SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT") dated as of June
22, 2000 between netGuru, Inc., a Delaware corporation f/k/a Research Engineers,
Inc. (the "COMPANY"), and Xxxxxxx Associates, L.P., a Delaware limited
partnership, and Westgate International, L.P., a Cayman Islands limited
partnership (individually and collectively, the "INVESTOR").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Investor are parties to that
certain securities purchase agreement dated as of March 8, 2000 pursuant to
which the Investor purchased in the aggregate 12,000 shares of the Company's
preferred stock (as later exchanged for a different series of preferred stock,
the "Preferred Stock") and warrants to purchase 90,000 shares of the Company's
common stock, among other things, and entered into a related registration rights
agreement as of the same date (collectively, such securities purchase agreement,
warrants and registration rights agreement, together with the Certificate of
Designations related to such Preferred Stock, are hereinafter referred to as the
"Preferred Stock Agreements");
WHEREAS, the Company desires to sell and issue to the
Investor, and the Investor wishes to purchase from the Company, an aggregate of
200,000 shares (the "COMMON SHARES") of common stock, par value $0.01, of the
Company ("COMMON STOCK"), and warrants (the "WARRANTS") to purchase 60,000
shares ("WARRANT SHARES") of Common Stock in the form of Exhibit B attached
hereto, on the terms and conditions set forth herein; and
WHEREAS, the Investor will have registration rights with
respect to the Common Shares and Warrant Shares pursuant to the terms of that
certain Registration Rights Agreement to be entered into between the Company and
the Investor substantially in the form of EXHIBIT C hereto ("REGISTRATION RIGHTS
AGREEMENT");
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON SHARES
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Section 1.1 ISSUANCE OF COMMON SHARES AND WARRANTS. Upon the following
terms and conditions, the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, the number of Common Shares and
Warrants indicated next to the Investor's name on Schedule I attached hereto.
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Section 1.2 PURCHASE PRICE. The purchase price for the Common Shares
and Warrants to be acquired by the Investor (the "PURCHASE PRICE") shall be the
Purchase Price set forth next to the Investor's name on SCHEDULE I.
Section 1.3 THE CLOSING.
(a) Subject to the fulfillment or waiver of the conditions set forth in
Article V hereof, the purchase and sale of the Common Shares and Warrants shall
take place at a closing (the "CLOSING"), on or about the date hereof or such
other date as the Investor and the Company may agree upon (the "CLOSING DATE").
(b) FORM OF PAYMENT. Each Investor shall pay their respective purchase
price for the Common Shares and Warrants by wire transfer to the account
designated by the Company in writing to each Investor against delivery of the
applicable Common Shares and Warrants, upon satisfaction of the other conditions
to the Closing. In addition, each party shall deliver all documents, instruments
and writings required to be delivered by such party pursuant to this Agreement
at or prior to the Closing. In lieu of delivering physical certificates
representing the Common Shares at Closing, the Company shall deliver to its
transfer agent, with a copy simultaneously at Closing to the Investor's counsel,
a letter authorizing and directing such transfer agent to deliver certificates
representing the Common Shares to the Investor within three (3) business days
after the Closing. Once payment of the Purchase Price has been made by an
Investor, such Investor shall own, and the Company shall be deemed to have
issued to such Investor, such Investor's applicable number of Common Shares and
Warrants as of the time of such payment, regardless of whether or when physical
certificates evidencing such securities are actually received by the Investor.
Nothing herein shall affect the Company's obligation hereunder to deliver
certificates representing the Common Shares and Warrants to the Investors.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
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Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Investor as of
the date hereof and the Closing Date:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT. The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Delaware and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
does not have any subsidiaries other than the subsidiaries listed on SCHEDULE
2.1(a) attached hereto ("SUBSIDIARIES"). Except where specifically indicated to
the contrary, all references in this Agreement to subsidiaries shall be deemed
to refer to all direct and indirect subsidiaries of the Company. The Company 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. "MATERIAL
ADVERSE EFFECT" means any adverse effect on the business, operations,
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properties, prospects or financial condition of the Company and its
subsidiaries, if any, and which is (either alone or together with all other
adverse effects) material to the Company and its Subsidiaries, if any, taken as
a whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Registration Rights Agreement, or any other agreement or
document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement and the Warrants ("TRANSACTION DOCUMENTS") and to
issue the Common Shares, Warrant Shares and the Warrants in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this Agreement, the
Registration Rights Agreement and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including the issuance of the Common Shares, the Warrant Shares and Warrants,
have been duly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors (or any
committee or subcommittee thereof) or stockholders is required, (iii) this
Agreement, the Registration Rights Agreement and the Warrants have been duly
executed and delivered by the Company, (iv) this Agreement, the Registration
Rights Agreement and the Warrants constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except (A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application, and (B) to the extent the
indemnification provisions contained in this Agreement and the Registration
Rights Agreement may be limited by applicable federal or state securities laws
and (v) the Common Shares, the Warrants and the Warrant Shares have been duly
authorized and, upon issuance thereof and payment therefor in accordance with
the terms of this Agreement, the Common Shares, the Warrants and the Warrant
Shares will be validly issued, fully paid and non-assessable, free and clear of
any and all liens, claims and encumbrances.
(c) CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 20,000,000 shares of Common Stock, of which
as of the date hereof, 13,380,433 shares are issued and outstanding, 1,970,859
shares are issuable and reserved for issuance pursuant to the Company's stock
option and purchase plans and committed pursuant to pending acquisitions, and
758,053 shares are issuable and reserved for issuance pursuant to securities
exercisable or exchangeable for, or convertible into, shares of Common Stock,
and (ii) 5,000,000 shares of preferred stock, of which as of the date hereof,
only 12,000 shares are issued and outstanding, all of which are designated
Series B Cumulative Convertible Preferred Stock and have been issued to the
Investors. All of such outstanding shares have been, or upon issuance will be,
validly issued, fully paid and nonassessable. As of the date hereof, except as
disclosed in SCHEDULE 2.1(c), (i) no shares of the Company's capital stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, (ii) there are no outstanding
debt securities, (iii) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
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commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the Securities Act of 1933, as amended ("SECURITIES ACT"
or "1933 ACT") (except the Registration Rights Agreement and except as set forth
on SCHEDULE 2.1(c)), (v) there are no outstanding securities of the Company or
any of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Common Shares, the Warrant Shares or the
Warrants, and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. The
Company has furnished to the Investor true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible or
exchangeable into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
(d) ISSUANCE OF SHARES. Upon issuance in accordance with this
Agreement and the Warrants, the Common Shares, Warrant Shares and Warrants will
be validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof.
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby and issuance of the Common Shares,
the Warrant Shares and the Warrants will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock of the Company or the
By-laws; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of the Nasdaq
National Market ("PRINCIPAL MARKET") or principal securities exchange or trading
market on which the Common Stock is traded or listed) applicable to the Company
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected. Neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, (x) its
certificate of incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock or By-laws or their
organizational charter or by-laws, respectively, (y) any material contract,
agreement, mortgage, indebtedness, indenture, instrument, or (z) any judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, the non-compliance with which (in the case of (z) only), would
be material to the Company or its Subsidiaries or interfere with the performance
of its obligations under the Transaction Documents. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any regulatory or
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self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents or the issuance
of the Common Shares, the Warrant Shares and the Warrants in accordance with the
terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company complies with and is not in violation of the listing requirements of the
Principal Market as in effect on the date hereof and the Closing Date and is not
aware of any facts which would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth on
Schedule 2.1(f), since December 31, 1998 the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has delivered to the Investor
or its representatives true and complete copies of any SEC Documents that were
not filed electronically via XXXXX. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2.2(b) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Investor with any material, nonpublic
information which was not publicly disclosed prior to the date hereof.
(g) ABSENCE OF CERTAIN CHANGES. Since December 31, 1998 there has
been no adverse change or adverse development in the business, properties,
assets, operations, financial condition, prospects, liabilities or results of
operations of the Company or its Subsidiaries which has had or, to the knowledge
of the Company or its Subsidiaries, is reasonably likely to have a Material
Adverse Effect. The Company has not taken any steps, and does not currently
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expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings.
(h) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
except which individually and in the aggregate, respectively, would be
reasonably likely to result in liability to the Company in excess of $50,000 and
$100,000, respectively.
(i) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by the Investor or any of its respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Investor's purchase of the Common
Shares. The Company further represents to the Investor that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(j) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, prospects, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
(k) NO INSIDE INFORMATION. The Company has not provided and, the
Company shall not provide, any Investor with any non-public information.
(l) NO INTEGRATED OFFERING. Except for the transactions
consummated pursuant to the Preferred Stock Agreements, neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of Common Shares, Warrant Shares and Warrants to the Investor to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of the Principal Market or other Approved
Market, nor will the Company or any of its Subsidiaries take any action or steps
that would cause the offering of the Common Shares or Warrant Shares to be
integrated with other offerings.
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(m) EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened, the effect
of which would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement. The Company and its Subsidiaries believe that relations
between the Company and its Subsidiaries and their respective employees are
good. No executive officer (as defined in Rule 501(f) of the 0000 Xxx) whose
departure would be adverse to the Company has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company.
(n) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two (2) years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secret or other similar rights
of others, or of any such development of similar or identical trade secrets or
technical information by others, and there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being threatened
against, the Company or its Subsidiaries regarding trademarks, trade name
rights, patents, patent rights, inventions, copyrights, licenses, service names,
service marks, service xxxx registrations, trade secrets or other infringement.
The Company and its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of all of their intellectual
properties.
(o) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) or (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
(p) TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 2.1(p) or such
as do not materially and adversely affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
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Company or any of its Subsidiaries. Any real property and facilities held under
lease by the Company or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
(q) INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries taken as a whole.
(r) REGULATORY PERMITS. The Company and its Subsidiaries possess
all material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities, necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(s) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(t) FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
(u) TAX STATUS. The Company and each of its Subsidiaries has made
or filed all United States federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
(i) has paid all taxes and other governmental assessments and charges, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (ii) has set aside on its books provisions
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reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and
the Company is not aware of any basis for any such claim.
(v) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents
filed on XXXXX at least thirty (30) Trading Days prior to the date hereof and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 2.1(c), none of the officers, directors or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
(w) DILUTIVE EFFECT. The Company understands and acknowledges that
the number of Warrant Shares issuable upon exercise of the Warrants purchased
pursuant to this Agreement will increase in certain circumstances. The Company
further acknowledges that, subject to such limitations as are expressly set
forth in the Transaction Documents, its obligation to issue Warrant Shares upon
exercise of the Warrants purchased pursuant to this Agreement is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other shareholders of the Company.
(x) APPLICATION OF TAKEOVER PROTECTIONS. There are no
anti-takeover provisions contained in the Company's Certificate of Incorporation
or otherwise which will be triggered as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Common Shares and Warrants and the Investor's ownership of the
Common Shares and Warrant Shares.
(y) RIGHTS PLAN. Neither the Company nor any of its Subsidiaries
has adopted a shareholder or rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company. The Company confirms that no provision of such plan will, under any
present or future circumstances, delay, prevent or interfere with the
performance of any of the Company's obligations under the Transaction Documents
and such plan will not be "triggered" by such performance.
(z) MARKET CAPITALIZATION. As of the date hereof, the aggregate
market value of the voting common equity of the Company held by non-affiliates
of the Company is greater than $100 million.
(aa) OBLIGATIONS ABSOLUTE. Each of the Company and the Investor
agrees that, subject only to the conditions, qualifications and exceptions (if
any) specifically set forth in the Transaction Documents, its obligations under
the Transaction Documents are unconditional and absolute. Except to the extent
(if any) specifically set forth in the Transaction Documents, each party's
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obligations thereunder are not subject to any right of set off, counterclaim,
delay or reduction.
(bb) ISSUANCE OF COMMON SHARES AND WARRANT SHARES. The Common
Shares and Warrant Shares are duly authorized and reserved for issuance and,
upon purchase of the Common Shares pursuant hereto and purchase of the Warrant
Shares upon exercise of the Warrants in accordance with the terms thereof, such
Common Shares and Warrant Shares, respectively, will be validly issued, fully
paid and non-assessable, free and clear of any and all liens, claims and
encumbrances, and entitled to be traded on the Principal Market or the New York
Stock Exchange or the American Stock Exchange, or the Nasdaq small cap market
(collectively with the Principal Market, the "APPROVED MARKETS"), and the
holders of such Common Shares and Warrant Shares shall be entitled to all rights
and preferences accorded to a holder of Common Stock. As of the date of this
Agreement, the outstanding shares of Common Stock are currently listed on the
Principal Market.
(cc) FORM S-3. Except for any ineligibility due to the late SEC
filings described on Schedule 2.1(f), the Company is eligible to file the
Registration Statement (as defined in the Registration Rights Agreement) for
secondary offerings on Form S-3 (as in effect on the date of this Agreement)
under the 1933 Act and rules promulgated thereunder, and Form S-3 (as in effect
on the date of this Agreement) is permitted to be used for the transactions
contemplated hereby under the 1933 Act and rules promulgated thereunder.
(dd) BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or the Investor relating to this Agreement or
the transactions contemplated hereby, except for the broker's fee of Shoreline
Pacific Institutional Finance, the Institutional Division of Financial West
Group ("Shoreline"), which shall be paid by the Company out of the Closing
proceeds.
(ee) NAME CHANGE. The Company's name was changed from "Research
Engineers, Inc." to "netGuru, Inc." as of February 25, 2000, and such corporate
name change has not had nor will have any affect on the rights, assets,
interests, obligations or liabilities of the Company or affect in any way the
representations and warranties herein pertaining to the Company (which apply to
the Company under both of such names).
(ff) INTERRA GLOBAL LIMITED. The Company has directly or
indirectly acquired at least 73% of Interra Global Limited of India ("Interra")
pursuant to an agreement between the Company, Interra and its equity holders
(the "Interra Transaction"). Such agreement is in full force and effect and
enforceable by the Company, and a copy of such agreement (together with any
amendments thereto or documents relating thereto) has been furnished to the
Investors to the extent requested by them. Interra now owns a 15 year Internet
Service Provider ("ISP") license (subject to revocation) covering all of India
pursuant to a Category A unrestricted license by the Ministry of
Telecommunications, Government of India. The Company is currently effectively
controlling all of Interra, including without limitation serving in a management
and/or policy making capacity for Interra's India ISP business.
10
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The
Investor hereby makes the following representations and warranties to the
Company as of the date hereof and the Closing Date:
(a) ACCREDITED INVESTOR STATUS; SOPHISTICATED INVESTOR. The
Investor is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act. The Investor has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of investment in the Common Shares, Warrant Shares and the Warrants.
(b) INFORMATION. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company which have been requested and materials relating to the offer and
sale of the Common Shares, the Warrant Shares and the Warrants which have been
requested by the Investor. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by the Investor or its
advisors, if any, or its representatives shall modify, amend or affect the
Investor's right to rely on the Company's representations and warranties
contained in Section 2.1 above. The Investor understands that its investment in
the Common Shares, the Warrant Shares and the Warrants involves a high degree of
risk. The Investor has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Common Shares, the Warrant Shares and the Warrants.
(c) NO GOVERNMENTAL REVIEW. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Common
Shares, the Warrant Shares and the Warrants or the fairness or suitability of
the investment in the Common Shares, the Warrants and Warrant Shares nor have
such authorities passed upon or endorsed the merits of the offering of the
Common Shares, the Warrant Shares and the Warrants.
(d) LEGENDS. The Company shall issue certificates for the Common
Shares, the Warrant Shares and the Warrants to the Investor without any legend
except as described in Article VI below. The Investor covenants that, in
connection with any transfer of Common Shares by the Investor pursuant to the
registration statement contemplated by the Registration Rights Agreement, it
will comply with the applicable prospectus delivery requirements of the 1933
Act, provided that copies of a current prospectus relating to such effective
registration statement are or have been supplied to the Investor.
(e) AUTHORIZATION; ENFORCEMENT. Each of this Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Investor and is a valid and binding agreement of
the Investor enforceable against the Investor in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. The Investor has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
11
the Registration Rights Agreement and each other agreement entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement.
(f) RESIDENCY. The Investor is a resident of the jurisdiction
indicated on SCHEDULE I.
(g) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Investor and the
consummation by the Investor of the transactions contemplated hereby and thereby
will not result in a violation of the certificate of incorporation, by-laws or
other documents of organization of the Investor.
(h) INVESTMENT REPRESENTATION. The Investor is purchasing the
Common Shares (and, if applicable, the Warrant Shares) and the Warrants for its
own account and not with a view to distribution in violation of any securities
laws. The Investor has been advised and understands that neither the Common
Shares, the Warrant Shares nor the Warrants have been registered under the 1933
Act or under the "blue sky" laws of any jurisdiction and may be resold only if
registered pursuant to the provisions of the 1933 Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law. The Investor has been
advised and understands that the Company, in issuing the Common Shares, the
Warrant Shares and Warrants, is relying upon, among other things, the
representations and warranties of the Investor contained in this Section 2.2 in
concluding that such issuance is a "private offering" and is exempt from the
registration provisions of the 1933 Act.
(i) RULE 144. The Investor understands that there is no public
trading market for the Warrants, that none is expected to develop, and that the
Warrants, Common Shares and Warrants may not be sold until such Warrant Shares,
Warrants or Common Shares are registered under the 1933 Act or an exemption from
registration is available. The Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the 1933 Act.
(j) BROKERS. The Investor has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or the Investor relating to this Agreement or
the transactions contemplated hereby except for the broker's fee of Shoreline
which shall be paid by the Company out of the Closing proceeds.
(k) RELIANCE BY THE COMPANY. The Investor understands that the
Common Shares, Warrant Shares and Warrants are being offered and sold in
reliance on a transactional exemption from the registration requirements of
Federal and state securities laws and that the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of the Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of the Investor to acquire
the Common Shares, Warrant Shares and Warrants.
ARTICLE III
COVENANTS
---------
12
Section 3.1 REGISTRATION AND LISTING; EFFECTIVE REGISTRATION. Until
such time as no Common Shares are held by the Investor and no Warrants are
outstanding, the Company will cause the Common Stock to continue at all times to
be registered under Sections 12(b) or (g) of the Exchange Act, will comply in
all material respects with its reporting and filing obligations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will not
take any action or file any document (whether or not permitted by the Exchange
Act or the rules thereunder) to terminate or suspend such reporting and filing
obligations. Until such time as no Common Shares are held by the Investor and no
Warrants are outstanding, the Company shall continue the listing or trading of
the Common Stock on the Principal Market or one of the other Approved Markets
and comply in all material respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Approved Market on which the
Common Stock is listed. The Company shall cause the Common Shares and Warrant
Shares to be listed on the Principal Market or one of the other Approved Markets
no later than the effectiveness of the registration of the Common Shares under
the Act, and shall continue such listing(s) on one of the Approved Markets, for
so long as any Common Shares are held by the Investor or Warrants are
outstanding.
Section 3.2 CERTIFICATES ON EXERCISE. Upon any exercise by the Investor
(or then holder of Warrants) of the Warrants, the Company shall issue and
deliver to the Investor (or holder) within three (3) trading days of the
exercise date a new Warrant or Warrants for the number of Warrant Shares which
the Investor (or holder) has not yet elected to exercise but which are evidenced
in part by the Warrant(s) submitted to the Company in connection with such
exercise (with the denominations of such new Warrant(s) designated by the
Investor or holder).
Section 3.3 REPLACEMENT CERTIFICATES. The certificate(s) representing
the Common Shares held by any Investor (or then holder) may be exchanged by the
Investor (or such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of Common
Shares, as requested by the Investor (or such holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
Section 3.4 SECURITIES COMPLIANCE. The Company shall notify the SEC and
the Principal Market, in accordance with their requirements (except for any
requirements which require filing of such notice prior to the date hereof), of
the transactions contemplated by this Agreement, the Warrants and the
Registration Rights Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Common Shares and Warrants
hereunder and the Warrant Shares issuable upon exercise thereof.
Section 3.5 NOTICES. The Company agrees to provide all holders of
Common Shares and Warrants with copies of all notices and information, including
without limitation notices and proxy statements in connection with any meetings,
that are provided to the holders of shares of Common Stock, contemporaneously
with the delivery of such notices or information to such Common Stock holders.
13
Section 3.6 USE OF PROCEEDS. The Company agrees that the net proceeds
received by the Company from the sale of the Common Shares hereunder and payment
of the exercise price of the Warrants shall be used for legally permitted
corporate purposes.
Section 3.7 RESERVATION OF SHARES; STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
issuance of the Common Shares hereunder and the issuance of the Warrant Shares
upon exercise of the Warrants, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the issuance of all such Common
Shares and the issuance of all such Warrant Shares upon exercise of all of the
Warrants, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the issuance of all such Common
Shares and the issuance of all such Warrant Shares upon exercise of the then
outstanding Warrants, the Company will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose, including without
limitation engaging in best efforts to obtain the requisite shareholder approval
and taking all other actions necessary or advisable. Without in any way limiting
the foregoing, the Company agrees to reserve and at all times keep available
solely for purposes of issuance of the Warrant Shares upon exercise of the
Warrants, such number of authorized but unissued shares of Common Stock that is
at least equal to 200% of the number of Warrant Shares issuable upon exercise of
all of the Warrants, computed as if all Warrants are exercisable at the then
Exercise Price (as defined in the Warrants). If at any time the number of
authorized but unissued shares of Common Stock is not sufficient to effect such
exercise of all the then outstanding Warrants, the Investor shall be entitled
to, INTER ALIA, the redemption rights provided in the Registration Rights
Agreement.
Section 3.8 BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article V of this Agreement.
Section 3.9 FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Common Shares, the Warrant Shares and the Warrants, as
required under Regulation D and to provide a copy thereof to the Investor
promptly after such filing. The Company shall, on or before the Closing Date,
take such action as the Company shall have reasonably determined is necessary to
qualify the Common Shares, the Warrant Shares and the Warrants for sale to the
Investor under applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Investor on or prior to the
Closing Date; provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits or taxation, in each case, in any
jurisdiction where it is not now so subject.
Section 3.10 PUBLICITY. The Company shall issue a press release with
respect to such transactions if so requested by Investor.
Section 3.11 SHAREHOLDER RIGHTS PLAN. None of the acquisitions of
Common Shares, Warrant Shares or Warrants nor the deemed beneficial ownership of
shares of Common Stock prior to, or the acquisition of such shares pursuant to,
14
the exercise of the Warrants will in any event under any circumstances trigger
the poison pill provisions of any stockholders' rights or similar agreements, or
a substantially similar occurrence under any successor or similar plan.
Section 3.12 FINANCIAL INFORMATION. The Company agrees to send the
following to the Investor for so long as any Common Shares issued hereunder are
held by the Investor or Warrants are outstanding: (i) on the same day as the
release thereof, facsimile or e-mail copies of all press releases issued by the
Company or any of its Subsidiaries; and (ii) copies of any notices and other
information made available or given to the shareholders of the Company
generally, contemporaneously with the making available or giving thereof to the
shareholders.
Section 3.13 TRANSACTIONS WITH AFFILIATES. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.
Section 3.14 PREFERRED STOCK AGREEMENTS. Nothing contained in this
Agreement, the Registration Rights Agreement or the Warrants, or in any other
instrument contemplated hereby or thereby, shall modify, amend, terminate or in
any way affect any of the Investors' rights or the Company's obligations under
or with respect to the Preferred Stock Agreements, and all such rights and
obligations shall be in addition to any and all rights and obligations
hereunder, except that Schedule A to the Registration Rights Agreement shall
replace and supercede Schedule A to the registration rights agreement included
in the Preferred Stock Agreements.
ARTICLE IV
TRANSFER AGENT INSTRUCTIONS.
----------------------------
The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates, registered in the name
of the Investor or its respective nominee(s), for the Common Shares issued
hereunder and the Warrant Shares issued upon exercise of the Warrants in such
amounts as specified by the Investor (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). The Company warrants that no instruction relating to the Common
Shares or Warrant Shares other than the Irrevocable Transfer Agent Instructions
referred to in this Article IV will be given by the Company to its transfer
agent and that the Common Shares and Warrant Shares shall be freely transferable
on the books and records of the Company as contemplated by Article VI below when
the legend referred to therein may be removed. Nothing in this Article IV shall
affect in any way the Investor's obligations and agreements set forth in Section
2.2(d) to comply with all applicable prospectus delivery requirements, if any,
upon resale of the Common Shares and Warrant Shares. The Company shall instruct
its transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Investor and without any restrictive legends.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Investor by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section will be
inadequate and agrees, in the event of a breach or threatened breach by the
15
Company of the provisions of this Section, that the Investor shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
ARTICLE V
CONDITIONS TO CLOSINGS
----------------------
Section 5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE COMMON SHARES AND WARRANTS. The obligation hereunder of the Company to
issue and/or sell the Common Shares and the Warrants to the Investor at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
applicable conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Investor will be true and correct in all
material respects as of the date when made and as of the Closing Date, as though
made at that time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Investor at or prior to the Closing including payment of the
purchase price set forth on Schedule I.
(c) 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 which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement.
(d) CERTIFICATE. The Investor shall have delivered a certificate
to the Company certifying that the representations and warranties of the
Investor contained in Section 2.2 are true and correct in all material respects
as of the Closing Date.
Section 5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTOR TO
PURCHASE THE COMMON SHARES AND WARRANTS. The obligation hereunder of the
Investor to acquire and pay for the Common Shares and Warrants at the Closing is
subject to the satisfaction, at or before the Closing, of each of the applicable
conditions set forth below. These conditions are for the Investor's benefit and
may be waived by the Investor at any time in its sole discretion.
(a) 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 the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which shall be true and correct in all material respects as of such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Company at or prior to the Closing, including, without
16
limitation, delivery of certificates representing the Common Shares and Warrants
issued to Investor (provided that stock certificates may be delivered within 3
business days following closing pursuant to Section 1.3(b)).
(c) NASDAQ TRADING. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC
and trading in securities generally as reported by the Principal Market (or
other Approved Market) shall not have been suspended or limited, and the Common
Stock shall be listed on the Principal Market or another Approved Market.
(d) 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 which
prohibits the consummation of any of the transactions contemplated by this
Agreement, the Warrants or the Registration Rights Agreement. The NASD shall not
have objected or indicated that it may object to the consummation of any of the
transactions contemplated by this Agreement.
(e) OPINION OF COUNSEL. At the Closing, the Investor shall have
received an opinion of counsel to the Company in the form attached hereto as
Exhibit A and such other opinions, certificates and documents as the Investor or
their counsel shall reasonably require incident to the Closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the Investor
shall have executed and delivered the Registration Rights Agreement in the form
and substance of EXHIBIT C attached hereto.
(g) OFFICER'S CERTIFICATE. The Company shall have delivered to the
Investor a certificate in form and substance satisfactory to the Investor and
the Investor's counsel, executed by an officer of the Company, certifying as to
satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Certificate of Incorporation, By-Laws,
good standing and authorizing resolutions of the Company.
(h) PREFERRED STOCK AGREEMENTS. The Company shall not be in breach
of any of its representations, warranties, covenants, obligations or agreements
contained in the Preferred Stock Agreements (except for the Company's failure to
timely file the registration statement required by the Preferred Stock
Agreements).
(i) MISCELLANEOUS. The Company shall have delivered to the
Investor such other documents relating to the transactions contemplated by this
Agreement or the Investor or its counsel may reasonable request.
ARTICLE VI
LEGEND AND STOCK
----------------
Upon payment therefor as provided in this Agreement, the Company will
issue one or more certificates representing the Common Shares and Warrants in
the name the Investor or its designees and in such denominations to be specified
17
by the Investor prior to (or from time to time subsequent to) Closing. Each
certificate representing the Common Shares, Warrants or Warrant Shares, prior to
such securities being registered under the 1933 Act for resale or available for
resale under Rule 144 under the 1933 Act, shall be stamped or otherwise
imprinted with a legend substantially in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Common Shares, Warrant Shares or Warrants
without the legend set forth above at such time as (i) the holder thereof is
permitted to dispose of such Common Shares or Warrants or the Warrant Shares
issuable upon exercise of the Warrants pursuant to Rule 144 under the Act, or
(ii) such Common Shares or the Warrant Shares are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser(s), in
form and substance reasonably satisfactory to the Company and its counsel) are
able to dispose of such shares publicly without registration under the Act, or
(iii) such securities have been registered under the 1933 Act.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares and any Warrant
Shares issued pursuant to exercise of the Warrants shall bear a legend in the
same form as the legend indicated above; provided that such legend shall be
removed from the Warrant Shares and Common Shares and the Company shall issue
new certificates without such legend if (i) the holder has sold or disposed of
such Common Shares or Warrant Shares pursuant to Rule 144 under the 1933 Act, or
the holder is permitted to dispose of such Common Shares or Warrant Shares
pursuant to Rule 144(k) under the 1933 Act, (ii) such Common Shares or Warrant
Shares are registered for resale under the 1933 Act, or (iii) such Common Shares
or Warrant Shares are sold to a purchaser or purchasers who (in the opinion of
counsel to the seller or such purchaser(s), in form and substance reasonably
satisfactory to the Company and it counsel) are able to dispose of such shares
publicly without registration under the 1933 Act. Upon such Registration
Statement becoming effective, the Company agrees to promptly, but no later than
three (3) business days thereafter, issue new certificates representing such
Common Shares or Warrant Shares without such legend. Any Common Shares or
Warrant Shares issued after the Registration Statement has become effective
shall be free and clear of any legends, transfer restrictions and stop orders.
Notwithstanding the removal of such legend, the Investor agrees to sell the
Common Shares and Warrant Shares represented by the new certificates in
accordance with the applicable prospectus delivery requirements (if copies of a
current prospectus are provided to the Investor by the Company) or in accordance
with an exemption from the registration requirements of the 1933 Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement entered
into in compliance with law, including applicable securities laws.
18
ARTICLE VII
TERMINATION
-----------
Section 7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Investor.
Section 7.2 OTHER TERMINATION. This Agreement may be terminated by
action of the Board of Directors of the Company or by the Investor at any time
if the Closing shall not have been consummated by the fifth business day
following the date of this Agreement; provided, however, that the party (or
parties) prepared to close shall retain its (or their) right to xxx for any
breach by the other party (or parties).
ARTICLE VIII
INDEMNIFICATION
---------------
In consideration of the Investor's execution and delivery of the this
Agreement and the Registration Rights Agreement and acquiring the Common Shares
hereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Investor and all of its partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate or document contemplated hereby or thereby, (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate or document contemplated hereby
or thereby, (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party and arising out of or resulting from (i) the
execution, delivery, performance, breach by the Company or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Common Shares or (iii) the status of the Investor or holder of the Common
Shares, Warrant Shares or Warrants as the Investor in the Company and (d) the
enforcement of this Section. Notwithstanding the foregoing, Indemnified
Liabilities shall not include any liability of any Indemnitee arising solely out
of such Indemnitee's willful misconduct or fraudulent action(s). To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Article VIII
shall be the same as those set forth in Section 6 (other than Section 6(b)) of
19
the Registration Rights Agreement, including, without limitation, those
procedures with respect to the settlement of claims and Company's right to
assume the defense of claims.
ARTICLE IX
GOVERNING LAW, MISCELLANEOUS.
-----------------------------
Section 9.1 GOVERNING LAW. 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 CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
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. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY.
Section 9.2 COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
Section 9.3 HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 9.4 SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
20
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.
Section 9.5 ENTIRE AGREEMENT; AMENDMENTS; WAIVERS.
(a) This Agreement supersedes all other prior oral or written
agreements between the Investor, 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 (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.
(b) The Investor may at any time elect, by notice to the Company,
to waive (whether permanently or temporarily, and subject to such conditions, if
any, as the Investor may specify in such notice) any of its rights under any of
the Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Investor in accordance with
its terms; PROVIDED, however, that the voluntary waiver contemplated by this
sentence may not reduce the Investor's obligations to the Company under the
Transaction Documents.
Section 9.6 NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery OR (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
If to the Company:
netGuru, Inc.
00000 Xxxx Xxxxx Xxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxxxx
With a copy to:
Xxxxx X. Xxxxxxx
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, Xxxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
21
If to the Transfer Agent:
American Stock Transfer and Trust Company
00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxx
If to the Investor:
Xxxxxxx Associates, L.P.
c/x Xxxxxxx Management Corporation
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000 and (000) 000-0000
Attention: Xxxxx Xxxxx
and
Westgate International, L.P.
c/x Xxxxxxx Management Corporation
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000 and (000) 000-0000
Attention: Xxxxx Xxxxx
With a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-986-8866
Attention: Xxxxxxx X. Xxxxxxx
Each party shall provide five (5) days prior written notice to the
other party of any change in address, telephone number or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a nationally recognized overnight delivery service, shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 9.7 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including any Permitted
Assignee (as defined below). The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
22
Investor, including by merger or consolidation. The Investor may assign some or
all of its rights hereunder to any assignee of the Common Shares, Warrants or
Warrant Shares who is an Accredited Investor, as defined in Rule 501(a) under
the 1933 Act (in each case, a "PERMITTED ASSIGNEE"); PROVIDED, however, that any
such assignment shall not release the Investor from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Investor shall be entitled
to pledge the Common Shares, Warrant Shares and Warrants in connection with a
bona fide margin account.
Section 9.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 9.9 SURVIVAL. The representations, warranties and agreements of
the Company and the Investor contained in the Agreement shall survive each of
the Closing.
Section 9.10 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 9.11 PLACEMENT AGENT. The Investor and the Company each
acknowledges and warrants that it has not engaged any placement agent in
connection with the sale of the Common Shares, the Warrant Shares and the
Warrants other than Shoreline, whose fees will be paid exclusively by the
Company. The Company and the Investor shall each be responsible for the payment
of any other fees or commissions of placement agents or brokers engaged,
directly or indirectly, by the Company or the Investor, respectively, in
connection with the purchase of the Common Shares, the Warrant Shares and the
Warrants by the Investor. The Company and the Investor shall pay, and hold the
other party harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
Section 9.12 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 9.13 REMEDIES. The Investor and each Permitted Assignee shall
have all rights and remedies set forth in this Agreement and the Registration
Rights Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
which such holders have under any law (including without limitation the
Preferred Stock Agreements). Any person having any rights under any provision of
this Agreement or the Registration Rights Agreement shall be entitled to enforce
such rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement or the
Registration Rights Agreement and to exercise all other rights granted by law.
The Investor and each Permitted Assignee without prejudice may withdraw, revoke
23
or suspend its pursuit of any remedy at any time prior to its complete recovery
as a result of such remedy.
Section 9.14 PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Investor hereunder or under the Registration Rights
Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
Section 9.15 DAYS. Unless the context refers to "business days" or
"Trading Days", all references herein to "days" shall mean calendar days.
Section 9.16 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, wherever the Investor exercises a right, election,
demand or option under a Transaction Document and the Company does not fully
perform its related obligations within the periods therein provided, then the
Investor in its sole discretion may rescind or withdraw from time to time any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.
[SIGNATURE PAGE FOLLOWS]
24
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed as of the date and year first above
written.
COMPANY: INVESTOR:
NETGURU, INC. WESTGATE INTERNATIONAL, L.P.
By: XXXXXXX INTERNATIONAL
CAPITAL ADVISORS INC., as
attorney-in-fact
By: /s/ Xxxxx Xxxxxxxxxx By: /s/ Xxxx X. Xxxxxx
--------------------------- ---------------------------
Name: Xxxxx Xxxxxxxxxx Name: Xxxx X. Xxxxxx
Title: President Title: President
XXXXXXX ASSOCIATES, L.P.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: General Partner
25
LIST OF SCHEDULES
-----------------
Schedule 2.1(a) Subsidiaries
Schedule 2.1(c) Capitalization
Schedule 2.1(p) Title
Schedule I Investors
LIST OF EXHIBITS
----------------
EXHIBIT A Opinion of Counsel
EXHIBIT B Warrant
EXHIBIT C Registration Rights Agreement
SCHEDULE I
----------
WARRANTS TO PURCHASE THE
JURISDICTION OF NUMBER OF FOLLOWING NUMBER OF PURCHASE
INVESTOR ORGANIZATION COMMON SHARES WARRANTS SHARES PRICE
-------- ------------ ------------- --------------- -----
Xxxxxxx Associates, L..P. Delaware, U.S.A. 100,000 30,000 $1,650,000
Westgate International, L.P. Cayman Islands, B.W.I. 100,000 30,000 $1,650,000
