EQUITY CREDIT AGREEMENT BY AND BETWEEN SPATIALIGHT, INC. AND THE INVESTORS LISTED ON SCHEDULE A Dated April 24, 2007
BY
AND BETWEEN
SPATIALIGHT,
INC.
AND
THE
INVESTORS LISTED ON SCHEDULE A
Dated
April
24, 2007
THIS
EQUITY CREDIT AGREEMENT
is
entered into as of the 24th day of April 2007 (this "AGREEMENT"), by and among
each of the Investors, severally and not jointly, in the percentages set forth
on Schedule A and SPATIALIGHT, INC., a corporation organized and existing under
the laws of the State of New York (the "COMPANY").
W
I T N E S S E T H :
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Investors, from time to time
as
provided herein, and the Investors shall purchase in the aggregate, up to
Fifteen Million Four Hundred Thousand Dollars ($15,400,000) of the Common Stock
(as defined below).
NOW,
THEREFORE,
the
parties hereto agree as follows:
ARTICLE
I
CERTAIN
DEFINITIONS
Section
1.1 DEFINED
TERMS. As
used
in this Agreement, the following terms shall have the following meanings
specified or indicated (such meanings to be equally applicable to both the
singular and plural forms of the terms defined).
"AGREEMENT"
shall have the meaning specified in the preamble hereof.
"BY-LAWS"
shall have the meaning specified in Section 4.7.
"CERTIFICATE"
shall have the meaning specified in Section 4.7
"CLAIM
NOTICE" shall have the meaning specified in Section 9.3(a).
"CLOSING"
shall mean one of the closings of a purchase and sale of shares of Common Stock
pursuant to Section 2.3.
"CLOSING
DATE" shall mean the fifth Trading Day following the Put Date, unless otherwise
agreed between the Investor and the Company.
“CLOSING
PRICE” shall mean, for any Trading Day, the closing bid price of the Common
Stock on the Principal Market for such Trading Day.
"COMMITMENT
PERIOD" shall mean the period commencing on the date hereof, and ending on
the
earlier of (i) the date on which the Investors shall have purchased Put Shares
pursuant to this Agreement for an aggregate Purchase Price of the Maximum
Commitment Amount, (ii) the date this Agreement is terminated pursuant to
Section 2.4, or (iii) the date occurring eighteen (18) months from the date
hereof.
"COMMON
STOCK" shall mean the Company's common stock, $.01 par value per share, and
any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of dividends (as and when
declared) and assets (upon liquidation of the Company).
"COMMON
STOCK EQUIVALENTS" shall mean any securities that are convertible into or
exchangeable for Common Stock or any options or other rights to subscribe for
or
purchase Common Stock or any such convertible or exchangeable
securities.
"COMPANY"
shall mean SpatiaLight, Inc.
"CONDITION
SATISFACTION DATE" shall have the meaning specified in Section 7.2.
"DAMAGES"
shall mean any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements and costs
and
expenses of expert witnesses and investigation).
"DISCOUNT"
shall mean (i) with respect to the first $3,700,000 of Common Stock purchased
pursuant to this Agreement, zero and (ii) with respect to the next $11,700,000
of Common Stock purchased pursuant to this Agreement, 5%.
"DISPUTE
PERIOD" shall have the meaning specified in Section 9.3(a).
"DTC"
shall the meaning specified in Section 2.2.
"DWAC"
shall the meaning specified in Section 2.3.
"EXCHANGE
ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
“EXCESS
PUT SHARES” shall mean the excess of the Interim Put Shares over the Put
Shares.
"FAST"
shall have the meaning specified in Section 2.2.
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"INDEMNIFIED
PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNIFYING
PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNITY
NOTICE" shall have the meaning specified in Section 9.3(b).
"INTERIM
PUT SHARES" shall be the number of Put Shares equal to (i) the Put Amount
divided
by
(ii) (A)
the average of the three lowest Closing Prices for the five (5) Trading Days
immediately preceding the Put Date minus
(B) the
result in the preceding clause (ii)(A) multiplied
by the
Discount.
"INVESTOR"
shall have the meaning specified in the preamble to this Agreement.
"MAXIMUM
COMMITMENT AMOUNT" shall mean Fifteen Million Four Hundred Thousand Dollars
($15,400,000) in the aggregate.
"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 or to the Company and such other entities controlling or controlled
by the Company, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company to enter into and perform its obligations under this
Agreement.
"NASD"
shall mean the National Association of Securities Dealers, Inc.
"NASDAQ"
shall mean The Nasdaq Stock Market, Inc.
"OUTSTANDING"
shall mean, with respect to the Common Stock, at any date as of which the number
of shares of Common Stock is to be determined, all issued and outstanding shares
of Common Stock, including all shares of Common Stock issuable in respect of
outstanding options, warrants, convertible securities, scrip or any certificates
representing fractional interests in shares of Common Stock; provided, however,
that Outstanding shall not include any shares of Common Stock then directly
or
indirectly owned or held by or for the account of the Company or held in escrow.
"PERSON"
shall mean an individual, a corporation, a partnership, an association, a trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"PRINCIPAL
MARKET" shall mean the Nasdaq Global Select Market, the Nasdaq Global Market,
the Nasdaq Capital Market, the Over the Counter Bulletin Board, the American
Stock Exchange or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
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"PURCHASE
PRICE" shall mean the Closing Price for each Trading Day set forth in the Put
Notice
minus
the
product of the Discount and the Closing Price for each Trading Day set forth
in
the Put Notice.
"PUT"
shall mean each occasion that the Company elects to exercise its right to tender
a Put Notice requiring Investor to purchase shares of Common Stock, subject
to
the terms and conditions of this Agreement.
"PUT
AMOUNT" shall mean, with respect to any Put, Sixty Thousand Dollars ($60,000),
for each of the Trading Days set forth in the Put Notice unless otherwise agreed
by the Investor and the Company.
"PUT
DATE" shall mean the Trading Day during the Commitment Period that a Put Notice
is deemed delivered pursuant to Section 2.2(b).
"PUT
NOTICE" shall mean a written notice, substantially in the form of Exhibit A
hereto, to Investor setting forth the Put Amount with respect to which the
Company intends to require Investor to purchase shares of Common Stock pursuant
to the terms of this Agreement.
"PUT
SHARES" shall mean the number of shares of Common Stock to be purchased by
the
Investor on the applicable Closing Date.
"REGISTRABLE
SECURITIES" shall mean the (a) Put Shares and (b) any securities issued or
issuable with respect to the Put Shares by way of exchange, stock dividend
or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (i) a Registration Statement has been declared
effective by the SEC and such Registrable Securities have been disposed of
pursuant to a Registration Statement, (ii) such Registrable Securities have
been
sold under circumstances under which all of the applicable conditions of Rule
144 are met, (iii) such time as such Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under
the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend
or
(iv) in the opinion of counsel to the Company, which counsel shall be reasonably
acceptable to Investor, such Registrable Securities may be sold without
registration under the Securities Actor the need for an exemption from any
such
registration requirements and without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
"REGISTRATION
STATEMENT" shall mean the Company’s registration statement on Form S-3,
Registration
No. 333-137100,
covering the registration of the issuance to each Investor of the Registrable
Securities under the Securities Act.
"REMAINDER
PUT SHARES" shall mean the number of Put Shares required to be delivered by
the
Company on the Closing Date minus
the
Interim Put Shares.
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"SEC"
shall mean the Securities and Exchange Commission.
"SECURITIES
ACT" shall mean the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder.
"SEC
DOCUMENTS" shall mean, as of a particular date, all reports and other documents
filed by the Company pursuant to the Securities Act and Section 13(a) or 15(d)
of the Exchange Act since the beginning of the Company's then most recently
completed fiscal year as of the time in question (provided that if the date
in
question is within ninety days of the beginning of the Company's fiscal year,
the term shall include all documents filed since the beginning of the second
preceding fiscal year).
"THIRD
PARTY CLAIM" shall have the meaning specified in Section 9.3(a).
"TRADING
DAY" shall mean any day during which the Principal Market shall be open for
business.
"TRANSACTION
DOCUMENTS" means the Equity Credit Agreement and the Closing
Certificate.
"TRANSFER
AGENT" shall mean the transfer agent for the Common Stock (and to any substitute
or replacement transfer agent for the Common Stock upon the Company's
appointment of any such substitute or replacement transfer agent).
"UNDERWRITER"
shall mean any underwriter participating in any disposition of the Registrable
Securities on behalf of Investor pursuant to a Registration
Statement.
ARTICLE
II
PURCHASE
AND SALE OF COMMON STOCK
Section
2.1 INVESTMENTS.
Upon the
terms and conditions set forth herein (including, without limitation, the
provisions of Article VII), on any Put Date the Company may exercise a Put
by
the delivery of a Put Notice and each Investor shall purchase Put Shares based
upon the product of the Put Amount multiplied
by
the
percentage set forth opposite such Investor’s name on Schedule A.
Section
2.2 MECHANICS.
(a) PUT
NOTICE. At
any
time during the Commitment Period, the Company may deliver a Put Notice to
the
Investors, subject to the conditions set forth in Section 7.2. Each Put Notice
shall be for the Put Amount for up to five (5) Trading Days including the date
that the Put Notice is deemed to be delivered pursuant to Section 2.2(b) and
up
to four (4) of the Trading Days thereafter. The Purchase Price shall be
determined for each Trading Day set forth in the Put Notice based upon the
Put
Amount for each such Trading Day. Unless otherwise agreed by the Investor,
the
Company shall not be entitled to deliver a Put Notice more than once every
five
(5) Trading Days.
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(b) DATE
OF DELIVERY OF PUT NOTICE. A
Put
Notice shall be deemed delivered on the later of: (i) the Trading Day it is
received by facsimile or otherwise by the Investor if such notice is received
on
or prior to 2:00 PM New York time, or the immediately succeeding Trading Day
if
it is received by facsimile or otherwise after 2:00 PM New
York
time on a Trading Day or at anytime on a day which is not a Trading Day and
(ii)
the delivery to the Investor of the Interim Put Shares through the Depository
Trust Company (“DTC”) Fast Automated Securities Transfer Program (“FAST”), as
described in Section 2.3.
Section
2.3 CLOSINGS.
On
each
Closing Date (a) the Investor shall provide the Company with transaction
confirmations showing the number of Put Shares sold and the price at which
the
Put Shares were sold on each Trading Day, (b) a computation of whether the
Put
Shares are greater or less than the Interim Put Shares, (c) the Company shall
authorize the transfer to the Remainder Put Shares to the Investors, in the
manner described below, or the Investor shall deliver to the Company the Excess
Put Shares, as the case may be, and (d) provided all conditions to Closing
have
been satisfied by the Company, Investor shall deliver to the Company the Put
Amount, by wire transfer of immediately available funds. In the event that
all
of the conditions to Closing are not met, then the Investor shall return the
Interim Put Shares to the Company or deliver the Put Amount to the Company
with
respect to the Interim Put Shares, at the option of the Investor. In lieu of
delivering physical certificates representing the Put Shares and the Interim
Put
Shares, the Company shall cause the Transfer Agent to electronically transmit,
on the Put Date or the Closing Date, as the case may be, the Interim Put Shares
or the Remainder Put Shares, as the case may be, by crediting the account of
the
Investor's prime broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system, and provide proof satisfactory to the Investor of such
delivery. In addition, on such Closing Date, each of the Company and Investor
shall deliver all documents, instruments and writings required to be delivered
or reasonably requested by either of them pursuant to this Agreement in order
to
implement and effect the transactions contemplated herein.
Section
2.4 TERMINATION
OF INVESTMENT OBLIGATION.
The
obligation of Investor pursuant to this Agreement to purchase shares of Common
Stock shall terminate permanently (including with respect to a Closing Date
that
has not yet occurred) in the event that (a) there shall occur any stop order
or
suspension of the effectiveness of the Registration Statement for an aggregate
of thirty (30) Trading Days during the Commitment Period, (b) the Company shall
at any time fail to comply with the requirements of Section 6.3, 6.4, or 6.6
and
such failure shall continue for more than thirty (30) days, or (c) in the event
of a breach or an event of default by the Company with respect to any agreement
entered into with an Investor or the occurrence of an event that with notice
or
lapse of time or both would become a default and the same is not cured by the
Company within thirty (30) days after written notice.
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF INVESTOR
Each
Investor represents and warrants, severally and not jointly, to the Company
that:
Section
3.1 INTENT.
Investor
is entering into this Agreement for its own account and Investor has no present
arrangement (whether or not legally binding) at any time to sell the Common
Stock to or through any person or entity; provided, however, Investor reserves
the right to dispose of the Common Stock at any time in accordance with federal
and state securities laws applicable to such disposition.
Section
3.2 SOPHISTICATED
INVESTOR. Investor
is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation
D)
and an accredited investor (as defined in Rule 501 of Regulation D), and
Investor has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Common Stock.
Investor acknowledges that an investment in the Common Stock is speculative
and
involves a high degree of risk.
Section
3.3 AUTHORITY.
(a)
Investor has the requisite power and authority to enter into and perform its
obligations under this Agreement and the transactions contemplated hereby in
accordance with its terms; (b) the execution and delivery of this Agreement
and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action and no further consent or authorization
of
Investor is required; and (c) this Agreement has been duly authorized and
validly executed and delivered by Investor and is a valid and binding agreement
of Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section
3.4 NOT
AN AFFILIATE.
Except
as set forth on Schedule 3.4, Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the
Company or any other Investor as of the time of signing of this document.
Section
3.5 ORGANIZATION
AND STANDING.
Investor is duly organized, validly existing and in good standing under the
laws
of its jurisdiction of organization, and has all requisite power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted. Investor is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature
of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have
a
material adverse effect on Investor.
Section
3.6 ABSENCE
OF CONFLICTS. The
execution and delivery of this Agreement and any other document or instrument
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, and compliance with the requirements hereof and thereof,
will not (a) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on Investor, (b) violate any provision
of
any indenture, instrument or agreement to which Investor is a party or is
subject, or by which Investor or any of its assets is bound, or conflict with
or
constitute a material default thereunder, (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor
to
any third party, or (d) require the approval of any third-party (that has not
been obtained) pursuant to any material contract, instrument, agreement,
relationship or legal obligation to which Investor is subject or to which any
of
its assets, operations or management may be subject.
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ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Investor that, except as disclosed in the
SEC
Documents:
Section
4.1 ORGANIZATION
OF THE COMPANY.
The
Company is a corporation duly organized and validly existing and in good
standing under the laws of the State of New York, and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified as a domestic
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section
4.2 AUTHORITY.
(a)
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and to issue the Put Shares; (b)
the execution and delivery of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly authorized by
all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, except for the
stockholder approval to issue Put Shares after the Investors have purchased
Put
Shares having an aggregate Purchase Price of $3,700,000; and (c) this Agreement
has been duly executed and delivered by the Company and constitutes valid and
binding obligations of the Company enforceable against the Company in accordance
with its respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section
4.3 CAPITALIZATION.
As
of the
date hereof, the authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, $.01 par value, of which 47,773,092 shares were issued
and outstanding. Except for options, warrants and conversion rights to purchase
15,390,727 shares of Common Stock, there are no options, warrants, or rights
to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to subscribe for any shares of capital stock of the
Company. All of the outstanding shares of Common Stock of the Company have
been
duly and validly authorized and issued and are fully paid and
nonassessable.
Section
4.4 COMMON
STOCK.
The
Company has registered the Common Stock pursuant to Section 12(b) or 12(g)
of
the Exchange Act and is in full compliance with all reporting requirements
of
the Exchange Act, and, except as disclosed in the SEC Documents, the Company
has
maintained all requirements for the continued listing or quotation of the Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date of this Agreement, the Principal Market is
NASDAQ.
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Section
4.5 SEC
DOCUMENTS.
The
Company has delivered or made available to Investor true and complete copies
of
the SEC Documents on file as of the date hereof. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the
Securities Act or the Exchange Act, as the case may be, and other federal,
state
and local laws, rules and regulations applicable to such SEC Documents, and
none
of the SEC Documents 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 light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto.
Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include 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 operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). The Registration Statement covers the issuance
of
the Put Shares. The Registration Statement covering the issuance of the Put
Shares was declared effective on February 14, 2007 by the Commission and neither
the Commission nor any state regulatory authority has issued, or threatened
to
issue, any order preventing or suspending the use of the Registration Statement
or the prospectus contained therein or has instituted or, to the Company’s
knowledge, threatened to institute any proceedings with respect to such an
order.
Section
4.6 VALID
ISSUANCES.
When
issued and paid for as herein provided, the Put Shares shall be duly and validly
issued, fully paid, and nonassessable. Neither the sales of the Put Shares
pursuant to, nor the Company's performance of its obligations under, this
Agreement shall (a) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Put Shares or any of the assets of the
Company, or (b) entitle the holders of Outstanding Common Stock to preemptive
or
other rights to subscribe to or acquire the Common Stock or other securities
of
the Company. The Put Shares shall not subject Investor to personal liability
by
reason of the ownership thereof.
Section
4.7 CORPORATE
DOCUMENTS.
The
Company has furnished or made available to Investor true and correct copies
of
the Company's Certificate of Incorporation, as amended and in effect on the
date
hereof (the "CERTIFICATE"), and the Company's By-Laws, as amended and in effect
on the date hereof (the "BY-LAWS").
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Section
4.8 NO
CONFLICTS. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not
(a)
result in a violation of the Certificate or By-Laws or (b) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become al default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
instrument or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (c) result in a violation of
any
federal, state, local or foreign law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound or
affected nor is the Company otherwise in violation of, conflict with or in
default under any of the foregoing. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity. Except as set forth on Schedule 4.8, the Company is not required under
federal, state or local law, rule or regulation 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 issue and sell the Common Stock in
accordance with the terms hereof (other than any SEC, NASD, state securities
filings or filings with the Principal Market that may be required to be made
by
the Company subsequent to any Closing).
Section
4.9 NO
MATERIAL ADVERSE CHANGE.
Since
March 16, 2007, no event has occurred that would have a Material Adverse Effect
on the Company, except as disclosed in the SEC Documents.
Section
4.10 NO
UNDISCLOSED LIABILITIES. The
Company has no liabilities or obligations that are material, individually or
in
the aggregate, and that are not disclosed in the SEC Documents on file on the
date hereof or otherwise publicly announced, other than those incurred in the
ordinary course of the Company's businesses since March 16, 2007 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company.
Section
4.11 NO
UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
March 16, 2007, no event or circumstance has occurred or exists with respect
to
the Company or its businesses, properties, prospects, operations or financial
condition, that, 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 in the SEC Documents.
Section
4.12 LITIGATION
AND OTHER PROCEEDINGS.
Except
as may be set forth in the SEC Documents, there are no lawsuits or proceedings
pending or to the best knowledge of the Company threatened, against the Company,
nor has the Company received any written or oral notice of any such action,
suit, proceeding or investigation, which would have a Material Adverse Effect.
Except as set forth in the SEC Documents, no judgment, order, writ, injunction
or decree or award has been issued by or, so far as is known by the Company,
requested of any court, arbitrator or governmental agency which would have
a
Material Adverse Effect.
Section
4.13 NO
MISLEADING OR UNTRUE COMMUNICATION.
Neither
this Agreement nor the Exhibits and schedules hereto contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements, in the light of the circumstances under which
they
were made, not misleading.
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ARTICLE
V
COVENANTS
OF INVESTOR
Section
5.1 COMPLIANCE
WITH LAW.
Investor's and all of Investor’s affiliates trading activities with respect to
shares of the Common Stock will be and have been in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the NASD and the Principal Market on which the Common
stock is listed. Investor acknowledges that it will be an underwriter with
respect to the Put Shares and will have the obligations and responsibilities
of
an underwriter under the Securities Act.
ARTICLE
VI
COVENANTS
OF THE COMPANY
Section
6.1 REGISTRATION
STATEMENT.
The
Company shall use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registerable Securities for sale
in
any jurisdiction.
Section
6.2 RESERVATION
OF COMMON STOCK.
The
Company shall have available and the Company shall reserve and keep available
at
all times, free of preemptive rights, shares of Common Stock for the purpose
of
enabling the Company to satisfy any obligation to issue the Put
Shares.
Section
6.3 LISTING
OF COMMON STOCK.
The
Company shall use its best efforts to maintain the listing of the Common Stock
on a Principal Market and, if applicable, will cause the Put Shares to be listed
on the Principal Market. The Company further shall, if the Company applies
to
have the Common Stock traded on any other Principal Market, include in such
application the Put Shares and shall take such other action as is necessary
or
desirable in the reasonable opinion of Investor to cause the Common Stock to
be
listed on such other Principal Market as promptly as possible. The Company
shall
use its commercially reasonable efforts to continue the listing and trading
of
the Common Stock on the Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects
with
the Company's reporting, filing and other obligations under the bylaws or rules
of the NASD and the Principal Market.
Section
6.4 EXCHANGE
ACT REGISTRATION. The
Company shall cause the Common Stock to continue to be registered under Section
12(g) or 12(b) of the Exchange Act, and will comply in all material respects
with its reporting and filing obligations under said Act, and will not take
any
action or file any document (whether or not permitted by said Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section
6.5 ISSUANCE.
The
sale
of the Put Shares to the Investor shall be registered pursuant to the
Registration Statement. The Put Shares shall be free of legends and no
instructions or "stop transfers orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent.
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Section
6.6 CORPORATE
EXISTENCE. The
Company shall take all commercially reasonable steps necessary to preserve
and
continue the corporate existence of the Company.
Section
6.7 NOTICE
OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT.
The
Company shall promptly notify Investor upon the occurrence of any of the
following events in respect of a registration statement or related prospectus
in
respect of an offering of Registrable Securities: (a) receipt of any request
for
additional information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the registration statement
for
amendments or supplements to the registration statement or related prospectus;
(b) the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of any Registration Statement
or
the initiation of any proceedings for that purpose; (c) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (d) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or
that requires the making of any changes in the registration statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not 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 not misleading, and that in the case of the related prospectus, it
will
not 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 the light of the circumstances under which they were made, not
misleading; and (e) the Company's reasonable determination that a post-effective
amendment to the registration statement would be appropriate, and the Company
shall promptly make available to Investor any such supplement or amendment
to
the related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events.
Section
6.8 CONSOLIDATION;
MERGER. The
Company shall not, at any time after the date hereof, effect any merger or
consolidation of the Company with or into, or a transfer of all or substantially
all of the assets of the Company to, another entity unless the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
the obligation to deliver to Investor such shares of Common Stock and/or
securities as Investor is entitled to receive pursuant to this
Agreement.
Section
6.9 DILUTION.
The
number of shares of Common Stock issuable as Put Shares may increase
substantially in certain circumstances as a result of a decline in the trading
price. The Company's executive officers and directors have studied and fully
understand the nature of the transactions contemplated by this Agreement and
recognize that they have a potential dilutive effect. The board of directors
of
the Company has concluded, in its good faith business judgment that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Put Shares is binding upon the
Company and enforceable regardless of the dilution such issuance may have on
the
ownership interests of other shareholders of the Company.
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Section
6.10 USE
OF PROCEEDS. The
Company may not use any proceeds from the sale of Put Shares for the repayment
of the principal amount of the indebtedness represented by the Senior Secured
Convertible Notes dated November 30, 2004 or the principal amount of any notes
payable to Argyle Capital Management Corporation.
ARTICLE
VII
CONDITIONS
TO DELIVERY OF
PUT
NOTICES AND CONDITIONS TO CLOSING
Section
7.1 CONDITIONS
PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL COMMON STOCK.
The
obligation hereunder of the Company to issue and sell the Put Shares to Investor
incident to each Closing is subject to the satisfaction, at or before each
such
Closing, of each of the conditions set forth below.
(a)
ACCURACY
OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material 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 INVESTOR. Investor
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 Investor at or prior to such Closing.
(c) EFFECTIVE
REGISTRATION STATEMENT.
The
Registration Statement shall be effective and (i) neither the Company nor
Investor shall have received notice that the SEC has issued or intends to issue
a stop order with respect to such Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of such Registration
Statement, either temporarily or permanently, or intends or has threatened
to do
so, and (ii) no other suspension of the use or withdrawal of the effectiveness
of such Registration Statement or related prospectus shall exist.
(d) NO
VIOLATION OF LAW. The
sale
or delivery of the Put Shares would not violate any applicable law.
Section
7.2 CONDITIONS
PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE AND THE OBLIGATION
OF INVESTOR TO PURCHASE PUT SHARES. The
right
of the Company to deliver a Put Notice and the obligation of Investor hereunder
to acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on (a) the date of delivery of such Put Notice and (b) the
applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of
the
following conditions:
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(a)
EFFECTIVE
REGISTRATION STATEMENT.
The
issuance of the Put Shares to the Investor shall be registered pursuant to
the
Registration Statement. The Registration Statement shall be effective on each
Condition Satisfaction Date and (i) neither the Company nor Investor shall
have
received notice that the SEC has issued or intends to issue a stop order with
respect to such Registration Statement or that the SEC otherwise has suspended
or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so, and (ii)
no
other suspension of the use or withdrawal of the effectiveness of such
Registration Statement or related prospectus shall exist.
(b)
ACCURACY
OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company 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.
(c)
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 to
be
performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(d) NO
BANKRUPTCY. The
Company has not (i) made an assignment for the benefit of its creditors; (ii)
filed a voluntary bankruptcy petition; (iii) become the subject of an order
for
relief or been declared insolvent in any federal or state bankruptcy or
insolvency proceedings; (iv) filed a petition or answer seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, termination,
or similar relief under any law; (v) filed an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against
the
Company in any proceeding; or (vi) sought, consented to, or acquiesced in the
appointment of a trustee, receiver, or liquidator of all or any substantial
part
of the Company's properties; and no proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any law has been filed that has not been dismissed within one
hundred twenty (120) after filing or with respect to which a trustee, receiver,
or liquidator of any substantial part of the Company's properties has been
appointed and ninety (90) days have expired without the appointment being
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated.
(e)
NO
INJUNCTION.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or adopted by any court or governmental
authority of competent jurisdiction that prohibits or directly and materially
adversely affects any of the transactions contemplated by this Agreement, and
no
proceeding shall have been commenced that may have the effect of prohibiting
or
materially adversely affecting any of the transactions contemplated by this
Agreement.
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(f)
ADVERSE
CHANGES. Since
the
date of filing of the Company's most recent SEC Document, no event that had
or
is reasonably likely to have a Material Adverse Effect has occurred.
(g)
NO
SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The
trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or the NASD and the Common Stock shall have been approved
for
listing or quotation on and shall not have been delisted from the Principal
Market. Investors acknowledge that the Company has received a delisting notice
from the NASD and may be delisted from the NASDAQ Capital Market.
(h)
LEGAL
OPINION. The
Company shall have caused to be delivered to Investor, an opinion of the
Company's legal counsel in the form of Exhibit B hereto, addressed to
Investor.
(i)
TEN
PERCENT LIMITATION.
Notwithstanding anything to the contrary contained herein, if, on any Closing
Date, the number of Put Shares then to be purchased pursuant to a Put Notice
by
Investor would, when aggregated with all other shares of Common Stock then
held
by Investor (including, for the purposes of this Section 7.2(h), Common Stock
issuable upon conversion, exercise or exchange, as applicable, of Common Stock
Equivalents then held by Investor), cause Investor to beneficially own in excess
of 9.99% of the total number of issued and outstanding shares of Common Stock
after giving effect to the Put (the "Percentage
Cap"),
then
the number of Put Shares shall be reduced to the extent necessary for Investor's
beneficial ownership of Common Stock, after giving effect to the Put, not to
exceed the Percentage Cap. For such purposes, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. In the event the number of Put Shares
with respect to any Put are required to be reduced pursuant to this Section
7.2(h), Investor shall provide, via facsimile, as soon as possible on the
Closing Date, and in no event later than 12:00 p.m. EST, a notice to the Company
setting forth the maximum number of shares issuable pursuant to such Put which
would not result in Investor's beneficial ownership exceeding the Percentage
Cap
and shall return to the Company any Excess Put Shares. In the event that the
amount of any Put Amount is limited as a result of this paragraph, at
SpatiaLight’s option, the maximum Put Amount thereafter shall be increased,
subject to the Percentage Cap, until such time as the total Put Amount available
under the terms of this Agreement shall be equal to the amount that would have
been available in the absence of the Percentage Cap.
(j)
SHAREHOLDER
VOTE.
The
issuance of shares of Common Stock with respect to the applicable Closing,
if
any, shall not violate the shareholder approval requirements of the Principal
Market. In the event that the Company desires to put shares of Common Stock
to
the Investors having an aggregate Purchase Price in excess of $3,700,000
commencing on the date of this Agreement, then the Company shall be obligated
to
obtain shareholder approval to issue Put Shares in excess of such
amount.
(k)
OTHER.
On
each
Condition Satisfaction Date, Investor shall have received and been reasonably
satisfied with such other certificates and documents as shall have been
reasonably requested by Investor in order for Investor to confirm the Company's
satisfaction of the conditions set forth in this Section 7.2., including,
without limitation, a certificate in substantially the form and substance of
Exhibit C hereto, executed 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.
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(l) NO
BREACH. On
each
Condition Satisfaction Date, there shall not (i) be an uncured event of default
or a breach of any agreement between the Company and an Investor or (ii) have
occurred an event that with notice or lapse of time or both would become a
default or a breach of an agreement between the Company and the Investor which
is uncured.
Section
7.3 DUE
DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC
INFORMATION.
(a)
The
Company shall make available for inspection and review by Investor, advisors
to
and representatives of Investor (who may or may not be affiliated with Investor
and who are reasonably acceptable to the Company), and any Underwriter, any
Registration Statement or amendment or supplement thereto or any blue sky,
NASD
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and
cause
the Company's officers, directors and employees to supply all such information
reasonably requested by Investor or any such representative, advisor or
Underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made
or
submitted by any of them), prior to and from time to time after the filing
and
effectiveness of such Registration.
(b)
Notwithstanding
anything contained herein to the contrary, each of the Company, its officers,
directors, employees and agents shall in no event disclose non-public
information to Investor, advisors to or representatives of
Investor.
(c)
Nothing
herein shall require the Company to disclose non-public information to Investor
or its advisors or representatives, and the Company represents that it does
not
disseminate non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the contrary, the
Company shall, as hereinabove provided, immediately notify the advisors and
representatives of Investor and any Underwriters of any event or the existence
of any circumstance (without any obligation to disclose the specific event
or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed
in
the prospectus included in a Registration Statement would cause such prospectus
to include a material misstatement or to omit a material fact required to be
stated therein in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Nothing contained in
this
Section 7.3 shall be construed to mean that such persons or entities other
than
Investor (without the written consent of Investor prior to disclosure of such
information) may not obtain non-public information in the course of conducting
due diligence in accordance with the terms and conditions of this Agreement
and
nothing herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such persons or
entities, any Registration Statement contains an untrue statement of a material
fact or omits a material fact required to be stated in such Registration
Statement or necessary to make the statements contained therein, in light of
the
circumstances in which they were made, not misleading.
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16 -
ARTICLE
VIII
COVER
Section
8.1 COVER.
If the
Company fails for any reason to deliver the Put Shares within two Trading Days
after a Closing Date and the Investor purchases, in an open market transaction
or otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by such Investor (the "Sold
Shares"), which delivery such Investor anticipated to make using the Put Shares
(a "Buy-In"), then the Company shall pay to such Investor, in addition to all
other amounts contemplated in other provisions of the Transaction Documents,
and
not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The
"Buy-In Adjustment Amount" is the amount equal to the excess, if any, of (x)
such Investor's total purchase price (including brokerage commissions, if any)
for the Covering Shares over (y) the net proceeds (after brokerage commissions,
if any) received by such Investor from the sale of the Sold Shares. The Company
shall pay the Buy-In Adjustment Amount to such Investor in immediately available
funds immediately upon demand by such Investor. By way of illustration and
not
in limitation of the foregoing, if such Investor purchases Covering Shares
having a total purchase price (including brokerage commissions) of $11,000
to
cover a Buy-In with respect to shares of Common Stock that it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount that the Company will be
required to pay to such Investor will be $1,000.
ARTICLE
IX
NOTICES;
INDEMNIFICATION
Section
9.1 NOTICES.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (a) personally served, (b) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (c)
delivered by reputable air courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice given in accordance herewith. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address
or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
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17 -
If
to the
Company:
SpatiaLight,
Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇
▇▇
▇▇▇▇▇
Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
Franklin,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
713-222-0938
If
to
Investor at the address set forth on Schedule A; with a copy (which shall not
constitute notice):
▇▇▇▇
▇.
▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇, LLP
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
Either
party hereto may from time to time change its address or facsimile number for
notices under this Section 9.1 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party
hereto.
Section
9.2 INDEMNIFICATION.
The
Company agrees to indemnify and hold harmless Investor and its officers,
directors, employees, and agents, and each Person or entity, if any, who
controls Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and the officers, directors, agents and
employees of each such controlling person, from and against any Damages, and
any
action in respect thereof to which any of such persons becomes subject to,
resulting from, arising out of or relating to (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any prospectus contained therein or in any amendment or supplement
thereto or arising out of or relating to any omission or alleged omission of
a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading or (ii) any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement,
in
each such case as such Damages are incurred, except to the extent such Damages
result solely from Investor's failure to perform any covenant or agreement
contained in this Agreement or Investor's or its officer's, director's,
employee's, agent's gross negligence or willful misconduct ( to the extent
that
it shall be finally determined by a court of competent jurisdiction which
determination is not subject to appeal or further review).
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Section
9.3 METHOD
OF ASSERTING INDEMNIFICATION CLAIMS.
All
claims for indemnification by any Indemnified Party (as defined below) under
Section 9.2 shall be asserted and resolved as follows:
(a)
(i) In
the
event any claim or demand in respect of which any person claiming
indemnification under any provision of this Article IX (an "INDEMNIFIED PARTY")
might seek indemnity under this Article is asserted against or sought to be
collected from such Indemnified Party by a person other than a party hereto
or
an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim for indemnification that is being asserted under
any
provision of this Article against any person (the "INDEMNIFYING PARTY"),
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim (a "CLAIM NOTICE")
with reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party shall not be obligated to indemnify the Indemnified Party with respect
to
such Third Party Claim to the extent that the Indemnifying Party's ability
to
defend has been irreparably and materially prejudiced by such failure of the
Indemnified Party.
(ii) The
Indemnifying Party shall notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined
below) (the "DISPUTE PERIOD") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under this
Article and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party
Claim.
(A)
If
the
Indemnifying Party notifies the Indemnified Party within the Dispute Period
that
the Indemnifying Party desires to defend the Indemnified Party with respect
to
the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying
Party shall have the right to defend, with counsel reasonably satisfactory
to
the Indemnified Party, at the sole cost and expense of the Indemnifying Party,
such Third Party Claim by all appropriate proceedings, which proceedings shall
be vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party (but
only with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or
that
provides for the payment of monetary damages as to which the Indemnified Party
shall not be indemnified in full pursuant to this Article). The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the Indemnified Party
may, at the sole cost and expense of the Indemnified Party, at any time prior
to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this clause (i), file any motion, answer or other pleadings or
take
any other action that the Indemnified Party reasonably believes to be necessary
or appropriate to protect its interests; and provided further, that if requested
by the Indemnifying Party, the Indemnified Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (A), and except as provided herein,
the Indemnified Party shall bear its own costs and expenses with respect to
such
participation. Notwithstanding the foregoing, the Indemnified Party may takeover
the control of the defense or settlement of a Third Party Claim at any time
if
it irrevocably waives its right to indemnity under this Article with respect
to
such Third Party Claim. Notwithstanding the foregoing, an Indemnified Party
shall have the right to employ separate counsel in any such proceeding and
to
control and participate in the defense thereof and the expense thereof shall
be
borne by the Indemnifying Party: (1) if the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the named parties to any such
proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and the reasonable fees and expenses of one separate counsel, (but no more
than
one separate counsel on behalf of all of the Indemnified Parties) shall be
at
the expense of the Indemnifying Party).
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19 -
(B) If
the
Indemnifying Party fails to notify the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice
but
fails to prosecute vigorously and diligently or settle the Third Party Claim,
or
if the Indemnifying Party fails to give any notice whatsoever within the Dispute
Period, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be settled
at
the discretion of the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). The Indemnified Party
will have full control of such defense and proceedings, including any compromise
or settlement thereof; provided, however, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified Party
and
its counsel in contesting any Third Party Claim which the Indemnified Party
is
contesting. Notwithstanding the foregoing provisions of this clause (B), if
the
Indemnifying Party has notified the Indemnified Party within the Dispute Period
that the Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying Party in
the
manner provided in clause (C) below, the Indemnifying Party will not be required
to bear the costs and expenses of the Indemnified Party's defense pursuant
to
this clause (B) or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses incurred by
the
Indemnifying Party in connection with such litigation. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by
the
Indemnified Party pursuant to this clause (B), and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
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(C)
If the
Indemnifying Party notifies the Indemnified Party that it does not dispute
its
liability or the amount of its liability to the Indemnified Party with respect
to the Third Party Claim under this Article or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party with respect
to such Third Party Claim, the amount of Damages specified in the Claim Notice
shall be conclusively deemed a liability of the Indemnifying Party under this
Article and the Indemnifying Party shall pay the amount of such Damages to
the
Indemnified Party on demand. If the Indemnifying Party has timely disputed
its
liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that if the dispute
is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems
appropriate.
(b)
In
the
event any Indemnified Party should have a claim under this Article against
the
Indemnifying Party that does not involve a Third Party Claim, the Indemnified
Party shall deliver a written notification of a claim for indemnity under this
Article specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "INDEMNITY NOTICE") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party
to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim
or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under this Article and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of
its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(c)
The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar rights of the Indemnified Party against the Indemnifying
Party
or others which would be available to the Indemnified Party at law or in equity,
and (ii) any liabilities the Indemnifying Party may be subject to.
ARTICLE
X
MISCELLANEOUS
Section
10.1 GOVERNING
LAW; JURISDICTION. This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New York without regard to the principles of conflicts of law.
Each
of the Company and Investor hereby submit to the exclusive jurisdiction of
the
United States Federal and state courts located in the State of New York, County
of New York with respect to any dispute arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby.
-
21 -
Section
10.2 JURY
TRIAL WAIVER.
The
Company and the Investor hereby waive a trial by jury in any action, proceeding
or counterclaim brought by either of the parties hereto against the other in
respect of any matter arising out of or in connection with the Transaction
Documents.
Section
10.3 Omitted
Section
10.4 ASSIGNMENT.
Neither
this Agreement nor any rights of Investor or the Company hereunder may be
assigned by either party to any other person.
Section
10.5 THIRD
PARTY BENEFICIARIES.
This
Agreement is intended for the benefit of the Company and Investor, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.
Section
10.6 TERMINATION.
This
Agreement shall terminate at the end of the Commitment Period or as otherwise
provided herein (unless extended by the agreement of the Company and the
Investors); provided, however, that the provisions of Article VI, VIII, IX
and X
shall survive the termination of this Agreement.
Section
10.7 ENTIRE
AGREEMENT. This
Agreement together with schedules and exhibits hereto, and the instruments
referenced herein contain the entire understanding of the Company and Investor
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor Investor
makes
any representation, warranty, covenant or undertaking with respect to such
matters.
Section
10.8 FEES
AND EXPENSES. Except
as
otherwise provided in this Agreement or any of the exhibits hereto, each of
the
Company and Investor agrees to pay its own expenses in connection with the
preparation of this Agreement and performance of its obligations hereunder
provided, however, that the Company agrees to the fees and expenses of an
Investor’s counsel not to exceed $30,000 and shall be payable in three equal
installments, 30, 60 and 90 days from the date hereof. In addition, the Company
shall pay all reasonable fees and expenses incurred by the Investor in
connection with any amendments, modifications or waivers of this Agreement.
The
Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto.
Section
10.9 AMENDMENTS;
WAIVERS. No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and all of the
Investors or, in the case of a waiver, by the party against whom enforcement
of
any such waived provision is sought. No waiver of any default with respect
to
any provision, condition or requirement of this Agreement shall be deemed to
be
a continuing waiver in the future or a waiver of any subsequent default or
a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
-
22 -
Section
10.10 NO
BROKERS.
The
Company agrees to indemnify the Investors against, and hold the Investors
harmless from, any judgments entered against Investors for fees in connection
with this transaction based on agreements between the Company and any broker
or
finder.
Section
10.11 COUNTERPARTS.
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. This Agreement, once executed by a party, may be delivered to the
other parties hereto by electronic transmission of a portable document format
(“PDF”) copy or facsimile transmission of a copy of this Agreement bearing the
signature of the parties so delivering this Agreement.
Section
10.12 SURVIVAL;
SEVERABILITY. The
representations, warranties, covenants and agreements of the Company hereto
shall survive each Closing hereunder. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force
and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement
to
any party.
Section
10.13 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 the 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.
Section
10.14 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.
Section
10.15 TITLE
AND SUBTITLES. The
titles and subtitles used in this Agreement are used for the convenience of
reference and are not to be considered in construing or interpreting this
Agreement.
Section
10.16 REPORTING
ENTITY FOR THE COMMON STOCK.
The
reporting entity relied upon for the determination of the trading price of
the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg L.P. or any successor thereto.
Section
10.17 PUBLICITY.
The
Company and Investor shall consult with each other in issuing any press releases
or otherwise making public statements with respect to the transactions
contemplated hereby and no party shall issue any such press release or otherwise
make any such public statement without the prior written consent of the other
parties, which consent shall not be unreasonably withheld or delayed, except
that no prior consent shall be required if such disclosure is required by law,
in which such case the disclosing party shall provide the other parties with
prior notice of such public statement. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of Investor without the prior
written consent of such Investor, except to the extent required by law. Investor
acknowledges that this Agreement and all or part of the Transaction Documents
may be deemed to be "material contracts" as that term is defined by Item
601(b)(10) of Regulation S-K, and that the Company may therefore be required
to
file such documents as exhibits to reports or registration statements filed
under the Securities Act or the Exchange Act. Investor further agrees that
the
status of such documents and materials as material contracts shall be determined
solely by the Company, in consultation with its counsel.
-
23 -
IN
WITNESS WHEREOF,
the
parties hereto have caused this Equity Credit Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth
above.
|
SPATIALIGHT,
INC.
By:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇▇▇
Title:
CEO
SOUTHRIDGE
PARTNERS LP
By:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇▇
Title:
SOUTHSHORE
CAPITAL FUND LTD.
By:
/s/ ▇▇▇▇▇ ▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇
Title:
▇▇▇▇▇▇
DIVERSIFIED STRATEGY MASTER FUND, LLC, ENA
By:
/s/ ▇▇▇▇▇▇▇ ▇' ▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇' ▇▇▇▇
Title:
|
-
24 -
|
ENABLE
OPPORTUNITY PARTNERS LP
By:
/s/ ▇▇▇▇▇▇▇ ▇' ▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇' ▇▇▇▇
Title:
ENABLE
GROWTH PARTNERS LP
By:
/s/ ▇▇▇▇▇▇▇ ▇' ▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇' ▇▇▇▇
Title:
IROQUOIS
MASTER FUND LTD.
By:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
|
-
25 -
EXHIBITS
|
EXHIBIT
A
|
Put
Notice
|
|
EXHIBIT
B
|
Opinion
|
|
EXHIBIT
C
|
Closing
Certificate
|
EXHIBIT
A
PUT
NOTICE
| TO: |
SOUTHRIDGE
PARTNERS LP
|
SOUTHSHORECAPITAL
FUND LTD.
▇▇▇▇▇▇
DIVERSIFIED STRATEGY MASTER FUND, LLC, ENA
ENABLE
OPPORTUNITY PARTNERS LP
ENABLE
GROWTH PARTNERS LP
IROQUOIS
MASTER FUND LTD.
We
refer
to the Equity Credit Agreement dated April 24, 2007 (the "Agreement") by and
among SpatiaLight, Inc. (the “Company”) and the Investors listed on Schedule A
annexed thereto.
We
hereby
give the Investors notice that the Investors are required to purchase Put Shares
in the Put Amount, based upon the percentages set forth in Schedule A to the
Agreement, in accordance with the terms of the Agreement for the following
Trading Days:
Place
check ▇▇▇▇ next to the applicable Trading Days:
| ü |
Put
Date
|
| ü |
First
Trading Day Following Put Date
|
| ü |
Second
Trading Day Following Put Date
|
| ü |
Third
Trading Day Following Put Date
|
| ü |
Fourth
Trading Day Following Put Date
|
The
Company is simultaneously delivering the Interim Put Shares in accordance with
the Agreement.
The
conditions set forth in Section 7.2 of the Agreement have been
satisfied.
Unless
the context otherwise requires, capitalized terms utilized herein shall have
the
meanings ascribed to such terms in the Agreement.
IN
WITNESS WHEREOF,
this
instrument has been executed as of the 27th day of April,
2007.
|
SPATIALIGHT,
INC.
By:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇▇▇
Title:
CEO
|
EXHIBIT
B
FORM
OF OPINION
|
Re:
|
Equity
Credit Agreement dated April 24, 2007 (the “Agreement”)
by and among SpatiaLight, Inc. (the “Company”)
and the Investors listed on Schedule A annexed
thereto
|
Ladies
and Gentlemen:
We
have
acted as counsel to SpatiaLight, Inc., a New York corporation (the "Company"),
in connection with (i) the preparation and filing by the Company with the
Securities and Exchange Commission of the Company’s registration statement (the
“Registration Statement”) on Form S-3, Registration No. 333-137100 under the
Securities Act. of 1933, as amended (the “Act”), relating to the offering on a
continuous basis of up to $75,000,000 of the Company’s Common Stock, warrants,
units and/or subscription rights, and (ii) the negotiation and preparation
of
the Agreement. Unless the context otherwise requires, capitalized terms utilized
herein shall have the meanings ascribed to such terms in the Agreement.
We
have
examined original, photostatic or certified copies of such records of the
Company as we have deemed relevant and necessary for purposes of the opinions
hereinafter set forth. In such examination, we have assumed the genuineness
of
all signatures, the authenticity of all documents and instruments submitted
to
us as originals and the conformity to authentic originals of all documents
and
instruments submitted to us as certified or photostatic copies. As to various
questions of fact material to our opinions we have relied upon representations
made to us by various officers and directors of the Company and we have not
conducted or received independent verification of those facts.
Based
on
the foregoing, we are of the opinion that:
(1) The
Registration Statement has become effective under the Act and, to our knowledge
after due inquiry, no stop order suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the prospectus
which forms a part thereof, has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Act.
(2) Any
required filing of the prospectus and any supplement thereto pursuant to Rule
424(b) of the Rules and Regulations under the Act has been made in the manner
and within the time period required by such Rule 424(b).
(3) The
sale
of the Put Shares to the Investors pursuant to the Registration Statement is
covered by the Registration Statement and, subject to the prospectus delivery
requirements and the limitations on actions by underwriters under the Act,
the
Put Shares may be sold by the Investors without restriction under the
Act.
EXHIBIT
C
CLOSING
CERTIFICATE
The
undersigned, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, hereby certifies, with respect to the Put Shares
of SpatiaLight, Inc., Inc. (the "Company") issuable in connection with the
Put
Notice, dated April 27, 2007 (the "Notice"), delivered pursuant to the Equity
Credit Agreement dated April 24, 2007 (the "Agreement") by and among
SpatiaLight, Inc. (the “Company”) and the Investors listed on Schedule A annexed
thereto as follows:
|
1.
|
The
undersigned is the duly elected President of the
Company.
|
|
2.
|
The
representations and warranties of the Company set forth in the Agreement
are true and correct in all material respects as though made on and
as of
the date hereof.
|
|
3.
|
The
Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing
Date
related to the Notice and has complied in all material respects with
its
obligations contained in the
Agreement.
|
|
4.
|
The
conditions set forth in Section 7.2 of the Agreement have been
satisfied.
|
Unless
the context otherwise requires, capitalized terms utilized herein shall have
the
meanings ascribed to such terms in the Agreement.
IN
WITNESS WHEREOF,
this
instrument has been executed as of the 24th
day of
April, 2007
|
SPATIALIGHT,
INC.
By:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
CEO
|
SCHEDULE
A
|
INVESTOR
|
PERCENTAGE
|
ADDRESS
FOR NOTICE
|
|
Southridge
Partners LP
|
40.79%
|
Southridge
Partners LP
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
|
Southshore
Capital Fund Ltd.
|
13.60%
|
Southshore
Capital Fund Ltd.
▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
P.O.
Box 972
Road
Town, Tortola
BVI
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
|
▇▇▇▇▇▇
Diversified Strategy
Master
Fund, LLC, ENA
|
1.34%
|
Enable
Capital Management
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
|
Enable
Opportunity Partners LP
|
2.68%
|
Enable
Capital Management
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
|
Enable
Growth Master Fund Ltd.
|
22.77%
|
Enable
Capital Management
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
|
Iroquois
Master Fund Ltd.
|
18.83%
|
Iroquois
Master Fund Ltd.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
SCHEDULE
3.4
AFFILIATES
OF COMPANY
▇▇▇▇▇▇
Diversified Strategy Master Fund, LLC, ENA, Enable Opportunity Partners LP
and
Enable Growth Partners LP are managed by Enable Capital Management.
SCHEDULE
4.8
REQUIRED
CONSENTS
None