Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
LEVEL 8 SYSTEMS, INC.,
AND
THE PURCHASERS LISTED ON SCHEDULE I
DATED AS OF AUGUST 14, 2002
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of August 14, 2002, by and among Xxxxx 0 Systems, Inc., a Delaware
corporation (the "Company"), and the various purchasers listed on Schedule I
hereto (each referred to herein as a "Purchaser" and, collectively, the
"Purchasers").
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, shares of the Company's Series C
Convertible Redeemable Preferred Stock, par value $.001 per share, liquidation
value $1,000 per share (the "Preferred Stock") in the form of Exhibit A annexed
hereto, and a stock purchase warrant (each a "Warrant", and, collectively, the
"Warrants"), in the form of Exhibit B annexed hereto to purchase shares of the
Company's common stock, par value $.001 per share (the "Common Stock"); and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form of Exhibit C attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
PURCHASE AND SALE
Purchase and Sale.
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On the Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and sell to each
Purchaser and each Purchaser, severally and not jointly, shall purchase from the
Company the shares of Preferred Stock as set forth on Schedule I and a Warrant
exercisable for the number of shares of Common Stock as set forth on Schedule I
for such Purchaser. The purchase price for the Preferred Stock and Warrants
purchased by each Purchasers shall be as set forth on Schedule I.
Closing.
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The Closing. The closing (the "Closing") of the purchase and
sale of the Preferred Stock and the Warrants shall take place at the offices of
Powell, Goldstein, Xxxxxx & Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000,
Xxxxxxx, Xxxxxxx 00000, or by transmission by facsimile and overnight courier,
immediately following the execution hereof or such later date or different
location as the parties shall agree, but in no event prior to the date that the
conditions set forth in Section 4.1 have been satisfied or waived by the
appropriate party (such date of the Closing, the "Closing Date"). At the
Closing:
Each Purchaser shall deliver to the Company (1) this
Agreement, duly executed by such Purchaser, (2) the Registration Rights
Agreement, duly executed by such Purchaser and (3) its portion of the purchase
price as set forth next to its name on Schedule I in United States dollars in
immediately available funds to an account or accounts designated in writing by
the Company; and
The Company shall deliver to each Purchaser (1) this
Agreement, duly executed by the Company, (2) the Registration Rights Agreement,
duly executed by the Company, (3) a Warrant representing the Purchaser's right
to acquire the number of shares of Common Stock as set forth on Schedule I
hereto registered in the name of such Purchaser and (4) a certificate evidencing
the number of shares of Preferred Stock purchased by such Purchaser as set forth
on Schedule I hereto, registered in the name of such Purchaser, the Preferred
Stock shall have the respective rights, preferences, limitations and privileges
set forth in Exhibit A attached hereto, which shall be incorporated into a
Certificate of Designation of Rights, Preferences and Limitations to be approved
by the Purchasers and the Company's Board of Directors and filed on or before
the Closing with the Secretary of State of Delaware.
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REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company represents
and warrants to each of the Purchasers that the statements contained in this
Section 2.1 are true, correct and complete as of the date hereof, and will be
true correct and complete as of the Closing Date (unless specifically made as of
another date), except as specified to the contrary in the corresponding
paragraph of the disclosure schedule prepared by the Company accompanying this
Agreement (the "Company Disclosure Schedules"):
a. Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware,
with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Except as set
forth on Schedule 2.1(a), the Company is duly qualified as a foreign corporation
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or in
the aggregate, (x) adversely affect the legality, validity or enforceability of
any of this Agreement or the Transaction Documents (as defined in Section
2.1(b)) or any of the transactions contemplated hereby or thereby, (y) have or
result in a material adverse effect on the results of operations, assets, or
financial condition of the Company, taken as a whole or (z) impair the Company's
ability to perform fully on a timely basis its obligations under any Transaction
Document (any of (x), (y) or (z), being a "Material Adverse Effect"). The
Company has made available to the Purchaser true and correct copies of the
Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's Bylaws, as in
effect on the date hereof (the "Bylaws").
b. Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Registration Rights Agreement and the
Warrants (collectively, the "Transaction Documents"), and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of each of
this Agreement and the Transaction Documents by the Company and the consummation
by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action by the Company. Each of this
Agreement and the Transaction Documents has been duly executed by the Company
and when delivered in accordance with the terms hereof will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto.
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c. Capitalization. As of the date hereof, the authorized capital stock of
the Company is as set forth in Schedule 2.1(c). All of such outstanding shares
of capital stock have been, or upon issuance will be, validly authorized and
issued, fully paid and nonassessable and were issued in accordance with the
registration provisions of the Securities Act, or pursuant to valid exemptions
therefrom. Except as disclosed in Schedule 2.1(c) or the SEC Documents (as
defined in Section 2.1(j)), (i) no shares of the Company's capital stock are
subject to preemptive rights nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company by virtue of any Transaction Document, as defined in Section 2.1(b)
above, (ii) 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 exchangeable for, or giving any Person
(as defined below) any right to subscribe for or acquire, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
the Registration Rights Agreement), (iv) there are no outstanding securities of
the Company or any of its subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to redeem a security of the Company or any of its subsidiaries, (v) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the shares of Common Stock as
described in this Agreement and (vi) except as specifically disclosed in the SEC
Documents, to the Company's knowledge, no Person (as defined below) or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of 5% of the Common Stock.
"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
d. Authorization and Validity; Issuance of Shares. The shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Conversion Shares")
and the exercise of the Warrants (the "Warrant Shares", and together with the
Conversion Shares the "Underlying Shares") are and will at all times hereafter
continue to be duly authorized and reserved for issuance and, when issued and
paid for in accordance with this Agreement and the Transaction Documents, will
be validly issued, fully paid and non-assessable, free and clear of all liens,
encumbrances and Company rights of first refusal, other than liens and
encumbrances created by the Purchasers (collectively, "Liens") and will not be
subject to any preemptive or similar rights other than as granted pursuant to
the Transaction Documents.
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e. No Conflicts. The execution, delivery and performance of this Agreement
and each of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including the
issuance of the Underlying Shares) do not and will not (i) conflict with or
violate any provision of the Certificate of Incorporation, Bylaws or other
organizational documents of the Company, (ii) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
(evidencing a Company debt or otherwise) to which the Company is a party or by
which any property or asset of the Company is bound or affected, except where
such conflict or violation has not resulted or would not reasonably be expected
to result, individually or in the aggregate, in a Material Adverse Effect, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed), or by which any material property
or asset of the Company is bound, except where such conflict has not resulted or
would not reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Effect.
f. Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement,
(ii) the application(s) or any letter(s) acceptable to the Nasdaq National
Market ("Nasdaq") for the listing of the Underlying Shares with Nasdaq (and with
any other national securities exchange or market on which the Common Stock is
then listed), and (iii) any filings, notices or registrations under applicable
Federal or state securities laws (together with the consents, waivers,
authorizations, orders, notices and filings referred to on Schedule 2.1(f), the
"Required Approvals"), except where failure to do so has not resulted or would
not reasonably result, individually, or in the aggregate, in a Material Adverse
Effect.
g. Litigation; Proceedings. Except as specifically set forth on Schedule
2.1(g) or in the SEC Documents (as hereinafter defined), there is no action,
suit, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or enforceability of any of this
Agreement or the Transaction Documents or (ii) would reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. Neither the
Company nor any subsidiary, nor, to the knowledge of the Company, any officer
thereof, is or has been, nor, to the knowledge of the Company, any director
thereof is or has been for the last three years, the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. There has not been, and, to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director that was a director of the Company at any time during the last three
years or officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company or any subsidiary under the Exchange Act or the Securities Act.
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h. No Default or Violation. Except as specifically set forth on Schedule
2.1(h), the Company (i) is not in default under or in violation of any
indenture, loan or other credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound and
which is required to be included as an exhibit to any SEC Document (as defined
in Section 2.1(j)) or will be required to be included as an exhibit to the
Company's next filing under either the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (ii) is in violation of any order
of any court, arbitrator or governmental body applicable to it, (iii) is in
violation of any statute, rule or regulation of any governmental authority to
which it is subject, (iv) is in default under or in violation of its Certificate
of Incorporation, Bylaws or other organizational documents, respectively in the
case of (i), (ii) and (iii), except where such violations have not resulted or
would not reasonably result, individually or in the aggregate, in a Material
Adverse Effect.
i. Private Offering. The Company and all Persons acting on its behalf have
not made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Preferred Stock, the Warrants or the
Underlying Shares or the issuance of such securities under the Securities Act.
Subject to the accuracy and completeness of the representations and warranties
of the Purchasers contained in Section 2.2, the offer, sale and issuance by the
Company to the Purchasers of the Preferred Stock, the Warrants and the
Underlying Shares is exempt from the registration requirements of the Securities
Act.
j. SEC Documents; Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Exchange Act. Since December 31,
2001, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it, with the Commission, pursuant to Section
13, 14 or 15(d) of the Exchange Act (the foregoing materials and all exhibits
included therein and financial statements and schedules thereto and documents
(other than exhibits to such documents) incorporated by reference therein being
collectively referred to herein as the "SEC Documents"), on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
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k. Material Changes. Since the date of the latest audited financial
statements included within the SEC Documents, except as specifically disclosed
in the SEC Documents, (i) there has been no event, occurrence or development
that has had or that could result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not altered
its method of accounting or the identity of its auditors, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock, and (v) the Company has not issued any
equity securities to any officer, director or affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending before
the Commission any request for confidential treatment of information.
l. Investment Company. The Company is not, and is not controlled by or
under common control with an affiliate (an "Affiliate") of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
m. Patents and Trademarks. The Company and its subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the failure to
so have could have, or reasonably be expected to result in, a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the Company
nor any subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any subsidiary violates or infringes upon the
rights of any Person which if determined adversely to the Company would,
individually or in the aggregate have a Material Adverse Effect. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
n. Transactions With Affiliates and Employees. Except as set forth in SEC
Documents, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
o. Form S-3 Eligibility. The Company is eligible to register the resale of
the Underlying Shares for resale by the Purchasers under Form S-3 promulgated
under the Securities Act.
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p. Listing and Maintenance Requirements. Except as set forth on Schedule
2.1(p), the Company has not, in the two years preceding the date hereof,
received notice (written or oral) from the Nasdaq National Market or any other
exchange or market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. Except as set forth on Schedule 2.1(p),
the Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements. The issuance and sale of the Preferred Stock and Warrants
hereunder does not contravene the rules and regulations of the Nasdaq National
Market and no approval of the shareholders of the Company is required for the
Company to issue and deliver to the Purchasers the number of shares or Preferred
Stock, the Conversion Shares and the Warrant Shares contemplated by this
Agreement.
q. Broker's Fees. No fees or commissions or similar payments with respect
to the transactions contemplated by this Agreement or the Transaction Documents
have been paid or will be payable by the Company to any third party broker,
financial advisor, finder, investment banker, or bank. The Purchaser shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
2.1(q) that may be due in connection with the transactions contemplated by this
Agreement and the Transaction Documents.
r. Disclosure. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company are true
and correct and do 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 light of the circumstances under which they were made, not
misleading.
s. Acknowledgement Regarding Purchasers' Purchase of Preferred Stock. The
Company further acknowledges that no Purchaser is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any statement made by any
Purchaser or any of their respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Purchasers' purchase of the
securities. The Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser, as applicable, is a corporation
or a limited liability company or limited partnership duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation with the requisite power and authority, corporate or
otherwise, to enter into and to consummate the transactions contemplated hereby
and by this Agreement and the Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The purchase by such Purchaser, as
applicable, of the shares of Preferred Stock and the Warrants hereunder has been
duly authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Transaction Documents has been duly executed and
delivered by each Purchaser and constitutes the valid and legally binding
obligation of each Purchaser, enforceable against such Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto.
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b. Investment Intent. Such Purchaser is acquiring the shares of Preferred
Stock, the Warrants and the Underlying Shares for its own account and not with a
present view to or for distributing or reselling the shares of Preferred Stock,
the Warrants or the Underlying Shares or any part thereof or interest therein in
violation of the Securities Act. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold the Preferred Stock or
Warrants or Underlying Shares for any period of time. Such Purchaser is
acquiring the Preferred Stock, Warrants and Underlying Shares hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Preferred Stock, Warrants or Underlying Shares.
c. Purchaser Status. At the time such Purchaser was offered the Preferred
Stock and the Warrants, and at the Closing Date and each date such Purchaser
exercises Warrants, (i) it was and will be an "accredited investor" as defined
in Rule 501 under the Securities Act and (ii) such Purchaser, either alone or
together with its representatives, had and will have such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Preferred Stock, the Warrants and the Underlying Shares. Such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act.
d. Reliance. Such Purchaser understands and acknowledges that (i) the
Preferred Stock, the Warrants and the Underlying Shares are being offered and
sold to the Purchaser without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
under Section 4(2) of the Securities Act or Regulation D promulgated thereunder
and (ii) the availability of such exemption depends in part on, and the Company
will rely upon the accuracy and truthfulness of, the representations set forth
in this Section 2.2 and such Purchaser hereby consents to such reliance.
e. Information. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Stock and the Warrants which have been requested by such Purchaser or its
advisors. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. The Purchaser understands that its
investment in the Preferred Stock and Warrants involves a significant degree of
risk. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Company's representations and warranties contained in this Agreement or
the Transaction Documents.
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f. Governmental Review. Such Purchaser understands that no United States
Federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Preferred Stock or
Warrants.
g. Residency. Such Purchaser is a resident of the jurisdiction set forth
immediately beside such Purchaser's name on Schedule I hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares held by it, such Purchaser
understands and agrees that it may do so (1) only pursuant to an effective
registration statement under the Securities Act, (2) pursuant to an available
exemption from the registration requirements of the Securities Act, (3) to an
affiliate of the Purchaser, or (4) pursuant to Rule 144 promulgated under the
Securities Act ("Rule 144"). In connection with any transfer of any Preferred
Stock, the Warrants, the Conversion Shares or Warrant Shares other than pursuant
to an effective registration statement, Rule 144, to the Company or to an
affiliate of the Purchasers, the Company may require the transferor thereof to
provide to the Company a written opinion of counsel experienced in the area of
United States securities laws selected by the transferor, the form and substance
of which opinion shall be customary for opinions of counsel in comparable
transactions and reasonably acceptable to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act; provided, however, that if the Preferred Stock, the Warrants,
the Conversion Shares or Warrant Shares may be sold pursuant to Rule 144(k), no
written opinion of counsel shall be required from any Purchaser if such
Purchaser provides reasonable assurances that such security can be sold pursuant
to Rule 144(k). Notwithstanding the foregoing, the Company hereby consents to
and agrees to register any transfer by any Purchaser to an affiliate of such
Purchaser, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act. Any
such transferee shall agree in writing to be bound by the terms of this
Agreement and the Transaction Documents and shall have the rights of a Purchaser
under this Agreement and the Transaction Documents. The Company shall not
require an opinion of counsel in connection with the transfer of the shares of
Common Stock, the Preferred Stock, the Warrant, the Conversion Shares or the
Warrant Shares to an affiliate of a Purchaser.
b. The Purchasers agree to the imprinting, so long as is required by this
Section 3.1(b), of the following legend on the Preferred Stock, the Warrants,
the Conversion Shares and the Warrant Shares:
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SHARES.
Neither the Preferred Stock, the Warrant, the Conversion Shares, nor the
Warrant Shares shall contain the legend set forth above (or any other legend)
(i) while a registration statement covering the resale of such security is
effective under the Securities Act, (ii) if in the written opinion of counsel to
the Company experienced in the area of United States securities laws such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission) or (iii) if such Preferred Stock, the Warrants, the Conversion
Shares or the Warrant Shares may be sold pursuant to Rule 144(k). The Company
agrees that it will provide any Purchaser, upon request, with a certificate or
certificates representing shares of Preferred Stock, the Warrant, the Conversion
Shares or the Warrant Shares, free from such legend at such time as such legend
is no longer required hereunder. If such certificate or certificates had
previously been issued with such a legend or any other legend, the Company
shall, upon request and upon the delivery of the legended certificate(s),
reissue such certificate or certificates free of any legend.
3.2 Stop Transfer Instruction. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which enlarge
the restrictions on transfer set forth in Section 3.1.
3.3 Listing and Reservation of Underlying Shares.
a. The Company shall (i) not later than ten (10) business days after the
Closing Date prepare and file with Nasdaq (as well as any other national
securities exchange or market on which the Common Stock is then listed)
additional shares listing applications or letters acceptable to Nasdaq covering
and listing a number of shares of Common Stock which is at least equal to 100%
the maximum number of Underlying Shares then issuable, assuming that the payment
of all future dividends on such shares then outstanding were made in shares of
Common Stock, (ii) take all steps necessary to cause the Underlying Shares to be
approved for listing on Nasdaq (as well as on any other national securities
exchange or market on which the Common Stock is then listed) as soon as possible
thereafter, (iii) maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all such Underlying Shares, and (iv) provide to the
Purchasers evidence of such listing. Prior to the effectiveness of the
Registration Statement, the Company shall promptly provide to each Purchaser
copies of any notices it receives from Nasdaq regarding the continued
eligibility of the Common Stock for listing on such automated quotation system.
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 3.3(a).
11
b. The Company at all times shall reserve a sufficient number of shares of
its authorized but unissued Common Stock to provide for the full conversion of
the Preferred Stock and the Warrants. If at any time the number of shares of
Common Stock authorized and reserved for issuance is insufficient to cover the
number of Conversion Shares and Warrant Shares issued and issuable upon
conversion of the Preferred Stock or exercise of the Warrant (based on the
Exercise Price (as defined in the Warrant) of the Warrant in effect from time to
time) without regard to any limitation on conversions or exercises, the Company
will promptly take all corporate action necessary to authorize and reserve such
shares including, without limitation, calling a special meeting of stockholders
to authorize additional shares to meet the Company's obligations under this
Section 3.3(b), in the case of an insufficient number of authorized shares, and
using best efforts to obtain stockholder approval of an increase in such
authorized number of shares.
3.4 Furnishing of Information. As long as any Purchaser owns the Preferred
Stock, the Warrants, the Conversion Shares or the Warrant Shares, the Company
will cause the Common Stock to continue at all times to be registered under
Section 12 of the Exchange Act or subject to Section 15(d) of the Exchange Act,
will timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 13, 14 or 15(d) of the Exchange Act and will
not take any action or file any document (whether or not permitted by the
Exchange Act or the rules thereunder) to terminate or suspend such reporting and
filing obligations. As long as any Purchaser owns the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as the holders of a majority of the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares may reasonably request,
all to the extent required from time to time to enable such Person to sell the
Preferred Stock, the Warrants, the Conversion Shares, or the Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in Section 3.1(b). Upon the request of any
such Person, the Company shall deliver to such Person a written certification of
a duly authorized officer as to whether it has complied with such requirements.
12
3.5 Integration. The Company shall not, and shall use its best efforts to
ensure that no affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the shares of Preferred Stock hereunder in a manner that would require the
registration under the Securities Act of the sale of the shares Preferred Stock
to the Purchasers, or that would be integrated with the offer or sale of the
Preferred Stock for purposes of the rules and regulations of the Nasdaq National
Market, if such integration would result in a violation of any such rule or
regulation.
3.6 Non-Public Information. Purchasers acknowledge that they may have been
provided material non-public information in connection with the transactions
contemplated hereby and that trading in securities of the Company while in the
possession of material non-public information is prohibited by the federal
securities laws. Subject to compliance with all applicable securities laws and
Nasdaq regulations, no Purchaser shall be prohibited by the Company from
engaging in its ordinary course brokerage and trading activities in respect of
the Company's Common Stock; provided that the personnel engaged in such
activities have not been involved with the transactions contemplated hereby and
have not been provided with confidential information with respect to the
Company. No Purchaser shall engage in any trading activity in the Company's
securities in violation of Regulation M under the Exchange Act.
3.7 Use of Proceeds. The Company shall use the net proceeds from the sale
of the shares of Common Stock hereunder for working capital purposes.
3.8 Best Efforts. Each of the parties hereto shall use its best efforts to
satisfy each of the conditions to be satisfied by it as provided in Article IV
of this Agreement.
3.9 Form D. The Company agrees to file a Form D with respect to the
Preferred Stock and Warrants as required by Rule 506 under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
3.10 Corporate Existence. Until such time as all of the Purchasers provide
the Company with written notice that they do not beneficially own any shares of
Preferred Stock or Warrants, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company's assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq, the New York Stock Exchange or the American Stock Exchange.
13
ARTICLE IV.
CONDITIONS
4.1 Closing.
a. Conditions Precedent to the Obligation of the Company to Sell the Shares
of Preferred Stock and the Warrants. The obligation of the Company to sell the
shares of Preferred Stock and the Warrants is subject to the satisfaction or
waiver by the Company, at or before the Closing Date, of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of the
Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or before the Closing Date;
(iii) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Transaction Documents;
(iv) Required Approvals. All Required Approvals shall have been obtained;
and
(v) Agreement of Preferred Stockholders. The holders of the Company's
Series A1 Preferred Stock and Series B1 Preferred Stock shall have executed and
delivered a waiver and consent agreement substantially in the form of Exhibit D
annexed hereto.
b. Conditions Precedent to the Obligation of the Purchasers to Purchase the
Shares of Preferred Stock and Warrants at the Closing. The obligation of each
Purchaser hereunder to acquire and pay for the shares of Preferred Stock and the
Warrants at the Closing is subject to the satisfaction or waiver by Purchaser,
at or before the Closing Date, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all respects as of the date when made and as of the
Closing Date;
(ii) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or before the Closing Date;
(iii) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement and
the Transaction Documents;
(iv) Required Approvals. All Required Approvals shall have been obtained;
14
(v) Agreement of Preferred Stockholders. The holders of the Company's
Series A1 Preferred Stock and Series B1 Preferred Stock shall have executed and
delivered a waiver and consent agreement substantially in the form of Exhibit D
annexed hereto; and
(vi) Shares of Capital Stock. The Company shall have duly reserved the
number of shares of Preferred Stock, the number of Conversion Shares and the
number or Warrant Shares issuable upon the exercise of the Warrants acquired by
the Purchasers on the Closing Date.
c. Documents and Certificates. At the Closing, the Company shall have
delivered to the Purchasers, the following in form and substance reasonably
satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the form attached
hereto as Exhibit E dated as of the Closing Date;
(ii) Preferred Stock Certificate. A Preferred Stock Certificate(s)
representing the number of shares of Preferred Stock purchased by such Purchaser
as set forth next to such Purchaser's name on Schedule I, registered in the name
of such Purchaser, each in form satisfactory to the Purchaser;
(iii) Warrant. A Warrant(s) representing the Warrants purchased by such
Purchaser as set forth next to such Purchaser's name on Schedule I, registered
in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and delivered the
Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the Closing Date
and signed by an executive officer of the Company confirming the accuracy of the
Company's representations and warranties as of such Closing Date and confirming
the compliance by the Company with the conditions precedent set forth in this
Section 4.1(c) as of the Closing Date;
(vi) Secretary's Certificate. A Secretary's Certificate dated the Closing
Date and signed by the Secretary or Assistant Secretary of the Company
certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Closing Date,
(B) that attached thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Closing Date and (C) that attached thereto is a
true and complete copy of the Resolutions duly adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement and of the Transaction Documents, and that such Resolutions have not
been modified, rescinded or revoked;
(vii) Transfer Agent Letter. The Company shall have delivered to each
Purchaser a letter from the Company's transfer agent certifying the number of
shares of Common Stock outstanding as of a date within five days of the Closing
Date; and
15
(viii) Other Documents. The Company shall have delivered to each Purchaser
such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. The Company will indemnify and hold the Purchasers and
their directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any misrepresentation, breach or inaccuracy, or any
allegation by a third party that, if true, would constitute a breach or
inaccuracy, of any of the representations, warranties, covenants or agreements
made by the Company in this Agreement or in the other Transaction Documents; or
(b) any cause of action, suit or claim brought or made against such Purchaser
Party and solely arising out of or solely resulting from the execution,
delivery, performance or enforcement of this Agreement or any of the other
Transaction Documents. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. Notwithstanding the foregoing, the
Company shall not be required to indemnify any the Purchaser under the terms of
this Article V with respect to any claim or violation for which indemnification
is expressly excluded under the Registration Rights Agreement.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
6.2 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or by registered or certified
mail, return receipt requested, postage prepaid, or by telecopy and confirmed by
telecopy answerback addressed as follows:
16
If to the Company:
Xxxxx 0 Systems, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
With a Copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
If to the Purchasers: To the address set forth on the counterpart signature
page of such Purchaser or at such other address as may be substituted by notice
given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall be deemed to have
been duly given and effective on the earliest of (a) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
business day, (b) the next business day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a business day or later than 6:30
p.m. (New York City time) on any business day, (c) the business day following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. As used herein, a "business day" means any day except Saturday,
Sunday and any day which shall be a federal legal holiday or a day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.
6.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
6.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.5 References. References herein to Sections are to Sections of this
Agreement, unless otherwise expressly provided.
17
6.6 Successors and Assigns; Assignability. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by either the Company or the Purchasers without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. In the event that such prior written consent is obtained and this
Agreement is assigned by either party, all covenants contained herein shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns.
6.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.8 Governing Law; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
(each a "Proceeding") shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) 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. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
6.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive following the Closing.
6.10 Execution; Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
18
6.11 Publicity. The Purchasers shall not issue any press release or make
any public disclosure regarding the transactions contemplated hereby unless such
press release or public disclosure is approved by the Company in advance.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may be
advised by counsel is legally necessary or advisable, and may make such
disclosure as it is advised by its counsel is required by law. Company shall
give Purchasers the opportunity to review any statements prior to their release.
6.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
6.13 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.14 Replacement of Certificates. If any certificate or instrument
evidencing any shares of Preferred Stock is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement shares.
6.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to the Purchasers hereunder or pursuant to the Transaction Documents or
the Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
19
6.16 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under this
Agreement or the Transaction Documents. The parties agree that monetary damages
may not be adequate compensation for any loss incurred by reason of any breach
of obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
6.17 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under this Agreement or any Transaction Document
are several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under this Agreement or any Transaction Document. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant 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 or as
a group with respect to such obligations or the transactions contemplated by
this Agreement or any the Transaction Document. Each Purchaser 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 Purchaser to be joined as
an additional party in any proceeding for such purpose.
6.18 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, however, that the Company shall
reimburse Xxxxx Xxxxxxx Partners I, Ltd. at the Closing for actual fees and
expenses of its counsel.
6.19 Understanding Among the Purchasers. It is acknowledged by each
Purchaser that no Purchaser has acted as an agent of any other Purchaser in
connection with making its investment hereunder and that no Purchaser shall be
acting as an agent of any other Purchaser in connection with monitoring its
investment hereunder. It is further acknowledged by each of the other Purchasers
that Xxxxx Xxxxxxx Partners I, Ltd. has retained Akin, Gump, Strauss, Xxxxx &
Xxxx, L.L.P. ("Akin Gump") to act as its counsel in connection with the
transactions contemplated hereby and under the other Transaction Documents and
that Akin Gump has not acted as counsel for any of the other Purchasers in
connection therewith and that none of the other Purchasers have the status of a
client of Akin Gump for conflict of interest or other purposes as a result
thereof.
20
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the day and year first above written.
XXXXX 0 SYSTEMS, INC.
By:
-----------------------------------------
Xxxx X. Xxxxxxxxx
Chief Financial and Operating Officer,
Corporate Secretary
PURCHASERS:
[COUNTERPART SIGNATURE PAGES FOLLOW]
21
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the day and year first above written.
PURCHASER
(Name of Purchaser)
By:
-------------------------------------------------
(Signature of Purchaser(s))
Name:
--------------------------------------------
(Name of Signatory if Purchaser is an Entity)
Title:
----------------------------------------------
(if Purchaser is an Entity)
Purchase Price: $____________
Address for Notice:
------------------------------------------
------------------------------------------
------------------------------------------
With a copy to:
------------------------------------------
------------------------------------------
------------------------------------------
22
SCHEDULE I
Number of Shares of Number of Shares
Name and Preferred Stock Underlying
Address of Purchaser Residence at Closing Date Warrants Purchase Price
-------------------- --------- --------------- -------- --------------
Xxxx Xxxx New Jersey 150 98,684 $150,000
0000 Xxxxxxx Xxx
Xxxx Xxx, XX 00000
Xxxxx Xxxxxxxxxx Pennsylvania 25 16,447 $25,000
000 Xxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Xxxxxx Bank Pennsylvania 25 16,447 $25,000
The Xxxxxxxxxxx
000 Xxxx Xxxxxxxxxxx, #0000
Xxxxxxxxxxxx, XX 00000
Xxxxx Xxxxxx Massachusetts 50 32,895 $50,000
c/o Signet Management
00 Xxxxxx Xxx
Xxxxxxxxx, XX 00000-0000
Xxxxxx Xxxxxx New Jersey 100 65,789 $100,000
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxxxx Xxxxxx New York 25 16,447 $25,000
0000 Xxxx 00xx Xx
Xxxxxxxx, XX 00000
Xxxxxxxxx Xxxxxxx California 25 16,447 $25,000
0 Xxxxxx Xxxxx
Xxxxxx Xxxxxx, XX 00000
Xxxxxxx Xxxxxxxxx New Jersey 50 32,895 $50,000
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Xxx Xxxxx New Jersey 25 16,447 $25,000
00 Xxxxx Xxx
Xxxx, XX 00000
Xxxxx Xxxxxxx Partners I, Ltd. New York 175 115,132 $175,000
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Liraz Systems Ltd. Israel 125 82,237 $125,000
0 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx, 00000
Xxxx and Xxxxxxx Xxxxxx Florida 100 65,789 $100,000
000 Xxxxxxx Xxxxxxxxx, Xxx. #000
Xxx Xxxxxxxx, Xxxxxxx 00000
Xxxxxx Xxxx New York 140 92,105 $140,000
000 0xx Xxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxx New York 150 98,684 $150,000
000 Xxxxx Xxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxxx New York 50 32,895 $50,000
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxxxx, XX 00000
Xxxxxxx Xxxxx New York 40 26,316 $40,000
00 Xxxxxxxxxx Xxx
Xxxxxxxx, XX 00000
Xxxxxxx X. Xxxx New Jersey 150 98,684 $150,000
00 Xxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxxxx, XX 00000.
Xxxxxxx Xxxxx Connecticut 50 32,895 $50,000
00 Xxxxx Xxxx Xxx
Xxxxxx, XX 000000
Xxxxxx Xxxx New York 25 16,447 $25,000
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxxxxx North Carolina 10 6,579 $10,000
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX, 00000
Xxxx Xxxxx New York 25 16,447 $25,000
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Xxxxxx Family Associates LP New Jersey 50 32,895 $50,000
c/o ThinkCentric
0000 Xxxxx 0 Xxxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxx New York 25 16,477 $25,000
000 Xxxxxx Xxx, Xxxxxx Xxxxxx, XX,
XX 00000 SS# ###-##-####
Exhibit A
[Form of Certificate of Designation]
Exhibit B
[Form of Warrant]
Exhibit C
[Registration Rights Agreement]
Exhibit D
[Form of Consent and Waiver of Preferred Stockholders]
Exhibit E
[Form of Company Legal Opinion]
The Purchasers listed on Schedule I to the Purchase Agreement (as defined below)
Ladies and Gentlemen:
We have represented Level 8 Systems, Inc., a Delaware corporation (the
"Company"), in connection with the Securities Purchase Agreement, dated as of
August __, 2002 (the "Purchase Agreement"), by and among the Company and the
Purchasers listed on Schedule I to the Purchase Agreement (the "Purchasers"). We
have also represented the Company in connection with the Certificate of
Designation, the Registration Rights Agreement and the Warrants (together with
the Purchase Agreement, the "Transaction Documents"). This opinion is delivered
pursuant to Section 4.1(c)(i) of the Purchase Agreement. Except as otherwise
indicated, capitalized terms used herein are defined as set forth in the
Purchase Agreement.
In connection with this opinion, we have assumed the accuracy and completeness
of all documents and records that we have reviewed, the genuineness of all
signatures other than those of the Company, the authenticity of the documents
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as certified, conformed or reproduced copies.
We have further assumed that:
A. All natural persons involved in the transactions contemplated by the
Transaction Documents (the "Transactions") have sufficient power and legal
capacity to enter into and perform their respective obligations thereunder and
to carry out their roles in the Transactions.
B. Each entity which is a party to the Transactions, other than the
Company, has been duly organized and is validly existing and in good standing
under its jurisdiction of organization, with the corporate or other
organizational power to perform its obligations under the Transaction Documents,
that each of such entities has all requisite power and authority to enter into
and perform under the Transaction Documents, and that each party to the
Transactions other than the Company (collectively, the "Other Parties") has duly
authorized, executed and delivered each document to which they are a party.
C. Each Other Party has satisfied all legal requirements that are
applicable to it to the extent necessary to make the Transaction Documents to
which it is a party to be enforceable against it in accordance with their
respective terms.
D. The conduct of the parties to the Transactions complies with any
applicable requirement of good faith, fair dealing and conscionability.
E. The Company holds the requisite title (both legal and beneficial) and
rights to any property involved in the Transactions.
F. There has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence.
G. All statutes, judicial and administrative decisions, and rules and
regulations of governmental agencies, applicable to this opinion are generally
available to lawyers practicing in the State of Georgia and are in a format that
makes legal research reasonably feasible.
In connection with this opinion, we have examined such corporate records
and other documents and have made such examinations of law as we have deemed
necessary. In rendering this opinion, as to questions of fact material to this
opinion, we have relied to the extent we have deemed such reliance appropriate,
without investigation, on certificates and other communications from public
officials and certificates from officers of the Company, and on the
representations and warranties of the Company and the Other Parties set forth in
the Transaction Documents and the schedules and certificates delivered pursuant
thereto.
Wherever we indicate that our opinion with respect to the existence or
absence of facts is based on our knowledge, our opinion is based solely on the
current actual knowledge of factual matters that the attorneys in this firm who
are representing the Company in connection with the Transactions recognize as
being relevant to the opinions or confirmations being rendered, and we have
conducted no independent investigation of factual matters in connection with
this opinion. The opinions set forth below are subject to the following
limitations and qualifications:
(1) the effects of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting the rights and remedies of
creditors generally;
(2) the effects of general principles of equity, whether applied by a court of
law or equity, with respect to the performance and enforcement of the
Transaction Documents;
(3) the effect and possible unenforceability of contractual provisions
providing for choice of governing laws;
(4) we express no opinion as to the effect of any federal (except to the extent
provided herein) or state securities laws or blue sky laws;
(5) we express no opinion as to the enforceability of any non-competition,
non-solicitation or confidentiality covenant in any of the Transaction
Documents;
(6) we express no opinion as to patent, copyright, trademark and other
intellectual property law;
(7) we express no opinion as to the possible unenforceability of provisions
providing for the modification of an agreement without the consent of all
of the parties to such agreement;
(8) we express no opinion as to the possible unenforceability of provisions
providing for the jurisdiction of courts, venues of actions, the waiver of
any party's rights to a trial by jury, or in certain cases, notices;
(9) we express no opinion as to fraudulent conveyance, usury laws, or taxation
laws;
(10) we express no opinion as to the possible unenforceability of provisions
providing for indemnification and contribution for liabilities arising
under federal or state securities laws;
(11) we express no opinion as to the possible unenforceability of provisions
imposing increased payments or charges or providing for liquidated damages
to the extent any such provisions are deemed to be penalties or
forfeitures; and
(12) we express no opinion as to the possible unenforceability of provisions
that enumerated remedies are not exclusive or that a party has the right to
pursue multiple remedies without regard to the other remedies elected or
that all remedies are cumulative.
Based upon and subject to the foregoing, and to the further qualifications
and limitations set forth below, it is our opinion that:
1. The Company is duly incorporated as a corporation and is validly existing
and in good standing under the laws of the State of Delaware.
2. The Company has all requisite corporate power and authority to (a) own and
use its properties, (b) conduct its business as presently conducted, (c)
execute and deliver the Transaction Documents, to perform its obligations
thereunder and to consummate the Transactions, and (d) to issue, sell and
deliver the Preferred Stock, the Warrants and the Reserved Shares (as
described in paragraph 8 below).
3. The execution, delivery and performance by the Company of the Transaction
Documents have been duly authorized by all requisite corporate action and
the Company has duly executed and delivered each of the Transaction
Documents.
4. Assuming that, contrary to their terms, the Transaction Documents are
governed by the laws of the State of Georgia, and, contrary to the facts,
that the laws of Georgia are identical to the laws of the State of New York
in all respects, the Transaction Documents are enforceable against the
Company in accordance with their terms.
5. Except as set forth in the Purchase Agreement or the schedules thereto, the
execution and delivery by the Company of the Transaction Documents, the
performance by the Company of its obligations thereunder, and the
consummation of the Transactions (i) do not and will not conflict with or
violate any provisions of the Certificate of Incorporation or Bylaws of the
Company, and (ii) do not and will not result in a violation of, any law,
statute, rule or regulation, or any order, judgment or decree, known to us
to which the Company is subject or by which any of its assets are bound.
6. Other than the filings identified in the Registration Rights Agreement, the
Purchase Agreement and the schedules thereto, no consent, approval, order
or authorization of, or registration, declaration or filing with, any
federal or State of Delaware governmental authority is required for the
execution and delivery by the Company of the Transaction Documents and for
the consummation by the Company of the Transactions.
7. When issued in compliance with the terms and conditions of the Purchase
Agreement, the shares of Preferred Stock set forth on Schedule I to the
Purchase Agreement will be validly issued, fully paid and non-assessable.
When issued upon conversion of the Preferred Stock in compliance with the
terms and conditions of the Certificate of Designation or upon exercise of
the Warrants in compliance with the terms and conditions of the Warrants
(as applicable), the Reserved Shares will be validly issued, fully paid and
non-assessable.
8. The Company has duly reserved _____________ shares of Common Stock for
issuance upon conversion of the Preferred Stock and __________ shares of
Common Stock for issuance upon conversion of the Warrants (the "Reserved
Shares").
9. Based in part upon the representations of the Company and the Purchasers
contained in the Purchase Agreement, the offer and sale of the Preferred
Stock to the Purchasers is exempt from the registration requirements of the
Securities Act of 1933, as amended to date.
10. Except as disclosed by the Company on Schedule 2.1(k) (SEC Documents;
Financial Statements) to the Purchase Agreement, to our knowledge, (a) the
Company has filed all reports required to be filed by it pursuant to
Section 13(a), 14(a) or 15(d) of the Exchange Act, since December 31, 1999
(the "SEC Documents") on a timely basis and (b) as of their respective
dates, the SEC Documents (except for the financial statements and
schedules, operating statistics and other financial data included therein,
as to which we express no opinion) complied in all material respects as to
form with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
We hereby confirm to you that, to our knowledge, except as identified in
the Purchase Agreement and the schedules thereto there are no actions, suits,
proceedings, orders, investigations or claims pending or threatened against the
Company, at law or in equity, or before or by any court, governmental
department, commission, board, bureau, agency, arbitrator or other
instrumentality.
Our opinions expressed above are limited to the laws of the State of
Georgia, the corporate laws of the State of Delaware, and, subject to the
limitations set forth herein, the federal laws of the United States of America,
and we do not express any opinion herein concerning any other law. In addition,
we express no opinion herein concerning any statues, ordinances, administrative
decisions, rules or regulations of any county, town, municipality or special
political subdivision (whether created or enabled through legislative action at
the federal, state or regional level). This opinion is given as of the date
hereof and we assume no obligation to advise you of changes that may hereafter
be brought to our attention. This opinion is solely for the information of the
Purchasers, and is not to be quoted in whole or in part or otherwise referred
to, nor is it to be filed with any governmental agency or any other person
without our prior written consent. This opinion is rendered solely for the
benefit of the Purchasers and solely for the purposes of the Transactions and
should not be relied upon for any other purpose.
