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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 24,
1997, by and among WavePhore, Inc., an Indiana corporation (the "Company"), and
each of the entities whose names appear on the signature pages hereof. Such
entities are each referred to herein as a "Purchaser" and, collectively, as the
"Purchasers".
The Company wishes to sell to each Purchaser, and each Purchaser wishes
to buy, on the terms and subject to the conditions set forth in this Agreement,
(i) the number of shares (the "Preferred Shares") of the Company's Series C
Convertible Preferred Stock (the "Preferred Stock") set forth next to such
Purchaser's name on the signature pages hereof and (ii) a Warrant in the form of
Exhibit A hereto (a "Warrant" and, when taken together with all of the warrants
issued to the other Purchasers hereunder, the "Warrants") entitling the holder
thereof to purchase the number of shares (the "Warrant Shares") of Common Stock
(as defined below) set forth next to such Purchaser's name on the signature
pages hereof. The Preferred Shares are convertible into shares (the "Conversion
Shares") of the Company's Common Stock (the "Common Stock") pursuant to the
terms of Articles of Amendment to the Company's Articles of Incorporation, the
form of which is attached hereto as Exhibit B (the "Articles of Amendment"). The
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares,
together with the Dividend Payment Shares (as defined in the Articles of
Amendment) and any other shares of Common Stock issuable pursuant to the terms
of the Articles of Amendment (the "Issuable Securities"), are collectively
referred to herein as the "Securities".
The Company has agreed to effect the registration of the Conversion
Shares, the Warrant Shares and the Issuable Securities under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration Rights
Agreement of even date herewith between the Company and the Purchasers (the
"Registration Rights Agreement"). The sale of the Preferred Shares and the
Warrants by the Company to the Purchasers will be effected in reliance upon the
exemption from securities registration afforded by the provisions of Regulation
D ("Regulation D"), as promulgated by the Securities and Exchange Commission
(the "Commission") under the Securities Act.
The Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
satisfaction of the conditions set forth herein, the Company agrees to sell at
the Closing (as defined below), and each Purchaser agrees to purchase, (i) the
number of Preferred Shares set forth below such Purchaser's name on the
signature pages hereof and (ii) a Warrant entitling the holder thereof to
purchase the number of Warrant Shares set forth below such Purchaser's name on
the signature pages hereof, at a purchase price for such Preferred Shares and
Warrant equal to one thousand dollars ($1,000) times the number of Preferred
Shares purchased by such Purchaser (the "Purchase
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Price"). It is anticipated that the aggregate purchase price to be paid by the
Purchasers for all of the Preferred Shares and Warrants issued pursuant to this
Agreement (the "Aggregate Purchase Price") will be twenty-four million dollars
($24,000,000).
1.2 Closing. Subject to the satisfaction of the conditions set forth
herein, the closing of the purchase and sale of the Preferred Shares and the
Warrants (the "Closing") will be deemed to occur when this Agreement and the
other Transaction Documents (as defined below) have been executed and delivered
by the Company and each Purchaser, and full payment of the Purchase Price has
been made by each Purchaser by wire transfer of immediately available funds to
an escrow account established for use in connection with the Closing against
delivery by the Company of duly executed certificates to each Purchaser
representing the Preferred Shares and the Warrant purchased by such Purchaser
hereunder. The date on which the Closing is deemed to occur is referred to
herein as the "Closing Date".
1.3 Certain Definitions. When used herein, (A) "business day" shall
mean any day on which the New York Stock Exchange and commercial banks in the
city of New York are open for business, (B) an "affiliate" of a party shall mean
any person or entity controlling, controlled by or under common control with
that party and (C) "control" shall mean, with respect to an entity, the ability
to direct the business, operations or management of such entity, whether through
an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, solely with respect to it, hereby makes the following
representations and warranties to the Company and agrees with the Company that,
as of the date of this Agreement and as of the Closing Date:
2.1 Authorization; Enforceability. Such Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Preferred Shares and the Warrant and to execute and deliver this
Agreement. This Agreement constitutes such Purchaser's valid and legally binding
obligation, enforceable in accordance with its terms, except as such enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity.
2.2 Accredited Investor; Investment Intent. Such Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares and the Warrant solely for its own account for
investment purposes as a principal and not with a present view to the public
resale or distribution of all or any part thereof, except pursuant to sales that
are exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however that in making such
representation, such Purchaser does not agree to hold the Securities for any
minimum or specific term and reserves the right to sell, transfer or otherwise
dispose of the Securities at any time in accordance with the provisions of this
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Agreement and with Federal and state securities laws applicable to such sale,
transfer or disposition.
2.3 Information. The Company has provided such Purchaser with a
Confidential Private Placement Memorandum, dated July 18, 1997 (including the
Exhibits attached thereto, the "Memorandum"), containing information regarding
the business, operations and financial condition of the Company, and has granted
to such Purchaser the opportunity to ask questions of and receive answers from
representatives of the Company, its officers, directors, employees and agents
concerning the Company and materials relating to the terms and conditions of the
purchase and sale of the Preferred Shares and the Warrant hereunder. Neither
such information nor any other investigation conducted by such Purchaser or any
of its representatives shall modify, amend or otherwise affect such Purchaser's
right to rely on the Company's representations and warranties contained in this
Agreement.
2.4 Limitations on Disposition. Such Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the Securities Act and may not be
transferred or resold without registration under the Securities Act or unless
pursuant to an exemption therefrom. Such Purchaser agrees not to sell, transfer
or otherwise dispose of the Securities unless and until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(b) (i) such Purchaser shall have notified the Company in
advance of the proposed disposition, and (ii) if reasonably requested
by the Company, such Purchaser shall have furnished the Company with an
opinion of counsel (the cost of which shall be borne by such
Purchaser), reasonably satisfactory to the Company, that such
disposition will not require registration under the Securities Act. It
is agreed that no opinion of counsel will be required for the transfer
of the Securities to an affiliate of such Purchaser or with respect to
a sale thereof made pursuant to Rule 144 under the Securities Act
("Rule 144").
2.5 Legend. Such Purchaser understands that the certificates
representing the Securities may bear at issuance a restrictive legend in
substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless a
registration statement under the Securities Act and applicable
state securities laws shall have become effective with regard
thereto, or an exemption from registration under the
Securities Act and applicable state securities laws is
available in connection with such offer, sale or disposition.
Such securities are issued subject to the provisions of (i)
the Articles of Incorporation of WavePhore, Inc. (the
"Company"), as amended, (ii) a Securities Purchase Agreement,
dated July 24 1997, by and between the Company and the
purchasers named therein, and (iii) a Registration
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Rights Agreement, dated July 24, 1997, by and between the
Company and such purchasers."
Notwithstanding the foregoing, it is agreed that, as long as
the resale of the Conversion Shares, the Warrant Shares or the Issuable
Securities, as the case may be, is registered pursuant to an effective
registration statement or such shares are eligible for resale under Rule 144(k),
(A) the Conversion Shares shall be issued upon a conversion of the Preferred
Shares pursuant to the terms of the Articles of Amendment, or in payment of a
dividend thereon, (B) the Warrant Shares shall be issued upon an exercise of the
Warrant pursuant to the terms thereof, and (C) the Issuable Securities shall be
issued in accordance with the terms of the Articles of Amendment, in each such
case without any legend or other restrictive language. The legend set forth
above shall be removed and the Company shall issue a new certificate without
such legend to the holder of any Security upon which it is stamped if (i) the
sale of such Security is registered under the Securities Act, (ii) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions (the cost of which
shall be borne by such holder) to the effect that such Security can be sold
publicly without registration under the Securities Act, (iii) such holder
provides the Company with reasonable assurances that such Security can be sold
pursuant to Rule 144 without any restriction as to the number of shares of or
represented by such Security that can then be immediately resold or (iv) such
Security has been sold pursuant to Rule 144.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties
to each Purchaser and agrees with such Purchaser that, as of the date of this
Agreement and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. Each of the Company
and its subsidiaries is 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. Each of the Company and its subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on the consolidated
business or financial condition of the Company and its subsidiaries taken as a
whole. The term "subsidiaries" shall mean entities in which the Company has an
equity interest of 50% or greater.
3.2 Authorization; Consents. The Company has the requisite corporate
power and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement and (iii) all other
agreements, documents, certificates or other instruments delivered by the
Company at the Closing (the instruments described in (i), (ii) and (iii) being
collectively referred to herein as the "Transaction Documents"), to execute and
perform its obligations under the Articles of Amendment, to execute and perform
its obligations under the Warrant, to issue and sell the Preferred Shares and
the Warrants to such Purchaser in accordance with the terms hereof, to issue the
Conversion Shares upon conversion of the Preferred Shares in accordance with the
Articles of Amendment, to issue the Warrant Shares upon exercise of the
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Warrants and to issue the Issuable Securities in accordance with the Articles of
Amendment. All corporate action on the part of the Company by its officers,
directors and shareholders necessary for (A) the authorization, execution and
delivery of, and the performance by the Company of its obligations under, the
Transaction Documents, (B) the authorization, execution and filing of, and the
performance by the Company of its obligations under, the Articles of Amendment,
and (C) the authorization and execution, and the performance by the Company of
its obligations under, the Warrant have been taken, and no further consent or
authorization of the Company, its Board of Directors, its shareholders, any
governmental agency or organization, or any other person or entity is required
(other than any consent of such shareholders that may be required pursuant to
Rule 4460 promulgated by the National Association of Securities Dealers, Inc.
(the "NASD") and, with respect to the Registration Rights Agreement, applicable
securities authorities).
3.3 Enforcement. The Transaction Documents, the Articles of Amendment
and the Warrant constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity.
3.4 Disclosure Documents; Material Agreements; Other Information. The
Company has filed with the Commission: (i) the Company's Annual Report on Form
10-K for the year ended December 31, 1996, (ii) a Quarterly Report on Form 10-Q
for the quarter ended Xxxxx 00, 0000, (xxx) all Current Reports on Form 8-K
required to be filed with the Commission since December 31, 1996 and (iv) the
Company's definitive Proxy Statement for its 1997 Annual Meeting of Shareholders
(collectively with the Memorandum, the "Disclosure Documents"). The Company is
not aware of any event occurring on or prior to the Closing (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing, other than
to amend its Form 8-K, filed with the Commission on June 12, 1997, to include
certain historical and pro forma financial information relating to the
acquisition described therein (the "Paracel Online Acquisition"). Each
Disclosure Document, as of the date of the filing thereof with the Commission,
conformed in all material respects to the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder and, as of the date of such filing, such Disclosure
Document did not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as described on Schedule 3.4 hereto, all material agreements
required to be filed as exhibits to the Disclosure Documents have been filed as
required; neither the Company nor any of its subsidiaries is in breach of any
agreement where such breach is reasonably likely to have a material adverse
effect on the consolidated business or financial condition of the Company and
its subsidiaries taken as a whole. The information provided to such Purchaser as
described in paragraph 2.3 above does not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Memorandum does not contain any
material, non-public information. Except as set forth in the Disclosure
Documents or any schedule or exhibit attached hereto, the Company has no
liabilities, contingent or otherwise,
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other than liabilities incurred in the ordinary course of business which, under
generally accepted accounting principles, are not required to be reflected in
such financial statements and which, individually or in the aggregate, are not
material to the consolidated business or financial condition of the Company and
its subsidiaries taken as a whole. As of their respective dates, the financial
statements of the Company included in the Disclosure Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied at the times and 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 adjustments).
3.5 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Stock and the
Warrants) exercisable for, or convertible into or exchangeable for any shares of
Common Stock and the number of shares initially to be reserved for issuance upon
conversion of the Preferred Shares and exercise of the Warrants in full is set
forth on Schedule 3.5 hereto. All of such outstanding shares of capital stock
have been, or upon issuance will be, validly issued, fully paid and
non-assessable. No shares of the capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances created by or through the Company. Except as
disclosed on Schedule 3.5, or as contemplated herein, as of the date of this
Agreement and as of the Closing, 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 or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries.
3.6 Valid Issuance.
3.6.1 The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be duly
and validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company, (ii) based in part upon the representations of such
Purchaser in this Agreement, will be issued, sold and delivered in compliance
with all applicable Federal and state securities laws and (iii) will be entitled
to all of the rights, preferences and privileges set forth in the Articles of
Amendment. The Conversion Shares are duly authorized and reserved for issuance
and, upon conversion of the Preferred Shares in accordance with the terms of the
Articles of Amendment, will be duly and validly issued, fully paid and
nonassessable,
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free and clear of any taxes, liens, claims, preemptive or similar rights or
encumbrances imposed by or through the Company. The Issuable Securities are duly
authorized and will be, upon the issuance thereof, duly and validly issued,
fully paid and nonassessable, free and clear of any taxes, liens, claims,
preemptive or similar rights or encumbrances imposed by or through the Company.
3.6.2 The Warrant is duly authorized and, when issued, sold
and delivered in accordance with the terms hereof, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights or encumbrances imposed by or through the
Company, and (ii) based in part upon the representations of such Purchaser in
this Agreement, will be issued, sold and delivered in compliance with all
applicable Federal and state securities laws. The Warrant Shares are duly
authorized and reserved for issuance and, upon exercise of the Warrant in
accordance with the terms thereof, will be duly and validly issued, fully paid
and nonassessable, free and clear of any taxes, liens, claims, preemptive or
similar rights or encumbrances imposed by or through the Company.
3.7 No Conflict with Other Instruments. Neither the Company
nor any of its subsidiaries is in violation of any provisions of its Certificate
of Incorporation, Bylaws or any other governing document as amended and in
effect on and as of the date hereof or in default (and no event has occurred
which, with notice or lapse of time or both, would constitute a default) under
any provision of any instrument or contract to which it is a party or by which
it is bound, or of any provision of any Federal or state judgment, writ, decree,
order, statute, rule or governmental regulation applicable to the Company, which
would have a material adverse effect on the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. The (i)
execution, delivery and performance of this Agreement, the Warrant and the other
Transaction Documents, (ii) execution and filing of the Articles of Amendment,
and (iii) consummation of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Preferred Shares and the
issuance and reservation for issuance of the Conversion Shares) will not result
in any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company or of any of its
subsidiaries or, except as disclosed in the Memorandum, the triggering of any
anti-dilution rights on the part of holders of the Company's securities.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes resulting
from the Paracel Online Acquisition or in the ordinary course of business and
normal year-end adjustments that are not, in the aggregate, materially adverse
to the consolidated business or financial condition of the Company and its
subsidiaries taken as a whole. Except as otherwise described in the Disclosure
Documents or the Memorandum, as of the date hereof and as of the Closing there
has been no material adverse change to the Company's business, operations,
properties, financial condition, prospects or results of operations since the
date of the Company's most recent audited financial statements contained in the
Disclosure Documents.
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3.8.2 The Company has filed all tax returns required to be
filed by it and paid all taxes which are due, except for taxes which it
reasonably disputes or which could not reasonably be expected to have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole.
3.8.3 Except as set forth in Schedule 3.8.3, each of the
Company and its subsidiaries is not the subject of any pending or, to the
Company's knowledge, threatened investigation or administrative or legal
proceeding by the Internal Revenue Service, the taxing authorities of any state
or local jurisdiction, the Commission or any state securities commission or
other governmental entity which could reasonably be expected to have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole.
3.8.4 Except as set forth in Schedule 3.8.4, there is no
material claim, litigation or administrative proceeding pending, or, to the
Company's knowledge, threatened, against the Company or any of its subsidiaries,
or against any officer, director or employee of the Company or any such
subsidiary in connection with such person's employment therewith. Neither the
Company nor any of its subsidiaries is a party to or subject to the provisions
of, any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality which could reasonably be expected to have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole.
3.9 Reporting Company; Form S-3. The Company is subject to the
reporting requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports required
thereby. The Company is eligible to register for resale shares of its Common
Stock on a registration statement on Form S-3 under the Securities Act.
3.10 Acknowledgement of Dilution. The Company acknowledges that the
issuance of (i) the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Articles of Amendment, (ii) the Warrant Shares
upon exercise of the Warrants, and (iii) the Issuable Securities in accordance
with the terms of the Articles of Amendment may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
(x) to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Articles of Amendment, (y) to issue Warrant
Shares upon exercise of the Warrant and (z) to issue Issuable Securities in
accordance with the terms of the Articles of Amendment is unconditional and
absolute regardless of the effect of any such dilution.
3.11 Intellectual Property. The Company and its subsidiaries own,
possess or can acquire on reasonable terms adequate trademarks, trade names and
other rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property rights necessary to conduct the
business now operated by them, or presently employed by them, and have not
received any notice of infringement of or conflict with asserted rights of
others with respect to any such
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rights that, if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole.
3.12 Registration Rights; Rights of Participation. Except as described
on Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to
any person or entity any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (B) no person or entity,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement or any other
Transaction Document which has not been waived.
3.13 Trading on Nasdaq. The Common Stock is authorized for quotation on
the Nasdaq National Market, and trading in the Common Stock on Nasdaq has not
been suspended. The Company is not in violation of any designation criteria of
the Nasdaq National Market, except for any violation that may occur as a result
of the possible integration of shares of Common Stock that may be issued in
connection with the Paracel Online Acquisition, and does not reasonably
anticipate that the Common Stock will lose its designation as a National Market
Security.
3.14 Solicitation. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Preferred Shares or
the Warrants or (ii) has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under any
circumstances that would require registration of the Preferred Shares or the
Warrants under the Securities Act.
3.15 Fees. The Company is not obligated to pay any compensation or
other fee, cost or related expenditure to any underwriter, broker, agent or
other representative in connection with the transactions contemplated hereby,
other than the fee owed by the Company to Southcoast Capital Corporation.
3.16 Foreign Corrupt Practices. To the knowledge of the Company,
neither the Company, nor any of its subsidiaries nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
subsidiary, has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee, (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
3.17 Other Issuances of Securities. The Company has not issued (and
will not issue) any shares of Common Stock or shares of any series of preferred
stock or other securities or instruments convertible into, exchangeable for or
otherwise entitling the holder thereof to acquire shares of
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Common Stock which would be subject to NASD Rule 4460 (or any successor rule)
and which would be integrated with the sale of the Preferred Shares to such
Purchaser, or the issuance of the Conversion Shares upon conversion thereof, for
purposes of determining whether shareholder approval is required under such
Rule, except for the possible integration of shares of Common Stock that may be
issued in connection with the Paracel Online Acquisition.
3.18 Environmental Matters. Except as set forth in the Disclosure
Documents or on Schedule 3.18 hereof:
3.18.1 During the period that the Company or any of its
subsidiaries has leased or owned its properties or owned or operated any
facilities, there have been no material disposals, releases or threatened
releases of Hazardous Materials (as defined below) on, from or under such
properties or facilities in violation of applicable law. The Company has no
knowledge of any material disposals, releases or threatened releases of
Hazardous Materials on, from or under any of such properties or facilities,
which may have occurred prior to the Company or any such subsidiary having taken
possession of any of such properties or facilities in violation of applicable
law. For purposes of this Agreement, the terms "disposal," "release" and
"threatened release" shall have the definitions assigned thereto by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq., as amended ("CERCLA"). For the purposes of this
Section "Hazardous Materials" shall mean any hazardous or toxic substance,
material or waste which is or becomes prior to the Closing regulated under, or
defined as a "hazardous substance," "pollutant," "contaminant," "toxic
chemical," "hazardous material," "toxic substance," or "hazardous chemical"
under (1) CERCLA; (2) the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; (3) the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; (4) the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; (5) the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq.; (6) regulations promulgated under any of the above
statutes; or (7) any applicable state or local statute, ordinance, rule or
regulation that has a scope or purpose similar to those statutes identified
above.
3.18.2 The Company or any of its subsidiaries has not received
any notice of, nor, to the Company's knowledge, are any of the Company's or any
such subsidiary's properties or facilities in violation of any federal, state or
local law, ordinance, regulation or order relating to industrial hygiene or to
the environmental conditions on, under or about such ground water condition.
During the time that the Company or any of its subsidiaries has owned or leased
its properties and facilities, neither the Company or any such subsidiaries nor,
to the Company's knowledge, any third party, has used, generated, manufactured
or stored on, under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials in violation of
applicable law.
3.18.3 During the time that the Company or any of its
subsidiaries has owned or leased its properties and facilities, there has been
no litigation brought or, to the Company's knowledge, threatened against the
Company or any such subsidiary, or any settlement reached by the Company or any
such subsidiary with, any party or parties alleging the presence, disposal,
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release or threatened release of any Hazardous Materials on, from or under any
of such properties or facilities, in violation of applicable law.
3.18.4 During the period that the Company or any of its
subsidiaries has owned or leased its properties and facilities, no Hazardous
Materials have been transported from such properties or facilities to any site
or facility now listed or proposed for listing on the National Priorities List,
at 40 C.F.R. Part 300, or any list with a similar scope or purpose published by
any state authority.
3.19 Title. Except as set forth in Schedule 3.19, the Company and its
subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, in each case free
and clear of all liens, encumbrances and defects, except for liens, claims or
encumbrances as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
3.20 Regulatory Permits. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
4. COVENANTS OF THE COMPANY.
4.1 Corporate Existence. The Company shall, so long as any Purchaser or
any affiliate of such Purchaser beneficially owns any Securities (but in no
event longer than five (5) years from the Closing Date), maintain its corporate
existence in good standing and shall pay all taxes owed by it when due except
for taxes which the Company reasonably disputes or as to which the failure to
pay could not reasonably be expected to have a material adverse effect on the
consolidated business or financial condition of the Company.
4.2 Provision of Information. The Company shall provide each Purchaser
with copies of its annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and proxy statements and other materials sent to
shareholders, in each such case promptly after the filing thereof with the
Commission, until the conversion or redemption of all of the Preferred Shares
and exercise of all of the Warrants held by such Purchaser.
4.3 Form D; Blue-Sky Qualification. 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 Purchaser promptly after such filing. The Company shall, on
or before the Closing, take such action as is
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necessary to qualify the Preferred Shares and the Warrants for sale under
applicable state or "blue-sky" laws or obtain an exemption therefrom, and shall
provide evidence of any such action to each Purchaser at or prior to the
Closing.
4.4 Reporting Status. As long as any Purchaser or any affiliate of such
Purchaser beneficially owns any Securities and until the date on which any of
the foregoing may be sold to the public pursuant to Rule 144(k) (or any
successor rule or regulation), (i) the Company shall timely file with the
Commission all reports required to be so filed pursuant to the Exchange Act and
(ii) the Company shall not terminate its status as an issuer required by the
Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination (other than a termination
resulting from the sale, conveyance or disposition of all or substantially all
of the assets of the Company, the effectuation of a transaction or series of
transactions, in which more than 50% of the voting power of the Company is
disposed of, or the consolidation, merger or other business combination of the
Company with or into any other entity, immediately following which the prior
shareholders of the Company fail to own, directly or indirectly, at least fifty
percent (50%) of the surviving entity). The Company agrees to file with the
Commission: (A) an amendment to its Form 8-K, which was filed with the
Commission on June 12, 1997 in connection with the Paracel Online Acquisition,
on or before the date required by the Exchange Act and (B) a Form 8-K describing
the terms of the transactions contemplated by this Agreement and the other
Transaction Documents, on or before the tenth (10th) day following the Closing
Date, in each case in the form required by the Exchange Act.
4.5 Shareholder Approval. The Company agrees to use all commercially
reasonable efforts to obtain, at the next annual or special meeting of its
shareholders which takes place subsequent to the Closing Date, or on such
earlier date as may be required by the NASD in order to maintain the Company's
designation as a Nasdaq National Market issuer, shareholder approval of the
transactions contemplated by this Agreement and the other Transaction Documents,
including without limitation the issuance and sale of the Preferred Shares and
the reservation for issuance and the issuance of the Conversion Shares upon
conversion of the Preferred Shares in accordance with the terms of the Articles
of Amendment. The Company further agrees that it will hold such annual meeting
of shareholders no later than June 30, 1998. If at any time prior to June 30,
1998, the number of shares of Common Stock issued upon conversion of the
Preferred Shares equals or exceeds 15% of the outstanding shares of Common Stock
on the Closing Date, the Company shall immediately notify the holders of
Preferred Shares of such occurrence and shall take action as promptly as
practicable thereafter (including, if necessary, seeking approval of its
shareholders to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon the conversion of the Preferred Shares) to
eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system (including, without limitation,
NASD Rule 4460(i)) or other self-regulatory organization with jurisdiction over
the Company or any of its securities or the Company's ability to issue shares of
Common Stock.
4.6 Reservation of Common Stock. The Company shall at all times have
authorized and reserved for issuance, free from any preemptive rights, solely
for the purpose of effecting conversions of the Preferred Shares hereunder and
the exercise of the Warrants, such number of
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its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all of the Preferred Shares and the exercise of the Warrants
in full (the "Reserved Amount"). As of the Closing Date, the Reserved Amount
shall be equal to no less than 175% of the number of shares of Common Stock
issuable upon conversion of all of the Preferred Shares to be issued at the
Closing and exercise of the Warrants in full. If at any time the Reserved Amount
is less than 125% of the number of shares of Common Stock issuable upon
conversion of all of the Preferred Shares then outstanding and exercise of the
Warrants in full, the Company shall take action as soon as practicable
thereafter (including seeking shareholder authorization for additional shares of
Common Stock) to increase the Reserved Amount to no less than 175% of the number
of shares of Common Stock into which such outstanding Preferred Shares are then
convertible and such Warrants are exercisable. The Company shall not reduce the
number of shares reserved for issuance hereunder without the written consent of
the holders of two-thirds of the Preferred Shares then outstanding.
4.7 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares and the Warrants as set forth in the Memorandum.
4.8 Quotation on Nasdaq. The Company shall (i) promptly following the
Closing, secure the designation and quotation of the Conversion Shares and the
Warrant Shares on the Nasdaq National Market, (ii) prior to the issuance
thereof, secure the designation and quotation of the Issuable Securities and
(iii) use its best efforts to maintain the designation and quotation, or
listing, of the Common Stock on the Nasdaq National Market or the New York Stock
Exchange or other national securities exchange.
4.9 Use of Purchaser Name. The Company shall not use, directly or
indirectly, any Purchaser's name in any advertisement, announcement, press
release or other similar communication unless it has received the prior written
consent of such Purchaser for the specific use contemplated or as otherwise
required by applicable law or regulation.
4.10 Right of First Offer. The Company agrees that it will not, during
the period beginning on the Closing Date and ending on the 365th day thereafter,
issue or agree to issue any equity securities of the Company (or securities
convertible into or exercisable or exchangeable, directly or indirectly, for
equity securities of the Company) in a non-public transaction unless it shall
have first delivered to each original Purchaser at least (5) business days prior
to the closing of such issuance written notice describing the proposed issuance,
including the terms and conditions thereof, and providing such Purchaser with an
option during the five (5) business day period following delivery of such notice
to purchase up to its proportionate share (based on the number of Preferred
Shares purchased by such Purchaser hereunder relative to the number of Preferred
Shares purchased by the other Purchasers hereunder) of the securities being
offered on the same terms as contemplated by such issuance (a "Right of First
Offer"). A Right of First Offer shall not apply to (i) any transaction involving
issuances of securities as consideration for a merger, consolidation,
acquisition or sale of assets, or in connection with any strategic partnership
or joint venture which is formed for a bona fide commercial purpose, (ii) the
issuance or exercise of options, warrants or other convertible securities to or
by employees, consultants or directors of the Company, or (iii) the exercise of
any outstanding warrants, options or convertible securities.
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4.11 Company's Instructions to Transfer Agent. On or prior to the
Closing, the Company shall execute and deliver irrevocable instructions to its
transfer agent (the "Transfer Agent") (i) to issue certificates representing
Conversion Shares upon conversion of the Preferred Shares in accordance with the
terms of the Articles of Amendment and receipt of a valid Conversion Notice (as
defined in the Articles of Amendment) from a Purchaser, in the amount specified
in such Conversion Notice in the name of such Purchaser or its nominee, (ii) to
issue certificates representing Warrant Shares upon exercise of the Warrant in
accordance with the its terms upon receipt of a valid Exercise Notice (as
defined in the Warrant) from a Purchaser, in the amount specified in such
Exercise Notice in the name of such Purchaser or its nominee, (iii) to issue
certificates representing the Issuable Securities upon the issuance thereof in
accordance with the Articles of Amendment and (iv) to deliver such certificates
to such Purchaser no later than the close of business on the later to occur of
(A) the third (3rd) business day following the related Conversion Date (as
defined in the Articles of Amendment) or the Exercise Date (as defined in the
Warrant), as the case may be, (B) the first business day following delivery of
the original certificates, duly endorsed, representing the Series C Preferred
Shares being converted or the Warrant being exercised, as the case may be, if
such delivery is effected at or prior to 2:00 p.m., Arizona time, and (C) the
second business day following delivery of such original certificates or Warrant
if such delivery is effected after 2:00 p.m., Arizona time. Delivery of
certificates representing Issuable Securities shall be made in the manner and at
the times specified in the Articles of Amendment. As long as purchases and sales
of shares of Common Stock are eligible for settlement at the Depository Trust
Company ("DTC"), the Company shall instruct the transfer agent that, in lieu of
delivering physical certificates to a Purchaser upon conversion of the Preferred
Shares, exercise of the Warrant, or issuance of the Issuable Securities, the
transfer agent may effect delivery of Conversion Shares or Warrant Shares, as
the case may be, by crediting the account of such Purchaser or its nominee at
DTC for the number of shares for which delivery is required hereunder within the
time frame specified above for delivery of certificates. The Company represents
to and agrees with each Purchaser that it will not give any instruction to the
Transfer Agent that will conflict with the foregoing instruction or otherwise
restrict such Purchaser's right to convert the Preferred Shares or exercise the
Warrant or to receive Conversion Shares or Issuable Securities in accordance
with the terms of the Articles of Amendment or to receive Warrant Shares in
accordance with the terms of the Warrant. In the event that the Company's
relationship with the Transfer Agent should be terminated for any reason, the
Transfer Agent shall continue acting as transfer agent pursuant to the terms
hereof until such time that a successor transfer agent is appointed by the
Company and agrees to be bound by the terms hereof.
4.12 Debt Covenant. The Company shall refrain, during the twelve month
period following the Closing Date, from incurring, assuming or guaranteeing any
indebtedness in excess of ten million dollars ($10,000,000), individually or in
the aggregate, without the prior written consent of the holders of two-thirds
(2/3) of the Preferred Shares then outstanding.
4.13 Environmental Covenant. In connection with any acquisition by the
Company or any of its subsidiaries of the assets or stock of any entity whereby
the Company or such subsidiary acquires an ownership interest in the properties
or facilities of such entity, the Company will, prior to the closing of any such
acquisition, perform such tests as are mandated by applicable law or
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necessary to determine whether, and hereby represents that, upon the
effectiveness of such acquisition, the Company or such subsidiary will be in
compliance with the representations made in subparagraphs 3.18.1 - 3.18.4 above.
4.14 Capital Raising Limitations. The Company will not, during the six
(6) month period following the effective date of the registration statement
required to be filed by the Company pursuant to the Registration Rights
Agreement, issue any (a) security which is convertible into, or exercisable or
exchangeable for, a variable number of shares of Common Stock which is based on
the market price of the Common Stock or (b) Common Stock (or any security
convertible into, or exercisable or exchangeable for, Common Stock) at an
effective price per share of Common Stock (after giving effect to the purchase
price paid for the security and, if applicable, the additional purchase price to
be paid upon the exercise, conversion or exchange of such security) which is
less than ninety percent (90%) of the closing price of the Common Stock on the
Trading Day immediately preceding the issuance of such Common Stock (the
limitations referred to in this sentence are collectively referred to as the
"Capital Raising Limitations"). The Capital Raising Limitations shall not apply
to any transaction involving issuances of securities as consideration in a
merger, consolidation, acquisition or sale of assets (in each case, the primary
purpose of which is not to raise equity capital) or pursuant to a strategic
partnership or joint venture which is formed for a bona fide commercial purpose,
or as consideration for the acquisition of a business, product or license by the
Company or in connection with the exercise of options by employees, directors or
consultants. The Capital Raising Limitations also shall not apply to (i) the
issuance of Common Stock in a transaction referred to in clause (b) above
pursuant to a public offering (other than an offering conducted pursuant to Rule
415 under the Securities Act), (ii) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, or (iii) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan for the benefit of the Company's employees,
directors or consultants.
5. COVENANTS OF EACH PURCHASER. Each Purchaser hereby covenants and agrees with
the Company that:
5.1 Short Sales. Except as otherwise provided herein, such Purchaser
will not maintain at the time of Closing, nor will it create or maintain at any
time following the Closing until the earlier to occur of (a) the date which is
five (5) years from the Closing Date and (b) the first date on which such
Purchaser no longer owns any Securities, a "short position" in the Common Stock;
provided, however, that any Purchaser which, immediately prior to the Closing,
holds (A) shares of the Company's Series A or Series B Preferred Stock, (B)
warrants to purchase shares of the Common Stock or (C) Common Stock issued
pursuant to conversion of such Series A or Series B Preferred Stock or exercise
of such warrants (the "Existing Securities") may create or maintain a short
position in the Common Stock up to the number of shares of Common Stock
represented by such Purchaser's Existing Securities (assuming the full
conversion or exercise of any such Existing Securities that are convertible or
exercisable into Common Stock); provided further, that any such Purchaser will
not create any short position with respect to shares of Common Stock represented
by such Existing Securities on or after the date of this Agreement and prior to
the date that is 180
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days from the date of this Agreement unless such position is created at a price
for the Common Stock of at least $11.00 per share. For purposes hereof, a "short
position" shall be deemed to have been maintained or created by a Purchaser if
such Purchaser (i) enters into a "short sale" (as such term is defined in Rule
3b-3 under the Exchange Act), (ii) purchases a put option to sell shares of
Common Stock or (iii) enters into a derivative or other similar transaction
whereby the Purchaser will be compensated in the event of a decline in the price
of the Common Stock; provided, however, that such term shall not include any
short sales effected as a result of the Company's failure to deliver Conversion
Shares, Issuable Securities or Warrant Shares, as the case may be, in accordance
with the terms of the Articles of Amendment or Warrant, respectively.
5.2 Selling Restrictions. Such Purchaser will not sell more than the
Maximum Amount (as defined below) of Conversion Shares, Warrant Shares or
Issuable Securities on any business day occurring during the period beginning on
the Closing Date and ending on the earlier to occur of (a) the date which is
five (5) years from the Closing Date and (b) the first date on which such
Purchaser no longer owns any Securities. The "Maximum Amount" shall mean the
greater of (i) 30,000 shares, (ii) 15% of the average daily trading volume of
the Common Stock over the five (5) Trading Days immediately preceding (but not
including) such business day or (iii) 15% of the trading volume of the Common
Stock on such business day. For purposes hereof, "trading volume" shall include
all trades reported to the National Association of Securities Dealers, Inc. or
otherwise to a "consolidated system" as that term is defined in the Exchange Act
and "Trading Day" shall mean any day on which the Common Stock is traded for any
period on the Nasdaq National Market or on the principal securities exchange or
market on which the Common Stock is then traded. The (A) sale or exchange of
shares of Common Stock by a Purchaser to a person or entity which has commenced
a bona fide tender or exchange offer for the Common Stock, as long as such
person or entity is not affiliated with, or acting in concert with or at the
direction of, such Purchaser or (B) exchange of such shares in connection with a
merger or similar transaction, shall not be deemed to be a sale subject to the
restrictions contained in this paragraph 5.2 as long as such sale or exchange is
made pursuant to the terms of such tender offer, exchange offer, merger or
transaction.
5.3 Exceptions for Optional or Mandatory Redemption. In the event that,
pursuant to the terms of the Articles of Amendment, the Company has the right to
effect an Optional Redemption (as defined in the Articles of Amendment) of the
Preferred Shares, each Purchaser may create, solely during the period in which
the Company has such right, and thereafter may maintain a short position with
respect to, up to the number of shares of Common Stock that is issuable upon
conversion of the maximum number of Preferred Shares held by such Purchaser that
are potentially subject to such Optional Redemption, without regard to the
limitations described in paragraph 5.1; provided, however, that a Purchaser may
not create a short position hereunder to the extent that such short position,
when added to any short position that may then be maintained by such Purchaser
pursuant to this paragraph 5.3, exceeds such number of shares of Common Stock.
If the Company delivers an Optional Redemption Notice (as defined in the
Articles of Amendment) in accordance with the terms of the Articles of
Amendment, each Purchaser may sell up to the number of shares of Common Stock
that is issuable upon conversion of the number of Preferred Shares held by such
Purchaser and subject to such Optional Redemption Notice without regard to the
limitations described in paragraph 5.2 above. At any time that, (A) pursuant to
the terms of the Articles of
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Amendment, the Purchasers are entitled to exercise their right to effect a
Mandatory Redemption (as defined in the Articles of Amendment) or (B) the Common
Stock ceases to be quoted on the Nasdaq National Market and, immediately
thereafter, the Common Stock is not listed on either the New York Stock Exchange
or the American Stock Exchange, the restrictions contained in this Section 5
shall not apply to the shares of Common Stock issued or issuable with respect to
the Preferred Shares.
5.4 Purchaser Defined. For purposes of this Section 5, the term
"Purchaser" shall include any affiliate or any person acting at the direction of
or in concert with such Purchaser. Notwithstanding the foregoing, the
limitations described in this Section 5 shall not apply to sales made or short
positions maintained by a registered broker-dealer that is affiliated with a
Purchaser (or by an affiliate of such broker-dealer), which sales result from
(x) bona fide customer orders or (y) proprietary trading effected by trading
desk personnel of such broker-dealer (or such affiliate) who are not acting at
the direction of or in concert with such Purchaser.
6. CONDITIONS TO CLOSING.
6.1 Conditions to Purchaser's Obligations at Closing. Each Purchaser's
obligations at the Closing, including without limitation its obligation to
purchase the Preferred Shares and the Warrant, are conditioned upon the
fulfillment of each of the following events:
6.1.1 the representations and warranties of the Company set
forth in this Agreement shall be true and correct in
all material respects as of the Closing Date as if
made on such date;
6.1.2 the Company shall have complied with or performed all
of the agreements, obligations and conditions set
forth in this Agreement that are required to be
complied with or performed by the Company on or
before the Closing;
6.1.3 the other Purchasers shall have purchased at the
Closing the aggregate number of Preferred Shares and
Warrants such that, when added to the Preferred
Shares and Warrant to be purchased by such Purchaser
hereunder, the Aggregate Purchase Price therefor
shall be equal to at least nineteen million, two
hundred thousand dollars ($19,200,000); provided,
that, if a Purchaser fails to Purchase all or any
portion of the Preferred Shares and Warrant to be
purchased by it hereunder, the other Purchasers shall
have the option, but not the obligation, to purchase
such Preferred Shares and Warrant on a pro rata
basis;
6.1.4 the Company shall have delivered to such Purchaser a
certificate, signed by an officer of the Company,
certifying that the conditions specified in
paragraphs 6.1.1 and 6.1.2 above have been fulfilled
as of the Closing;
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6.1.5 the Company shall have filed the Articles of
Amendment with the Secretary of State of the State of
Indiana and shall have furnished such Purchaser with
a file-stamped copy thereof;
6.1.6 each of the executive officers of the Company who own
shares of Common Stock shall have executed and
delivered the letter agreement attached hereto as
Exhibit 6.1.6 regarding such person's agreement to
vote the shares of Common Stock held by such person
in favor of the approval of shareholders described in
subparagraph 4.5 above;
6.1.7 the Company shall have delivered to such Purchaser an
opinion of counsel for the Company, dated as of the
Closing Date, in form and substance reasonably
acceptable to the parties;
6.1.8 the Company shall have executed and delivered the
Registration Rights Agreement;
6.1.9 the Common Stock shall be designated for quotation
and actively traded on the Nasdaq National Market;
6.1.10 there shall have been no material adverse changes in
the Company's consolidated business or financial
condition since the date of the Company's most recent
audited financial statements contained in the
Disclosure Documents; and
6.1.11 the Company shall have authorized and reserved for
issuance 175% of the aggregate number of shares of
Common Stock issuable upon (i) conversion of all of
the Preferred Shares to be issued at the Closing and
(ii) exercise of the Warrants in full.
6.2 Conditions to Company's Obligations at Closing. The Company's
obligations at the Closing are conditioned upon the fulfillment of each of the
following events:
6.2.1 the representations and warranties of each Purchaser
shall be true and correct in all material respects as
of the Closing Date as if made on such date; and
6.2.2 each Purchaser shall have complied with or performed
all of the agreements, obligations and conditions set
forth in this Agreement that are required to be
complied with or performed by such Purchaser on or
before the Closing.
7. INDEMNIFICATION.
The Company agrees to indemnify and hold harmless each Purchaser and
its officers, directors, employees and agents, and each person who controls such
Purchaser within the meaning
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of the Securities Act or the Exchange Act (each, a "Purchaser Indemnified
Party") against any losses, claims, damages, liabilities or reasonable
out-of-pocket expenses (including the reasonable fees and disbursements of
counsel) as incurred, joint or several, to which it, they or any of them, may
become subject and not otherwise reimbursed, arising out of or in connection
with the breach by the Company of any of its representations, warranties or
covenants made herein.
Each Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company and its officers, directors, employees and agents, and each
person who controls the Company within the meaning of the Securities Act or the
Exchange Act (each, a "Company Indemnified Party") (a Purchaser Indemnified
Party and a Company Indemnified Party are each hereinafter referred to as an
"Indemnified Party") against any losses, claims, damages, liabilities or
expenses (including the fees and disbursements of counsel) as incurred, joint or
several, to which it, they or any of them, may become subject and not otherwise
reimbursed, arising out of or in connection with the breach by such Purchaser of
any of its representations, warranties or covenants made herein.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action by a third party pursuant to which indemnification
may be sought hereunder, such Indemnified Party will, if a claim in respect
thereof is to be made against the other party (the "Indemnifying Party"),
deliver to the Indemnifying Party a written notice of the commencement thereof
and the Indemnifying Party shall have the right to participate in and to assume
the defense thereof with counsel reasonably selected by the Indemnifying Party,
provided, however, that an Indemnified Party shall have the right to retain its
own counsel, with the reasonably incurred fees and expenses of such counsel to
be paid by the Indemnifying Party, if representation of such Indemnified Party
by the counsel retained by the Indemnifying Party would be inappropriate due to
actual or potential conflicts of interest under applicable standards of
professional conduct between such Indemnified Party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the Indemnifying Party within a reasonable time of the commencement of
any such action will not relieve the Indemnifying Party of any of its
obligations hereunder with respect to such action except to the extent such
failure is prejudicial to the Indemnifying Party's ability to defend any such
action.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of pending or threatened action in
respect of which an Indemnified Party 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 Party from all
liability on any claims that are the subject matter of such action. An
Indemnifying Party will not be liable for any settlement of any action or claim
effected without its written consent.
Nothing contained herein shall be deemed to entitle any party to
punitive damages.
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8. MISCELLANEOUS.
8.1 Survival; Severability. The representations, warranties,
covenants and indemnities made by the parties herein shall survive the Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
8.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted 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 permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The Purchaser may assign its
rights hereunder, in connection with any private sale or transfer of the
Preferred Shares or the Warrant in accordance with the terms hereof, as long as,
as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement, in which case the term "Purchaser" shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto;
provided, however, that in no event shall a Purchaser have the right to assign
its rights under paragraph 4.10 hereof.
8.3 Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to 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 Purchaser to
be joined as an additional party in any proceeding for such purpose.
8.4 No Reliance; Representations by Purchasers. Each party
acknowledges that (i) it has such knowledge in business and financial matters as
to be fully capable of evaluating this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby, (ii) it is not
relying on any advice or representation of the other party in connection with
entering into this Agreement, the other Transaction Documents or such
transactions (other than the representations made in this Agreement or the other
Transaction Documents), (iii) it has not received from such party any assurance
or guarantee as to the merits (whether legal, regulatory, tax, financial or
otherwise) of entering into this Agreement or the other Transaction Documents or
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the performance of its obligations hereunder and thereunder, and (iv) it has
consulted with its own legal, regulatory, tax, business, investment, financial
and accounting advisors to the extent that it has deemed necessary, and has
entered into this Agreement and the other Transaction Documents based on its own
independent judgment and on the advice of its advisors as it has deemed
necessary, and not on any view (whether written or oral) expressed by such
party. Each Purchaser acknowledges that it can bear the economic risk of the
purchase of the Preferred Shares and related Warrant, including the total loss
of such Purchaser's investment. Each Purchaser represents and warrants that the
information provided to the Company by such Purchaser in a Confidential
Purchaser Questionnaire is accurate and complete as of the Closing Date.
8.5 Injunctive Relief. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to each Purchaser
and that the remedy or remedies at law for any such breach will be inadequate
and agrees, in the event of any such breach, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate and
specific performance of such obligations without the necessity of showing
economic loss.
8.6 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed under the laws of the State of New York without regard
to the conflict of laws provisions thereof. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
8.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.8 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
8.9 Notices. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 5:00 p.m., eastern time, on a business day or, if such day is not a
business day, on the next succeeding business day, (ii) on the next business day
after timely
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delivery to an overnight courier and (iii) on the third business day after
deposit in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed to the parties as follows:
If to the Company:
WavePhore, Inc.
0000 X. 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx (with a copy to the General Counsel)
Fax: 000-000-0000
and if to any Purchaser, to such address for such Purchaser as shall appear on
the signature page hereof executed by such Purchaser, or as shall be designated
by such Purchaser in writing to the Company.
8.10 Expenses. Except as otherwise specified herein, the
Company and each Purchaser shall pay all costs and expenses that it incurs in
connection with the negotiation, execution, delivery and performance of this
Agreement; provided that the Company shall reimburse the Purchasers for their
reasonable out-of-pocket expenses, including legal expenses, not to exceed
fifty-five thousand dollars ($55,000), in the aggregate, at Closing.
8.11 Entire Agreement; Amendments. This Agreement and the
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed 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 a written
instrument signed by the party against whom enforcement of any such waiver is
sought; provided, however, that no amendment or modification to paragraph 5.1 or
5.2 hereof may be made except pursuant to a written instrument executed by the
Company and each of the holders of Preferred Shares then outstanding. No such
amendment shall be effective to the extent that, by its terms, it applies to
less than all of the holders of Preferred Shares then outstanding.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
WAVEPHORE, INC.
By:
__________________________
Name: Xxxxx Xxxxxxxxxx
Title: EVP & COO
PURCHASER NAME: ______________________________
By: _________________________
Name:
Title:
ADDRESS:
_______________________________
_______________________________
Tel: ___________________________
Fax: ___________________________
Number of Shares of Series C Preferred Stock to be Purchased: _______________
Number of Shares of Common Stock to be
Represented by the Warrant to be Purchased: _______________
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