EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
XxxxXxxx.xxx
Suite 500
0000 Xxxxxxxxx Xxxxxxx Xxxx.
Xx. Xxxxx, Xxxxxxx 00000
Ladies & Gentlemen:
The undersigned, __________________ (the "Investor"), hereby confirms
its agreement with you as follows:
1. This Securities Purchase Agreement (the "Agreement") is made effective
as of July 14, 2003 between XxxxXxxx.xxx, a Nevada corporation (the "Company"),
and the Investor.
2. The Company has authorized the issuance and sale of up to 1,000,000
shares of common stock of the Company, $0.001 par value per share (the "Common
Stock"), subject to adjustment by the Company's Board of Directors. Shares of
Common Stock issued and sold by the Company are sometimes hereinafter referred
to as "Primary Shares."
3. The Company and the Investor agree that the Investor will purchase from
the Company ____ shares (the "Shares"), which will be sold for a purchase price
of $20.27 per Share, or an aggregate purchase price of $_________ pursuant to
the Terms and Conditions for Purchase of Shares attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein. Unless otherwise
requested by the Investor, certificates representing the Shares purchased by the
Investor will be registered in the Investor's name and address as set forth
below.
4. The Investor represents that, except as set forth below, (a) it has
currently and within the past five years has had no position, office or other
relationship with the Company or its affiliates including, without limitation,
the Company's parents and subsidiaries, (b) neither it, nor any group of which
it is a member or to which it is related, beneficially owns (including the right
to acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any member of the National Association
of Securities Dealers, Inc. Exceptions:
_______________________________________________________________________________
_______________________________________________________________________________.
(If no exceptions, write "none." If left blank, response will
be deemed to be "none.")
5. Without limiting the foregoing, the Investor hereby makes all of the
Representations, Warranties and Covenants of the Investor set forth in Section 6
of the Terms and Conditions for Purchase of Shares attached hereto as Annex I.
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
__________________________________
"INVESTOR"
By: _________________________________________
Print Name: _________________________________
Title: ______________________________________
Address: ____________________________________
Tax ID No.: _________________________________
Contact name: _______________________________
Telephone: __________________________________
Facsimile: __________________________________
Name in which Shares should be registered
(if different): _____________________________
AGREED AND ACCEPTED:
XxxxXxxx.xxx
__________________________________
By: _________________________
Title: _________________________
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. Authorization and Sale of the Shares. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of up to
1,000,000 Primary Shares. The Company reserves the right to increase or decrease
these numbers in its sole discretion.
2. Agreement to Sell and Purchase the Shares; Subscription Date.
2.1 At the Closing (as defined in Section 3), the Company
will sell to the Investor, and the Investor will purchase from the Company, upon
the terms and conditions hereinafter set forth, the number of Shares set forth
on the signature page hereto at the purchase price set forth on such signature
page.
2.2 The Company is entering into this same form of
Securities Purchase Agreement with certain other investors (collectively, the
"Other Investors") effective as of the date hereof (the "Subscription Date"),
and expect to complete sales of Shares to them. (The Investor and the Other
Investors are hereinafter sometimes collectively referred to as the "Investors,"
and this Agreement and the Securities Purchase Agreements executed by the Other
Investors are hereinafter sometimes collectively referred to as the
"Agreements.")
3. Delivery of the Shares at Closing. The completion of the
purchase and sale of the shares (the "Closing") shall occur on the Subscription
Date (the "Closing Date"), at the offices of the Company's counsel.
At the Closing, the Company shall deliver to the Investor one or more
stock certificates representing the number of Shares set forth on the signature
page hereto, each such certificate to be registered in the name of the Investor
or, if so indicated on the signature page hereto, in the name of a nominee
designated by the Investor. The Company's obligation to issue the Shares to the
Investor shall be subject to the following conditions, any one or more of which
may be waived by the Company: (a) receipt by the Company of a certified or
official bank check or wire transfer of funds in the full amount of the purchase
price for all such Primary Shares being purchased hereunder; (b) completion of
the purchases and sales under the Agreements with the Other Investors such that
a minimum of 1,000,000 shares are sold pursuant to the Agreements; and (c) the
accuracy of the representations and warranties made by the Investors and Other
Investors pursuant to Section 6 hereof and the fulfillment of those undertakings
of the Investors and Other Investors to be fulfilled prior to the Closing and
(d) on the Closing Date, no legal action, suit or proceeding shall be pending or
threatened which seeks to restrain or prohibit the transactions contemplated by
the Agreements.
The Investor's obligation to purchase the Shares shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) receipt by the Investor or its authorized agent of one or more
stock certificates representing the number of Shares purchased set forth on the
signature page hereto; (b) the accuracy of the representations and warranties
made by the Company pursuant to Section 4 , and the fulfillment of those
undertakings of the Company to be fulfilled prior to the Closing; (c) on the
Closing Date, no legal action, suit or proceeding shall be pending or
threatened which seeks to restrain or prohibit the transactions contemplated by
the Agreements; (d) the Company shall have delivered to the Investors its
certificate, dated the Closing Date, duly executed by its Chief Executive
Officer to the effect set forth in clause (e) above; (f) the receipt by the
Investors of a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of the Company certifying (i) the certificate of
incorporation and bylaws of the Company as in effect on the Closing Date, (ii)
all resolutions of the board of directors (and committees thereof) of the
Company relating to the Agreements and the transactions contemplated thereby and
(iii) the incumbency of all officers of the Company executing the Agreements and
any other agreement or document contemplated thereby; and (g) receipt by the
Investor of an opinion letter, dated as of the Closing Date, from Porter,
Wright, Xxxxxx & Xxxxxx LLP, counsel to the Company, in form of Exhibit A
hereto.
4. Representations, Warranties and Covenants of the Company.
Except as otherwise described in the Company's SEC Documents (as defined in
Section 4.4), which qualify the following representations, warranties and
covenants in their entirety, the Company hereby represents and warrants to, and
covenants with, the Investor, as follows:
4.1 Organization. Each of the Company and its
Subsidiaries (as defined in Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act") is duly organized and validly existing in good
standing under the laws of the jurisdiction of its organization. Each of the
Company and its Subsidiaries has full power and authority to own, operate and
occupy its properties and to conduct its business as presently conducted and is
registered or qualified to do business and in good standing in each jurisdiction
in which it owns or leases property or transacts business and where the failure
to be so qualified would have a material adverse effect upon the financial
condition or business, operations or assets of the Company and its Subsidiaries,
considered as one enterprise, and no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
4.2 Due Authorization. The Company has all requisite
power and authority to execute, deliver and perform its obligations under the
Agreements, and the Agreements have been duly authorized and validly executed
and delivered by the Company and constitute legal, valid and binding agreements
of the Company enforceable against the Company in accordance with their terms,
except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.3 Non-Contravention. The execution and delivery of the
Agreements, the issuance and sale of the Primary Shares to be sold by the
Company under the Agreements, the fulfillment of the terms of the Agreements and
the consummation of the transactions contemplated thereby will not (A) conflict
with or constitute a violation of, or default (with or without the giving of
notice or the passage of time or both) under, (i) any material bond, debenture,
note or other evidence of indebtedness, or under any material lease, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or any Subsidiary
is a party or by which it or any of its Subsidiaries or their respective
properties are bound, (ii) the charter, by-laws or other organizational
documents of the Company or any Subsidiary, or (iii) any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company or any Subsidiary or their
respective properties, except where such conflict, violation or default would
not have a material adverse effect on the financial condition or results of
operations of the Company and Subsidiaries taken as one enterprise, (B) result
in the creation or imposition of any lien, encumbrance, claim, security interest
or restriction whatsoever upon any of the material properties or assets of the
Company or any Subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them is bound or to which any of the
property or assets of the Company or any Subsidiary is subject. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, self-regulatory
organization, stock exchange or market, or other governmental body in the United
States is required for the execution and delivery of the Agreements and the
valid issuance and sale of the Primary Shares to be sold pursuant to the
Agreements, other than such as have been made or obtained, and except for any
securities filings required to be made under federal or state securities laws.
4.4 Reporting Status. The Company has filed in a timely
manner all documents that the Company was required to file under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), during the 12 months
preceding the date of this Agreement. The following documents complied in all
material respects with the SEC's requirements as of their respective filing
dates, and the information contained therein as of the date thereof did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under where they were made not misleading, except to
the extent that information contained in any such document has been revised or
superseded by a later filed SEC Document (as defined below):
(i) The Company's Annual Report on Form 10-KSB and
Amendment No. 1 to Form 10-KSB for the year ended
December 31, 2002, including the exhibits thereto
(the "Form 10-KSB"); and
(ii) all other documents, including the exhibits thereto,
filed by the Company with the SEC since December 31,
2002, pursuant to the reporting requirements of the
Exchange Act (together with the Form 10-KSB, the "SEC
Documents").
The SEC Documents, when taken together as a whole, as of the
date hereof, do not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made not
misleading.
4.5 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 50,000,000 shares of Common Stock and
500,000 shares of preferred stock, par value $.001 per share, of the Company
(the "Preferred Stock"). As of March 31, 2003, there were approximately (i)
18,747,127 shares of Common Stock issued and outstanding, (ii) 0 shares of
Preferred Stock issued and outstanding, (iii) 1,766,839 shares of Common Stock
reserved for issuance upon the exercise or conversion of options, warrants or
convertible securities granted or issuable by the Company, not including the
Company's 1999 Stock Incentive Plan and (iv) 3,377,988 shares reserved for
issuance under the Company's 1999 Stock Incentive Plan. All outstanding shares
of Common Stock are duly authorized, validly issued, fully paid and
nonassessable, free from any liens or any other encumbrances created by the
Company with respect to the issuance and delivery thereof and not subject to
preemptive rights. The Primary Shares to be sold pursuant to the Agreements have
been duly authorized, and when issued and paid for in accordance with the terms
of the Agreements will be duly and validly issued, fully paid and nonassessable,
free and clear of all pledges, liens, encumbrances and other restrictions (other
than those arising under federal or state securities laws as a result of the
private placement of the Primary Shares to the Investors). Either no preemptive
right, co-sale right, right of first refusal or other similar right exists with
respect to the Primary Shares or the issuance and sale thereof, or if any such
preemptive right, co-sale right, right of first refusal or other similar right
exists, it has been waived with respect to the Primary Shares or the issuance
and sale thereof. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Primary Shares.
4.6 Legal Proceedings. There is no material legal or
governmental proceeding pending or, to the knowledge of the Company, threatened
to which the Company or any Subsidiary or any officer or director of the Company
or any Subsidiary in their capacity as such officer or director is or may be a
party or of which the business or property of the Company or any Subsidiary is
subject that is not disclosed in the SEC Documents. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body (including, without limitation, the SEC) pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries wherein an unfavorable decision, ruling or finding could adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under the Agreements.
4.7 No Violations. Neither the Company nor any Subsidiary
is in violation of its charter, bylaws, or other organizational document, or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the business, operations,
assets or financial condition of the Company and its Subsidiaries, considered as
one enterprise, or is in default (and there exists no condition which, with or
without the passage of time or giving of notice or both, would constitute a
default) in any material respect in the performance of any bond, debenture, note
or any other evidence of indebtedness in any indenture, mortgage, deed of trust
or any other material agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound or by
which the properties of the Company or any Subsidiary are bound, which would be
reasonably likely to have a material adverse effect upon the business,
operations, assets or financial condition of the Company and its Subsidiaries,
considered as one enterprise.
4.8 Governmental Permits, Etc. With the exception of the
matters which are dealt with separately in Section 4.1, 4.4, 4.13 and 4.14, each
of the Company and its Subsidiaries has
all necessary franchises, licenses, certificates and other authorizations from
any foreign, federal, state or local government or governmental agency,
department, or body that are currently necessary for the operation of the
business of the Company and its Subsidiaries as currently conducted, except
where the failure to currently possess could not reasonably be expected to have
a material adverse effect upon the business, operations, assets or financial
condition of the Company and its Subsidiaries, considered as one enterprise.
4.9 Intellectual Property. Except as otherwise disclosed
in the SEC Documents, each of the Company and its Subsidiaries owns or possesses
sufficient rights to use all patents, patent rights, trademarks, copyrights,
licenses, inventions, trade secrets, trade names and know-how (collectively,
"Intellectual Property") that are necessary for the conduct of its business as
now conducted, and as proposed to be conducted in the SEC Documents, except
where the failure to currently own or possess could not reasonably be expected
to have a material adverse effect on the financial condition or business of the
Company and its Subsidiaries considered as one enterprise. Except as set forth
in the SEC Documents, (i) neither the Company nor any of its Subsidiaries has
received any notice of, or has any knowledge of, any infringement of asserted
rights of a third party with respect to any Intellectual Property that,
individually or in the aggregate, would have a material adverse effect on the
financial condition or business, operations or assets of the Company and its
Subsidiaries considered as one enterprise and (ii) neither the Company nor any
of its Subsidiaries has received any notice of any infringement rights by a
third party with respect to any Intellectual Property that, individually or in
the aggregate, would have a material adverse effect upon the business,
operations, assets or financial condition of the Company and its Subsidiaries,
considered as one enterprise.
4.10 Environmental Matters. The Company and its
Subsidiaries (i) are in compliance in all material respects with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
have received all material permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
4.11 Financial Statements. The financial statements of the
Company and the related notes thereto included in the SEC Documents present
fairly in all material respects, in accordance with generally accepted
accounting principles, the financial position of the Company and its
Subsidiaries as of the dates indicated, and the results of its operations and
cash flows for the periods therein specified. Such financial statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods therein specified, except as set forth in the SEC Documents and subject
in the case of unaudited financial statements, to normal year-end audit
adjustments.
4.12 No Material Adverse Change. Except as disclosed in
the SEC Documents, since December 31, 2002 there has not been (i) any material
adverse change in the financial
condition or earnings of the Company and its Subsidiaries considered as one
enterprise nor has any material adverse event occurred to the Company or its
Subsidiaries, (ii) any material adverse event affecting the Company or any of
its Subsidiaries, (iii) any obligation, direct or contingent, that is material
to the Company and its Subsidiaries considered as one enterprise, incurred by
the Company, except obligations incurred in the ordinary course of business,
(iv) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its Subsidiaries, or (v) any loss or
damage (whether or not insured) to the physical property of the Company or any
of its Subsidiaries which has been sustained which has a material adverse effect
on the condition (financial or otherwise), earnings, operations or business of
the Company and its Subsidiaries considered as one enterprise. Except as
disclosed in the SEC Documents, neither the Company nor any of its Subsidiaries
has (i) sold, assigned, transferred, abandoned, mortgaged, pledged or subjected
to lien any of its material properties, tangible or intangible, or rights under
any material contract, permit, license, franchise or other agreement or (ii)
waived or cancelled any material indebtedness or other obligations owed to the
Company or any such Subsidiary.
4.13 NASDAQ Listing. The Company's Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is listed on The
Nasdaq Stock Market, Inc. National Market (the "Nasdaq National Market"), and
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
de-listing the Common Stock from the Nasdaq National Market, nor to the
Company's knowledge is the National Association of Securities Dealers, Inc.
("NASD") currently contemplating terminating such listing. The Company and the
Common Stock currently meet the criteria for continued listing and trading on
the Nasdaq National Market.
4.14 Listing of the Shares. The Company shall comply with
all requirements of the National Association of Securities Dealers, Inc. with
respect to the issuance of the Primary Shares and the listing thereof on the
Nasdaq National Market. In furtherance thereof, the Company shall use its best
efforts to take such actions as may be necessary and as soon as practicable and
in no event later than 20 days after the Closing Date to file with the Nasdaq
National Market an application or other document required by the Nasdaq National
Market and pay all applicable fees for the listing of the Primary Shares with
the Nasdaq National Market and shall provide evidence of such filing to the
Investors. The Company knows of no reason why the Primary Shares will not be
eligible for listing on the Nasdaq National Market.
4.15 No Manipulation of Stock. The Company has not taken
and will not, in violation of applicable law, take, any action designed to or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
4.16 S-3 Status. The Company meets the requirements for
filing Form S-3 for the registration of the resale of the Shares by the
Investors and will use its best efforts to maintain S-3 status with the SEC
during the Registration Period (as defined in Section 8.1(e)).
4.17 Insurance. The Company maintains and will continue to
maintain insurance against loss or damage by fire or other casualty and such
other insurance, including, but not limited to, product liability insurance, in
such amounts and covering such risks as is reasonably adequate
consistent with industry practice for the conduct of its business and the value
of its properties, all of which insurance is in full force and effect.
4.18 Tax Matters. The Company has filed all material
federal, state and local income and franchise and other tax returns required to
be filed and has paid or accrued all taxes due in accordance therewith, and no
tax deficiency has been determined adversely to the Company which has had (nor
does the Company have any knowledge of any tax deficiency which, if determined
adversely to the Company, might have) a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the Company and
its Subsidiaries considered as one enterprise.
4.19 Investment Company. The Company is not an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the SEC thereunder and will not become an
investment company upon the receipt and application of the net proceeds of this
offering.
4.20 No Registration. Assuming the accuracy of the
representations and warranties made by, and compliance with the covenants of,
the Investors and Other Investors in Section 6 hereof, no registration of the
Shares under the Securities Act is required in connection with the offer and
sale of the Shares by the Company to the Investors as contemplated by the
Agreements.
4.21 Intentionally Omitted.
4.22 Form D. The Company agrees to file one or more Forms
D with respect to the Primary Shares on a timely basis as required under
Regulation D under the Securities Act to claim the exemption provided by Rule
506 of Regulation D and to, upon request, provide a copy thereof to the
Investors and their counsel.
4.23 Certain Future Financings and Related Actions.
(a) The Company will not sell, offer to sell,
solicit offers to buy or otherwise negotiate in respect of any "security" (as
defined in the Securities Act) that is or could be integrated with the sale of
the Shares in a manner that would require the registration of the Shares under
the Securities Act.
(b) The Company shall not offer, sell, contract
to sell or issue (or engage any person to assist the Company in taking any such
action) any equity securities or securities convertible into, exchangeable for
or otherwise entitling the holder to acquire, any Common Stock at a price below
the market price of the Common Stock during the period from the date of this
Agreement to the effective date of the Registration Statement; provided,
however, that nothing in this Section 4.23(b) shall prohibit the Company from
issuing securities (v) to employees, directors, officers, advisors or
consultants of the Company; (w) upon exercise of conversion, exchange, purchase
or similar rights issued, granted or given by the Company and outstanding as of
the date of this Agreement; (x) pursuant to a public offering underwritten on a
firm commitment basis registered under the Securities Act; (y) for the purpose
of funding the acquisition of securities or assets of any entity in a single
transaction or a series of related transactions; or (z) pursuant to a strategic
partnership or alliance agreement, loan agreement, equipment lease or similar
commercial agreement (including licensing and similar arrangements).
4.24 Use of Proceeds. The Company will use the net
proceeds from the sale of Primary Shares for geographic expansion and
opportunistic strategic acquisitions as well as working capital and other
general corporate purposes.
4.25 Anti-Takeover. The issuance and sale of the Primary
Shares shall not violate Nevada Revised Statutes sections 78.411 to 78.444
inclusive and Nevada Revised Statutes section 78.378 to 78.3793 inclusive,
however, such statutes may limit the Investors' ability to acquire additional
shares of the Company's Common Stock in the future.
5. [RESERVED]
6. Representations, Warranties and Covenants of the Investor. The
Investor hereby represents and warrants to, and covenants with, the Company as
follows:
6.1 (i) The Investor is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act, or a non-U.S.
person as defined in Regulation S promulgated under the Securities Act and the
Investor has the knowledge, sophistication and experience necessary to make, and
is qualified to make decisions with respect to, investments in shares presenting
an investment decision like that involved in the purchase of the Shares,
including investments in securities issued by the Company and investments in
comparable companies, and has requested, received, reviewed and considered all
information it deemed relevant in making an informed decision to purchase the
Shares, including without limitation, the Confidential Private Placement
Memorandum dated July 10, 2003, as supplemented by the Company, and all exhibits
attached thereto and incorporated by reference therein (the "Memorandum")and
information regarding Espotting Media, Inc.; (ii) the Investor is acquiring the
number of Shares set forth on the signature page hereto for its own account for
investment only and with no present intention of distributing any of the Shares
in violation of the Securities Act or any arrangement or understanding with any
other persons regarding the distribution of such Shares; (iii) the Investor is
able, without materially impairing its financial condition to hold the Shares
for an indefinite period of time and to suffer a complete loss of its
investment; (iv) the Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder; (v) the Investor has filled in all
requested information on the signature page hereto for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (vi) the
Investor will notify the Company promptly of any change in any of such
information until such time as the Investor has sold all of its Shares or until
the Company is no longer required to keep the Registration Statement effective;
(vii) the Investor has, in connection with its decision to purchase the number
of Shares set forth on the signature page hereto, relied only upon the SEC
Documents, other publicly available information, and the representations and
warranties of the Company contained herein, (viii) Investor acknowledges that
the Company does not have audited financial statements for Espotting Media, Inc.
and that Investor has decided to go forward with this transaction without such
financial statements; and (ix) there is no assurance that
the Company's pending acquisition of Espotting Media, Inc. will be consummated.
The Investor understands that its acquisition of the Shares has not been
registered under the Securities Act or registered or qualified under any state
securities laws in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the truth and accuracy of, and the
Investor's compliance with, the representations, warranties, agreements and
covenants of the Investor set forth in this Agreement and the bona fide nature
of the Investor's investment intent as expressed herein.
6.2 The Investor acknowledges that the Company has
represented that no action has been or will be taken in any jurisdiction outside
the United States by the Company that would permit an offering of the Shares, or
possession or distribution of offering materials in connection with the issue of
the Shares, in any jurisdiction outside the United States where action for that
purpose is required. If the Investor is located or domiciled outside the United
States it agrees to comply with all applicable laws and regulations in each
foreign jurisdiction in which it purchases, offers, sells, or delivers Shares or
has in its possession or distributes any offering material, in all cases at its
own expense.
6.3 The Investor hereby covenants with the Company that
the Investor has not been formed for the sole purpose of acquiring the Shares
and covenants not to make any sale of the Shares without complying with the
provisions of this Agreement, including Section 8.2 hereof, provided that the
Company complies with its obligations under Section 8.1, without effectively
causing the prospectus delivery requirement under the Securities Act to be
satisfied, if applicable, and the Investor acknowledges that the certificates
evidencing the Shares will be imprinted with a legend that prohibits their
transfer except in accordance therewith. The Investor acknowledges that there
may occasionally be times when the Company, based on the advice of its counsel,
determines that, subject to the limitations of Section 8.2, it must suspend the
use of the Prospectus forming a part of the Registration Statement until such
time as an amendment to the Registration Statement has been filed by the Company
and declared effective by the SEC or until the Company has amended or
supplemented such Prospectus.
6.4 The Investor further represents and warrants to, and
covenants with, the Company that (i) the Investor has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery, and performance of this Agreement and (ii) this
Agreement constitutes a valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification and contribution agreements
of the Investors herein may be legally unenforceable.
6.5 The Investor understands and agrees that all Shares
may not be transferred by Investors in the absence of an effective registration
statement under the Securities Act or evidence acceptable to the Company and its
counsel, which may include an opinion of counsel, that
registration is not required. The Investor understands and agrees that the
Certificates representing Shares will contain the following restrictive legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
6.6 The Investor hereby represents and warrants that
execution and delivery of this Agreement by the Investor, the performance by the
Investor of this Agreement and the consummation of the transactions contemplated
hereby will not result in a material breach or violation of, or material
conflict with, any of the terms or provisions of, or constitute a material
default by the Investor under, any indenture, mortgage, deed of trust
(constructive or other), loan agreement, lease, franchise, license or other
agreement or instrument to which such Investor or any of its properties is
bound, any statute, or any judgment, decree, order, rule, or regulation or any
court or governmental agency or body applicable to such Investor or any of its
properties.
6.7 Investor will not directly or indirectly, sell, offer
to sell, solicit offers to buy, dispose of, loan, pledge, or grant any right
with respect to (collectively, a "Disposition"), the Common Stock of the Company
in violation of the Securities Act, nor will Investor engage in any hedging or
other transaction which is designed to or could reasonably be expected to lead
to or result in a Disposition of Common Stock of the Company by the Investor or
any other person or entity in violation of the Securities Act. Such prohibited
hedging or other transactions would include without limitation effecting any
short sale or having in effect any short position (whether or not such sale or
position is against the box and regardless of when such position was entered
into) or any purchase, sale, or grant of any right (including without limitation
any put or call option) with respect to the Common Stock of the Company or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Common Stock of the Company. The Investor acknowledges that the Shares shall
bear a restrictive legend to the effect that the Shares have not been registered
under the Securities Act of 1933, as amended and such Shares may not be sold or
transferred in the absence of an effective registration statement or pursuant to
an exemption from registration.
6.8 The Investor understands that nothing in this
Agreement or any other materials presented to the Investor in connection with
the purchase and sale of the Shares constitutes legal, tax, or investment
advice. The Investor has consulted such legal, tax, and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of Shares.
6.9 The Investor agrees to use the information contained
in this Agreement and the Memorandum for the sole purpose of evaluating a
possible investment in the Company's shares and for no other purpose. The
Investor further agrees that the information contained in this Agreement and the
Memorandum, and all information given to Investor regarding Espotting Media,
Inc., is strictly confidential. The Investor further agrees that Investor is
prohibited from reproducing or distributing the Memorandum, in whole or in part.
The Investor further agrees that the existence
and nature of all conversations regarding the Offering must be kept strictly
confidential and that the federal securities laws impose restrictions on trading
based on information regarding this offering. Specifically, Investor shall
maintain in confidence all such information, together with any other non-public
information regarding the Company obtained from the Company or its agents during
the course of the financing represented hereby. The Company has caused such
materials to be delivered to Investor in reliance upon such agreement and upon
Rule 100(b)(2)(ii) of Regulation FD as promulgated by the Securities and
Exchange Commission.
6.10 If the Investor is an individual, the Investor
certifies that he or she is not nor to his or her knowledge has been designated,
a "suspected terrorist" as defined in Executive Order 13224. If the Investor is
a corporation, trust, partnership, limited liability company or other
organization, the Investor certifies that, to the best of Investor's knowledge,
the Investor has not been designated, and is not owned or controlled by, a
"suspected terrorist" as defined in Executive Order 13224. The Investor hereby
acknowledges that the Company seeks to comply with all applicable laws
concerning money laundering and related activities. In furtherance of those
efforts, the Investor hereby represents, warrants and agrees that: (i) none of
the cash or property that the Investor will pay or will contribute to the
Company has been or shall be derived from, or related to, any activity that is
deemed criminal under United States law; and (ii) no contribution or payment by
the Investor to the Company, to the extent that they are within the Investor's
control, shall cause the Company to be in violation of the United States Bank
Secrecy Act, the United States Money Laundering Control Act of 1986 or the
United States International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001. The Investor shall promptly notify the Company if any of
these representations ceases to be true and accurate regarding the Investor. The
Investor agrees to provide the Company any additional information regarding the
Investor that the Company deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Investor understands and agrees that if at any time it is discovered that any of
the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Company may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Investor's investment in the Company. The Investor further understands that
the Company may release confidential information about the Investor and, if
applicable, any underlying beneficial owners, to proper authorities if the
Company, in its sole discretion, determines that it is in the best interests of
the Company in light of relevant rules and regulations under the laws set forth
in subsection (ii) above.
7. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations, and warranties made by the Company and
the Investor herein shall survive the execution of this Agreement, the delivery
to the Investor of the Shares being purchased, and the payment therefor for a
period of one (1) year from the Closing Date. Notwithstanding the previous
sentence, the obligations of the Company pursuant to Article 8 of this
Agreement, shall survive until the end of the Registration Period, as such term
is defined in Section 8.1(e) of the Agreement.
8. Registration of the Shares; Compliance with the Securities
Act.
8.1 Registration Procedures and Expenses. The Company
shall:
(a) subject to receipt of necessary information
from the Investors, use its best efforts to prepare and file with the SEC as
soon as practicable a registration statement (the "Registration Statement") on
Form S-3 to enable the resale of the Registrable Shares (as defined below) by
the Investors on a delayed or continuous basis under Rule 415 of the Securities
Act. The Registration Statement may include shares of common stock other than
those held by the Investor and the Other Investors, provided that the inclusion
of those shares would not affect the plan of distribution included in the
Registration Statement. "Registrable Shares" means (a) all shares of Common
Stock purchased in the Offering (b) Penalty Shares (as defined below), if any,
and (c) any shares of capital stock issued or issuable, from time to time, upon
any reclassification, share combination, share subdivision, stock split, share
dividend, merger, consolidation or similar transaction or event or otherwise as
a distribution on, in exchange for or with respect to any of the foregoing, in
each case held at the relevant time by an Investor;
(b) reserved;
(c) use its best efforts, subject to receipt of
necessary information from the Investors, to cause the Registration Statement to
become effective within 200 days after the Closing Date;
(d) cause to be delivered to Investor a
confirmation as of the time the Registration Statement becomes effective that
the Registration Statement does not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading;
(e) use its best efforts to prepare and file
with the SEC such amendments and supplements to the Registration Statement and
the Prospectus used in connection therewith and take all such other actions as
may be necessary to keep the Registration Statement current and effective for a
period (the "Registration Period") not exceeding, with respect to each
Investor's Registrable Shares, the earlier of (i) the second anniversary of the
Closing Date, (ii) the date on which the Investor may sell all Shares then held
by the Investor without restriction by the volume limitations of Rule 144(e) of
the Securities Act, and (iii) such time as all Registrable Shares held by such
Investor have been sold (A) pursuant to a registration statement, (B) to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, and/or (C) in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale;
(f) promptly furnish to the Investor with
respect to the Shares registered under the Registration Statement such number of
copies of the Registration Statement, Prospectuses and Preliminary Prospectuses
in conformity with the requirements of the Securities Act and such
other documents as the Investor may reasonably request, in order to facilitate
the public sale or other Disposition of all or any of the Shares by the
Investor;
(g) promptly take such action as may be
necessary to qualify, or obtain, an exemption for the Registrable Shares under
such of the state securities laws of United States jurisdictions as shall be
necessary to qualify, or obtain an exemption for, the sale of the Registrable
Shares in states specified in writing by the Investor; provided, however, that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
(h) bear all expenses in connection with the
procedures in paragraph (a) through (e) of this Section 8.1 and the registration
of the Shares pursuant to the Registration Statement, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made with the
NASD); (ii) fees and expenses of compliance with federal securities and state
"blue sky" or securities laws; (iii) expenses of printing (including printing
certificates for the Registrable Securities and Prospectuses), messenger and
delivery services and telephone; (iv) all application and filing fees in
connection with listing the Registrable Securities on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(v) all fees and disbursements of counsel of the Company and independent
certified public accountants of the Company; provided, however, that each
Investor shall be responsible for paying the underwriting commissions or
brokerage fees, and taxes of any kind (including, without limitation, transfer
taxes) applicable to any Disposition, sale or transfer of such Investor's
Registrable Securities and any fees and expenses of counsel or other advisors to
the Investor or Other Investors. The Company shall, in any event, bear its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, rating agency fees and the fees and expenses of any person,
including special experts, retained by the Company;
(i) advise the Investors, within two business
days by e-mail, fax or other type of communication, and, if requested by such
person, confirm such advice in writing: (i) after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose, or any other order issued by any
state securities commission or other regulatory authority suspending the
qualification or exemption from qualification of such Registrable Securities
under state securities or "blue sky" laws; and it will promptly use its best
efforts to prevent the issuance of any stop order or other order or to obtain
its withdrawal at the earliest possible moment if such stop order or other order
should be issued; (ii) when the Prospectus or any Prospectus Supplement or
post-effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment thereto, when the same has become
effective; and (iii) after the Company shall receive notice or obtain knowledge
of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the Prospectus,
any amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the statements
therein not misleading;
(j) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC which could affect the sale
of the Registrable Shares;
(k) use its best efforts to cause all
Registrable Shares to be listed on each securities exchange or market, if any,
on which equity securities issued by the Company are then listed; and
(l) use its best efforts to take all other steps
necessary to effect the registration of the Registrable Shares contemplated
hereby and to enable the Investors to sell the Shares under Rule 144.
(m) The Company further agrees that, in the
event that the Registration Statement has not been declared effective by the SEC
within 200 days after the Closing Date (a "Registration Default"), for each
30-day period or part thereof during which the Registration Default remains
uncured (each, a "Penalty Period"), the Company shall issue or pay, as
applicable, to each Investor 1% of the aggregate purchase price paid by the
Investor for its Shares, payable in validly issued, fully paid and nonassessable
shares of Common Stock (valued at the average of the closing price of the Common
Stock for the three trading days ending on the last trading day of such Penalty
Period) (the "Penalty Shares") or cash, or a combination thereof, at the option
of the Company; provided, however, that the maximum aggregate payment of cash,
or issuance of Penalty Shares to each Investor, as the case may be, in respect
of a Registration Default shall not exceed 5% of the aggregate purchase price
paid by such Investor for Shares and provided further, that if the issuance of
Penalty Shares by the Company would result in the Company being required under
NASDAQ rules or other applicable rules to obtain the approval of the Company's
stockholders, then the Company shall pay cash rather than issue such Penalty
Shares to the extent needed to avoid such stockholder approval. The Company
shall deliver said shares or cash payment to the Investor by the fifth business
day after the end of each such Penalty Period
8.2 Transfer of Shares; Suspension.
(a) The Investor agrees that it will not effect
any Disposition of the Shares or its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act except as
contemplated in the Registration Statement referred to in Section 8.1 and as
described below or otherwise in accordance with the Securities Act, and that it
will promptly notify the Company of any changes in the information set forth in
the Registration Statement regarding the Investor or its plan of distribution.
(b) Except in the event that paragraph (c) below
applies, the Company shall, at all times during the Registration Period,
promptly (i) prepare and file from time to time with the SEC a post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or a supplement or amendment to any document incorporated therein by
reference or file any other required document so that such Registration
Statement will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and so that, as thereafter delivered to
purchasers of the Shares being sold thereunder, such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii)
provide the Investor with copies of any documents filed pursuant to Section
8.2(b)(i); and (iii) inform each Investor that the Company has complied with its
obligations in Section 8.2(b)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been
declared effective, the Company will notify the Investor to that effect, will
use its best efforts to secure the effectiveness of such post-effective
amendment as promptly as possible and will promptly notify the Investor pursuant
to Section 8.2(b)(i) hereof when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event
(i) of any request by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to a Registration Statement or related Prospectus or
for additional information; (ii) of the issuance by the SEC or any other federal
or state governmental authority of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose; (iii) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (iv) of any event or
circumstance which necessitates the making of any changes in the Registration
Statement or Prospectus, or any document incorporated or deemed to be
incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; then the Company shall deliver a certificate in
writing to the Investor (the "Suspension Notice") to the effect of the foregoing
and, upon receipt of such Suspension Notice, the Investor will refrain from
selling any Registrable Shares pursuant to the Registration Statement (a
"Suspension") until the Investor's receipt of copies of a supplemented or
amended Prospectus prepared and filed by the Company, or until it is advised in
writing by the Company that the current Prospectus may be used, and has received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its best efforts to cause the use of the
Prospectus so suspended to be resumed as soon as reasonably practicable after
the delivery of a Suspension Notice to the Investor. In addition to and without
limiting any other remedies (including, without limitation, at law or at equity)
available to the Investor, the Investor shall be entitled to specific
performance in the event that the Company fails to comply with the provisions of
this Section 8.2(c).
(d) Notwithstanding the foregoing paragraphs of
this Section 8.2, the Investor shall not be prohibited from selling Registrable
Shares under the Registration Statement as a result of Suspensions on more than
two occasions (for two separate suspension events) of not more than 30 days each
in any twelve month period.
(e) Provided that a Suspension is not then in
effect, the Investor may sell Registrable Shares under the Registration
Statement, provided that it arranges for delivery of a current Prospectus to the
transferee of such Shares. Upon receipt of a request therefor, the Company has
agreed to provide, at its own expense, an adequate number of current
Prospectuses (including
documents incorporated by reference therein) to the Investor and to supply
copies to any other parties requiring such Prospectuses.
(f) In the event of a sale of Registrable Shares
by the Investor under the Registration Statement, the Investor must also deliver
to the Company's transfer agent, with a copy to the Company, a Certificate of
Subsequent Sale substantially in the form attached hereto as Exhibit B, so that
the Registrable Shares may be properly transferred.
8.3 Indemnification. For the purpose of this Section 8.3:
(i) the term "Selling Investor" shall include the
Investor and any affiliate of such Investor;
(ii) the term "Registration Statement" shall include any
final Prospectus, exhibit, supplement or amendment included in or relating to
the Registration Statement referred to in Section 8.1; and
(iii) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement or Prospectus a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(a) The Company agrees to indemnify and hold
harmless each Selling Investor from and against any losses, claims, damages,
liabilities or expenses to which such Selling Investor may become subject (under
the Securities Act or otherwise) insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of, or are based upon (i) any untrue statement of a material fact contained in
the Registration Statement or Prospectus, (ii) any failure by the Company to
fulfill any undertaking included in the Registration Statement, or (iii) any
breach of any representation, warranty or covenant made by the Company in this
Agreement, and the Company will promptly reimburse such Selling Investor for any
reasonable legal or other expenses incurred in investigating, defending or
preparing to defend, settling, compromising or paying any such action,
proceeding or claim, provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage, liability or expense
arises solely out of, or is based solely upon, an untrue statement made in such
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by such Selling Investor specifically for
use in preparation of the Registration Statement or the failure of such Selling
Investor to comply with its covenants and agreements contained in Sections 6.3
or 8.2 hereof respecting sale of the Shares or any statement or omission in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to
the Investor at least three business days prior to the pertinent sale or sales
by the Investor. Notwithstanding the foregoing, the Company shall not be liable
to any Selling Investor for any consequential damages, including lost profits,
solely with respect to losses, claims, damages, liabilities or expenses to which
such Selling Investor may become subject arising out of, or based upon, any
breach of any representation, warranty or covenant made by the Company in this
Agreement.
(b) [RESERVED]
(c) The Investor agrees (severally and not
jointly with any other Investor) to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any losses, claims,
damages, liabilities or expenses to which the Company (or any such officer,
director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise solely out of, or are based
solely upon, (i) any failure to comply with the covenants and agreements
contained in Section 6.3 or 8.2 hereof respecting sale of the Shares, or (ii)
any untrue statement of a material fact contained in the Registration Statement
if such untrue statement was made in reliance upon and in conformity with
written information furnished by the Investor specifically for use in
preparation of the Registration Statement (provided, however, that no Investor
shall be liable in any such case for any untrue statement in any Registration
Statement or Prospectus if such statement has been corrected in writing by such
Investor and delivered to the Company at least three business days prior to the
pertinent sale or sales by the Investor), and the Investor will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend, settling, compromising or paying any such action,
proceeding or claim. Notwithstanding the foregoing, (x) the Investor's aggregate
liability pursuant to this subsection (b) and subsection (d) shall be limited to
the net amount received by the Investor from the sale of the Shares and (y) the
Investor shall not be liable to the Company for any consequential damages,
including lost profits, solely with respect to losses, claims, damages,
liabilities or expenses to which the Company (or any officer, director or
controlling person as set forth above) may become subject (under the Securities
Act or otherwise), arising out of, or based upon, any failure to comply with the
covenants and agreements contained in Section 6.3 or 8.2 hereof respecting sale
of the Shares.
(d) Promptly after receipt by any indemnified
person of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Section 8.3, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, but the omission to
so notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party under this Section 8.3 (except to the extent
that such omission materially and adversely affects the indemnifying party's
ability to defend such action) or from any liability otherwise than under this
Section 8.3. Subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person, the indemnifying person
shall be entitled to participate therein, and, to the extent that it shall elect
by written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person of
its election to assume the defense thereof, such indemnifying person shall not
be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof,
provided further, however, that if there exists or shall exist a conflict of
interest that would make it inappropriate, in the opinion of counsel to the
indemnified person, for the same counsel to represent both the indemnified
person and such indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying
person; provided, however, that no indemnifying person shall be responsible for
the fees and expenses of more than one separate counsel (together with
appropriate local counsel) for all indemnified parties. In no event shall any
indemnifying person be liable in respect of any amounts paid in settlement of
any action unless the indemnifying person shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld. No
indemnifying person shall, without the prior written consent of the indemnified
person, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified person is or could have been a party and
indemnification could have been sought hereunder by such indemnified person,
unless such settlement includes an unconditional release of such indemnified
person from all liability on claims that are the subject matter of such
proceeding.
(e) If the indemnification provided for in this
Section 8.3 is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above in respect of any losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Investor on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by the Company on the one
hand or an Investor on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement. The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this subsection (e) were determined by pro
rata allocation (even if the Investors were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Investor shall be required to contribute any amount in excess
of the net amount received by the Investor from the sale of the Shares. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Investors'
obligations in this subsection to contribute are several in proportion to their
sales of Shares to which such loss relates and not joint.
(f) The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 8.3, and are fully informed
regarding said provisions.
8.4 Rule 144. For a period of two years following the
date hereof, the Company agrees with each holder of Registrable Shares to:
(a) comply with the requirements of Rule 144(c)
under the Securities Act with respect to current public information about the
Company;
(b) use its best efforts to file with the SEC in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act (at any time it is subject to such
reporting requirements); and
(c) furnish to any holder of Registrable Shares
upon request (i) a written statement by the Company as to its compliance with
the requirements of said Rule 144(c) and the reporting requirements of the
Securities Act and the Exchange Act (at any time it is subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other publicly-filed reports and documents of the
Company as such holder may reasonably request to avail itself of any similar
rule or regulation of the SEC allowing it to sell any such securities without
registration.
8.5 Termination of Conditions and Obligations. The
conditions precedent imposed by Section 6 or this Section 8 upon Dispositions of
the Registrable Shares by the Investor shall cease and terminate as to any
particular number of the Registrable Shares and the restrictive legend shall be
removed when such Registrable Shares shall have been effectively registered
under the Securities Act and sold or otherwise disposed of in accordance with
the intended method of disposition set forth in the Registration Statement
covering such Registrable Shares or at such time as an opinion of counsel
reasonably satisfactory to the Company shall have been rendered to the effect
that such conditions are not necessary in order to comply with the Securities
Act (provided that such opinion shall not be required if the Company shall be
furnished with written documentation reasonably satisfactory to it that such
Registrable Shares are being transferred in a customary transaction exempt from
registration under Rule 144 under the Securities Act).
9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed (A) if within
domestic United States by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (B) if delivered from outside the United States, by International
Federal Express or facsimile, and shall be deemed given (i) if delivered by
first-class registered or certified mail domestic, three business days after so
mailed, (ii) if delivered by nationally recognized overnight carrier, one
business day after so mailed, (iii) if delivered by International Federal
Express, two business days after so mailed, and (iv) if delivered by facsimile,
upon electric confirmation of receipt and shall be delivered as addressed as
follows:
(a) if to the Company, to:
XxxxXxxx.xxx
Suite 500
0000 Xxxxxxxxx Xxxxxxx Xxxx.
Xx. Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx-Xxxxxxxxx
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Porter, Wright, Xxxxxx & Xxxxxx LLP
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
(b) if to the Investor, at its address on the signature
page hereto, or at such other address or addresses as
may have been furnished to the Company in writing,
with a copy to:
10. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Investor.
11. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
12. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the New York, without giving
effect to the principles of conflicts of law.
14. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements relating to such subject matter
are expressly cancelled.
15. Finders Fees. Except for fees due finders engaged by the
Company, which will be paid by the Company, neither the Company or the Investor,
nor any affiliate thereof has incurred any obligation which will result in the
obligation of the other party to pay any finder's fee or commission in
connection with this transaction.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
17. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
Company and the Investors, including without limitation and without the need for
an express assignment, affiliates of the Investors. With respect to transfers
that are not made pursuant to the Registration Statement, the rights and
obligations of an Investor under this Agreement shall be automatically assigned
by such Investor to any transferee of
all or any portion of such Investor's Registrable Shares who is a Permitted
Transferee (as defined below); provided, however, that within two business days
prior to the transfer, (i) the Company is provided notice of the transfer
including the name and address of the transferee and the number of Registrable
Shares transferred; and (ii) that such transferee agrees in writing to be bound
by the terms of this Agreement. (For purposes of this "Agreement, a "Permitted
Transferee" shall mean any Person who (a) is an "accredited investor," as that
term is defined in Rule 501(a) of Regulation D under the Securities Act and (b)
is a transferee in a transaction that is exempt from the registration
requirements of the Securities Act and is not in fact registered under the
Securities Act of at least 20,000 Registrable Shares as permitted under the
securities laws of the United States). Upon any transfer permitted by this
Section 16, the Company shall be obligated to such transferee to perform all of
its covenants under this Agreement as if such transferee were an Investor.
18. Expenses. Each of the Company and the Investors shall bear its
own expenses in connection with the preparation and negotiation of the
Agreement.
