--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
Between
XXXXXXXXX.XXX, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of September 30, 1999
--------------------------------------------------------------------------------
Exhibit 10.4
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September
30, 1999, among Xxxxxxxxx.Xxx, Inc., a Delaware corporation (the "Company"), and
the investors signatory hereto on the date hereof (each such investor is a
"Purchaser" and all such investors are, collectively, the "Purchasers").
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,
severally and not jointly, desire to purchase from the Company, shares of the
Company's common stock, $.001 par value per share (the "Common Stock"), and
certain other securities of the Company as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
(a) The Closing. (i) Subject to the terms and conditions set forth
in this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall purchase an aggregate of 784,616 shares of Common Stock (the
"Shares") for an aggregate purchase price of $5,100,000. The closing of the
purchase and sale of the Shares (the "Closing") shall take place at the offices
of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("Xxxxxxxx Xxxxxxxxx"), 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately following the
execution hereof or such later date as the parties shall agree. The date of the
Closing is hereinafter referred to as the "Closing Date."
(ii) At the Closing, the parties shall deliver or shall cause
to be delivered the following: (A) the Company shall deliver to each Purchaser
(1) a stock certificate representing the number of Shares indicated below such
Purchaser's name on the signature page of this Agreement, registered in the name
of such Purchaser, (2) a Common Stock purchase warrant, in the form of Exhibit
A, registered in the name of such Purchaser, pursuant to which such Purchaser
shall have the right to acquire shares of Common Stock upon the terms and in
such number as set forth therein (each an "Adjustable Warrant"), (3) a Common
Stock purchase warrant, in the form of Exhibit B, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire the
number of shares of Common Stock indicated below such Purchaser's name on the
signature page of this Agreement, upon the terms set forth therein, at an
exercise price per share (subject to adjustment as provided therein) of $7.50
(each, a "Closing Warrant" and together with the Adjustable Warrants, the
"Warrants"), (4) the legal opinion of Xxxxx & Xxxxxxx LLP, outside counsel to
the Company, substantially in the form of Exhibit C, and (5) all other
documents, instruments and writings required to be delivered at or prior to the
Closing by the Company pursuant to this Agreement, including an executed
Registration Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit D (the "Registration Rights Agreement"), and
the Transfer Agent Instructions, in the form of Exhibit E, delivered to and
acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); and (B) each Purchaser shall deliver to the Company (1) the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement in United States dollars in immediately available funds by wire
transfer to an account designated for such purpose prior to the Closing Date in
writing by the
Company, and (2) all documents, instruments and writings required to have been
delivered at or prior to the Closing Date by such Purchaser pursuant to this
Agreement, including an executed Registration Rights Agreement.
1.2 Certain Defined Terms. For purposes of this
Agreement,"Trading Day" and "Per Share Market Value" shall have the meanings set
forth in Exhibit A and "Business Day" shall mean 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 generally are authorized or required by
law or other governmental action to close. A "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
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State 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. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries is an
entity, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation or other entity 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, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Transfer
Agent Instructions or the Warrants (collectively, the "Transaction Documents"),
(y) have or result in a material adverse effect on the results of operations,
assets, prospects, or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
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. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective articles of incorporation, by-laws or other
charter or organizational documents.
(c) Capitalization. The number of authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). Except as
disclosed in Schedule 2.1(c), the Company owns all of the capital stock of each
Subsidiary. Except as disclosed in Schedule 2.1(c), no securities of the Company
or any Subsidiary are entitled to preemptive or similar rights, nor is any
holder of securities of the Company or any Subsidiary entitled to preemptive or
similar rights arising out of any agreement or understanding with the Company or
any Subsidiary by virtue of any of the Transaction Documents. Except as
disclosed in Schedule 2.1(c), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, except as a result of the purchase and sale of the
Securities, or rights or obligations convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Reports (as defined below) or
Schedule 2.1(c), no Person 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..
(d) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the terms hereof and the
Warrants, shall have been duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "Liens"). The Company has reserved a number of duly
authorized number of shares of Common Stock for issuance hereunder upon exercise
of the Warrants that is not less than the sum of (i) the aggregate number of
Shares to be issued hereunder; (ii) the maximum number of Underlying Shares (as
defined below) issuable upon exercise of the Adjustable Warrants, assuming that
the Per Share Market Value utilized to determine the number of such Underlying
Shares is 50% of the average Per Share Market Value on the Trading Day
immediately preceding the Closing Date; and (iii) the number of Underlying
Shares issuable upon exercise in full of the Closing Warrants (such number of
shares of Common Stock as contemplated in clauses (i), (ii) and (iii), the
"Initial Minimum"). The shares of Common Stock issuable upon exercise of the
Warrants are referred to herein as the "Underlying Shares." The Shares, the
Warrants and the Underlying Shares are collectively referred to herein as, the
"Securities."
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's articles of
incorporation, bylaws or other charter documents (each as amended through the
date hereof), or (ii) subject to obtaining the Required Approvals (as defined
below), and except as set forth in Schedule 2.1(e), 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 (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, 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 or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), as could not, individually
or in the aggregate, have or result in a Material Adverse Effect. The business
of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, could not have or result in
a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is 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 or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.11, (ii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Shares and the
Underlying Shares by the Purchasers (the "Underlying Shares Registration
Statement"), (iii) the application(s) to the Nasdaq National Market ("NASDAQ")
for the listing of the Shares and the Underlying Shares with the NASDAQ (and
with any other national securities exchange of market in which the Common Stock
is then listed) in the time and manner required thereby , (vi) applicable Blue
Sky filings, and (v) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (the items described in clauses (i)-(vi)
are collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specified in the SEC Reports,
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) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, individually or in the aggregate,
have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or 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 (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is in violation of any statute, rule or regulation of any governmental
authority, except as could not individually or in the aggregate, have or result
in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any Person acting on its
behalf has taken or is, to the knowledge of the Company, contemplating taking
any action which could subject the offering, issuance or sale of the Securities
to the registration requirements of the Securities Act including soliciting any
offer to buy or sell the Securities by means of any form of general solicitation
or advertising.
(j) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act of 1933, as amended
(the "Securities Act"), and the Exchange Act for the two years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein as
the "SEC Reports" and, together with the Schedules to this Agreement the
"Disclosure Materials") on a timely
basis or has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports 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
Reports, 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. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Reports. The financial statements of the Company
included in the SEC Reports 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. Since June 30,1999, except as specifically disclosed in the SEC
Reports, (a) there has been no event, occurrence or development that has or that
could result in a Material Adverse Effect, (b) the Company has not incurred any
liabilities (contingent or otherwise) other than (x) liabilities incurred in the
ordinary course of business consistent with past practice and (y) 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, (c) the
Company has not altered its method of accounting or the identity of its auditors
and (d) the Company has not declared or made any payment or distribution of cash
or other property to its stockholders or officers or directors (other than in
compliance with existing Company stock or stock option plans) with respect to
its capital stock, or purchased, redeemed (or made any agreements to purchase or
redeem) any shares of its capital stock.
(k) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. No fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other person, with respect to the transactions
contemplated by this Agreement. The Purchasers 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 that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and its respective Affiliates, from and against
all claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Form S-3 Eligibility. The Company is eligible to register its
Common Stock for resale under Form S-3 promulgated under the Securities Act.
(n) Listing and Maintenance Requirements. The Company has not, in
the two years preceding the date hereof, except for notice sent by NASDAQ to the
Company in error, received notice (written or oral) from the NASDAQ or any other
stock exchange, market or trading facility on which the Common Stock is or has
been listed (or on which it has been quoted) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such exchange,
market or trading
facility. 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.
(o) 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 rights
(collectively, the "Intellectual Property Rights") which are necessary or
material for use in connection with their respective business as described in
the SEC Reports and as contemplated to be conducted, and which the failure to so
have would have a Material Adverse Effect. Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or its Subsidiaries violates or infringes upon the rights of
any Person, to the best 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.
(p) 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 as described in the SEC Reports, except where the failure to possess
such permits could not, individually or in the aggregate, have or result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(q) Title. Except as set forth in Schedule 2.1(q), the Company and
the Subsidiaries have good and marketable title in fee simple to all real
property and 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,
except for Liens as do not materially affect the value of such property and do
not materially 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 materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.
(r) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided the Purchasers or their agents or counsel with
any information that constitutes or might constitute material non-public
information. The Company understands and confirms that the Purchasers shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. 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 not
misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable federal and state securities laws or under an exemption from such
registration. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any amount of time.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and at each exercise date
under the Warrants, it will be, an "accredited investor" as defined in Rule
501(a)(8) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has 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 Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such Purchaser
is able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of any Purchaser
or its representatives or counsel shall modify, amend or affect a Purchaser's
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that (i)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or has
made 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 OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company, without requiring a legal opinion as described in the immediately
preceding sentence, hereby consents to and agrees to register on the books of
the Company and with any transfer agent for the securities of the Company any
transfer of Securities by a Purchaser to an Affiliate of such Purchaser or to
one or more funds or managed accounts under common management with such
Purchaser, and any transfer among any such Affiliates or one or more funds or
managed accounts, provided that the transferee certifies to the Company that it
is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof). Any such transferee shall agree
in writing to be bound by the terms of this Agreement and shall have the rights
of the Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE 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.
Neither Shares nor Underlying Shares shall not contain the legend
set forth above nor any other legend at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Registration Statement at such time if such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that such Registration Statement is declared effective by the
Commission. The Company agrees that if any Shares or Underlying Shares are
issued with a legend in accordance with this Section 3.1(b), it will, within
three (3) Trading Days after request therefor by a Purchaser and the surrender
by such Purchaser of the certificate representing the applicable Shares or
Underlying Shares, provide such Purchaser with a
certificate or certificates representing such Shares or Underlying Shares, free
from such legend at such time as such legend would not have been required under
this Section 3.1(b) had such issuance occurred on the date of such request. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of Underlying Shares upon exercise of the Warrants will 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
to issue Underlying Shares upon exercise of the Warrants pursuant to the terms
thereof is unconditional and absolute regardless of the effect of any such
dilution.
3.3 Furnishing of Information. As long as the Purchasers own Securities,
the Company covenants to 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 the Exchange Act. So long as the
Purchasers own Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act such information as is required for the Purchasers to sell the
Securities under Rule 144 promulgated under the Securities Act. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell Underlying 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 this Section. 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.
3.4 Integration. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate 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
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of the Nasdaq Stock Market.
3.5 Increase in Authorized Shares. If on any date the Company would be, if
a notice of exercise were to be delivered on such date, precluded from issuing
200% of the number of Underlying Shares as would then be issuable upon exercise
in full of the Adjustable Warrants (the "Current Required Minimum") due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly (and in any case, within 30 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting authorization
to amend the Company's articles of incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least such
number of shares as is reasonably adequate to enable the Company to comply with
its issuance, exercise and reservation of shares obligations as set forth in
this Agreement and the Warrants (the sum of (x) the number of shares of Common
Stock then outstanding plus all shares of Common Stock issuable upon exercise of
all outstanding options, warrants and convertible instruments other than the
Adjustable Warrants, and (y) the Current Required Minimum, shall be a reasonable
number). In connection therewith, the Board of Directors shall (a) adopt proper
resolutions authorizing such increase, (b) recommend to and otherwise use its
best efforts to promptly and duly obtain stockholder approval to carry out such
resolutions (and hold a special meeting of the stockholders no later than the
earlier to occur of the 60th day after delivery of the proxy materials relating
to such meeting and the 90th day after request by a holder of Warrants to issue
the number of Underlying Shares in accordance with the terms hereof) and (c)
within five (5)
Business Days of obtaining such stockholder authorization, file an appropriate
amendment to the Company's articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
(i) in the time and manner required by the NASDAQ and such other national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed for trading, prepare and file with the NASDAQ (and
such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed for trading) an additional
shares listing application covering a number of shares of Common Stock which is
not less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing in the NASDAQ (as well as on
any such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchasers evidence of such listing, and
the Company shall maintain the listing of its Common Stock thereon. If the
number of Underlying Shares issuable upon exercise of the then unexercised
portion of the Adjustable Warrants exceeds 85% of the number of Underlying
Shares previously listed on account thereof with NASDAQ (and any such other
required exchanges), then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum with respect thereto.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon exercise in full of the Warrants in accordance with the
Warrants, in such amount as may be required to fulfill its obligations in full
under the Warrants, which reserve shall equal no less than the then Current
Required Minimum.
3.7 Exercise Procedures. The Transfer Agent Instructions and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the exercise of the Warrants, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the Purchasers to exercise the Warrants.
3.8 Notice of Breaches. Each of the Company and the Purchasers shall give
prompt written notice to the other of any breach by it of any representation,
warranty or other agreement contained in any Transaction Document, as well as
any events or occurrences arising after the date hereof which would reasonably
be likely to cause any representation or warranty or other agreement of such
party, as the case may be, contained therein to be incorrect or breached as of
the Closing Date. However, no disclosure by a party pursuant to this Section
shall be deemed to cure any breach of any representation, warranty or other
agreement contained in any Transaction Document.
3.9 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities or a transaction intended to be exempt or not subject to registration
under the Securities Act (a "Subsequent Placement") until the 180th day after
the Underlying Shares Registration Statement is first declared effective by the
Commission, except (i) the granting of options or warrants to employees,
officers and directors, and the issuance of shares upon exercise of options
granted, under any stock option plan heretofore or hereinafter duly adopted by
the Company, (ii) shares of Common Stock issuable upon exercise of currently
outstanding options and warrants and upon conversion of any currently
outstanding convertible securities of the Company, in each case to the extent
disclosed in Schedule 2.1(c) but not with respect to any amendment or
modification thereof, and (iii) shares of Common Stock issuable upon exercise of
the Warrants in
accordance with the terms thereof, unless (A) the Company delivers to each
Purchaser a written notice (the "Subsequent Placement Notice") of its intention
effect such Subsequent Placement, which Subsequent Placement Notice shall
describe in reasonable detail the proposed terms of such Subsequent Placement,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Placement shall be effected, and attached to which shall be a
term sheet or similar document relating thereto and (B) such Purchaser shall not
have notified the Company by 5:30 p.m. (New York City time) on the fifth (5th)
Trading Day after its receipt of the Subsequent Placement Notice of its
willingness to cause such Purchaser to provide (or to cause its sole designee to
provide), subject to completion of mutually acceptable documentation, financing
to the Company on the same terms set forth in the Subsequent Placement Notice.
If the Purchasers shall fail to notify the Company of their intention to enter
into such negotiations within such time period, the Company may effect the
Subsequent Placement substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Placement Notice;
provided, that the Company shall provide the Purchasers with a second Subsequent
Placement Notice, and the Purchasers shall again have the right of first refusal
set forth above in this Section (a), if the Subsequent Placement subject to the
initial Subsequent Placement Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Placement Notice within thirty
(30) Trading Days after the date of the initial Subsequent Placement Notice with
the Person (or an Affiliate of such Person) identified in the Subsequent
Placement Notice. The rights of the Purchasers under this Section shall apply to
each Subsequent Placement contemplated by the Company or such Subsidiary,
regardless of any prior waivers or non-participation.
(b) Except for (w) Shares, (x) Underlying Shares, (y) other
"Registrable Securities" (as such term is defined in the Registration Rights
Agreement) to be registered, and securities of the Company as set forth in
Schedule 6(b) of the Registration's Rights Agreement to be registered, in the
Underlying Shares Registration Statement in accordance with the Registration
Rights Agreement, and (z) Common Stock permitted to be issued pursuant to
paragraph (a)(i) - (iii) of Section 3.9 (a), the Company shall not, for a period
of not less than 90 Trading Days after the date that the Underlying Shares
Registration Statement is declared effective by the Commission, without the
prior written consent of the Purchasers (i) issue or sell any of its or any of
its Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) file a registration statement for
the issuance or resale of any securities of the Company. Any days that a
Purchaser is not permitted or unable to utilize the prospectus or otherwise to
sell Underlying Shares under the Underlying Shares Registration Statement shall
be added to such 90 Trading Day period for the purposes of this Section.
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
(i) on the Closing Date, issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K or Form 10-Q (as applicable) disclosing the transactions
contemplated hereby within ten (10) Business Days after the Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the Securities
Act as required under Regulation D promulgated under the Securities Act and
provide a copy thereof to the Purchasers promptly after the filing thereof. The
Company shall, no less than two (2) Business Days prior to the filing of any
disclosure required by clauses (ii) and (iii) above, provide a copy thereof to
the Purchasers. The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications pertaining to the transactions
contemplated hereby without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except that no prior
consent shall be required if such disclosure is required by law and such consent
can not reasonably be expected to be received prior to the time required to
complete such filing or make such statement in accordance with such applicable
law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of a Purchaser, or include the name of a Purchaser in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of such Purchaser, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law, in which case the Company shall provide such Purchaser with
prior notice of such disclosure.
3.11 Transfer of Intellectual Property Rights. Except in connection with
the sale of all or substantially all of the assets of the Company, the Company
shall not transfer, sell or otherwise dispose of any Intellectual Property
Rights, or allow any of the Intellectual Property Rights to become subject to
any Liens, or fail to renew such Intellectual Property Rights (if renewable and
it would otherwise lapse if not renewed).
3.12 Use of Proceeds. The Company shall use the net proceeds from the sale
of Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than trade payables in
the ordinary course of business), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation. Pending
application of the proceeds of this placement in the manner permitted hereby,
the Company will invest such proceeds in interest bearing accounts and/or
short-term, investment grade interest bearing securities.
3.13 Reimbursement. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or entity in connection with
the transactions contemplated by this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Xxxxxxxx
Xxxxxxxxx $25,000 for the preparation and negotiation of the Transaction
Documents. The $25,000 may be deducted from the proceeds of the Purchase Price
payable to the Company and paid directly by the Purchasers to Xxxxxxxx
Xxxxxxxxx. Other than the amounts contemplated in the immediately preceding
sentence, and except as otherwise 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. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents, together with
the Exhibits and Schedules thereto 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,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
4.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Xxxxxxxxx.Xxx, Inc.
000 Xxxxxx Xxxxxx,
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 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 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.
4.5 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.
4.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 Governing Law. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents 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 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 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 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.
4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and exercise of the
Warrants.
4.10 Execution. 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) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 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 affecting 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.
4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its 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.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is 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 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 with respect to such obligations or
the transactions contemplated by 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 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
XXXXXXXXX.XXX, INC..
By:
---------------------------------------
Name:
Title:
STRONG RIVER INVESTMENTS, INC.
By:
---------------------------------------
Name:
Title:
Purchase Price for Common Stock
to be acquired at Closing: $2,550,000
Number of Shares to be acquired at
Closing: 392,308
Warrant Shares subject to Closing
Warrant; 78,461
Address for Notice:
Strong River Investments, Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Avi Vigder
With copies to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and
(000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx X. Xxxxx, Esq.
MONTROSE INVESTMENTS L.P.
By:
---------------------------------------
Name:
Title:
Purchase Price for Common Stock
to be acquired at Closing: $2,550,000
Number of Shares to be acquired at
Closing: 392,307
Warrant Shares subject to Closing
Warrant; 78,461
Address for Notice:
Montrose Investments, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxx
Xxx Xxxxxx
With copies to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and
(000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx X. Xxxxx, Esq.
