EXHIBIT 10.55
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of May 7, 1999,
by and among xXxx.xxx, Inc., a Delaware corporation, with headquarters located
at 0000 Xxxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000 (the "Company"), and the
investors listed on the Schedule of Buyers attached hereto (individually, a
"Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
B. The Company has authorized the following new series of its
preferred stock, par value $.01 per share: the Company's Series A Convertible
Preferred Stock (the "Preferred Stock"), which shall be convertible into shares
of the Company's Common Stock, par value $.01 per share (the "Common Stock")
(as converted, the "Conversion Shares"), in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Preferred
Stock, substantially in the form attached hereto as Exhibit A (the "Certificate
of Designations");
C. The Buyers wish to purchase, upon the terms and conditions stated
in this Agreement, an aggregate of up to 1,500 shares of the Preferred Stock
(the "Preferred Shares") in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers and warrants, in substantially the form
attached hereto as Exhibit E (the "Warrants"), to acquire 200 shares of Common
Stock for each Preferred Share purchased (as exercised, collectively, the
"Warrant Shares"); and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
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a. Purchase of Preferred Shares. Subject to the satisfaction
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(or waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer and each Buyer severally agrees to purchase
from the Company the respective number of Preferred Shares set forth opposite
such Buyer's name on the Schedule of Buyers, along with Warrants to acquire the
respective number of Warrant Shares set forth opposite such Buyer's name on the
Schedule of Buyers (the "Closing"). The purchase price (the "Purchase Price")
of the Preferred Shares and the related Warrants at the Closing shall be
$15,000,000.
b. Closing Date. The date and time of the Closing (the "Closing
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Date") shall be 10:00 a.m. Central Time, within three (3) business days
following the date hereof, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyers). The
Closing shall occur on the Closing Date at the offices of Xxxxxx Xxxxxx &
Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000.
c. Form of Payment. On the Closing Date, (i) each Buyer shall
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pay the Purchase Price to the Company for the Preferred Shares and Warrants to
be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer, stock
certificates (in the denominations as such Buyer shall request) (the "Preferred
Stock Certificates") representing such number of the Preferred Shares which
such Buyer is then purchasing (as indicated opposite such Buyer's name on the
Schedule of Buyers) along with the Warrants such Buyer is purchasing (as
indicated opposite such Buyer's name on the Schedule of Buyers) hereunder,
duly executed on behalf of the Company and registered in the name of such Buyer
or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the
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Preferred Shares and the Warrants, (ii) upon conversion of the Preferred
Shares, will acquire the Conversion Shares then issuable and (iii) upon
exercise of the Warrants, will acquire the Warrant Shares issuable upon
exercise thereof (the Preferred Shares, the Conversion Shares, the Warrants and
the Warrant Shares collectively are referred to herein as the "Securities"),
for its own account for investment only and not with a view towards, or for
resale in connection with, the distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making
the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
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investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
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Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein
in order to
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determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. Information. Such Buyer and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below. Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.
e. No Governmental Review. Such Buyer understands that no
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United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering of
the Securities.
f. Transfer or Resale. Such Buyer understands that except as
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provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with assurances reasonably acceptable to
the Company that such Securities can be sold, assigned or transferred pursuant
to Rule 144 promulgated under the 1933 Act, as amended, (or a successor rule
thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act
or any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. Legends. Such Buyer understands that, subject to the last
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paragraph of this Section 2(g), the certificates or other instruments
representing the Preferred Shares and the Warrants and the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear a restrictive legend in substantially the following form (and
a stop-transfer order may be placed against transfer of such stock
certificates):
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are sold in a registered sale under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides the Company with an opinion of
counsel, in a form reasonably acceptable to the Company, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act, or (iii) such holder provides the Company with
assurances reasonably acceptable to the Company that the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
h. Validity; Enforcement. This Agreement has been duly and
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validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its 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.
i. Residency. Such Buyer is a resident of that country specified in
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its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
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"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or
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indirectly, owns capital stock or holds an equity or similar interest) are
corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, "Material Adverse
Effect" means any material adverse effect on the business, properties, assets,
operations, results of operations, financial condition or prospects of the
Company and its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below). The
Company has no Subsidiaries except as set forth on Schedule 3(a).
b. Authorization; Enforcement; Validity. (i) The Company has
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the requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5), the Warrants and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof
and thereof, (ii) the execution and delivery of the Transaction Documents and
the Certificate of Designations by the Company and the consummation by it of
the transactions contemplated hereby and thereby, including without limitation
the issuance of the Preferred Shares and the Warrants and the reservation for
issuance and the issuance of the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders (except
such stockholder approval as may be required (A) by the Nasdaq National Market
for the issuance of a number of Conversion Shares which is greater than 20% of
the number of shares of Common Stock outstanding on the Closing Date ("20%
Approval") or (B) to increase the number of authorized shares of Common Stock
of the Company), (iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
prior to the Closing Date, the Certificate of Designations has been filed with
the Secretary of State of the State of Delaware and has not been amended since
the date it was filed.
c. Capitalization. As of the date hereof, the authorized
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capital stock of the Company consists of (i) 35,000,000 shares of Common Stock,
of which as of May 5, 1999, 12,415,655 shares are issued and outstanding,
3,234,144 shares are reserved for issuance
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pursuant to the Company's stock option and purchase plans and 204,832 shares
are issuable and reserved for issuance pursuant to securities (other than the
Preferred Shares and the Warrants) 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 zero shares are issued and outstanding.
As of the Closing Date the Company shall not have issued or reserved for
issuance any shares of Common Stock since May 5, 1999 except pursuant to the
exercise of options for which shares of Common Stock were reserved as of May 5,
1999 and are reflected in the number of reserved shares set forth in clause (i)
of the immediately preceding sentence. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(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 bound to issue currently or potentially in the
future additional shares of capital stock of the Company or any of its
Subsidiaries or 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, (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 1933 Act (except the Registration Rights Agreement),
(v) there are no outstanding securities or instruments 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 bound to redeem currently or potentially
in the future 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 Securities as described in this
Agreement, 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 Buyer 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 amended and
as in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock and the material
rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly
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authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the Certificate of Designations. A sufficient
number of shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and upon
exercise of the Warrants. Upon conversion or exercise in accordance with the
Certificate of Designations or the Warrants, as the case may be,
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the Conversion Shares and the Warrant Shares will be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to
the issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Assuming the accuracy of the representations set forth
in Section 2, the issuance by the Company of the Securities is exempt from
registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
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execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the
Certificate of Designations and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares and the
Warrant Shares) 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 or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market (as defined
below)) 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. Except as disclosed in Schedule 3(e), neither the Company nor its
Subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or By-laws or their
organizational charter or by-laws, respectively. Except as disclosed in
Schedule 3(e), neither the Company or any of its Subsidiaries is in violation
or any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations or amendments which would not,
individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted in
violation of any law, ordinance or regulation of any governmental entity,
except for possible violations the sanctions for which either individually or
in the aggregate would not have a Material Adverse Effect. Except as
specifically contemplated by the Transaction Documents 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 or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents or to perform its obligations under the Certificate of
Designations, in each case in accordance with the terms hereof or thereof.
Except as disclosed in Schedule 3(e), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain on or prior
to the Closing Date pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company is not in
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violation of the listing requirements of the Nasdaq National Market, including,
without limitation, the requirements set forth in Rule 4460 of the Nasdaq
National Market.
f. SEC Documents; Financial Statements. Since December 31,
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1997, 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"). A complete list of the SEC Documents is set forth on Schedule
3(f). 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). Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Buyers with any material, nonpublic
information.
g. Absence of Certain Changes. Except as disclosed in Schedule
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3(g), since December 31, 1998, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings. Except as disclosed in Schedule 3(g), since December 31, 1998,
the Company has not declared or paid any dividends, sold any assets in excess
of $1,000,000 outside of the ordinary course of business or had capital
expenditures in excess of $1,000,000.
h. Absence of Litigation. There is no action, suit,
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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 the
Company, the Common Stock or any of the Company's Subsidiaries or,
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to the knowledge of the Company, any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, except as set
forth in Schedule 3(h).
i. Acknowledgment Regarding Buyers' Purchase of Preferred
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Shares. The Company acknowledges and agrees that each of the Buyers is
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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 each Buyer 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 any of the Buyers or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
j. No General Solicitation. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
k. No Integrated Offering. Neither the Company, nor any of its
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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 require registration of any of
the Securities under the 1933 Act or, except as set forth on Schedule 3(k)
cause this offering of the Securities to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of
the Company are listed or designated. Neither the Company nor any of its
Subsidiaries take any action or steps that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings for purposes of provisions relating to the 20%
Approval.
l. Employee Relations. No executive officer (as defined in Rule
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501(f) of the 0000 Xxx) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer's employment with the
Company.
m. Intellectual Property Rights. Except as disclosed in the SEC
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Documents, each of the Company and each Subsidiary (i) to the knowledge of the
Company and the Subsidiaries, owns, or possesses adequate rights to use, all
patents, patent rights, inventions, trade secrets, know-how, proprietary
techniques, including processes and substances, trademarks, service marks,
trade names and copyrights described or referred to in the SEC Documents or
owned or used by it or which are necessary for the conduct of its business,
except for failure to own or possess any such rights as would not, individually
or in the aggregate, have a material
adverse effect on the business, properties, assets, operations, results of
operations, financial condition or prospects of the Company and its
Subsidiaries, if any, taken as a whole, and (ii) has no reason to believe, and
is not aware of any claim, that the conduct of its business will conflict with
any such rights of others which conflict or claim is or would be material to
the business, properties, assets, operations, results of operations, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole.
n. Tax Status. The Company and each of its Subsidiaries has
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made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless
and only to the extent that the Company and each of its Subsidiaries has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
o. Transactions With Affiliates. Except as set forth on
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Schedule 3(o) and in the SEC Documents filed at least ten days prior to the
date hereof and other than the grant of stock options disclosed on Schedule
3(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.
p. Application of Takeover Protections. The Company and its
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board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti-
takeover provision under the Certificate of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyers as
a result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Buyer's ownership
of the Securities.
q. Rights Agreement. The Company has not adopted a shareholder
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rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
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r. Year 2000 Compliance. The Company has initiated a review and
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assessment of all areas within its and each Subsidiaries' business and
operations that could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by the Company or any of the
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, the Company believes that the computer
applications that are currently material to its or any Subsidiaries' business
and operations are reasonably expected to be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000, except to
the extent that a failure to do so would not reasonably be expected to have a
Material Adverse Effect.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D
-------------------
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on
or before the Closing Date, take such action as the Company shall determine is
reasonably necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the earlier of (i) the date which is
----------------
one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares and
the Warrant Shares without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto), or (ii) the date on which (A) the
Investors shall have sold all the Conversion Shares and the Warrant Shares and
(B) none of the Preferred Shares or Warrants is outstanding (the "Registration
Period"), the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
---------------------
following to each Investor during the Registration Period: (i) unless the
following are filed with the SEC through XXXXX and are available to the public
through
11
XXXXX, within one (1) business day after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q,
any Current Reports on Form 8-K and any registration statements (other than on
Form S-8) or amendments filed pursuant to the 1933 Act; (ii) on the same day as
the release thereof, facsimile copies of all press releases issued by the
Company or any of its Subsidiaries; and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Right of First Refusal. Subject to the exceptions described
----------------------
below, the Company and its Subsidiaries shall not contract with any party for
any equity financing (including any debt financing with an equity component) or
issue any equity securities of the Company or any Subsidiary or securities
convertible or exchangeable into or for equity securities of the Company or any
Subsidiary (including debt securities with an equity component) in any form
("Future Offerings") during the period beginning on the date hereof and ending
on, and including, the date which is one year after the Closing Date, unless it
shall have first delivered to each Buyer or a designee appointed by such Buyer
written notice (the "Future Offering Notice") describing the proposed Future
Offering, including the terms and conditions thereof, and providing each Buyer
an option to purchase up to its Aggregate Percentage (as defined below) of the
securities to be issued in such Future Offering, as of the date of delivery of
the Future Offering Notice, in the Future Offering (the limitations referred to
in this and the preceding sentence are collectively referred to as the "Capital
Raising Limitations"). For purposes of this Section 4(g), "Aggregate
Percentage" at any time with respect to any Buyer shall mean the percentage
obtained by dividing (i) the aggregate number of the Preferred Shares initially
issued to such Buyer by (ii) the aggregate number of the Preferred Shares
initially issued to all the Buyers. A Buyer can exercise its option to
participate in a Future Offering by delivering written notice thereof to
participate to the Company within five (5) business days after receipt of a
Future Offering Notice, which notice shall state the quantity of securities
being offered in the Future Offering that such Buyer will purchase, up to its
Aggregate Percentage, and that number of securities it is willing to purchase
in excess of its Aggregate Percentage. In the event that one or more Buyers
fail to elect to purchase up to each such Buyer's Aggregate Percentage, then
each Buyer which has indicated that it is willing to purchase a number of
securities in such Future Offering in excess of its Aggregate Percentage shall
be entitled to purchase its pro rata portion (determined in the same manner as
described in the preceding sentence) of the securities in the Future Offering
which one or more of the Buyers have not elected to purchase. In the event the
Buyers fail to elect to fully participate in the Future Offering within the
periods described in this Section 4(g), the Company shall have 60 days
thereafter to sell the securities of the Future Offering that the Buyers did
not elect to purchase, upon terms and conditions, no more favorable to the
purchasers thereof than specified in the Future Offering Notice. In the event
the Company has not sold such securities of the Future Offering within such 60
day period, the Company shall not thereafter issue or sell such securities
without first offering such securities to the Buyers in the manner provided in
this Section 4(g). The Capital Raising Limitations shall not apply to (i) a
loan from a commercial bank which does
12
not have any equity feature, (ii) any transaction involving the Company's
issuances of securities (A) as consideration in a merger or consolidation, (B)
in connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), (C) as consideration for the
acquisition of a business, product, license or other assets by the Company, or
(D) equipment lease financing, (iii) the issuance of Common Stock in a firm
commitment, underwritten public offering, (iv) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other convertible
securities outstanding as of the date hereof, (v) the grant of additional
options or warrants, or the issuance of additional securities, under any
Company stock option plan, restricted stock plan or stock purchase plan for the
benefit of the Company's employees, officers, directors or consultants for
services provided to the Company. The Buyers shall not be required to
participate or exercise their right of first refusal with respect to a
particular Future Offering in order to exercise their right of first refusal
with respect to later Future Offerings.
g. Listing. The Company shall promptly secure the listing of
-------
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents and the
Certificate of Designations. The Company shall maintain the Common Stock's
authorization for quotation on the Nasdaq National Market, The Nasdaq SmallCap
Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc.
(collectively, the "Principal Market"). The Company shall promptly, and in no
event later than 10 business days, provide to each Buyer copies of any notices
it receives from the Principal Market regarding the continued eligibility of
the Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses incurred by the Company
in connection with satisfying its obligations under this Section 4(h).
h. Expenses. Upon submission of appropriate receipts, subject
--------
to Section 9(l) below, at the Closing, the Company shall reimburse the Buyers
for the Buyers' expenses (including reasonable attorneys' fees and expenses) in
due diligence and negotiating and preparing the Transaction Documents and
consummating the transactions contemplated thereby (including the review of any
provision of information for the Registration Statement) up to an aggregate of
$35,000.
i. Filing of Form 8-K. On or before May 17, 1999, the Company
------------------
shall file a Form 8-K with the SEC describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
or, at the Company's option, a Form 10-Q containing the information that would
otherwise be disclosed in such Form 8-K.
j. Right to Exchange Preferred Shares. Subject to the
----------------------------------
exceptions described below, so long as any Preferred Shares remain outstanding,
if the Company issues or agrees to
13
issue any equity securities or any instrument convertible into or exercisable
or exchangeable for equity securities of the Company (other than pursuant to a
firm commitment, underwritten public offering) ("New Equity Securities"), the
Company shall provide written notice thereof via facsimile and overnight
courier to each holder of Preferred Shares ("New Financing Notice") at least
ten (10) days prior to the date that the Company enters into any agreement with
respect to any New Equity Securities or issues any New Equity Securities.
Within one business day after each issuance of New Equity Securities, the
Company shall make an irrevocable exchange offer to each holder of Preferred
Shares on such terms and conditions as each such holder shall reasonably
require to exchange any or all of such holder's Preferred Shares for a like
amount (based on the following formula to value each Preferred Share: the
Stated Value plus any accrued and unpaid dividends) of the New Equity
Securities. Each such exchange offer shall remain open until the earlier of
(i) the date which is 15 business days after the receipt by each holder of
Preferred Shares of the New Financing Notice or (ii) such time as all of the
holders of Preferred Shares accept or reject, in writing, such exchange offer
(the "Exchange Offer Notice Period"). Notwithstanding the foregoing, a holder
of Preferred Shares shall not be entitled pursuant to this Section 4(j) to
exchange such Preferred Shares for securities issued by the Company as part of
(i) a loan from a commercial bank which does not have any equity feature, (ii)
any transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation, (B) in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), (C) as consideration for the acquisition of a business,
product, license or other assets by the Company, or (D) equipment lease
financing, (iii) the issuance of Common Stock in a firm commitment,
underwritten public offering, (iv) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, (v) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option plan, restricted stock plan or stock purchase plan for the benefit of
the Company's employees, officers, directors or consultants for services
provided to the Company.
k. Restrictions on Sales. Each Buyer severally agrees during
---------------------
the 20 trading days immediately preceding the One-Year Adjustment Date (as
defined in the Certificate of Designations), such Buyer will not sell any
shares of Common Stock at a price below the Conversion Price (as defined in the
Certificate of Designations ) then in effect.
l. Compliance with Section 9 of Securities Exchange Act. So
----------------------------------------------------
long as a Buyer holds any Preferred Shares, such Buyer will comply at all times
with the provisions of Section 9 of the 1934 Act, and the rules promulgated
thereunder, with respect to transactions involving the securities of the
Company.
14
5. 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 each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Preferred Shares or exercise of the
Warrants (the "Irrevocable Transfer Agent Instructions"). All certificates
representing the Conversion Shares and Warrant Share shall bear the
restrictive legend specified in Section 2(g) until such legend is permitted to
be removed pursuant to the last paragraph of Section 2(g). The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
the Warrant Shares, prior to registration of the Conversion Shares and the
Warrant Shares under the 0000 Xxx) will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 5
shall affect in any way each Buyer's obligations and agreements set forth in
Section 4(d) to comply with all applicable prospectus delivery requirements, if
any, upon resale of the Securities. If a Buyer provides the Company with an
opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act or the Buyer provides the Company with
assurances reasonably acceptable to the Company that the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the Conversion Shares and the
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer
and without any restrictive legend. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Buyers 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 5 will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this
Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Preferred Shares to each Buyer at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:
a. Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
b. The Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware.
c. Such Buyer shall have delivered to the Company the Purchase
Price for the Preferred Shares and the related Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
d. The representations and warranties of such Buyer shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 2 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Preferred
Shares at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in
its sole discretion by providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction
Documents and delivered the same to such Buyer.
b. The Certificate of Designations, shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof certified
by such Secretary of State shall have been delivered to such Buyer.
c. The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been suspended by
the SEC or the Principal
16
Market and the Conversion Shares and the Warrant Shares shall be listed upon
the Principal Market.
d. The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and an update as of the
Closing Date regarding the representation contained in Section 3(c) above.
e. Such Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit C attached
hereto.
f. The Company shall have executed and delivered to such Buyer
the Warrants and the Preferred Stock Certificates (in such denominations as
such Buyer shall request) for the Preferred Shares being purchased by such
Buyer at the Closing.
g. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii).
h. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
i. The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company in Delaware and
the qualification and good standing of the Company in California issued by the
Secretary of State of each such state as of a date within 10 days of the
Closing Date.
j. The Company shall have delivered to such Buyer a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Delaware within 10 days of the Closing Date.
k. The Company shall have delivered to such Buyer a secretary's
certificate, dated as the Closing Date, as to (i) the resolutions described in
Section 7(g), (ii) the Certificate of Incorporation and (iii) the Bylaws, each
as in effect at the Closing.
17
l. The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five days of the Closing Date.
m. The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of the
Securities pursuant to this Agreement in compliance with such laws, except such
filings as are not required to be made on or prior to the Closing Date.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
---------------
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Designations, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, officers, directors, employees 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, instrument
or document contemplated hereby or thereby or (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or the Certificate of Designations or any other certificate, instrument or
document contemplated hereby or thereby. 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.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law; Jurisdiction; Jury Trial. All questions
---------------------------------------
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of California,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
California. Each party hereby irrevocably waives any right it may have, and
agrees not to request, a jury trial for the adjudication of any dispute
hereunder or in connection with or arising out of this agreement or any
transaction contemplated hereby.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become
18
effective when counterparts have been signed by each party and delivered to the
other party; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.
c. Headings. The headings of this Agreement are for convenience
--------
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
----------------------------
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Preferred Shares then outstanding. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents or the
Certificate of Designations unless the same consideration also is offered to
all of the parties to the Transaction Documents or holders of Preferred Shares,
as the case may be.
f. Notices. Any notices, consents, waivers or other
-------
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
xXxx.xxx, Inc.
0000 Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
19
Facsimile: 000-000-0000
Attention: Xxxx X. Xxxxx, Chief Financial Officer
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxx
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or at such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by 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.
g. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of at least two-thirds (2/3) of the
Preferred Shares then outstanding, including by merger or consolidation, except
pursuant to a Major Transaction (as defined in Section 3(c) of the Certificate
of Designations) with respect to which the Company is in compliance with
Section 3 of the Certificate of Designations. A Buyer may assign some or all
of its rights hereunder to (i) a Permitted Transferee (as defined below)
without the consent of the Company and (ii) to a person which is not a
Permitted Transferee with the prior consent of the Company, which consent shall
not be unreasonably withheld. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Buyers shall be entitled to pledge
the Securities in connection with a bona fide margin account or other loan
secured by such Securities. For purposes of this Section 9(i), a "Permitted
Transferee" shall mean (i) a Buyer, (ii) an Affiliate (as that term is defined
in Rule 501(b) under the 1933 act) of a Buyer, (iii) any holder of Preferred
Shares or Warrants and (iv) any Affiliate of a holder of Preferred Shares or
Warrants.
h. No Third Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
9(l), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. 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.
l. Termination. In the event that the Closing shall not have
-----------
occurred with respect to a Buyer on or before five (5) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated by the
Buyers pursuant to this Section 9(l), the Company shall remain obligated to
reimburse the nonbreaching Buyers for the expenses described in Section 4(i)
above.
m. Placement Agent. The Company acknowledges that it has
---------------
engaged Reedland Capital Partners as placement agent in connection with the
sale of the Preferred Shares
21
and the related Warrants, which placement agent may have formally or informally
engaged other agents on its behalf. The Company shall be responsible for the
payment of any placement agent's fees or broker's commissions (other than those
of placement agents or brokers engaged by a Buyer) relating to or arising out
of the transactions contemplated hereby. The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in connection
with any such claim. Each Buyer, severally and not jointly, represents that it
has not engaged any placement agent or broker for the sale by the Company of
the Preferred Shares and Warrants to such Buyer.
n. 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.
o. Remedies. Each Buyer and each holder of the Securities shall
--------
have all rights and remedies set forth in the Transaction Documents and the
Certificate of Designations and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
-----------------
payment or payments to the Buyers hereunder or pursuant to the Certificate of
Designations or Warrants or the Buyers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, 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.
* * * * * *
22
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
------- ------
XXXX.XXX, INC. XXXXXX CAPITAL LTD.
By: /s/ XXXXXX X. XXXXXX III By: /s/ XXXXXX X. XXXXXXX
------------------------------ --------------------------
Name: Xxxxxx X. Xxxxxx III Name: Xxxxxx X. Xxxxxxx
----------------------------
Its: CEO and Chairman Its: Authorized Signatory
----------------------------
XXXXXXX CAPITAL LTD.
By: /s/ XXXXXX X. XXXXXXX
-----------------------
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
SCHEDULE OF BUYERS
Investor's Name Investor Address Number of Investor's Legal
and Facsimile Number Preferred Representatives'
Shares/ Address and
Warrant Facsimile Number
Shares
----------------------- -------------------------------- ----------- -------------------------
Xxxxxx Capital Ltd. Citadel Investment Group, L.L.C. 975/195,000 Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx Attention: Xxxxxx X.
Facsimile: (000) 000-0000 Xxxxxxxx, Esq.
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
Residence: Illinois Telephone: (000) 000-0000
Xxxxxxx Capital Ltd. Citadel Investment Group, L.L.C. 525/105,000 Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx Attention: Xxxxxx
Facsimile: (000) 000-0000 X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
Residence: Illinois Telephone: (000) 000-0000
SCHEDULES
---------
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(f) SEC Documents
Schedule 3(g) Material Changes
Schedule 3(h) Litigation
Schedule 3(k) Integrated Offerings
Schedule 3(o) Transactions with Affiliates
Schedule 4(d) Use of Proceeds
EXHIBITS
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Exhibit A Form of Certificate of Designations, Preferences and Rights of
the Preferred Shares
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Company Counsel Opinion
Exhibit D Form of Irrevocable Transfer Agent Instructions
Exhibit E Form of Warrant
