PURCHASE AGREEMENT
EXHIBIT
10.1
THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 1st day of June, 2006 by
and among PFSweb, Inc., a Delaware corporation (the “Company”), and the Investors set forth on the
signature pages affixed hereto (each an “Investor” and collectively the “Investors”).
Recitals
A. The Company and the Investors are executing and delivering this Agreement in reliance upon
the exemptions from securities registration of this Offering afforded by the provisions of
Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933, as amended, Section 4(2) thereunder and such other
exemptions as may be applicable thereto; and
B. The Investors wish to purchase from the Company, and the Company wishes to sell and issue
to the Investors, upon the terms and conditions stated in this Agreement, an aggregate of 5,000,000
shares of the Company’s Common Stock, par value $0.001 per share (together with any securities into
which such shares may be reclassified the “Common Stock”), at purchase price of $1.00 per share
(the “Offering”); and
C. Contemporaneous with the sale of the Common Stock, the parties hereto will execute and
deliver a Registration Rights Agreement, in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate” means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is under common
control with, such Person.
“Business Day” means a day, other than a Saturday or Sunday, on which banks in New
York City are open for the general transaction of business.
“Company’s Knowledge” means the actual knowledge of the executive officers (as defined
in Rule 405 under the 0000 Xxx) of the Company, after due inquiry.
“Confidential Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans, and customer and
supplier lists and related information).
“Control” (including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
“Effective Date” means the date on which the initial Registration Statement is
declared effective by the SEC.
“Effectiveness Deadline” means the date on which the initial Registration Statement is
required to be declared effective by the SEC under the terms of the Registration Rights Agreement.
“Intellectual Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not reduced to
practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos,
slogans and Internet domain names, together with all goodwill associated with each of the
foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals
for any of the foregoing; and (v) proprietary computer software (including but not limited to data,
data bases and documentation).
“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), business, or prospects of
the Company and its Subsidiaries taken as a whole, (ii) the enforceability of the Company’s
obligations under the Transaction Documents or (iii) the ability of the Company to perform its
obligations under the Transaction Documents.
“Nasdaq” means The Nasdaq Capital Market.
“Person” means an individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.
“Purchase Price” means Five Million Dollars ($5,000,000).
“Registration Statement” has the meaning set forth in the Registration Rights
Agreement.
“SEC Filings” has the meaning set forth in Section 4.6.
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“Shares” means the Five Million (5,000,000) shares of Common Stock being purchased by
the Investors hereunder.
“Subsidiary” of any Person means another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or indirectly by such
first Person.
“Transaction Documents” means this Agreement and the Registration Rights Agreement.
“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations promulgated thereunder.
“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date, each of the Investors shall severally, and not jointly, purchase,
and the Company shall sell and issue to the Investors, the Shares in the respective amounts set
forth opposite the Investors’ names on the signature pages attached hereto in exchange for the
Purchase Price as specified in Section 3 below.
3. Closing. Upon confirmation that the other conditions to closing specified herein
have been satisfied or duly waived by the Investors, the Company shall deliver to Xxxxxxxxxx
Xxxxxxx PC, in trust, a certificate or certificates, registered in such name or names as the
Investors designate on the signature page hereof, representing the Shares, with instructions that
such certificates are to be held for release to the Investors only upon payment in full of the
Purchase Price to the Company by all the Investors. Upon such receipt by Xxxxxxxxxx Xxxxxxx PC of
the certificates, each Investor shall promptly, but not later than 10:00 a.m. Eastern time on the
immediately following Business Day, cause a wire transfer in same day funds to be sent to the
account of the Company as instructed in writing by the Company, in an amount representing such
Investor’s pro rata portion of the Purchase Price as set forth on the signature pages to this
Agreement. On the date (the “Closing Date”) the Company receives the Purchase Price, the
certificates evidencing the Shares shall be released to the Investors (the “Closing”). The Closing
of the purchase and sale of the Shares shall take place at the offices of Xxxxxxxxxx Xxxxxxx PC,
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other location and on
such other date as the Company and the Investors shall mutually agree.
4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”):
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4. 1 Organization, Good Standing and Qualification. Except as set forth in
Schedule 4.1, each of the Company and its Subsidiaries is a corporation or limited
liability company duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite corporate power and
authority to carry on its business as now conducted and to own its properties. Each of the Company
and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business or its ownership or leasing of
property makes such qualification or leasing necessary unless the failure to so qualify has not had
and could not reasonably be expected to have a Material Adverse Effect. The Company’s Subsidiaries
are listed on Schedule 4.1 hereto.
4.2 Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers, directors and stockholders necessary for
(i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization
of the performance of all obligations of the Company hereunder or thereunder, and (iii) the
authorization, issuance and delivery of the Shares. The Transaction Documents constitute the
legal, valid and binding obligations of the Company, enforceable against the Company in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting creditors’ rights
generally, including general rules of equity, and limitations upon indemnity or contribution under
applicable federal and state securities laws.
4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized capital stock
of the Company on the date hereof; (b) the number of shares of capital stock issued and
outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock
plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares) exercisable for, or convertible into or exchangeable for any
shares of capital stock of the Company. All of the issued and outstanding shares of the Company’s
capital stock have been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties. Except as described on Schedule 4.3, all
of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in
full compliance with applicable state and federal securities law and any rights of third parties
and are owned by the Company or a Subsidiary, beneficially and of record, subject to no lien,
encumbrance or other adverse claim. Except as described on Schedule 4.3, no Person is
entitled to pre-emptive or similar statutory or contractual rights with respect to any securities
of the Company. Except as described on Schedule 4.3, there are no outstanding warrants,
options, convertible securities or other rights, agreements or arrangements of any character under
which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities
of any kind and except as contemplated by this Agreement, neither the Company nor any of its
Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind.
Except as described on Schedule 4.3 and except for the Registration Rights Agreement, there
are no voting agreements, buy-sell agreements, option or right of first purchase agreements or
other agreements of any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as described on
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Schedule 4.3 and except as provided in the Registration Rights Agreement, no Person has the
right to require the Company to register any securities of the Company under the 1933 Act, whether
on a demand basis or in connection with the registration of securities of the Company for its own
account or for the account of any other Person.
Except as described on Schedule 4.3, the issuance and sale of the Shares hereunder
will not obligate the Company to issue shares of Common Stock or other securities to any other
Person (other than the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.
Except as described on Schedule 4.3, the Company does not have outstanding stockholder
purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right
to purchase any equity interest in the Company upon the occurrence of certain events.
4.4 Valid Issuance. The Shares have been duly and validly authorized and, when issued
and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and
shall be free and clear of all encumbrances and restrictions (other than those created by the
Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws.
4.5 Consents. The execution, delivery and performance by the Company of the
Transaction Documents and the offer, issuance and sale of the Shares require no consent of, action
by or in respect of, or filing with, any Person, governmental body, agency, or official other than
filings that have been made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company undertakes to file
within the applicable time periods. Subject to the accuracy of the representations and warranties
of each Investor set forth in Section 5 hereof, the Company has taken all action necessary to
exempt (i) the issuance and sale of the Shares and (ii) the other transactions contemplated by the
Transaction Documents from the provisions of any stockholder rights plan or other “poison pill”
arrangement, any anti-takeover, business combination or control share law or statute binding on the
Company or to which the Company or any of its assets and properties may be subject and any
provision of the Company’s Certificate of Incorporation or Bylaws that is or could reasonably be
expected to become applicable to the Investors as a result of the transactions contemplated hereby,
including without limitation, the issuance of the Shares and the ownership, disposition or voting
of the Shares by the Investors or the exercise of any right granted to the Investors pursuant to
this Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has made available to the
Investors through the XXXXX system, true and complete copies of the Company’s most recent Annual
Report on Form 10-K for the fiscal year ended December 31, 2005 (as amended prior to the date
hereof, the “10-K”), and all other reports filed by the Company pursuant to the 1934 Act since the
filing of the 10-K and prior to the date hereof (collectively, the “SEC Filings”). The SEC Filings
are the only filings required of the Company pursuant to the 1934 Act during such period.
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4.7 Use of Proceeds. The net proceeds of the sale of the Shares hereunder shall be
used by the Company for working capital and general corporate purposes.
4.8 No Material Adverse Change. Since December 31, 2005, except as identified and
described in the SEC Filings or as described on Schedule 4.8, there has not been:
(i) any material adverse change in the consolidated assets, liabilities, financial condition
or operating results of the Company from that reflected in the financial statements included in the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, except for changes in
the ordinary course of business;
(ii) any declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or repurchase of any
securities of the Company;
(iii) any material damage, destruction or loss, whether or not covered by insurance to any
assets or properties of the Company or its Subsidiaries;
(iv) any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a
material right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of business and which is
not material to the assets, properties, financial condition, operating results or business of the
Company and its Subsidiaries taken as a whole;
(vi) (A) any change or amendment to the Company’s Certificate of Incorporation or Bylaws, or
(B) any material change to any material contract or arrangement by which the Company or any
Subsidiary is bound or to which any of their respective assets or properties is subject, except, in
the case of clause (B) only, for changes made in the ordinary course of business;
(vii) any material labor difficulties or labor union organizing activities with respect to
employees of the Company or any Subsidiary;
(viii) any material transaction entered into by the Company or a Subsidiary other than in the
ordinary course of business;
(ix) the loss of the services of any key employee, or material change in the composition or
duties of the senior management of the Company or any Subsidiary;
(x) the loss or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect.
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4.9 SEC Filings; S-3 Eligibility.
(a) At the time of filing thereof (or, if amended prior to the date hereof, when amended), the
SEC Filings complied as to form in all material respects with the requirements of the 1934 Act as
then in effect and did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each registration statement and any amendment thereto filed by the Company with the SEC
since January 1, 2003 pursuant to the 1933 Act and the rules and regulations thereunder, as of the
date such statement or amendment became effective, complied as to form in all material respects
with the 1933 Act as then in effect and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in order to make the
statements made therein not misleading; and each prospectus filed by the Company with the SEC
pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of any sale
of securities pursuant thereto did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not misleading.
(c) The Company is eligible to use Form S-3 to register the Registrable Securities (as such
term is defined in the Registration Rights Agreement) for sale by the Investors as contemplated by
the Registration Rights Agreement.
4.10 No Conflict, Breach, Violation or Default. The execution, delivery and
performance of the Transaction Documents by the Company and the issuance and sale of the Shares
will not conflict with or result in a breach or violation of any of the terms and provisions of, or
constitute a default under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws,
both as in effect on the date hereof (true and complete copies of which have been made available to
the Investors through the XXXXX system), or (ii)(a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having jurisdiction over the
Company, any Subsidiary or any of their respective assets or properties, or (b) any agreement or
instrument to which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties is subject, except, as
to this clause (ii), any conflict, breach, violation or default that could not reasonably be
expected to have a Material Adverse Effect.
4.11 Tax Matters. Except as set forth in Schedule 4.11, the Company and each
Subsidiary has timely prepared and filed all tax returns or extensions therefor required to have
been filed by the Company or such Subsidiary with all appropriate governmental agencies and timely
paid all taxes shown thereon as owed by it. Except as described in the SEC Filings, the charges,
accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are
adequate in all material respects, and there are no material unpaid assessments against the Company
or any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any additional
taxes, penalties or interest for any fiscal period or audits by any
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federal, state or local taxing authority except for any assessment which is not material to the
Company and its Subsidiaries, taken as a whole. Except as described in the SEC Filings, all taxes
and other assessments and levies that the Company or any Subsidiary is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper governmental
entity or third party when due or are being disputed in good faith by appropriate proceedings and
for which adequate reserves have been established on the books of the Company. There are no tax
liens or claims pending or, to the Company’s Knowledge, threatened against the Company or any
Subsidiary or any of their respective assets or property. Except as described on Schedule
4.11, there are no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.
4.12 Title to Properties. Except as disclosed in the SEC Filings, the Company and
each Subsidiary has good and marketable title to all real properties and all other properties and
assets owned by it, in each case free from liens and encumbrances that would materially affect the
value thereof or materially interfere with the use made or currently planned to be made thereof by
them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds any leased
real or material personal property under valid and enforceable leases which are in full force and
effect.
4.13 Certificates, Authorities and Permits. The Company and each Subsidiary possess
adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it and which, if not obtained or maintained,
could reasonably be expected to have a Material Adverse Effect; and, except as set forth in the SEC
Filings or Schedule 4.13, neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or such Subsidiary, could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.
4.14 Labor Matters.
(a) Except as set forth on Schedule 4.14, the Company is not a party to or bound by
any collective bargaining agreements or other agreements with labor organizations. The Company has
not violated in any respect any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, labor organizations or any laws, regulations or orders
affecting employment discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours, except, in each case, as could not reasonably be expected to have a
Material Adverse Effect.
(b) (i) There are no labor disputes existing, or to the Company’s Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts or any other
disruptions of or by the Company’s employees, (ii) there are no unfair labor practices or petitions
for election pending or, to the Company’s Knowledge, threatened before the National Labor Relations
Board or any other federal, state or local labor commission relating to the Company’s employees,
(iii) no demand for recognition or certification heretofore made by any labor organization or group
of employees is pending with respect to the Company and (iv) to the
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Company’s Knowledge, the Company enjoys good labor and employee relations with its employees and
labor organizations.
(c) The Company is, and at all times has been, in compliance in all material respects with all
applicable laws respecting employment (including laws relating to classification of employees and
independent contractors) and employment practices, terms and conditions of employment, wages and
hours, and immigration and naturalization except, in each case, as could not reasonably be expected
to have a Material Adverse Effect. There are no claims pending against the Company before the
Equal Employment Opportunity Commission or any other administrative body or in any court asserting
any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42
U.S.C. §§ 1981 or 1983 or any other federal, state or local Law, statute or ordinance barring
discrimination in employment except, in each case, as could not reasonably be expected to have a
Material Adverse Effect.
(d) Except as disclosed in the SEC Filings or as described on Schedule 4.14, the
Company is not a party to, or bound by, any employment or other contract or agreement that contains
any severance, termination pay or change of control liability or obligation, including, without
limitation, any “excess parachute payment,” as defined in Section 2806(b) of the Internal Revenue
Code.
(e) Except as specified in Schedule 4.14, to the Company’s Knowledge, each of the
Company’s full-time employees is a Person who is either a United States citizen or a permanent
resident entitled to work in the United States. To the Company’s Knowledge, the Company has no
liability for the improper classification by the Company of such employees as independent
contractors or leased employees prior to the Closing.
4.15 Intellectual Property.
(a) All Intellectual Property of the Company and its Subsidiaries is currently in compliance
with all applicable registration and filing requirements (including timely filings, proofs and
payments of fees) and, to the Company’s Knowledge, is valid and enforceable. Except as described
in the SEC Filings or as described on Schedule 4.15, no Intellectual Property of the
Company or its Subsidiaries which is necessary for the continuing conduct of all or any material
portion of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted
has been or is now involved in any cancellation, dispute or litigation, and, to the Company’s
Knowledge, no such action is threatened. No patent of the Company or its Subsidiaries has been or
is now involved in any interference, reissue, re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the continuing conduct of all or any material portion
of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted to
which the Company or any Subsidiary is a party or by which any of their assets are bound (other
than generally commercially available, non-custom, off-the-shelf software application programs)
(collectively, “License Agreements”) are valid and binding obligations of the Company or its
Subsidiaries that are parties thereto and, to the Company’s
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Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’
rights generally, and there exists no event or condition which will result in a material violation
or breach of or constitute (with or without due notice or lapse of time or both) a default by the
Company or any of its Subsidiaries under any such License Agreement.
(c) Except as described in the SEC Filings or as described on Schedule 4.15, the Company and
its Subsidiaries own or have the valid right to use all of the Intellectual Property that is
necessary for the continuing conduct of all or any material portion of the Company’s and each of
its Subsidiaries’ respective businesses as currently conducted and for the ownership, maintenance
and operation of the Company’s and its Subsidiaries’ properties and assets, free and clear of all
liens, encumbrances, adverse claims or obligations to license all such owned Intellectual Property
and Confidential Information, other than licenses entered into in the ordinary course of the
Company’s and its Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential Information used or
held for use in the respective businesses of the Company and its Subsidiaries.
(d) Except as set forth in the SEC Filings or Schedule 4.15, to the Company’s
Knowledge, the conduct of the Company’s and its Subsidiaries’ businesses as currently conducted
does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual
Property rights of any third party or any confidentiality obligation owed to a third party, and, to
the Company’s Knowledge, the Intellectual Property and Confidential Information of the Company and
its Subsidiaries which are necessary for the continuing conduct of all or any material portion of
the Company’s and each of its Subsidiaries’ respective businesses as currently conducted are not
being Infringed by any third party. Except as described in the SEC Filings or as described on
Schedule 4.15, there is no litigation or order of any governmental entity pending or
outstanding or, to the Company’s Knowledge, threatened or imminent, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of any Intellectual
Property or Confidential Information of the Company and its Subsidiaries and the Company’s and its
Subsidiaries’ use of any Intellectual Property or Confidential Information owned by a third party,
and, to the Company’s Knowledge, there is no valid basis for the same.
(e) The consummation of the transactions contemplated hereby and by the other Transaction
Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or
any of its Subsidiaries’ ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted.
(f) The Company and its Subsidiaries have taken reasonable steps to protect the Company’s and
its Subsidiaries’ rights in their Intellectual Property and Confidential Information. To the
Company’s Knowledge, each employee, consultant and contractor who has had access to Confidential
Information which is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to
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be conducted has executed an agreement to maintain the confidentiality of such Confidential
Information and has executed appropriate agreements that are substantially consistent with the
Company’s standard forms thereof. To the Company’s Knowledge, except under confidentiality
obligations, there has been no material disclosure of any of the Company’s or its Subsidiaries’
Confidential Information to any third party.
4.16 Environmental Matters. Neither the Company nor any Subsidiary is in violation of
any statute, rule, regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any real property
contaminated with any substance that is subject to any Environmental Laws, is liable for any
off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim
relating to any Environmental Laws, which violation, contamination, liability or claim has had or
could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;
and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to
such a claim.
4.17 Litigation. Except as described in the SEC Filings or Schedule 4.17,
there are no pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties which could reasonably be expected to have a
Material Adverse Effect; and to the Company’s Knowledge, no such actions, suits or proceedings are
threatened or contemplated.
4.18 Financial Statements. The financial statements included in each SEC Filing
present fairly, in all material respects, the consolidated financial position of the Company as of
the dates shown and its consolidated results of operations and cash flows for the periods shown,
and such financial statements have been prepared in conformity with the then applicable United
States generally accepted accounting principles applied on a consistent basis (“GAAP”) (except as
may be disclosed therein or in the notes thereto, and, in the case of quarterly financial
statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth in the financial
statements of the Company included in the SEC Filings filed prior to the date hereof or as
described on Schedule 4.18, neither the Company nor any of its Subsidiaries has incurred
any liabilities, contingent or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of such financial
statements.
4.19 Insurance Coverage. The Company and each Subsidiary maintains in full force and
effect insurance coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each Subsidiary, and the Company
reasonably believes such insurance coverage to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to insure.
4.20 Compliance with Nasdaq Continued Listing Requirements. Except as described on
Schedule 4.20, the Company is in compliance with applicable Nasdaq continued
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listing requirements. There are no proceedings pending or, to the Company’s Knowledge, threatened
against the Company relating to the continued listing of the Common Stock on Nasdaq and the Company
has not received any notice of, nor to the Company’s Knowledge is there any basis for, the
delisting of the Common Stock from Nasdaq.
4.21 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of the Company, other than
as described in Schedule 4.21.
4.22 No Directed Selling Efforts or General Solicitation. Neither the Company nor any
Person acting on its behalf has conducted any general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offer or sale of any of the Shares.
4.23 No Integrated Offering. 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
Company security or solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the Shares under the 1933
Act.
4.24 Private Placement. Assuming the accuracy of the representations and warranties
of the Investors set forth herein, the Offering is exempt from the registration requirements of the
1933 Act.
4.25 Questionable Payments. Neither the Company nor any of its Subsidiaries nor, to
the Company’s Knowledge, any of their respective current or former stockholders, directors,
officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has
on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a)
used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious
entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment of any nature.
4.26 Transactions with Affiliates. Except as disclosed in the SEC Filings or as
disclosed on Schedule 4.26, none of the officers or directors of the Company and, to the
Company’s Knowledge, none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and 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
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officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer, director, trustee or
partner.
4.27 Internal Controls. The Company is in material compliance with the provisions of
the Xxxxxxxx-Xxxxx Act of 2002 currently applicable to the Company. The Company and the
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 GAAP 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. The Company has established disclosure
controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material information relating to
the Company, including the Subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which the Company’s most recently filed period
report under the 1934 Act, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of
the period covered by the most recently filed Quarterly Report on Form 10-Q (such date, the
“Evaluation Date”). The Company presented in its most recently filed Quarterly Report on Form 10-Q
the conclusions of the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company’s internal controls (as such term is defined in
Item 308 of Regulation S-K) or, to the Company’s Knowledge, in other factors that could
significantly affect the Company’s internal controls. The Company maintains and will continue to
maintain a standard system of accounting established and administered in accordance with GAAP and
the applicable requirements of the 0000 Xxx.
4.28 Disclosures. Neither the Company nor any Person acting on its behalf has
provided the Investors or their agents or counsel with any information that constitutes or might
constitute material, non-public information, other than the Transaction Documents and the proposed
terms of the transactions contemplated thereby. The representations and warranties of the Company
contained in the Transaction Documents do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
5. Representations and Warranties of the Investors. Each of the Investors hereby
severally, and not jointly, represents and warrants to the Company that:
5.1 Organization and Existence. Such Investor is a validly existing corporation,
limited partnership or limited liability company and has all requisite corporate, partnership or
limited liability company power and authority to invest in the Shares pursuant to this Agreement
and was not formed solely for the purpose of investing in the Shares.
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5.2 Authorization. The execution, delivery and performance by such Investor of the
Transaction Documents to which such Investor is a party have been duly authorized and will each
constitute the valid and legally binding obligation of such Investor, enforceable against such
Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability, relating to or
affecting creditors’ rights generally.
5.3 Purchase Entirely for Own Account. The Shares to be purchased by such Investor
hereunder will be acquired for such Investor’s own account, not as nominee or agent, for investment
and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act,
and such Investor is not a party to any arrangement or understanding with respect to, and has no
present intention of selling, granting any participation in, or otherwise distributing the same in
violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell
or otherwise dispose of all or any part of such Shares in compliance with applicable federal and
state securities laws and the applicable provisions of the Transaction Documents. Such Investor
has no present intention to change or influence control of the Company within the meaning of Rule
13d-1 of the 1934 Act. Nothing contained herein shall be deemed a representation or warranty by
such Investor to hold the Shares for any period of time. Such Investor is not, and is not an
Affiliate of, a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a
business that would require it to be so registered.
5.4 Investment Experience. Such Investor acknowledges that it can bear the economic
risk and complete loss of its investment in the Shares and has such knowledge, sophistication and
experience in financial or business matters, including investments in securities similar to the
Shares, that it is capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. Such Investor has had an opportunity to receive all
information related to the Company requested by it and to ask questions of and receive answers from
the Company regarding the Company, its business and the terms and conditions of the offering of the
Shares. Such Investor acknowledges receipt and review of copies of the SEC Filings, including the
risk factors set forth therein. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, limit or otherwise affect such Investor’s right to rely on
the Company’s representations and warranties contained in this Agreement.
5.6 Restricted Securities. Such Investor understands that the Shares are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold or otherwise transferred without
registration under the 1933 Act only in certain limited circumstances. Such Investor shall not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any
offers to buy, purchase or otherwise acquire or take a pledge of) any of the Investor’s Shares,
except in compliance with all applicable federal or state securities laws and the applicable
provisions of the Transaction Documents.
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5.7 Legends. It is understood that, except as provided below, certificates evidencing
the Shares may bear the following or any similar legend, and the Investor will comply with the
provisions thereof:
(a) “The securities represented hereby may not be offered, sold or transferred unless (i) such
securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii)
such securities may be sold pursuant to Rule 144(k), or (iii) the Company has received an opinion
of counsel reasonably satisfactory to it that such transfer may lawfully be made without
registration under the Securities Act of 1933 or qualification under applicable state securities
laws.”
(b) If required by the authorities of any state in connection with the issuance of sale of the
Shares, the legend required by such state authority.
5.8 Accredited Investor. Such Investor is an accredited investor as defined in Rule
501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General Solicitation. Such Investor did not learn of the investment in the
Shares as a result of any general solicitation or general advertising.
5.10 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of such Investor.
5.11 Prohibited Transactions. Since the time it learned of the Offering, neither such
Investor nor any Affiliate of such Investor which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Investor’s investments or
trading or information concerning such Investor’s investments, including in respect of the Shares,
or (z) is subject to such Investor’s review or input concerning such Affiliate’s investments or
trading (collectively, “Trading Affiliates”) has, directly or indirectly, effected or agreed to
effect any (A) transactions in the Common Stock or (B) short sale (including any short sale as
defined in Rule 200 of Regulation SHO under the 1934 Act), whether or not against the box,
established any “put equivalent position” (as defined in Rule 16a-1(h) under the 0000 Xxx) with
respect to the Common Stock, granted any other right (including, without limitation, any put or
call option) with respect to the Common Stock or with respect to any security that includes,
relates to or derived any significant part of its value from the Common Stock or otherwise sought
to hedge its position in the Shares (a “Short Sale”). Prior to the earliest to occur of (i) the
termination of this Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline, such
Investor shall not, and shall cause its Trading Affiliates not to, engage, directly or indirectly,
in a Short Sale. Such Investor acknowledges that the representations, warranties and covenants
contained in this Section 5.11 are being made for the benefit of the Investors as well as the
Company and that each of the other Investors shall have an independent right to assert any claims
against such Investor arising out of any breach or violation of the provisions of this Section
5.11.
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5.12 No Disclosure. Such Investor has not disclosed to any third party (other than
its partners, members, managers, employees, agents and representatives involved in the Offering)
the existence and/or terms of the Offering.
6. Conditions to Closing.
6.1 Conditions to the Investors’ Obligations. The obligation of each Investor to
purchase the Shares at the Closing is subject to the fulfillment to such Investor’s satisfaction,
on or prior to the Closing Date, of the following conditions, any of which may be waived by such
Investor (as to itself only):
(a) The representations and warranties made by the Company in Section 4 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and correct in all
material respects as of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it on or prior to the
Closing Date.
(b) The Company shall have obtained any and all consents, permits, approvals, registrations
and waivers necessary or appropriate for consummation of the purchase and sale of the Shares and
the consummation of the other transactions contemplated by the Transaction Documents, all of which
shall be in full force and effect.
(c) The Company shall have executed and delivered the Registration Rights Agreement.
(d) The Company shall have received confirmation from Nasdaq that the Shares have been
approved for inclusion on The Nasdaq Capital Market upon official notice of issuance.
(e) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(f) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to
the fulfillment of the conditions specified in subsections (a), (b), (d), (e) and (i) of this
Section 6.1.
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(g) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of
Directors of the Company approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Shares, certifying the current versions of the
Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and
authority of persons signing the Transaction Documents and related documents on behalf of the
Company.
(h) The Investors shall have received an opinion from Xxxxx & Xxxxxx PC, the Company’s
counsel, dated as of the Closing Date, in the form attached hereto as Exhibit C.
(i) No stop order or suspension of trading shall have been imposed by Nasdaq, the SEC or any
other governmental or regulatory body with respect to public trading in the Common Stock.
6.2 Conditions to Obligations of the Company. The Company’s obligation to sell and
issue the Shares at the Closing is subject to the fulfillment to the satisfaction of the Company on
or prior to the Closing Date of the following conditions, any of which may be waived by the
Company:
(a) The representations and warranties made by the Investors in Section 5 hereof, other than
the representations and warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the
“Investment Representations”), shall be true and correct in all material respects when made, and
shall be true and correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Investment Representations shall be
true and correct in all respects when made, and shall be true and correct in all respects on the
Closing Date with the same force and effect as if they had been made on and as of said date. The
Investors shall have performed in all material respects all obligations and covenants herein
required to be performed by them on or prior to the Closing Date.
(b) The Investors shall have executed and delivered the Registration Rights Agreement.
(c) The Investors shall have delivered the Purchase Price to the Company.
6.3 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand, and the Investors, on the other hand, to
effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the Investors;
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(ii) By the Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the Company;
(iii) By an Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the
Investor; or
(iv) By either the Company or any Investor (with respect to itself only) if the Closing has
not occurred on or prior to June 15, 2006;
provided, however, that, except in the case of clause (i) above, the party seeking to terminate its
obligation to effect the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other Transaction Documents
if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate
its obligation to effect the Closing.
(b) In the event of termination by the Company or any Investor of its obligations to effect
the Closing pursuant to this Section 6.3, written notice thereof shall forthwith be given to the
other Investors and the other Investors shall have the right to terminate their obligations to
effect the Closing upon written notice to the Company and the other Investors. Nothing in this
Section 6.3 shall be deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.
7. Covenants and Agreements of the Company.
7.1 Reports. The Company will furnish to the Investors and/or their assignees such
information relating to the Company and its Subsidiaries as from time to time may reasonably be
requested by the Investors and/or their assignees; provided, however, that the Company shall not
disclose material nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company identifies such
information as being material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material nonpublic
information for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect thereto.
7.2 No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction Documents.
7.3 Insurance. The Company shall not materially reduce the insurance coverages
described in Section 4.19.
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7.4 Compliance with Laws. The Company will comply in all material respects with
all applicable laws, rules, regulations, orders and decrees of all governmental authorities.
7.5 Listing of Underlying Shares and Related Matters. Promptly following the date
hereof, the Company shall take all necessary action to cause the Shares to be listed on The Nasdaq
Capital Market no later than the Closing Date. Further, if the Company applies to have its Common
Stock or other securities traded on any other principal stock exchange or market, it shall include
in such application the Shares and will take such other action as is necessary to cause such Common
Stock to be so listed. The Company will use commercially reasonable efforts to continue the
listing and trading of its Common Stock on the Nasdaq Capital Market or the Nasdaq National Market
System and, in accordance, therewith, will use commercially reasonable efforts to comply in all
respects with the Company’s reporting, filing and other obligations under the bylaws or rules of
such market or exchange, as applicable.
7.6 Termination of Covenants. The provisions of Sections 7.1 through 7.4 shall
terminate and be of no further force and effect on the date on which the Company’s obligations
under the Registration Rights Agreement to register or maintain the effectiveness of any
registration covering the Registrable Securities (as such term is defined in the Registration
Rights Agreement) shall terminate.
7.7 Removal of Legends. Upon the earlier of (i) registration for resale pursuant to
the Registration Rights Agreement or (ii) Rule 144(k) becoming available the Company shall (A)
deliver to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable instructions
that the Transfer Agent shall reissue a certificate representing the Shares without legends upon
receipt by such Transfer Agent of the legended certificates for such Shares, together with either
(1) a customary representation by the Investor that Rule 144(k) applies to the shares of Common
Stock represented thereby or (2) a statement by the Investor that such Investor has sold the shares
of Common Stock represented thereby in accordance with the Plan of Distribution contained in the
Registration Statement, and (B) cause its counsel to deliver to the Transfer Agent one or more
blanket opinions to the effect that the removal of such legends in such circumstances may be
effected under the 1933 Act. From and after the earlier of such dates, upon an Investor’s written
request, the Company shall promptly cause certificates evidencing the Investor’s Shares to be
replaced with certificates which do not bear such restrictive legends. When the Company is
required to cause unlegended certificates to replace previously issued legended certificates, if:
(1) unlegended certificates are not delivered to an Investor within three (3) Business Days of
submission by that Investor of legended certificate(s) to the Transfer Agent and supporting
documentation as provided above and (2) prior to the time such Shares are received free from
restrictive legends, the Investor, or any third party on behalf of such Investor or for the
Investor’s account, purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Investor of such Shares (a “Buy-In”), then the Company
shall pay in cash to the Investor (for costs incurred either directly by such Investor or on behalf
of a third party) the amount by which the total purchase price paid for Common Stock as a result of
the Buy-In (including brokerage commissions, if any) exceeds the proceeds received by such Investor
as a result of the sale to which such Buy-In
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relates. The Investor shall provide the Company written notice indicating the amounts payable to
the Investor in respect of the Buy-In.
8. Survival and Indemnification.
8.1 Survival. The representations, warranties, covenants and agreements contained in
this Agreement shall survive the Closing of the transactions contemplated by this Agreement for a
period of 18 months after the Closing Date.
8.2 Indemnification. The Company agrees to indemnify and hold harmless each Investor
and its Affiliates and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without limitation
reasonable attorney fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending or threatened and
the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject
as a result of any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction Documents, and will reimburse any such
Person for all such amounts as they are incurred by such Person.
8.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Person
(the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or investigation in respect of
which indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall promptly
notify the Company in writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the
payment of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its obligations
hereunder except to the extent that the Company is materially prejudiced by such failure to notify.
In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless:
(i) the Company and the Indemnified Person shall have mutually agreed to the retention of such
counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of
both parties by the same counsel would be a conflict of interest due to actual or potential
differing interests between them. The Company shall not be liable for any settlement of any
proceeding effected without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the plaintiff, the Company
shall indemnify and hold harmless such Indemnified Person from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Company
shall not effect any settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability arising out of such proceeding.
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9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Investors, as applicable, provided,
however, that an Investor may assign its rights and delegate its duties hereunder in whole or in
part to an Affiliate or to a third party acquiring some or all of its Shares in a private
transaction without the prior written consent of the Company or the other Investors, after notice
duly given by such Investor to the Company provided, that no such assignment or obligation shall
affect the obligations of such Investor hereunder. The provisions of this Agreement shall inure to
the benefit of and be binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
9.2 Counterparts; Faxes. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may also be executed via facsimile, which shall be deemed an
original.
9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed
given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be notified at the
address as follows, or at such other address as such party may designate by ten days’ advance
written notice to the other party:
If to the Company:
PFSweb, Inc.
000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxx & Samson PC
0 Xxxxxx Xxxxx
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Fax: (000) 000-0000
0 Xxxxxx Xxxxx
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Fax: (000) 000-0000
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If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5 Expenses. The parties hereto shall pay their own costs and expenses in connection
herewith, except that the Company shall pay the reasonable fees and expenses of Xxxxxxxxxx Xxxxxxx
PC not to exceed $40,000; it being understood that Xxxxxxxxxx Xxxxxxx PC has only rendered legal
advice to the Special Situations Funds participating in this transaction and not to the Company or
any other Investor in connection with the transactions contemplated hereby, and that each of the
Company and each Investor has relied for such matters on the advice of its own respective counsel.
Such expenses shall be paid not later than the Closing. The Company shall reimburse the Investors
upon demand for all reasonable out-of-pocket expenses incurred by the Investors, including without
limitation reimbursement of attorneys’ fees and disbursements, in connection with any amendment,
modification or waiver of this Agreement or the other Transaction Documents which was requested by
the Company. In the event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall severally, but not
jointly, pay their pro rata share of the reasonable attorneys’ fees and other reasonable
out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.
9.6 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Required Investors (as defined in the Registration Rights Agreement). Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each holder of any Shares
purchased under this Agreement at the time outstanding, each future holder of all such Shares, and
the Company.
9.7 Publicity. Except as set forth below, no public release or announcement
concerning the transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or announcement by the
Investors) or the Investors (in the case of a release or announcement by the Company) (which
consents shall not be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities exchange or securities
market, in which case the Company or the Investors, as the case may be, shall allow the Investors
or the Company, as applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such issuance. By 8:30
a.m. (New York City time) on the trading day immediately following the Closing Date, the Company
shall issue a press release disclosing the consummation of the transactions contemplated by this
Agreement. No later than the third trading day following the Closing Date,
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the Company will file a Current Report on Form 8-K attaching the press release described in the
foregoing sentence as well as copies of the Transaction Documents. In addition, the Company will
make such other filings and notices in the manner and time required by the SEC or Nasdaq. Except
as set forth herein, the Company shall not publicly disclose the name of any Investor, or include
the name of any Investor in any filing with the SEC (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with periodic filing
requirements under the 0000 Xxx) or any regulatory agency or Nasdaq, without the prior written
consent of such Investor, except to the extent such disclosure is required by law or trading market
regulations, in which case the Company shall provide the Investors with prior notice of such
disclosure.
9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
9.9 Entire Agreement. This Agreement, including the Exhibits and the Disclosure
Schedules, and the other Transaction Documents constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the subject matter
hereof and thereof.
9.10 Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry
out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein
contained.
9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York located in New York
County and the United States District Court for the Southern District of New York for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH
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RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER.
9.12 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Shares pursuant to the Transaction Documents has been made by such Investor independently of any
other Investor. Nothing contained herein or in any Transaction Document, and no action taken by
any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Shares or enforcing its rights under the Transaction Documents. Each Investor
shall be entitled to independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Investor to be joined as an additional party in any proceeding for
such purpose. The Company acknowledges that each of the Investors has been provided with the same
Transaction Documents for the purpose of closing a transaction with multiple Investors and not
because it was required or requested to do so by any Investor.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.
| The Company: | PFSWEB, INC. | |||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||||
| Name: Xxxxxx X. Xxxxxx | ||||||||
| Title: Chief Financial Officer | ||||||||
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| The Investors: | SPECIAL SITUATIONS FUND III QP, L.P. | |||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||||
| Name: Xxxxxx X. Xxxxx | ||||||||
| Title: General Partner | ||||||||
| Aggregate Purchase Price: $2,500,000 | ||||||||
Number of Shares: 2,500,000 |
||||||||
Address for Notice: |
||||||||
| 000 Xxxxxxx Xxxxxx | ||||||||
| Xxxxx 0000 | ||||||||
| Xxx Xxxx, XX 00000 | ||||||||
| with a copy to: | ||||||||
| Xxxxxxxxxx Xxxxxxx PC | ||||||||
| 00 Xxxxxxxxxx Xxxxxx | ||||||||
| Xxxxxxxx, XX 00000 | ||||||||
| Attn: Xxxx X. Xxxxxxxx, Esq. | ||||||||
| Telephone: 000.000.0000 | ||||||||
| Facsimile: 973.597.2400 | ||||||||
| SPECIAL SITUATIONS FUND III, L.P. | ||||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||||
| Name: Xxxxxx X. Xxxxx | ||||||||
| Title: General Partner | ||||||||
| Aggregate Purchase Price: $300,000 | ||||||||
Number of Shares: 300,000 |
||||||||
Address for Notice: |
||||||||
| 000 Xxxxxxx Xxxxxx | ||||||||
| Xxxxx 0000 | ||||||||
| Xxx Xxxx, XX 00000 | ||||||||
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| with a copy to: | ||||||||
| Xxxxxxxxxx Xxxxxxx PC | ||||||||
| 00 Xxxxxxxxxx Xxxxxx | ||||||||
| Xxxxxxxx, XX 00000 | ||||||||
| Attn: Xxxx X. Xxxxxxxx, Esq. | ||||||||
| Telephone: 000.000.0000 | ||||||||
| Facsimile: 973.597.2400 | ||||||||
| SPECIAL SITUATIONS CAYMAN FUND, L.P. | ||||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||||
| Name: Xxxxxx X. Xxxxx | ||||||||
| Title: General Partner | ||||||||
| Aggregate Purchase Price: $700,000 | ||||||||
Number of Shares: 700,000 |
||||||||
Address for Notice: |
||||||||
| 000 Xxxxxxx Xxxxxx | ||||||||
| Xxxxx 0000 | ||||||||
| Xxx Xxxx, XX 00000 | ||||||||
| with a copy to: | ||||||||
| Xxxxxxxxxx Xxxxxxx PC | ||||||||
| 00 Xxxxxxxxxx Xxxxxx | ||||||||
| Xxxxxxxx, XX 00000 | ||||||||
| Attn: Xxxx X. Xxxxxxxx, Esq. | ||||||||
| Telephone: 000.000.0000 | ||||||||
| Facsimile: 973.597.2400 | ||||||||
| SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P. | ||||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||||
| Name: Xxxxxx X. Xxxxx | ||||||||
| Title: General Partner | ||||||||
| Aggregate Purchase Price: $1,500,000 | ||||||||
Number of Shares: 1,500,000 |
||||||||
| 000 Xxxxxxx Xxxxxx | ||||||||
| Xxxxx 0000 | ||||||||
| Xxx Xxxx, XX 00000 | ||||||||
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| with a copy to: | ||||||||
| Xxxxxxxxxx Xxxxxxx PC | ||||||||
| 00 Xxxxxxxxxx Xxxxxx | ||||||||
| Xxxxxxxx, XX 00000 | ||||||||
| Attn: Xxxx X. Xxxxxxxx, Esq. | ||||||||
| Telephone: 000.000.0000 | ||||||||
| Facsimile: 973.597.2400 |
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