
disclosed in the Schedule of Exceptions attached as Exhibit E hereto (the
"Schedule of Exceptions"):
(a) Organization and Authorization. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own and operate
its properties and assets and to carry on its business as currently conducted.
The Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the Company. The Company is not in
default or violation of any material term or provision of its Certificate of
Incorporation, as amended, or By-laws nor will the consummation of the
transactions contemplated by this Agreement cause any such default or violation.
The Company has all requisite corporate power and authority to enter into this
Agreement, to sell the Securities hereunder and to carry out and perform its
obligations under the terms of this Agreement. This Agreement is a valid and
binding obligation of the Company,
8
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and available equitable
remedies. This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement in
accordance with its terms, subject to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally. Upon their issuance and delivery pursuant to this Agreement, the
Underlying Shares will be validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the Underlying
Shares are subject to restrictions on transfer under state and/or federal laws.
(b) Reporting Issuer Company Status. The Company is in full
-------------------------------
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the 1934 Act, and shall use its best
efforts to maintain such status on a timely basis. The Company has registered
its Common Stock pursuant to Section 12 of the 1934 Act and, as of the Closing
Date for the Series B Preferred Stock, the Common Stock trades on the NASDAQ
National Market System. The Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the 1934 Act for a period of at least twelve (12) months immediately preceding
the offer to sell the Securities (or for such shorter period that the Company
has been required to file such material).
(c) Capitalization. The authorized capital stock of the Company
--------------
consists of 30,000,000 of Common Stock, $0.001 par value, and 500,000 shares of
Preferred Stock, $0.001 par value, of which 30,000 shares have been designated
Series A 8.5% Convertible Preferred Stock, $0.001 par value and 20,000 shares
have been designated Series B Convertible Preferred Stock. As of March 31, 1998,
13,372,976 shares of Common Stock have been issued and are outstanding,
and20,003 shares of Series A 8.5% Convertible Preferred Stock have been issued
and are outstanding. All issued and outstanding shares of Common Stock and
Series B Convertible Preferred Stock have been duly authorized and validly
issued and are fully paid and nonassessable.
(d) Company to Reserve Shares. The Company will reserve from its
--------------------------
authorized but unissued shares of Common Stock such number of shares of Common
Stock to permit the conversion of all of the Series B Preferred Stock and
issuance of the Drip Shares, provided that the number of shares of Common Stock
so reserved shall at no time be less than two hundred (200%) percent of the
number of shares of Common Stock for which the Series B Preferred Stock is at
any time convertible. If at any time the number of authorized but unissued
shares of Common Stock shall be insufficient to satisfy the conversion or
issuance hereunder, in addition to such other remedies as shall be available to
the holder of Series B Preferred Stock, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(e) Listing. The Company will use best efforts to maintain the
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listing of its Common Stock on the NASDAQ National Market System. The Company
will take no action which would import their continued listing or eligibility of
the Company from such listing.
9
(f) Company to Honor Telecopied Notices. The Company will permit each
-----------------------------------
Buyer to exercise its right to convert the Series B Preferred Stock by
telecopying an executed and completed Notice of Conversion to the Company and
delivering the original Notice of Conversion and the certificate representing
the Series B Preferred Stock to the Company by express courier. The Company
will use all commercially reasonable efforts to transmit the certificates
representing Underlying Shares issuable upon conversion of any Series B
Preferred Stock (together with the certificates representing any then-remaining
unconverted Preferred Stock) to Buyer via express courier, at the address set
forth herein, by electronic transfer or otherwise within three (3) NASDAQ
trading days after the applicable Conversion Date (defined below) if the Company
has received the original Notice of Conversion and Preferred Stock certificate
being so converted by such date. In addition to any other remedies which may be
available to Buyer, in the event that the Company fails for any reason to
transmit such shares of Common Stock within such three (3) NASDAQ trading day
period, Buyer will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the Company and
Buyer shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion.
In the event that the Common Stock issuable upon conversion of the
Series B Preferred Stock is not delivered within five (5) NASDAQ trading days of
delivery of a Notice of Conversion by the Company of a valid Notice of
Conversion and the Preferred Stock to be converted (such date of delivery
referred to as the "Conversion Date"), the Company shall pay to the Buyer, in
immediately available funds, upon demand, as liquidated damages for such failure
and not as a penalty, for each $100,000 of Series B Preferred Stock sought to be
converted $250 for each of the first ten (10) days and $500 per day thereafter
that the Underlying Shares are not delivered, which liquidated damages shall run
from the sixth (6th) NASDAQ trading day after the Conversion Date. Any and all
payments required pursuant to this paragraph shall be payable in cash upon
demand of Buyer.
(g) SEC Filings. For a period of at least twelve (12) months
-----------
immediately preceding this offer and sale, or such shorter period that the
Company has been required to file the SEC Filings, to the best of the Company's
knowledge (i) none of the Company's filings with the Securities and Exchange
Commission contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, and (ii) the Company has timely filed all requisite forms, reports
and exhibits thereto with the Securities and Exchange Commission.
(h) Full Disclosure. There is no fact known to the Company (other
---------------
than general economic conditions known to the public generally) that has not
been disclosed in writing to the Buyer that (i) could reasonably be expected to
have a material adverse effect on the condition (financial or otherwise) or in
the earnings, business affairs, business prospects, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
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(i) Other Convertible Interests. Except as described in the SEC
---------------------------
Filings, (i) there are no other outstanding debt or equity securities presently
convertible into shares of Common Stock or that could be convertible into shares
of Common Stock, and (ii) the Company has no outstanding restricted shares of
Common Stock, or shares of Common Stock sold under Regulation S or Regulation D
under the Securities Act or outstanding under any other exemption from
registration, which are available for sale as unrestricted free trading stock.
(j) No Undisclosed Liabilities or Events. The Company has no
------------------------------------
liabilities or obligations other than those disclosed in the SEC Filings, this
Agreement or those incurred in the ordinary course of the Company's business
since March 31, 1998, and which individually or in the aggregate, do not or
would not have a material adverse effect on the properties, business, condition
(financial or otherwise), results of operations or prospects of the Company. No
event or circumstances has occurred or exists with respect to the Company or its
properties, business, condition (financial or otherwise), results of operations
or prospects, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed.
(k) No Default. The Company is not in default in the performance or
----------
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it is or its property is bound,
and neither the execution, nor the delivery by the Company, nor the performance
by the Company of its obligations under this Agreement, including the conversion
provision of the Series B Preferred Stock will conflict with or result in the
breach or violation of any of the terms or provisions of, or constitute a
default or result in the creation or imposition of any lien or charge on any
assets or properties of the Company under, any material indenture, mortgage,
deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound or any
statute or the Certificate of Incorporation, as amended, or Bylaws, as amended,
of the Company, or any decree, judgment, order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or its
properties, or the Company's listing agreement for its Common Stock.
(l) Intellectual Property Rights. Except as disclosed in the SEC
----------------------------
Filings, the Company has sufficient trademarks, trade names, patent rights,
copyrights and licenses to conduct its business as presently conducted in the
SEC Filings. To the Company's knowledge, neither the Company nor its products
is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and is not aware of any claim being made against it regarding any
trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
business or financial condition of the Company.
(m) Litigation. Except as disclosed in the SEC Filings, there is no
----------
action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Company. The
11
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality.
(n) Title to Assets. Except as set forth in SEC Filings, the Company
---------------
has good and marketable title to all properties and material assets described in
the SEC Filings as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than such as are not
material to the business of the Company.
(o) Subsidiaries. Except as disclosed in the SEC Filings, the Company
------------
does not presently own or control, directly or indirectly, any interest in any
other corporation, partnership, association or other business entity.
(p) Required Governmental Permits. The Company is in possession of
-----------------------------
and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities which are material to the current conduct of its business, all of
which are valid and in full force and effect.
(q) Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the SEC which may at any time permit the
sale of the Securities to the public without registration, the Company agrees to
use its best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date on which the Company becomes subject to the reporting
requirements of the Securities Act or the 1934 Act;
(ii) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the 1934 Act;
(iii) to furnish to Buyer forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144, and of the Securities Act and the 1934 Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as Buyer may reasonably request in availing
itself of any rule or regulation of the SEC allowing Buyer to sell any such
Securities without registration.
(r) Dilution. The Company is aware and acknowledges that conversion
--------
of the Series B Preferred Stock and the issuance of DRIP Shares could cause
dilution to existing stockholders and could significantly increase the
outstanding number of shares of Common Stock.
(s) Restrictions on Future Financings. The Company cannot, without
---------------------------------
the prior written approval of all of the Buyers, enter into any transaction
whereby the Company issues freely tradable securities or securities that would
be freely tradable for a period of three and one half (3.5) months following the
Effective Date. In the event the Company enters into a
12
transaction prior to the end of the aforementioned three and one half month
period whereby the Company agrees to issue freely tradable securities, or
securities that would be freely tradable, after the aforementioned three and one
half (3.5) month period, it will contractually prohibit such investor from
conducting any short selling of the Company's securities prior to the expiration
of said three and one half month period.
Notwithstanding the aforementioned, in the event the Company wishes to
enter into a transaction for debt or equity financing which is convertible into
shares of Common Stock of the Company .within eighteen (18) months following the
Closing Date for the Series B Preferred Stock, the Company will give each Buyer
written notice of the terms and conditions of such offer (the "ROFR Notice").
Each Buyer shall have a pro rata right of first refusal to participate in such
offering in an amount not to exceed a total of the greater of (i) an aggregate
of US $5,000,000 or (ii) the sum of US $2,000,000 plus the total dollar value of
all Dollar Amounts through the date of the ROFR Notice. Each Buyer shall have
three (3) business days to reply in writing after receipt of the ROFR Notice
from the Company. Such reply may be sent via facsimile. In the event such
written reply is not received by the Company within such three (3) business day
period, it will be deemed a refusal by such Buyer. Buyers shall have the right
to review all final documentation regarding such placements and such
documentation shall be delivered to each Buyer within ten (10) days from the
closing date of such transaction(s). Each Buyer's pro rata right to exercise
the right of first refusal granted under this Section shall be equal to the
ratio that shares of Series B Preferred Stock that such Buyer purchases bear to
all shares of Series B Preferred Stock sold to all Buyers.
No equity or debt financing, including the issuance of debt
convertible into equity, consummated with a merger or acquisition of assets by
the Company shall constitute a financing which would trigger the right of first
refusal hereunder in favor of the Buyers. The right of first refusal under this
Section shall supersede any other similar right that the Buyers may have with
respect to offerings of securities of the Company.
In the event the Buyers do not exercise their right of first refusal as set
forth above, and the Company enters into a transaction as set forth above, the
Buyers have the right to thereafter reject any Call For Proceeds served upon
them.
(t) Use of Proceeds. The Company agrees that the proceeds received by
it from this transaction shaall be used for working capital purposes and not for
the repayment of any Note.
(u) No Integration. The Company represents that its counsel has been
--------------
orally informed by its Nasdaq representative that the issuance of its Series A
Preferred Stock to the Buyers pursuant to a transaction in December 1997 is not
to be integrated with, nor considered a continuous offering with this
transaction.
(v) Eligibility. The Company represents that as of the date hereof
-----------
meets the eligibility requirements for the filing of a Form S-3 registration
statement.
13
4. Representations and Warranties of the Company and Buyer. Each of Buyer
-------------------------------------------------------
and the Company represent to the other the following with respect to itself:
(a) Non-contravention/No Conflict. The execution and delivery of this
-----------------------------
Agreement and the consummation of the issuance of the Securities and the
transaction contemplated by this Agreement do not and will not conflict with or
result in a breach by such party of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-laws of such
party, or any indenture, mortgage, deed of trust of other material agreement or
instrument to which such party is a party or by which it or any of its
properties or assets are bound, or any existing applicable law, rule or
regulation or any applicable decree, judgment or order of any court, Federal or
State regulatory body, administrative agency or other governmental body having
jurisdiction over such party or any of its properties or assets. The execution,
delivery and performance of this Agreement and the consummation by such party of
the transactions contemplated hereby or relating hereto do not and will not (i)
result in a violation of such party's charter documents, by-laws, partnership
agreement, certificate of limited partnership or other governing documents, as
the case may be, or (ii) conflict with, or constitute a default (or an event
which with notice of 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 party is a
party, or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such party
or any of its properties. Such party is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or the transactions contemplated hereby;
provided that for purposes of the representation made in this sentence, each
party is assuming and relying upon the accuracy of the relevant representations
and agreements of the other party herein.
(b) Approvals. Neither the Company nor Buyer is aware of any
---------
authorization, approval or consent of any governmental body which is legally
required for the issuance and sale of the Securities, other than filings to
comply with the Securities Act and applicable state securities or "blue sky"
laws.
(c) Indemnification.
---------------
(i) Each of the Company and Buyer agrees to indemnify the other
and to hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
(ii) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
14
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, unless
the indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Buyer, the fees and expenses of such counsel shall be at the expense of the
indemnifying party if (i) the employment of such counsel has been specifically
authorized in writing by the indemnifying party, or (ii) the named parties to
any such action (including any impleaded parties) include both the Buyer and the
indemnifying party and the Buyer shall have been advised by such counsel that
there may be one or more legal defenses available to the indemnifying party
different from or in conflict with any legal defenses which may be available to
the Buyer (in which case the indemnifying party shall not have the right to
assume the defense of such action on behalf of the Buyer, it being understood,
however, that the indemnifying party shall, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable only for the reasonable fees and expenses of one separate firm of
attorneys for each Buyer, which firm shall be designated in writing by the
Buyer). No settlement of any action against an indemnified party shall be made
without the prior written consent of the indemnified party, which consent shall
not be unreasonably withheld.
(d) Time of Representations and Warranties. Each representation and
--------------------------------------
warranty made by each party hereunder shall be deemed made as of the date hereof
and as of each Closing Date, unless the context shall clearly require otherwise.
5. Restrictions on Conversion and Exercise. Restrictions on Conversion
---------------------------------------
and Exercise shall be subject to the Certificate of Designation.
6. Registration or Exemption Requirements. Buyer acknowledges and
--------------------------------------
understands that the Securities may not be resold or otherwise transferred
except in a transaction registered under the Securities Act and any applicable
state securities laws or unless an exemption from such registration is
available. Buyer understands that the Securities will be imprinted with a
legend that prohibits the transfer of the Securities unless (i) they are
registered or such registration is not required, and (ii) if the transfer is
pursuant to an exemption from registration other than Rule 144 under the
Securities Act and, if the Company shall so request in writing, an opinion of
counsel reasonably satisfactory to the Company is obtained to the effect that
the transaction is so exempt.
15
7. Conditions to the Company's Obligation to Sell the Series B Preferred
---------------------------------------------------------------------
Stock. Buyer understands that the Company's obligation to sell the Series B
-----
Preferred Stock is further conditioned upon:
(a) Execution. The execution and delivery of this Agreement,
---------
including all Exhibits attached hereto, by the Company; and
(b) Delivery of Funds. Delivery into escrow by Buyer of good cleared
-----------------
funds as payment in full for the purchase of the Series B Preferred Stock as
more fully set forth in the Escrow Agreement; and
(c) Representations. All representations and warranties of the Buyer
---------------
shall remain true and correct as of the Closing Date for the Series B Preferred
Stock.
8. Conditions to Buyers' Obligation to Purchase the Series B Preferred
-------------------------------------------------------------------
Stock. Buyer's obligation to purchase the Series B Preferred Stock is
-----
conditioned upon:
(a) Execution. The execution and delivery of this Agreement,
---------
including Exhibits attached hereto, for the sale of the Series B Preferred
Stock;
(b) Delivery of Certificates. Delivery of the original Series B
------------------------
Preferred Stock Certificate at the Closing Date for the Series B Preferred
Stock;
(c) Representations. All representations and warranties of the
---------------
Company shall remain true and correct as of the Closing Date for the Series B
Preferred Stock;
(d) Legal Opinion. Receipt of opinion of counsel in the form of
-------------
Exhibit F hereto for the Closing Date for the sale and purchase of Series B
Preferred Stock;
(e) Certificate of Designation. Receipt of a copy of the filed
--------------------------
Certificate of Designation for the Series B Preferred Stock immediately prior to
the Closing Date for the sale and purchase of the Series B Preferred Stock;
(f) Transfer Instructions. Receipt of a copy of the executed
---------------------
irrevocable instructions to the Transfer Agent in the form annexed hereto as
Exhibit G; and
9. Conditions Precedent to the Obligation of the Company to Issue and
------------------------------------------------------------------
Sell Common Stock Associated With a Call. The obligation hereunder of the
----------------------------------------
Company to issue and sell the Drip Shares to the Buyers incident to each Closing
for Drip Shares is subject to the satisfaction, at or before each such Closing,
of each of the conditions set forth below.
(a) Accuracy of Each of the Buyers Representation and Warranties. The
------------------------------------------------------------
representations and warranties of each of the Buyers shall be true and correct
in all material
16
respects as of the date of this Agreement and as of the date of each such
Closing as though made at each such time.
(b) Performance by the Buyers. The Buyers shall have performed,
-------------------------
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Buyers at or prior to such Closing.
10. Conditions Precedent to the Right of the Company to Deliver a Call for
----------------------------------------------------------------------
Proceeds and the Obligation of the Buyers to Purchase Drip Shares. The right of
-----------------------------------------------------------------
the Company to deliver a Call for Proceeds and the obligation of the Buyers
hereunder to acquire and pay for the Drip Shares incident to a Closing for Drip
Shares is subject to the satisfaction, on (i) the date of delivery of such Call
for Proceeds, and (ii) the applicable Closing Date for each Call for
Proceeds (each a "Condition Satisfaction Date"), of the conditions above, and
each of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall
---------------------------------------------
have filed with the SEC a registration statement with respect to the resale of
that number of Drip Shares indicated in the applicable Call for Proceeds in
accordance with the terms of the Registration Rights Agreement. As set forth in
the Registration Rights Agreement and herein, the registration statement
(including all Drip Shares in the Call for Proceeds) shall have previously
become effective and shall remain effective during at least the three (3)
trading days immediately preceding each Condition Satisfaction Date and each
Call Date, and (i) neither the Company nor any of the Buyers shall have received
notice that the SEC has issued or intends to issue a stop order with respect to
the aforementioned registration statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the aforementioned registration
statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and each of the Buyers are
reasonably satisfied that the SEC no longer is considering or intends to take
such action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of the aforementioned registration statement or related prospectus
shall exist.
(b) Authority. The Company shall have obtained all permits and
---------
qualifications required by any state for the offer, issuance, and sale of the
Drip Shares, or shall have the availability of exemptions therefrom. The sale
and issuance of the Drip Shares shall be legally permitted by all laws and
regulations to which the Company is subject. The Company shall have previously
reserved that number of Drip Shares issuable pursuant to the applicable Call For
Proceeds.
(c) Accuracy of the Company's Representations and Warranties. The
--------------------------------------------------------
representations and warranties of the Company in the Registration Statement,
this Agreement and all Exhibits attached hereto shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Buyers.
17
(d) Performance by the Company. The Company shall have performed,
--------------------------
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, the Escrow Agreement, the
Registration Rights Agreement, and the Certificate of Designation for the Series
B Preferred Stock to be performed, satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order,
-------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement or any of the Exhibits annexed hereto, and no proceeding shall
have been commenced that may have the effect of prohibiting or adversely
affecting any of the transactions contemplated by this Agreement or any of the
Exhibits annexed hereto.
(f) Adverse Changes. The Company shall certify in writing that since
---------------
the date of the Company's most recent filing with the SEC, no event that had or
is reasonably likely to have a Material Adverse Effect has occurred. "Material
Adverse Effect" shall mean any effect on the business, operations, properties,
prospects or financial condition of the Company that is material and adverse to
the Company and its subsidiaries and affiliates, taken as a whole, and/or any
condition, circumstance or situation that would prohibit or otherwise in any
material respect interfere with the ability of the Company to enter into and
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Escrow Agreement, or the Certificate of Designation for the
Series B Preferred Stock in any material respect.
(g) No Suspension of Trading In or Delisting of Common Stock. The
--------------------------------------------------------
trading of the Common Stock (including, without limitation, the Drip Shares) is
not suspended by the SEC, the Nasdaq National Market, or the Nasdaq Small Cap
Stock Market (if applicable), and the Common Stock (including, without
limitation, the Drip Shares) shall have been approved for listing or quotation
on and shall not have been delisted from the Nasdaq National Market, or the
Nasdaq Small Cap Stock Market (if applicable). The issuance of shares of Common
Stock with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Nasdaq Marketplace Rules. The Company
shall not have received any notice (other than that referred to on the Schedule
of Exceptions) from Nasdaq concerning delisting of the Common Stock on the
Principal Market, and the Company currently meets all listing requirements (or
has received a waiver from such requirements and is in compliance with same)
during the thirty (30) day period immediately preceding any Closing Date for
Drip Shares.
(h) Minimum Price. The closing bid price for the Common Stock must
-------------
equal or exceed one ($1.00) dollar for each of the ten (10) trading days
immediately preceding the completion of all the conditions set forth in this
Section (as adjusted for stock splits, stock dividends, reverse stock splits and
similar events);
(i) No Knowledge. The Company has no knowledge of any event more
------------
likely than not to have the effect of causing such Registration Statement
(including all Drip Shares in the Call for Proceeds) to be suspended or
otherwise ineffective (which event is more likely than not to
18
occur within the ten (10) trading days following the trading day on which such
Call for Proceeds is deemed delivered).
(j) Trading Cushion. At least thirty (30) calendar days shall have
---------------
elapsed since the next preceding Call Date.
(k) Legal Opinion. The Buyers shall receive an opinion from counsel
-------------
to the Company in the form of Exhibit F annexed hereto on each Closing for Drip
Shares.
(l) Certificate. On each Condition Satisfaction Date, the Buyers
-----------
shall have received from the Company and been reasonably satisfied with such
other certificates and documents as shall have been reasonably requested by the
Buyers in order for the Buyers to confirm the Company's satisfaction of the
conditions set forth in this Section, including, without limitation, a
certificate in substantially the form and substance of Exhibit H hereto,
executed in either case by an executive officer of the Company and to the effect
that all the conditions to such Closing shall have been satisfied as at the date
of each such certificate.
(m) No Bankruptcy. On or prior to such Closing Date, there shall
-------------
have been no filing of a petition in bankruptcy, either voluntarily or
involuntarily, with respect to Company or any subsidiary and there shall not
have commenced any proceedings under any bankruptcy or insolvency laws, or any
laws relating to the relief of debtors, readjustment of indebtedness or
reorganization of debtors and there shall have been no calling of a meeting of
creditors of Company or appointment of a committee of creditors or liquidating
agents or offering of a composition or extension to creditors by, for, with or
without the consent or acquiescence of the Company.
(n) Listing Of Securities. As of such Closing, the Common Shares to
---------------------
be delivered on such Closing shall have been approved for trading on the Nasdaq
National Market or the Nasdaq Small Cap Stock Market, subject to official notice
of issuance.
(o) No Proceeding. There is no action, suit, proceeding, inquiry or
-------------
investigation before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company or any of its subsidiaries, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under this Agreement, the Registration
Rights Agreement or any of such other documents.
(p) No Change in Control. No change of control of the Company shall
--------------------
have occurred since the Closing Date for the Series B Preferred Stock.
11. Miscellaneous.
-------------
(a) Governing Law/Jurisdiction. This Agreement will be construed and
--------------------------
enforced in accordance with and governed by the laws of the State of Delaware,
except for
19
matters arising under the Securities Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of Delaware or
the state courts of the State of Delaware in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdiction. Each party hereby agrees
that if another party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
(b) Confidentiality. If for any reason the transactions contemplated
---------------
by this Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party (except information
publicly available or in such party's domain prior to the date hereof, and
except as required by court order) and shall promptly return to the other
parties all schedules, documents, instruments, work papers or other written
information, without retaining copies thereof, previously furnished by it as a
result of this Agreement or in connection herewith. Each of the Company and
Buyer agrees to keep confidential and not to disclose to or use for the benefit
of any third party the terms of this Agreement or any other information which at
any time is communicated by the other party as being confidential without the
prior written approval of the other party; provided, however, that this
provision shall not apply to information which, at the time of disclosure, is
already part of the public domain (except by breach of this Agreement) and
information which is required to be disclosed by the Exchange Act or other
applicable law.
(c) Counterparts; Facsimile. This Agreement may be executed in
-----------------------
multiple counterparts, each of which may be executed by less than all of the
parties and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original.
(d) Entire Agreement, Amendments. This Agreement supersedes all other
----------------------------
prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
20
(e) 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.
(f) Fees. Each party shall pay its own fees and expenses (including
----
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated
hereby.
(g) 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 a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested, or (iv) one
(I) day after deposit with a nationally recognized overnight delivery 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:
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to the Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number. Unless otherwise
expressly stated, a "day" shall refer to any day on which the Principal Market
is open for trading.
(h) Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Buyer, which consent shall
not be unreasonably withheld. The Buyer may assign its rights
21
hereunder with notice to the Company, but without the consent of the Company,
provided, however, that any such assignment shall not release the Buyer from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption.
(i) Replacement of Certificates. Upon (i) receipt of evidence
---------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Drip Shares or the Series B
Preferred Stock, and (ii) in the case of any such loss, theft or destruction of
such certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company, or (iii) in the case of any such
mutilation, on surrender and cancellation of such certificate, the Company at
its expense will execute and deliver, in lieu thereof, a new certificate of like
tenor.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
22
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
"COMPANY" "BUYERS"
STORM TECHNOLOGY, INC. LIBERTYVIEW FUND, LLC
By: _______________________ By:_______________________
Title:_____________________ Title:____________________
Name:______________________ Name:_____________________
LIBERTYVIEW PLUS FUND
By:_______________________
Title:____________________
Name:_____________________
CPR (USA), INC.
By:_______________________
Title:____________________
Name:_____________________
23
SCHEDULE OF BUYERS
------------------
Subscriber Purchase Price for Number of Total Aggregate
Name and Address Series B Preferred Preferred Shares Drip Shares Dollar Amount
---------------- ------------------ ---------------- -------------------------
CPR (USA), Inc. $ 1,000,000 10,000
000 Xxxxxx Xx., 00xx Xx.
Xxxxxx Xxxx, XX 00000
State of Origination:
Delaware Corp.
Libertyview Plus Fund $ 800,000 8,000
Xxxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx XXXX
Xxxxx of Origination:
Bermuda Corp.
Libertyview Fund, LLC $ 200,000 2,000
000 Xxxxxx Xx., 37th Fl.
Xxxxxx Xxxx, XX 00000
State of Origination:
Delaware LLC
Legal Counsel for all of the above purchasers
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP
Address: 00 Xxxxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
24
Exhibit A
---------
Certificate of Designation
25
Exhibit B
---------
Registration Right Agreement
26
Exhibit C
---------
Escrow Agreement
27
Exhibit D
---------
Notice of Conversion
28
Exhibit E
---------
Schedule of Exceptions
29
Exhibit F
---------
Legal Opinion
30
EXHIBIT G
INSTRUCTIONS TO TRANSFER AGENT
EXHIBIT H
COMPLIANCE CERTIFICATE
