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SERIES B PREFERRED STOCK PURCHASE AGREEMENT
BY AND AMONG PRICESMART, INC. and
THE INVESTORS LISTED ON EXHIBIT A ATTACHED
HERETO
Dated as of July ___, 2003
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TABLE OF CONTENTS
1. AUTHORIZATION AND SALE OF THE SHARES
1
1.1 Authorization of the Shares.
1
1.2 Sale of the Shares.
1
2. CLOSING
1
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2
3.1 Organization, Good Standing and Qualification
2
3.2 Authorization
2
3.3 Valid Issuance of the Securities
3
3.4 Capitalization
3
3.5 Noncontravention
4
3.6 Reports Filed Under the Securities Exchange Act of
5
1934; Financial Statements
3.7 Absence of Certain Changes
5
3.8 No General Solicitation.
5
3.9 Disclosure.
5
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
6
4.1 Organization and Qualification
6
4.2 Authorization
6
4.3 Purchase for Own Account
6
4.4 Accredited Investor Status
6
4.5 Restricted Securities
7
4.6 Due Diligence and No Solicitation
7
4.7 Further Limitations on Disposition
7
4.8 Legends
7
5. PRE-CLOSING COVENANTS OF THE PARTIES
8
5.1 General
8
5.2 Notice of Developments
8
6. POST-CLOSING COVENANTS OF THE PARTIES.
8
6.1 Status of Dividends.
8
6.2 Listing; Reservation.
8
7. CONDITIONS TO THE INVESTORS' OBLIGATIONS AT CLOSING
9
7.1 Representations and Warranties True
9
7.2 Compliance with Covenants
9
7.3 No Litigation
9
7.4 Securities Exemptions
9
7.5 Certificate of Designations.
9
7.6 Shares.
10
7.7 Proceedings.
10
7.8 No Material Adverse Effect.
10
8. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING
10
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8.1 Representations and Warranties True
10
8.2 Payment of Consideration
10
8.3 No Litigation
10
8.4 Securities Exemptions
11
9. REGISTRATION STATEMENT FOR RESALE OF THE SHARES
11
9.1 Registration.
11
9.2 Company Obligations.
11
9.3 Restrictions on Registrations.
12
9.4 Investor Obligations and Rights.
13
9.5 Indemnification.
14
9.6 Expenses.
16
10. TERMINATION
17
10.1 Termination
17
10.2 Effect of Termination.
17
11. MISCELLANEOUS.
17
11.1 Survival of Warranties
17
11.2 Specific Performance.
17
11.3 Successors and Assigns
18
11.4 Governing Law
18
11.5 Counterparts
18
11.6 Headings
18
11.7 Notices
19
11.8 No Finder's Fees
19
11.9 Amendments and Waivers
20
11.10 Attorneys' Fees
20
11.11 Severability
20
11.12 Entire Agreement
20
11.13 No Third Party Beneficiaries.
20
11.14 Public Announcements.
20
11.15 Further Assurances
20
11.16 Fees and Expenses.
20
11.17 Waiver of Jury Trial.
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SCHEDULES
Schedule 3.4(b)
EXHIBITS
Exhibit A Schedule of Investors
Exhibit B Certificate of Designations
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SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This SERIES B PREFERRED STOCK PURCHASE AGREEMENT (including the Exhibits
and Schedules hereto, this "Agreement") is made and entered into as
of July ___,
2003 by and among PriceSmart, Inc., a Delaware corporation (the "Company"), and
the investors listed on Exhibit A attached hereto (each an "Investor" and,
collectively, the "Investors"). The Investors and the Company are referred to
herein individually as a "Party" and together as the "Parties."
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Investors, and the Investors
desire to purchase from the Company, an aggregate of 30,000 shares of the
Company's Series B Preferred Stock, par value $.0001 per share (the "Series B
Preferred"), on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties agree as follows:
1. AUTHORIZATION AND SALE OF THE SHARES.
1.1 Authorization of the Shares. The Company has authorized a new
series of preferred stock, designated 8% Series B Cumulative Convertible
Redeemable Preferred Stock, such series having the rights, preferences and
privileges provided for in the Company's Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights of
8%
Series B Cumulative Convertible Redeemable Preferred Stock and Qualifications,
Limitations and Restrictions Thereof, a form of which is attached hereto as
Exhibit B (the "Series B Certificate"). In addition, the Company has authorized
the issuance and sale to the Investors of an aggregate of 30,000 shares of the
Series B Preferred (the "Shares").
1.2 Sale of the Shares. Subject to the terms and conditions of this
Agreement, the Company agrees to sell to each of the Investors at the Closing,
and each of the Investors severally agrees to purchase from the Company at the
Closing, that number of Shares set forth opposite each such Investor's name on
Exhibit A attached hereto at a purchase price of $1,000 per share
(the "Purchase
Price"). The shares of the Company's common stock, par value $.0001 per share
(the "Common Stock"), issued or issuable upon conversion of the Shares are
referred to as the "Conversion Shares." The Shares and the Conversion
Shares are
collectively referred to as the "Securities."
2. CLOSING. The purchase and sale of the Shares (the "Closing") will take
place at the offices of Xxxxxx & Xxxxxxx LLP, 00000 Xxxx Xxxxx Xxxxx,
Xxxxx 000,
Xxx Xxxxx, XX 00000 at 10:00 a.m. Pacific Time, on July ___, 2003, or if any of
the conditions set forth in Section 7 (other than conditions with respect to
actions the respective Parties will take at the Closing itself) has not been
satisfied, a later date selected by the Investors, which date shall be within
five (5) Business Days (as defined below) following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the
transactions to occur at the
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Closing (other than conditions with respect to actions the respective Parties
will take at the Closing itself) (such date, the "Closing Date").
"Business Day"
means any day, other than a Saturday, Sunday or a day on which banking
institutions in the State of California are authorized or obligated by law,
regulation or executive order to close. At the Closing, the Company
will deliver
to each of the Investors (i) a certificate registered in the
Investor's name and
in the denominations designated by such Investor prior to the Closing Date
representing the Shares and (ii) the other documents and certificates to be
delivered pursuant to Section 7 hereof, all against payment of the Purchase
Price by wire transfer of immediately available funds as directed pursuant to
instructions delivered by the Company to the Investors prior to the Closing
Date. The number of Shares to be purchased at the Closing by each Investor and
the portion of aggregate Purchase Price to be paid by each Investor are set
forth next to each Investor's name on Exhibit A hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to, and agrees with, the Investors that the statements
in the following paragraphs of this Section 3 are true and correct:
3.1 Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries (as defined below) is a corporation,
partnership or
limited liability company duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
power and authority to own or lease and operate its properties and to conduct
its business as it is currently being conducted and is proposed to be
conducted.
Each of the Company and its Subsidiaries is duly licensed, authorized or
qualified as a foreign corporation, partnership or limited liability
company for
the transaction of business and is in good standing under the laws of
each other
jurisdiction in which its ownership, lease or operation of property or conduct
of business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the assets, liabilities,
condition (financial or otherwise), results of operations, prospects
or business
of the Company and its Subsidiaries taken as a whole ("Material Adverse
Effect"). The Company is not in default under or in violation of any provision
of its amended and restated certificate of incorporation (the "Certificate of
Incorporation") or its bylaws (the "Bylaws"). "Subsidiary" means as to any
Person (as defined below), any other Person of which more than 50% of
the shares
of the voting stock or other voting interests are owned or controlled, or the
ability to select or elect more than 50% of the directors or similar
managers is
held, directly or indirectly, by such first Person or one or more of its
Subsidiaries or by such first Person and one or more of its Subsidiaries.
"Person" means any individual, corporation, company, association, partnership,
limited liability company, joint venture, trust, unincorporated organization or
Governmental Authority (as defined below).
3.2 Authorization. The Company has all requisite power
and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
All corporate action on the part of the Company necessary for the
authorization,
execution and delivery of this Agreement, the performance of the obligations of
the Company at the Closing, the performance of the obligations of the Company
under Section 9 hereof and the issuance and delivery of the Securities has been
taken, and this Agreement has been duly executed and delivered by the Company
and constitutes a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of
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creditors' rights generally; (ii) the effect of rules of law governing the
availability of equitable remedies; and (iii) the unenforceability
under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy or prohibited
by law.
3.3 Valid Issuance of the Securities.
(a) The Shares have been duly and validly
authorized, reserved
for issuance and, when issued, sold and delivered by the Company in accordance
with the terms of this Agreement for the consideration provided for
herein, will
have been duly and validly issued, will be fully paid and
nonassessable and will
be free of any mortgage, pledge, lien, security interest, claim, voting
agreement, conditional sale agreement, title retention agreement, restriction,
option or encumbrance of any kind, character or description whatsoever ("Lien")
(other than those that may be created by the Investors) and free of any
restrictions on transfer other than restrictions on transfer under applicable
federal and state securities laws and, assuming the truth and
correctness of the
Investors' representations and warranties in Section 4 below, will be issued in
compliance with all applicable federal and state securities laws.
(b) The Conversion Shares have been duly and validly
authorized by the Company and reserved for issuance and, when issued in
accordance with the terms of the Series B Certificate, will have been duly and
validly issued, will be fully paid and nonassessable and will be free of any
Liens (other than those that may be created by the Investors) and free of any
restrictions on transfer other than restrictions on transfer under applicable
federal and state securities laws and will be issued in compliance with all
applicable federal and state securities laws.
3.4 Capitalization.
(a) The entire authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, of which [6,871,913] shares (not
including [413,650] shares held by the Company as treasury shares) were issued
and outstanding as of [May 29], 2003, and 2,000,000 shares of preferred stock,
par value $.0001 per share, of which 20,000 shares of the Company's 8% Series A
Cumulative Convertible Redeemable Preferred Stock, and not including the Shares
issued pursuant to this Agreement, are issued and outstanding as of the date of
this Agreement. Except as set forth in the SEC Documents (as defined below) and
except as contemplated hereby, there are no outstanding or authorized warrants,
options, purchase rights, subscription rights, conversion rights, exchange
rights or other contracts, commitments or obligations that could require the
Company or any of its Subsidiaries to issue, grant, deliver or sell
or otherwise
cause to be issued, granted, delivered or sold or become outstanding
any capital
stock of the Company or any of its Subsidiaries, except for those
granted in the
ordinary course of business since the dates of the SEC Documents. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company or any of its
Subsidiaries. To the Company's knowledge, there are no voting trusts,
proxies or
other agreements or understandings with respect to the voting of the capital
stock of the Company.
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(b) Except as set forth on Schedule 3.4(b) hereto, the
registration of the Conversion Shares pursuant to Section 9 hereof
will not give
rise to any registration rights on behalf of any Person under any agreement or
instrument applicable to the Company. Except as set forth on Schedule 3.4(b)
hereto, other than pursuant to Section 9 hereof, no Person has any right to
require the Company to register securities of the Company under the Securities
Act of 1933, as amended (the "1933 Act").
3.5 Noncontravention.
(a) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, ordinance, code, injunction, judgment,
order, decree, ruling, charge, writ, determination or other restriction ("Law")
of any government or political subdivision or department thereof, any
governmental regulatory body, commission, board, agency or instrumentality, or
any court or arbitrator or alternative dispute resolution body, in each case
whether federal, state, local or foreign ("Governmental Authority")
to which the
Company or any of its Subsidiaries is subject or any provision of the
Certificate of Incorporation or the Bylaws or the certificate of incorporation
or bylaws or similar constituent documents of the Company's
Subsidiaries or (ii)
conflict with, result in a breach or violation of, constitute a
default (with or
without notice or the passage of time) under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
give rise to a right to put or to compel a tender offer for outstanding
securities of the Company or any of its Subsidiaries or require any notice,
consent, waiver or approval under any agreement, contract, lease,
license, loan,
debt instrument, note, bond, indenture, mortgage, deed of trust, joint venture
agreement, approval of a Governmental Authority or other arrangement to which
the Company or any of its Subsidiaries is a party or by which the
Company or any
of its Subsidiaries is bound or to which any of the Company's or its
Subsidiaries' assets is subject (or result in the imposition of any mortgage,
pledge, Lien, encumbrance, charge or other security interest upon any of such
assets or properties), except in either case, where such violation, conflict or
default would not have a Material Adverse Effect.
(b) Except for filings which may be required under state
securities laws, for which filings the Company shall be responsible,
neither the
Company nor any of its Subsidiaries is required to give any notice to, make any
filing or registration with, or obtain any authorization, consent or
approval of
any Governmental Authority in connection with the execution, delivery and
performance by the Company of this Agreement and the transactions contemplated
hereby (including the issuance of Common Stock upon conversion of the Series B
Preferred).
(c) No consent or approval of the Company's stockholders is
required by Law, the Certificate of Incorporation, the Bylaws, the rules and
regulations of the Nasdaq Stock Market, or otherwise, for the execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby (including the issuance of Common Stock
upon conversion of the Series B Preferred).
(d) The execution, delivery and performance of this Agreement
by the Company and the consummation of transactions contemplated
hereby will not
constitute a
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"Change of Control" as such term is defined in any contract, agreement,
indenture, mortgage, note, lease or other instrument to which the
Company or any
of its Subsidiaries is a party or by which the Company or any such
Subsidiary is
bound or to which the properties of the Company or any such Subsidiary is
subject.
3.6 Reports Filed Under the Securities Exchange Act of 1934;
Financial Statements.
(a) The Company has timely filed with the Securities and
Exchange Commission (the "SEC") all reports required to be filed by the Company
under the Securities Exchange Act of 1934, as amended (the "1934
Act"). All such
reports filed by the Company with the SEC in the preceding twelve (12) months
(the "SEC Documents") (i) comply in all material respects, with the applicable
requirements of the 1934 Act and the 1933 Act, and (ii) contain all statements
required to be stated therein in accordance with the 1934 Act and do
not contain
any 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.
(b) As of their respective dates (except as they have been
correctly amended), the financial statements of the Company included in the SEC
Documents (i) complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (ii) have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (A) as may be otherwise indicated in such financial statements
or the notes thereto or (B) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary
statements) and
(iii) fairly present the financial position of the Company and its Subsidiaries
as of the dates thereof and the results of its operations and cash flows of the
Company and its Subsidiaries (on a consolidated basis) for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
3.7 Absence of Certain Changes. Except as disclosed in the SEC
Documents or otherwise disclosed in public announcements or press releases,
since August 31, 2002, the Company and its Subsidiaries have conducted their
consolidated business in the ordinary and usual course and there has been no
change to the business, properties, assets, operations, prospects, results of
operations or condition (financial or otherwise) of the Company or its
Subsidiaries (taken as a whole), except for such changes which could not be
reasonably expected to have a Material Adverse Effect.
3.8 No General Solicitation. Neither the Company, nor any of its
Affiliates (as defined below), nor any person acting on its or their
behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D ("Regulation D") promulgated under the 0000 Xxx) in
connection with the offer or sale of the Shares. "Affiliate" has the
meaning set
forth in Rule 12b-2 promulgated under the 1934 Act as in effect on the date
hereof. The term "Affiliated" has a correlative meaning.
3.9 Disclosure. No information that has been provided to the
Investors by the Company or any of its representatives in connection with the
transactions contemplated by this Agreement, and no exhibit, document,
statement, certificate or schedule furnished or to be
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furnished to the Investors pursuant to this Agreement, contains or
will contain,
as the case may be, any untrue statement of a material fact, or omits or will
omit, as the case may be, to state a material fact necessary to make the
statements or facts contained therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the Investors
severally and not jointly represents and warrants to the Company that the
statements in the following paragraphs of this Section 4 are true and correct
with respect to such Investor:
4.1 Organization and Qualification. The Investor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. The Investor has all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated by
this Agreement.
4.2 Authorization. All action on the part of the Investor necessary
for the authorization, execution and delivery of this Agreement and the
performance of all obligations of the Investor hereunder has been taken, and
this Agreement has been duly executed and delivered by the Investor and
constitutes a valid and legally binding obligation of the Investor, enforceable
in accordance with its terms, except as may be limited by (a) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights
generally; (b) the
effect of rules of law governing the availability of equitable
remedies; and (c)
the unenforceability under certain circumstances under law or court
decisions of
provisions providing for the indemnification of or contribution to a party with
respect to a liability where such indemnification or contribution is
contrary to
public policy or prohibited by law.
4.3 Purchase for Own Account. Except as permitted pursuant to
Section 11.3 hereof, the Securities to be acquired by the Investor hereunder
will be acquired for investment for the Investor's own account, not
as a nominee
or agent, and not with a view to the public resale or distribution thereof
within the meaning of the 1933 Act, and the Investor has no present
intention of
selling or otherwise distributing the same. The Investor does not have any
contract, undertaking, agreement or arrangement with any Person to sell,
transfer or grant participations to such Person or to any third Person, with
respect to the Securities. The Investor also represents that it has not been
formed for the specific purpose of acquiring the Securities.
4.4 Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Regulation D. By reason of its business and
financial experience, sophistication and knowledge, the Investor is capable of
evaluating the risks and merits of the investment made pursuant to this
Agreement. The Investor confirms that it is able (a) to bear the economic risk
of this investment, as well as other risk factors as more fully set
forth herein
and in the SEC Documents, (b) to hold the Securities for an
indefinite period of
time and (c) to bear a complete loss of the Investor's investment; and the
Investor represents that it has sufficient liquid assets so that the
illiquidity
associated with this investment will not cause any undue financial difficulties
or affect the Investor's ability to provide for its current needs and possible
financial contingencies.
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4.5 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the 1933 Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, the
Investor represents that it is familiar with Rule 144 promulgated
under the 1933
Act ("Rule 144"), as presently in effect, and understands the resale
limitations
imposed thereby and by the 1933 Act. The Investor understands that the Company
is under no obligation to register any of the securities sold hereunder except
as provided in Section 9 hereof.
4.6 Due Diligence and No Solicitation. The Investor has had a
reasonable opportunity to ask questions of and receive answers from the Company
and its officers, and all such questions have been answered to the full
satisfaction of the Investor. At no time was the Investor presented with or
solicited by any leaflet, public promotional meeting, circular, newspaper or
magazine article, radio or television advertisement or any other form
of general
advertising.
4.7 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, the Investor further agrees not
to make any
disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration
statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) the Investor
shall have furnished the Company at the Investor's expense an opinion of
counsel, reasonably satisfactory to the Company that such disposition will not
require registration of such securities under the 1933 Act; provided that the
Company shall not require an opinion of counsel for routine sales of shares
pursuant to Rule 144.
4.8 Legends. It is understood that the certificates evidencing the
Securities will bear the legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE
SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM.
(b) The legend referred to in Section 4.8(a) above shall be
removed from a certificate representing such Securities or shares of Common
Stock issued upon conversion thereof if the securities represented thereby are
sold pursuant to an effective registration statement under the 1933 Act, or
there is delivered to the Company such satisfactory
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evidence, which may include an opinion of independent counsel, as
reasonably may
be requested by the Company, to confirm that neither such legend nor the
restrictions on transfer set forth therein are required to ensure
that transfers
of such securities will not violate the registration requirements of the 1933
Act.
5. PRE-CLOSING COVENANTS OF THE PARTIES. The Parties agree as
follows with
respect to the period between the execution of this Agreement and the Closing:
5.1 General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing
conditions set
forth in Sections 7 and 8 below).
5.2 Notice of Developments. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its own representations and warranties in Section 3 or 4 above. No
disclosure
by any Party pursuant to this Section 5.2, however, shall be deemed to cure any
misrepresentation, breach of warranty or breach of covenant.
6. POST-CLOSING COVENANTS OF THE PARTIES.
6.1 Status of Dividends. The Company agrees to treat the Series B
Preferred as equity for all tax purposes unless the Company determines that
there is no reasonable basis for such position. The Company shall
take no action
(other than as required by Law) that would jeopardize the availability of the
dividends received deduction under Section 243(a)(1) of the Internal Revenue
Code of 1986, as amended, for the distributions on Series B Preferred that are
paid out of current or accumulated earnings and profits, if any.
6.2 Listing; Reservation.
(a) So long as the Investors or their respective Affiliates
Beneficially Own any Securities, the Company shall use its best efforts to
ensure that the shares of Common Stock continue to be quoted on the
NASDAQ Stock
Market; provided, however, this Section 6.2(a) shall not restrict the Company
from engaging in any reclassification, capital reorganization or
other change in
the outstanding shares of Common Stock or any consolidation or merger of the
Company with or into another corporation or any other transaction in which the
stockholders of the Company are required to exchange their shares of Common
Stock for stock or other securities of the Company or any other Person.
"Beneficially Own" with respect to any securities means having "beneficial
ownership" of such securities (as determined pursuant to Rule 13d-3 promulgated
under the 1934 Act as in effect on the date hereof, except that a Person shall
be deemed to Beneficially Own all such securities that such Person
has the right
to acquire by conversion, exercise of option or otherwise whether such right is
exercisable immediately or after the passage of time). The terms "Beneficial
Ownership" and "Beneficial Owner" have correlative meanings.
(b) From and after the Closing Date, the Company shall at all
times reserve and keep available, out of its authorized and unissued Common
Stock, solely for the purpose of issuing Common Stock upon the
conversion of the
Shares, such number of shares of
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Common Stock free of preemptive rights as shall be sufficient to issue Common
Stock upon the conversion of the Shares.
7. CONDITIONS TO THE INVESTORS' OBLIGATIONS AT CLOSING. The
obligations of
the Investors under Section 2 of this Agreement with respect to the Closing are
subject to the fulfillment or waiver, on the Closing Date, of each of the
following conditions:
7.1 Representations and Warranties True. The representations and
warranties of the Company contained in Section 3 qualified as to materiality
shall be true and correct in all respects, and those not so qualified shall be
true and correct in all material respects on and as of the Closing
Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date (except where such representation and warranty speaks by
its terms as of a different date, in which case it shall be true and correct as
of such date). The Company shall have delivered to the Investors at the Closing
a certificate in form and substance reasonably satisfactory to the Investors
dated the Closing Date and signed by the chief executive officer and the chief
financial officer of the Company to the effect that the condition set forth in
this Section 7.1 has been satisfied.
7.2 Compliance with Covenants. The Company shall have performed all
of its obligations hereunder in all material respects and complied with all
agreements, undertakings, covenants and conditions required hereunder to be
performed by it at or prior to the Closing. The Company shall have delivered to
the Investors at the Closing a certificate in form and substance reasonably
satisfactory to the Investors dated the Closing Date and signed by the chief
executive officer and the chief financial officer of the Company to the effect
that the condition set forth in this Section 7.2 has been satisfied.
7.3 No Litigation.
(a) No Law shall have been promulgated, enacted or entered
that restrains, enjoins, prevents, materially delays, prohibits or otherwise
makes illegal the performance of this Agreement or the transactions
contemplated
hereby.
(b) No action, suit or proceeding shall be pending or
threatened before any Governmental Authority wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (i) prevent, materially delay,
prohibit or otherwise make illegal the consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect) or
(iii) affect adversely the right of the Investors to own the Shares.
7.4 Securities Exemptions. The offer and sale of the Shares to the
Investors pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act, the qualification requirements of the California
Corporate Securities Law of 1968 (the "California Securities Law") and the
registration and/or qualification requirements of all other applicable state
securities laws.
7.5 Certificate of Designations. The Series B Certificate
shall have
been filed with the Secretary of State of the State of Delaware and a copy of
the Series B Certificate,
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certified by the Secretary of State of the State of Delaware, shall have been
delivered to the Investors.
7.6 Shares. The Company shall have executed and delivered to the
Investors the certificates representing the Shares to be purchased by the
Investors pursuant to Section 1.2 hereof.
7.7 Proceedings. All corporate and other proceedings to be taken by
the Company in connection with this Agreement and with respect to the
transactions contemplated hereby to be completed at or prior to the Closing and
documents incident thereto shall have been completed in form and substance
reasonably satisfactory to the Investors, and the Investors shall have received
all such counterpart originals or certified or other copies of this Agreements
and such other documents as it may reasonably request.
7.8 No Material Adverse Effect. No event shall have occurred and no
condition shall have arisen or been created since the date of this Agreement
which has had, or would be reasonably likely to have, a Material
Adverse Effect.
8. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company to the Investors under this Agreement with respect to the Closing
are subject to the fulfillment or waiver on the Closing Date of each of the
following conditions:
8.1 Representations and Warranties True. The representations and
warranties of the Investors contained in Section 4 qualified as to materiality
shall have been true and correct in all respects, and those not so qualified
shall have been true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date (except where such representation
and warranty speaks by its terms as of a different date, in which case it shall
be true and correct as of such date).
8.2 Payment of Consideration. The Investors shall have paid the
Purchase Price in accordance with the provisions of Section 1.2.
8.3 No Litigation.
(a) No Law shall have been promulgated, enacted or entered
that restrains, enjoins, prevents, materially delays, prohibits or otherwise
makes illegal the performance of this Agreement or the transactions
contemplated
hereby.
(b) No action, suit or proceeding shall be pending or
threatened before any Governmental Authority wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (i) prevent, delay, prohibit or
otherwise make illegal the consummation of any of the transactions contemplated
by this Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling or charge shall be in effect).
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8.4 Securities Exemptions. The offer and sale of the Shares to the
Investors pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act, the qualification requirements of the California
Securities Law and the registration and/or qualification requirements of all
other applicable state securities laws.
9. REGISTRATION STATEMENT FOR RESALE OF THE SHARES.
9.1 Registration. As promptly as practicable after the Closing but
in any event within thirty (30) days following the Closing Date, the Company
shall prepare and file with the SEC a registration statement on Form S-3 (the
"Registration Statement"), and maintain effective for the period specified in
Section 9.2(a) for use by the Investors and their respective Affiliates at any
time during such period with respect to the offering and sale or other
disposition of the Conversion Shares.
9.2 Company Obligations. In the case of each registration effected
by the Company pursuant to this Section 9, the Company will keep the Investors,
as applicable, advised in writing as to the initiation of each registration and
as to the completion thereof. At its expense, the Company will:
(a) use its best efforts to cause such registration to remain
effective at all times until the earlier of (i) such time as the distribution
described in the registration statement relating to the Conversion Shares has
been completed and (ii) two (2) years from the Closing Date;
(b) prepare and file with the SEC such amendments and
post-effective amendments to such registration statement and supplements to the
prospectus as may be (i) reasonably requested by the holders of a majority of
the Conversion Shares, (ii) reasonably requested by any participating
holder (to
the extent such request relates to information relating to such holder), or
(iii) necessary to keep such registration effective for the period of time
required by this Section 9;
(c) prepare and deliver to the Investors as many copies of
each preliminary and final prospectus and other documents incident thereto as
each of the Investors from time to time may reasonably request;
(d) immediately notify the Investors, at any time when a
prospectus relating to a registration of Conversion Shares is required to be
delivered under the 1933 Act, of the happening of any event as a
result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and, at the request of the Investors, prepare a supplement or
amendment to such registration statement so that, as thereafter
delivered to the
purchasers of such Conversion Shares, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact
required to
be stated or necessary to make the statements therein not misleading;
(e) list the Conversion Shares on the automated quotation
system and/or securities exchanges upon which the Common Stock is listed;
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(f) use its best efforts to register or qualify and maintain
the qualification of the Conversion Shares covered by such registration under
such state securities or "blue sky" laws for offers and sales to the public as
the Investors shall reasonably request; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation to do business under
the laws of or become subject to taxation in, any jurisdiction in
which it shall
not be then qualified, or to file any general consent to service of process;
(g) otherwise use its best efforts to comply with the
securities laws of the United States and other applicable jurisdictions and all
applicable rules and regulations of the SEC and comparable Governmental
Authorities in other applicable jurisdictions;
(h) notify the Investors (i) when the Registration Statement
or any amendment thereto has been filed or become effective, when the
prospectus
or any amendment or supplement thereto has been filed and to furnish the
Investors with copies thereof, (ii) of the issuance by the SEC of any
stop order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of the preliminary prospectus or the Final
Prospectus (as defined below) or the initiation or threatening of any
proceedings for such purposes, and (iii) the receipt by the Company of any
notification with respect to the suspending of the qualification of the
Conversion Shares for offering or sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(i) with a view to making available the benefits of certain
rules and regulations of the SEC which may permit the sale of restricted
securities to the public without registration, the Company agrees to: (i) make
and keep public information available as those terms are understood and defined
in Rule 144; (ii) use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the 1933 Act and
the 1934 Act at any time after it has become subject to such reporting
requirements; and (iii) so long as an Investor or transferee of an
Investor owns
any Securities, furnish to such Investor or transferee of such Investor upon
request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the 1933 Act and the 1934 Act, a copy
of the most recent annual or quarterly report of the Company, and such other
reports and documents so filed as such Investor or transferee of such Investor
may reasonably request in availing itself of any rule or regulation of the SEC
allowing such Investor or transferee of such Investor to sell any such
securities without registration.
9.3 Restrictions on Registrations. If at any time or from time to
time after the effective date of the Registration Statement, the Company
promptly notifies the Investors in writing of the existence of a Potential
Material Event (as defined below), the Investors shall not offer or sell any
Conversion Shares or engage in any other transaction involving or relating to
the Conversion Shares, from the time of the giving of notice with respect to a
Potential Material Event until the Investors receive written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event. If a Potential
Material Event shall occur prior to the date the Registration Statement is
filed, then notwithstanding Section 9.1 above, the Company's obligation to file
the Registration Statement shall be delayed until such Potential Material Event
either has been disclosed to the public or no longer constitutes a Potential
Material Event. "Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
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registration statement, as determined in good faith by the Chief Executive
Officer or the Board of Directors that disclosure of such information in a
Registration Statement would be materially detrimental to the business and
affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Chief Executive
Officer or the Board of Directors, be materially adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Chief Executive Officer or
the Board of Directors that the applicable Registration Statement would be
materially misleading absent the inclusion of such information. In no event
shall the suspension of the Registration Statement (or the permissible delay in
filing a Registration Statement) (i) exceed ninety (90) days on any
one occasion
as a result of a Potential Material Event or (ii) be permitted more than once
during any 12-month period.
9.4 Investor Obligations and Rights.
(a) Each of the Investors shall cooperate as reasonably
requested by the Company with the Company in connection with the preparation of
the Registration Statement, and for so long as the Company is obligated to file
and keep effective the Registration Statement, shall provide to the Company, in
writing, for use in the Registration Statement, all such information regarding
such Investor and its plan of distribution of the Conversion Shares as may be
reasonably necessary to enable the Company to prepare the
Registration Statement
and prospectus covering the Conversion Shares, to maintain the currency and
effectiveness thereof and otherwise to comply with all applicable requirements
of law in connection therewith. Each of the Investors shall have the right to
prepare any portions of the Registration Statement requiring information
regarding such Investor and its plan of distribution of the Conversion Shares.
(b) During such time as an Investor may be engaged in a
distribution of the Conversion Shares, such Investor shall comply with
Regulation M promulgated under the 1934 Act and pursuant thereto it
shall, among
other things; (i) not engage in any stabilization activity in connection with
the securities of the Company in contravention of such regulation; (ii)
distribute the Conversion Shares under the Registration Statement solely in the
manner described in the Registration Statement; and (iii) cease distribution of
such Conversion Shares pursuant to such Registration Statement upon receipt of
written notice from the Company that the prospectus covering the Conversion
Shares contains any untrue statement of a material fact or omits a
material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(c) Each of the Investors hereby covenants with the Company
not to make any sale of the Conversion Shares without effectively causing the
prospectus delivery requirements under the 1933 Act to be satisfied unless the
sale is made pursuant to an exemption from registration.
(d) Each of the Investors acknowledges and agrees that the
Conversion Shares sold pursuant to the Registration Statement are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing the Conversion Shares is accompanied by a
certificate reasonably satisfactory to the Company to the effect that
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(i) the Conversion Shares have been sold in accordance with this Agreement and
the Registration Statement and (ii) the requirement of delivering a current
prospectus has been satisfied.
(e) Following termination of the effectiveness of the
Registration Statement, each of the Investors shall discontinue sales of
Conversion Shares pursuant thereto upon receipt of notice from the Company of
its intention to remove from registration the Conversion Shares covered thereby
which remain unsold, and each of the Investors shall promptly notify
the Company
of the number of Conversion Shares registered that remain unsold immediately
upon receipt of the notice from the Company.
(f) Each of the Investors will observe and comply with the
1933 Act, the 1934 Act and the general rules and regulations thereunder, as now
in effect and as from time to time amended and including those
hereafter enacted
or promulgated, in connection with any offer, sale, pledge, transfer or other
disposition of the Conversion Shares or any part thereof.
9.5 Indemnification.
(a) The Company will indemnify and hold harmless to the
fullest extent permitted by law each of the Investors, as applicable, each of
its Affiliates and each of their respective officers, directors, shareholders,
employees, advisors, agents and partners, and each person controlling each of
the Investors, with respect to each registration which has been effected
pursuant to this Section 9 against all Losses (as defined below) jointly and
severally arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any amendment or supplement thereto or any documents
incorporated by reference therein and any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the 1933 Act or the
1934 Act or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse each of the
Investors, each of its Affiliates and each of their respective officers,
directors, shareholders, employees, advisors, agents and partners, and each
person controlling each of the Investors for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
Losses; provided, however, that the Company will not be liable in any such case
to the extent that any such Losses arise out of or is based on any untrue
statement or omission based upon written information furnished to the
Company by
the Investors and stated expressly to be specifically for use therein. "Losses"
shall mean, collectively, any and all losses, penalties, judgments, suits,
costs, claims, liabilities, damages and expenses (including, without
limitation,
reasonable attorneys' fees and disbursements).
(b) Each of the Investors will, if Conversion Shares held by
it are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify and hold harmless to the fullest
extent permitted by law the Company, each of its Affiliates and their
respective
directors, employees, advisors, agents and officers and each person
who controls
the Company, against all Losses arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration
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statement, prospectus, offering circular or other document made by
such Investor
in writing, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements by such
Investor therein not misleading, and will reimburse the Company and its
directors, officers, partners, persons, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating
or defending
any such Losses, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or
alleged omission)
is made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Investor and stated expressly to be specifically for use
therein; provided, however, that the obligations of each of the Investors
hereunder shall be limited to an amount equal to the net proceeds to such
Investor of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
9.5 (the "Indemnified Party") shall give notice to the party required
to provide
indemnification (the "Indemnifying Party") promptly after such
Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless (i) the Indemnifying Party
has agreed in
writing to pay such fees or expenses, (ii) the Indemnifying Party shall have
failed to assume the defense of such claim within a reasonable time after
receipt of notice of such claim from the Person entitled to indemnification
hereunder and employ counsel reasonably satisfactory to such Person, (iii) the
Indemnified Party has reasonably concluded (based on the written advice of
counsel) that there may be legal defenses available to it or other Indemnified
Parties that are different from or in addition to those available to the
Indemnifying Party, or (iv) the Indemnified Party shall have reasonably
concluded that there may be a conflict of interest between the Indemnifying
Party and the Indemnified Party in such action, in which case the fees and
expenses of counsel shall be at the expense of the Indemnifying Party), and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 9 unless the Indemnifying Party is materially prejudiced
thereby. If such defense is not assumed by the Indemnifying Party, the
Indemnifying Party will not be subject to any liability for any settlement made
without its consent, but such consent may not be unreasonably withheld. If the
Indemnifying Party assumes the defense, the Indemnifying Party shall not have
the right to settle such action without the written consent of the Indemnified
Party. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the
defense of
such claim and litigation resulting therefrom.
If the indemnification provided for in this Section 9.5
is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any Losses
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referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and of the Indemnified Party on the other in connection with the
statements
or omissions which resulted in such loss, liability, claim, damage or expense,
as well as any other relevant equitable considerations. The relative fault of
the Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue (or alleged untrue)
statement of a material fact or the omission (or alleged omission) to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding anything in this Section 9.5 to the contrary, no Indemnifying
Party (other than the Company) shall be required pursuant to this
Section 9.5 to
contribute any amount in excess of the amount by which the net
proceeds received
by such Indemnifying Party from the sale of Conversion Shares in the
offering to
which the Losses of the Indemnified Party relates exceeds the amount of any
damages which such Indemnifying Party has otherwise been required to pay by
reason of such untrue statement or omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 9.5 were determined by pro rata
allocation
or by any other method of allocation that does not take account of
the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(d) The foregoing indemnity agreement of the Company and
Investors is subject to the condition that, insofar as they relate to
any Losses
made in a preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement in
question becomes effective or the amended prospectus filed with the
SEC pursuant
to Rule 424(b) promulgated under the 1933 Act (the "Final Prospectus"), such
indemnity or contribution agreement shall not inure to the benefit of an
Investor if a copy of the Final Prospectus was timely furnished to
such Investor
in sufficient quantities for delivery and was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the 1933 Act.
(e) Notwithstanding any other provision of this
Agreement, the
obligations of the parties under this Section 9.5 shall survive indefinitely.
9.6 Expenses. The Company shall pay all expenses incident to the
registration of the Conversion Shares under this Section 9 including without
limitation, all registration, listing, quotation and filing fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, and the fees and disbursements of
counsel for
the Company and its independent public accountants. With respect to
sales of the
Conversion Shares, the Investors shall pay all underwriting discounts and
commissions and fees of underwriters, selling brokers, dealer managers or
similar securities industry professionals relating to the distribution of the
Conversion Shares to be sold by the Investors, the fees and disbursements of
counsel retained by the Investors and transfer taxes, if any.
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10. TERMINATION.
10.1 Termination. This Agreement may be terminated at any
time prior
to the Closing:
(a) by mutual written agreement of the Company and the
Investors;
(b) by either the Investors or the Company (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) if the
Closing shall not have been consummated on or before [July 31], 2003;
(c) by either the Investors or the Company if a court of
competent jurisdiction or a Governmental Authority shall have issued a
non-appealable final judgment, injunction, order, ruling or decree or taken any
other action having the effect of permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement provided
that the Party seeking to terminate this Agreement pursuant to this clause (c)
shall have used its reasonable best efforts to have such judgment, injunction,
order, ruling or decree lifted, vacated or denied; or
(d) by either the Investors or the Company (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in the event
of a material breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the breaching Party of such
breach.
10.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any Party hereto (or any
stockholder, director, officer, partner, employee, agent, consultant or
representative of such Party) except as set forth in this Section
10.2, provided
that nothing contained in this Agreement shall relieve any party from liability
for any breach of this Agreement and provided further that Section 11 shall
survive termination of this Agreement.
11. MISCELLANEOUS.
11.1 Survival of Warranties. The representations and warranties of
the Company and the Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the
Closing for a
period of twenty-four (24) months from the Closing Date and shall in no way be
affected by any knowledge or investigation of the subject matter
thereof made by
or on behalf of the Investors or the Company, as the case may be.
11.2 Specific Performance. The parties hereto specifically
acknowledge that monetary damages are not an adequate remedy for violations of
this Agreement, and that any party hereto may, in its sole discretion, apply to
a court of competent jurisdiction for specific performance or
injunctive or such
other relief as such court may deem just and proper in order to
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enforce this Agreement or prevent any violation hereof and, to the extent
permitted by applicable Law and to the extent the party seeking such relief
would be entitled on the merits to obtain such relief, each party waives any
objection to the imposition of such relief.
11.3 Successors and Assigns.
(a) This Agreement shall bind and inure to the benefit of the
Company and the Investors and their respective successors, permitted assigns,
heirs and personal representatives; provided that the Company may not
assign its
rights or obligations under this Agreement to any Person without the prior
written consent of the Investors.
(b) Nothwithstanding Section 11.3(a) or any other
provision to
the contrary in this Agreement, the Investors may assign any and all of their
rights and obligations under Section 9 hereof in connection with the
transfer to
such assignee of at least 1,000 Shares (or the Conversion Shares issued upon
conversion thereof).
11.4 Governing Law.
(a) This Agreement shall be governed by and construed under
the internal laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within that
State, without reference to principles of conflict of laws or choice of law
thereof.
(b) The Parties hereto hereby agree that the appropriate and
exclusive forum for any disputes arising out of this Agreement solely between
the Company and any of the Investors shall be the United States District Court
for the Southern District of California, and, if such court will not hear any
such suit, the courts of the state of Delaware, and the parties hereto hereby
irrevocably consent to the exclusive jurisdiction of such courts, and agree to
comply with all requirements necessary to give such courts jurisdiction. The
Parties hereto further agree that the Parties will not bring suit with respect
to any disputes arising out of this Agreement except as expressly set forth
below for the execution or enforcement of judgment, in any jurisdiction other
than the above specified courts. Each of the Parties hereto
irrevocably consents
to the service of process in any action or proceeding hereunder by the mailing
of copies thereof by registered or certified airmail, postage prepaid, to the
address specified in Section 11.7 hereof. The foregoing shall not limit the
rights of any party hereto to serve process in any other manner
permitted by the
law or to obtain execution of judgment in any other jurisdiction. The Parties
further agree, to the extent permitted by law, that final and unappealable
judgment against any of them in any action or proceeding contemplated above
shall be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified or exemplified
copy of which shall be conclusive evidence of the fact and the amount of
indebtedness.
11.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.6 Headings. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless
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otherwise provided, refer to sections and paragraphs hereof and exhibits and
schedules attached hereto, all of which exhibits and schedules are incorporated
herein by this reference.
11.7 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then four
(4) Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid and addressed to the intended recipient as
set forth below:
To the Company: PriceSmart, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxx LLP
00000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the Investors: To the names and addresses set
forth on the signature pages hereto
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service
or ordinary mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may change
the address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set
forth.
11.8 No Finder's Fees. Each party represents that it neither is nor
will be obligated for any finder's or broker's fee or commission in connection
with this transaction. The Company agrees to indemnify and hold
harmless each of
the Investors from any liability for any commission or compensation in the
nature of a finder's or broker's fee (and any asserted liability) for which the
Company or any of its officers, employees or representatives is responsible.
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11.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively)
only with the written consent of the Company and the Investors.
11.10 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
11.11 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be
enforceable in
accordance with its terms.
11.12 Entire Agreement. This Agreement, together with all exhibits
and schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the Parties with respect to the subject matter hereof.
11.13 No Third Party Beneficiaries. This Agreement is for the sole
benefit of the Parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended or shall
confer upon
any other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except that the provisions of
Section 9.5 shall inure to the benefit of and be enforceable by each
Indemnified
Party.
11.14 Public Announcements. The Investors and the Company shall
consult with each other before issuing any press release with respect to this
Agreement or the transactions contemplated hereby and neither shall issue any
such press release or make any such public statement without the prior consent
of the other, which consent shall not be unreasonably withheld; provided,
however, that a Party may, without the prior consent of the other Party, issue
such press release or make such public statement as may upon the advice of
counsel be required by law if it has used commercially reasonable efforts to
consult with the other Party prior thereto. The Parties hereby consent to the
filing of this Agreement by the Company and a Schedule 13D and Form 4
by each of
the Investors, as applicable, with the SEC.
11.15 Further Assurances. From and after the date of this
Agreement,
upon the request of any of the Investors or the Company, the Company and the
Investors shall execute and deliver such instruments, documents or other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
11.16 Fees and Expenses. Except as otherwise provided in this
Agreement, each of the Parties shall each bear its own expenses incurred in
connection with the negotiation and
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execution of this Agreement and each other agreement, document and instrument
contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.
11.17 Waiver of Jury Trial. THE COMPANY AND THE INVESTORS HEREBY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY:
PRICESMART, INC.
By: ______________________________
Name: ______________________________
Title:______________________________
THE INVESTOR:
[___________________________________]
By: ______________________________
Name: ______________________________
Title:______________________________
Address:____________________________
____________________________
____________________________
Facsimile: _________________________
Phone: _________________________
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SCHEDULE 3.4(b)
Piggyback: Under a Common Stock Purchase Agreement dated April 12, 2002 (the
"IFC Purchase Agreement"), if the Company proposes to register any
shares of its
Common Stock in connection with an underwritten public offering, International
Finance Corporation ("IFC") possesses piggyback registration rights to require
the Company to include up to an aggregate of 300,000 shares of the Company's
Common Stock in such registration on the same terms and conditions as the
securities otherwise being sold through the underwriters. These piggyback
registration rights are in effect until the earlier of (1) such time as IFC has
completed the resale of its shares, (2) such time as IFC is able to freely sell
its shares without registration and without regard to volume or manner of sale
and (3) two years from IFC's purchase of the shares.
Other registration rights:
1. Under a Registration Rights Agreement dated June 3, 2000, PSC, S.A.
("PSC") possesses registration rights with respect to an aggregate
of 679,500 shares of the Company's Common Stock. Pursuant to the
Registration Rights Agreement, the Company filed registration
statements on Form S-3 on July 27, 2000 and August 8, 2001, which
were subsequently declared effective. PSC has the right to require
that the registration statement be kept effective until PSC or a
permitted assignee has completed the distribution of its shares as
described in the registration statements.
2. Under Series A Preferred Stock Purchase Agreements dated
January 15,
2002 and January 18, 2002, Grupo Xxxxxxx, X.X. de C.V., The Price
Family Charitable Fund, The Price Family Charitable Trust, The Sol
and Xxxxx Xxxxx Trust, Xxxxxxxxxxx--Close Investment Partnership,
L.P., X. Xxxxxxxxxxx Investment Partnership, L.P., Performance
Capital II, Little Wing LP, Trade Winds Fund Ltd., Terrier Partners
LP, Wynnefield Partners Small Cap Value, LP, Wynnefield Partners
Small Cap Value, LP I, and Wynnefield Small Cap Value
Offshore Fund,
Ltd. (collectively, the "Series A Investors") possess registration
rights with respect to an aggregate of 533,329 shares of the
Company's Common Stock. Pursuant to the Series A Preferred Stock
Purchase Agreements, the Company filed a registration statement on
Form S-3 on February 26, 2002, which was subsequently declared
effective. The Series A Investors have the right to
require that the
registration statement be kept effective until the earlier of (1)
such time as the Series A Investors have completed the distribution
of their shares as described in the registration statement and (2)
two years from their purchase of the shares of Series A Preferred
Stock.
3. Under the IFC Purchase Agreement, IFC possesses registration rights
with respect to an aggregate of 300,000 shares of the Company's
Common Stock. Pursuant to the IFC Purchase Agreement, the Company
filed a registration statement on Form S-3 on April 18, 2002, which
was subsequently declared effective. IFC has the right to require
that the registration statement be kept effective until the earlier
of (1) such time as IFC is able to freely sell its shares without
registration and without regard to volume or manner of sale and (2)
two years from its purchase of the shares.
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4. Under Common Stock Purchase Agreements dated June 24, 2002, Green
Hill Investments, Inc., Chancellor Holdings Limited and Nithyananda
Ent. Ltd. (collectively, the "GCN Investors") possess registration
rights with respect to an aggregate of 47,808 shares of the
Company's Common Stock. Pursuant to the Common Stock Purchase
Agreements, the Company filed a registration statement on Form S-3
on July 19, 2002, which was subsequently declared
effective. The GCN
Investors have the right to require that the registration statement
be kept effective until the earlier of (1) such time as the GCN
Investors are able to freely sell their shares without registration
and without regard to volume or manner of sale and (2) two years
from their purchase of the shares.
5. Under a Common Stock Purchase Agreement dated August 9, 2002, PSC
possesses registration rights with respect to an
aggregate of 79,313
shares of the Company's Common Stock. Pursuant to the Common Stock
Purchase Agreement, the Company filed a registration statement on
Form S-3 on October 25, 2002, which was subsequently declared
effective. PSC has the right to require that the registration
statement be kept effective until the earlier of (1) such time as
PSC is able to freely sell its shares without registration and
without regard to volume or manner of sale and (2) two years from
its purchase of the shares.
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EXHIBIT A
Schedule of Investors
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EXHIBIT B
Certificate of Designations
