SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February 25,
2005, by and among WinWin Gaming, Inc., a Delaware corporation, with
headquarters located at 0000 X. Xxxxxx Xxx. Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000
(the "Company"), and the investors listed on the Schedule of Buyers attached
hereto (each, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(as so amended, the "1933 Act");
B. The Company has authorized the issuance and sale of up to fourteen
million (14,000,000) shares of its common stock, par value $0.01 per share (the
"Common Stock") and warrants, in substantially the form attached hereto as
Exhibit A (the "Warrants"), pursuant to the terms of this Agreement;
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate of up to fourteen million (14,000,000) shares of
Common Stock (the "Offered Shares") in the respective amounts set forth opposite
each Buyer's name on the Schedule of Buyers, together with Warrants exercisable
into share of Common Stock (the "Warrant Shares"); and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement"), pursuant to which the Company has agreed
to provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF OFFERED SHARES.
a. Purchase of Offered Shares. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company the respective number of Offered Shares set forth opposite such
Buyer's name on the Schedule of Buyers, together with the Warrants, at the
respective purchase price (the "Purchase Price") set forth opposite such Buyer's
name on the Schedule of Buyers (the "Closing"). The Offered Shares, together
with the Warrants and the Warrant Shares are referred to herein as the
"Securities").
b. Closing Dates.
i. Initial Closing Date. The date and time of the initial
Closing (the "Initial Closing Date") shall be 10:00 a.m. California Time, on the
date hereof, subject to notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and the Buyers). The initial
Closing shall occur on the Closing Date at the offices of Shartsis, Xxxxxx &
Xxxxxxxx LLP, Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000.
1
ii. Subsequent Closings. It is anticipated that new investors
reasonably approved by the initial Buyer hereunder (the "New Buyers") may not be
purchasing Offered Shares at the initial Closing, but may acquire Offered Shares
in an aggregate amount (taken together with the Offered Shares acquired by the
initial Buyer) not to exceed Fourteen Million (14,000,000) shares of Common
Stock at additional closings to occur on or before the thirtieth (30th) day
following the date hereof (each a "Subsequent Closing," and together with the
Initial Closing, the "Closings"; with the date of any Initial Closing or
Subsequent Closing, as applicable, being referred to herein as a "Closing
Date"), provided however, that Xxx Xxxxxxx Private Opportunities Fund L.P. shall
have the right to acquire up to 2,000,000 Offered Shares at the first Subsequent
Closing of at least 1,000,000 Offered Shares to New Buyers, or if no such
Subsequent Closing occurs, on the thirtieth (30th) day after the Initial
Closing. Any such Offered Shares Xxx Xxxxxxx Private Opportunities Fund L.P.
elects not to purchase at the first Subsequent Closing shall thereafter be
available for sale as otherwise provided in this Section 1.b.ii. Any sales of
Offered Shares and Warrants at Subsequent Closings shall be made on the terms
and conditions set forth in this Agreement and shall be considered to have been
issued pursuant hereto. The Schedule of Buyers shall be amended at each
Subsequent Closing, without the need to obtain the consent of any party hereto,
to reflect the name and address of each New Purchaser participating in such
Subsequent Closing, the number of Offered Shares issued at such Subsequent
Closings and the other information required by the Schedule of Buyers. Each New
Purchaser who participates in a Subsequent Closing shall execute and deliver to
the Company a counterpart signature page or joinder to this Agreement pursuant
to which each such New Purchaser agrees to be bound by the terms and provisions
hereof. The Company shall deliver to each such New Purchaser at each Subsequent
Closing a Compliance Certificate executed by an executive officer of the
Company, dated the Subsequent Closing Date, and certifying (i) that the
representations and warranties made by the Company in Section 3 of this
Agreement were true and correct when made, and are true and correct in all
material respects as of the Subsequent Closing Date and (ii) that all covenants,
agreements, and conditions contained in this Agreement to be performed by the
Company on or prior to the Subsequent Closing have been fully performed or
complied with in all material respects.
iii. Form of Payment. On the Closing Date, (i) each Buyer shall pay
an amount equal to the Purchase Price to the Company for the Offered Shares and
Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer, stock
certificates (in the denominations as such Buyer shall request (the "Common
Stock Certificates") representing such number of the Offered Shares which such
Buyer is then purchasing (as indicated opposite such Buyer's name on the
Schedule of Buyers), along with the Warrant, duly executed on behalf of the
Company and registered in the name of such Buyer or its designee.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
a. Investment Purpose. Such Buyer (i) is acquiring the Offered
Shares and the Warrants for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempt from registration under
the 1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Offered Shares or the Warrants for any
minimum or other specific term and reserves the right to dispose of them at any
time in accordance with or pursuant to a registration statement or an exemption
under the 1933 Act and otherwise in accordance with applicable law.
2
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D, and such
Buyer is also knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in securities
presenting an investment decision like that involved in the purchase of the
Securities, including investments in securities issued by the Company and
investments in comparable companies.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
c. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
d. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless
subsequently registered thereunder or there is an exemption from registration;
(ii) any sale of the Securities made in reliance on Rule 144 promulgated under
the 1933 Act, as amended, or any successor rule thereto ("Rule 144") may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 0000 Xxx) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register such securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
3
e. Legends. Such Buyer understands that the certificates or other
instruments representing the Securities, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE
HOLDER, WHICH MAY RESTRICT THE TRANSFER OF SUCH SECURITIES IN CERTAIN
CIRCUMSTANCES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE,
AT THE COMPANY'S PRINCIPAL OFFICE.
The legends set forth above shall be removed and the Company shall issue a
certificate without such legends to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold. Such Buyer acknowledges, covenants and agrees to sell the
Securities represented by a certificate(s) from which the legends have been
removed, only pursuant to (i) a registration statement effective under the 1933
Act or (ii) advice of counsel that such sale is exempt from registration
required by Section 5 of the 1933 Act, including, without limitation, a
transaction pursuant to Rule 144.
f. Validity; Enforcement. Such Buyer has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable against such Buyer in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
g. Residency. Such Buyer is a resident of that state and country
specified in its address on the Schedule of Buyers.
h. Brokers or Finders. The Company will not incur, directly or
indirectly, as a result of any action taken by the Buyers, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transactions contemplated hereby.
4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means a "Subsidiary" as
defined in Rule 405 under the 0000 Xxx) are corporations duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power and authorization
to own their properties and to carry on their business as now being conducted,
except where the failure of any Subsidiary to be duly organized, validly
existing and in good standing would not have a Material Adverse Effect. Each of
the Company and its Subsidiaries is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). The Company has no Subsidiaries except
as set forth on Schedule 3(a).
b. Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5), the Warrants and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Offered Shares and the
Warrants and the reservation for issuance and the issuance of the shares of
Common Stock to be issued on exercise of the Warrants (the "Warrant Shares"),
have been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 300,000,000 shares of Common Stock, of
which as of the date hereof, 41,411,601 shares are issued and outstanding,
20,000,000 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans and 4,189,445 shares are issuable and reserved for
issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock, and (ii)
10,000,000 shares of Preferred Stock, of which as of the date hereof, no shares
are issued and outstanding. All of such outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), (i) no shares of the Company's capital stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, (ii) none of the Company or
any of its Subsidiaries has any outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
5
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
antidilution or similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement, and (vii) the Company does not have
any stock appreciation rights or stock "phantom stock" plans or agreements or
any similar plan or agreement. The Company has furnished to the Buyer true and
complete copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws as amended and as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
Schedule 3(c) lists all issuances of the Company's securities (both debt and
equity) since January 1, 2004, detailing the name of the acquirer, the number
and type of securities acquired, and the consideration paid. Schedule 3(c) also
lists each sale of Common Stock by the Company's officers, directors and greater
than 5% owners of the Company's Common Stock from January 1, 2004, through and
including the date of this Agreement.
d. Issuance of Securities. The Offered Shares are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and nonassessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Incorporation. A sufficient number
of shares of Common Stock (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(f) below) have been duly authorized and reserved
for issuance upon exercise of the Warrants such that upon such exercise the
Company will have sufficient shares to issue to the holders of the Warrants in
order to satisfy its obligations thereunder. Upon exercise of the Warrants, the
Warrant Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities is exempt from registration under the
1933 Act.
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Incorporation and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and the issuance and registration of
the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation or the By-laws or (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party, or result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the Principal
Market (as defined in Section 4(h) below)) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of or in default under its Certificate of Incorporation
or By-laws or their organizational charter or by-laws, respectively, except, in
each case, where such violation, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except, in each case,
where such violation could not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the Company. The business of the
Company and its Subsidiaries is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for violations the
sanctions for which either individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents or to perform
its obligations under the Certificate of Designations, in each case in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof.
6
f. SEC Documents; Financial Statements. Since April 14, 2004, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company has delivered to or otherwise made available to the Buyers or their
respective representatives true and complete copies of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries or
any of their officers, directors, employees or agents have provided the Buyers
with any material, nonpublic information.
7
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since December 31, 2003, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings. Except
as disclosed in Schedule 3(g), since December 31, 2003 the Company has not
declared or paid any dividends, sold any assets in excess of $50,000 outside of
the ordinary course of business or had capital expenditures in excess of
$50,000. Except as disclosed in Schedule 3(g), since December 31, 2003, there
has not been any other event which could have a Material Adverse Effect or which
could adversely affect the validity or enforceability of, or the authority or
the ability of the Company to perform its obligations under the Transaction
Documents.
h. Absence of Litigation. Except as set forth in Schedule 3(h),
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries or any of
the Company's or the Company's Subsidiaries' officers or directors in their
capacities as such, which could have a Material Adverse Effect.
i. Acknowledgment Regarding Buyers' Purchase of Securities. The
Company acknowledges and agrees that each of the Buyers is acting solely in the
capacity of arm's-length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by any of the Buyers or any of their respective representatives or agents
in connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
8
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor, to the Company's knowledge, 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) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor, to the Company's knowledge, any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated, nor will the Company or any of its Subsidiaries take any
action or steps that would require registration of any of the Securities under
the 1933 Act (except pursuant to the Registration Rights Agreement) or cause the
offering of the Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union, neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer (as defined in Rule 501(f)
of the 0000 Xxx) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company. No
executive officer, to the best knowledge of the Company and its Subsidiaries,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, nondisclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.
n. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted or as proposed to be conducted, except where the
failure to own or possess such rights could not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. None of the
Company's trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement, unless such
expiration or termination could not reasonably be expected to, individually or
in the aggregate, have a Material Adverse Effect. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, and the Company is not aware of any third party
making any unauthorized or infringing use of the intellectual properties of the
Company or any of its Subsidiaries.
9
o. Environmental Laws. The Company and its Subsidiaries (i) are in
compliance 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 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 such permit, license or approval except where, in each of the
three foregoing cases, the failure to so comply could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
p. Title. The Company and its Subsidiaries have sufficient title to
all real property, if any, owned by it and good and valid title to all personal
property owned by it which, in each case, is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects, except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
q. Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged, and all of such insurance is in full force and effect. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that could not reasonably
be expected to, individually or in the aggregate, have a Material Adverse
Effect.
r. Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess any such certificate,
authorization or permit could not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect, and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.
s. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general specific or authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
10
t. Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject unless and only
to the extent that the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
u. Transactions With Affiliates. Except as set forth in Schedule
3(u) or in the SEC Documents filed at least ten (10) days prior to the date
hereof and other than the grant of stock options disclosed on Schedule 3(c),
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
v. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
w. No Other Agreements. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
x. Material Contracts. All material contracts of the Company that
are required by applicable rules and regulations of the SEC to be filed as
exhibits to the SEC Documents ("Material Contracts") have been so filed. The
Company has not received notice of a default and is not in default under, or
with respect to, any Material Contract. To the knowledge of the Company, no
other party to any Material Contract is in default thereunder, nor does any
condition exist that, with notice or lapse of time or both, would constitute a
default by such party thereunder.
y. Brokers or Finders. The Buyers will not incur, directly or
indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transactions contemplated hereby.
11
z. Officers, Directors and 5% Shareholders. Each of the Company's
key executive officers and directors and persons owning 5% or more of the Common
Stock is listed on Schedule 3(z).
4. COVENANTS.
a. Closing Conditions Compliance. Each party shall use its best
efforts to satisfy timely each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States. The Company shall make all filings and reports relating the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States following the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of which
the Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Offered Shares and the Warrant Shares without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Offered
Shares and the Warrant Shares and (B) none of the Offered Shares or Warrants is
outstanding (the "Registration Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale
of the Offered Shares for substantially the same purposes and in substantially
the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees that until the second
anniversary of the Initial Closing it shall send the following to each Investor
(as that term is defined in the Registration Rights Agreement) during the
Registration Period: (i) within two (2) days after the filing thereof with the
SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form
10-Q, any Current Reports on Form 8-K, including any amendments to such
documents, and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, provided that if any such report is
not filed with the SEC through XXXXX then the Company shall deliver a copy of
such report to each Investor by facsimile on the same day it is filed with the
SEC; (ii) on the same day as the release thereof, facsimile copies of all press
releases issued by the Company or any of its Subsidiaries; and (iii) copies of
any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon exercise of all
outstanding Warrants.
12
g. Lock Up. The Company shall obtain for Buyers' benefit the written
agreement from each of its executive officers and directors not to sell, loan,
dispose, pledge or transfer, directly or indirectly, more than five percent (5%)
of the Company's capital stock they own or control, such restrictions to apply
from the date hereof through the period ending on the day following the 180th
consecutive day that the Registration Statement is available for the resale of
the Offered Shares and Warrant Shares. Such agreement shall be in substantially
the form provided in Exhibit B hereto. The Company shall provide a standing stop
with its transfer agent to prohibit any such proscribed activity.
h. Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. Subject to meeting
applicable listing requirements, the Company shall use reasonable business
efforts to obtain authorization of the Common Stock for quotation on the Nasdaq
National Market, the Nasdaq SmallCap Market, The New York Stock Exchange, Inc.
or The American Stock Exchange, Inc., as applicable (the "Principal Market").
Once listed for quotation on the Principal Market, neither the Company nor any
of its Subsidiaries shall take any action which would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(h).
i. Expenses. The Company shall reimburse Xxx Xxxxxxx Private
Opportunities Fund L.P. its expenses (including reasonable attorneys' fees and
expenses) in due diligence and negotiating and preparing the Transaction
Documents and consummating the transactions contemplated thereby up to an
aggregate of $25,000.
j. Filing of Form 8-K. On or before the first (1st) business day
following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act.
k. Limitation on Filing Registration Statements. From the date
hereof through the period ending on the day following the 30th consecutive
trading day that the Registration Statement is available for the resale of the
Offered Shares and Warrant Shares, the Company shall not register any securities
other than the Securities and securities on Form S-8 issued in connection with
any stock option plan, stock purchase plan, stock bonus plan or other plan for
the benefit of employees, officers or directors of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
a. Delivery of Legended Common Stock. Upon execution of this
Agreement, the Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Offered Shares and
the Warrant Shares in such amounts as specified from time to time by each Buyer
to the Company (the "Irrevocable Transfer Agent Instructions"), which
instructions shall be in the form as provided in Exhibit D hereto. Prior to
registration of the Offered Shares and the Warrant Shares under the 1933 Act,
all Securities shall bear the restrictive legend specified in Section 2(g) of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof (in the case of the
Offered Shares and the Warrant Shares, prior to registration of the Offered
Shares and the Warrant Shares under the 0000 Xxx) will be given by the Company
to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement.
13
b. Delivery of Unlegended Common Stock. After the Offered Shares and
Warrant Shares have been registered for resale, in lieu of delivering physical
certificates representing Offered Shares or Warrant Shares, provided the
Company's transfer agent is participating in the Depositary Trust Company
("DTC") Fast Automated Securities Transfer program, on the written request of a
Buyer who shall have previously instructed its broker to confirm such request to
the Company's transfer agent, the Company shall cause its transfer agent to
transmit electronically the Offered Shares or the Warrant Shares to the Buyer by
crediting the account of the Buyer's prime broker with DTC through its Deposit
Withdrawal Agent Commission system no later than the date upon which the Company
is required to deliver shares to the Buyer under the terms of this Agreement.
Nothing in this Section 5 shall affect in any way each Buyer's obligations and
agreements set forth in Section 2(g) to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Securities. If a Buyer
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act or the Buyer provides the
Company with reasonable assurances (including, without limitation, by delivering
a certificate of an executive officer of such Buyer) that the Securities can be
sold pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and promptly instruct its transfer agent to issue one
or more certificates in such name and in such denominations as specified by such
Buyer and without any restrictive legend.
c. Timing of Delivery. Whenever the Company is required to deliver
Securities under the Transaction Documents, whether with or without a
restrictive legend, such delivery shall be made within three (3) business days
of the day that request is made for delivery of such Securities.
d. Specific Performance. The Company acknowledges that a breach by
it or its transfer agent of their respective obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach of the
provisions of this Section 5, that the Buyers shall be entitled, in addition to
all other available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Offered
Shares to each Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
14
a. Such Buyer shall have executed each of the Transaction Documents
to which it is a party and delivered the same to the Company.
b. Such Buyer shall have delivered to the Company the Purchase Price
for the Offered Shares and the related Warrants being purchased by such Buyer at
the Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of such Buyer shall be true
and correct as of the Closing Date (except for representations and warranties
that speak as of a specific date), and such Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Buyer at or prior to the Closing Date.
d. The offer and sale of the Offered Shares and the related Warrants
to such Buyer pursuant to this Agreement shall be exempt from the registration
requirements under the 1933 Act and shall be exempt from the registration and/or
qualification requirements of all applicable state securities laws.
e. Such Buyer shall have delivered to the Company such other
documents relating to the transactions contemplated by this Agreement as the
Company or its counsel reasonably request.
8. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Offered Shares at
each Closing is subject to the satisfaction, at or before the applicable Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction Documents
and delivered the same to such Buyer.
b. Trading in the Common Stock shall not have been suspended.
c. The representations and warranties of the Company shall be true
and correct as of the Closing Date (except for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer.
d. Such Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit C attached
hereto.
15
e. The Company shall have executed and delivered to such Buyer the
Warrants and the Common Stock Certificates (in such denominations as such Buyer
shall request) for the Offered Shares being purchased by such Buyer at the
Closing.
f. The Board of Directors of the Company shall have adopted
resolutions authorizing the issuance of the Offered Shares, the Warrants and the
Warrant Shares and the other transactions provided by this Agreement and the
Transaction Documents in a form reasonably acceptable to such Buyer.
g. As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock a sufficient number of shares of Common
Stock for the purpose of effecting the exercise of the Warrants.
h. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
i. The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in such corporation's state of incorporation issued by the Secretary
of State of such state of incorporation as of a date within 10 days of the
Closing Date.
j. The Company shall have delivered to such Buyer a certified copy
of the Certificate of Incorporation as certified by the Secretary of State of
the State of Delaware within 10 days of the Closing Date.
k. The Company shall have delivered to such Buyer a secretary's
certificate, dated as the Closing Date, as to (i) the resolutions described in
Section 7(f), (ii) the Certificate of Incorporation and (iii) the Bylaws, each
as in effect at the Closing.
l. The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of the
Securities pursuant to this Agreement in compliance with such laws.
m. The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel reasonably request.
9. INDEMNIFICATION.
In consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall,
for a period of twelve months following the date the Offered Shares and the
Warrant Shares have been continuously registered for resale for at least 30
consecutive trading days, defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
officers, directors, employees, direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(d) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (e) the
status of such Buyer or holder of the Securities as an investor in the Company.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Notwithstanding anything in ??this Section 8 to the
contrary, in no event shall a Buyer have or assert any claim against the Company
based upon or arising out of any matter for which a Buyer is entitled to
indemnification hereunder unless, until and to the extent that the aggregate of
all such claims under this Section 8, exceeds $10,000 aggregate threshold (at
which point the Company will be obligated to indemnify such Buyer or Buyers from
and against all such Indemnified Liabilities back to the first dollar).
16
10. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of California. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of San Francisco, California, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other parties; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
17
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of a majority of the Offered Shares then outstanding,
and no provision hereof may be waived other than by an instrument in writing
signed by the party against whom enforcement is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Offered Shares then outstanding.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Winwin Gaming, Inc.
0000 X. Xxxxxx Xxx.
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
With a copy to:
Xxxxx X. Xxxxxxxxxx
Xxxxxx Xxxx & Priest LLP
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
18
If to the Transfer Agent:
Integrity Stock Transfer
0000 X. Xxxxx Xxxxxx Xxxxxxx
Xxxxxxxx 0 Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxx Xxxxxxxx
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers attached hereto, with copies to such Buyer's
representatives, if any, specified on the Schedule of Buyers
, or at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party in accordance with the above provisions five (5) days prior
to the effectiveness of such change.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Offered Shares. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of a majority of the Offered Shares then outstanding,
including by merger or consolidation. A Buyer may assign some or all of its
rights hereunder without the consent of the Company, provided, however, that any
such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Buyers shall be entitled to
pledge the Securities in connection with a bona fide margin account.
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations, warranties and covenants of the
Company and the Buyers shall survive the Closing. Each Buyer shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
j. Publicity. The Company and each Buyer holding more than 25% of
the Offered Shares shall have the right to approve before issuance any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to such transactions as is required by applicable
law and regulations (although such Buyers shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
19
l. No Strict Construction. The language used in this Agreement will
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
m. Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. The parties hereto hereby declare that it is impossible to measure in money
the damages which will accrue to Buyers by reason of the Company's failure to
perform any of the obligations under this Agreement and agree that the terms of
this Agreement shall be specifically enforceable by Buyers. If a Buyer
institutes any action or proceeding to specifically enforce the provisions
hereof, any person or entity against whom such action or proceeding is brought
hereby waives the claim or defense therein that such Buyer has an adequate
remedy at law, and such person or entity shall not offer in any such action or
proceeding the claim or defense that such remedy at law exists.
n. Independence. The Company and each Buyer acknowledge that each
Buyer (other than Buyers that are affiliated with each other prior to the
signing of this Agreement) is acting and has acted independently from one
another and not as a group in connection with the transaction evidenced by the
Transaction Documents, including without limitation, performing due diligence,
negotiating the Transaction Documents, and deciding whether to acquire the
Securities, hold the Securities, vote the Securities or dispose of the
Securities. The Company and each Buyer (other than Buyers that are affiliated
with each other prior to the signing of this Agreement) further acknowledge that
each Buyer intends to act independently from one another and not as a group in
connection with (i) any amendment or waiver of rights under this Agreement or
the Registration Rights Agreement, (ii) any future purchase or sale of the
Company's equity securities, (iii) the acquisition, holding, voting or disposing
of the Securities or any other capital stock of the Company, or (iv) any other
matter arising under or related to the Transaction Documents.
o. Representation. Each party hereto acknowledges that Xxx Xxxxxxx
Private Opportunities Fund L.P. retained Shartsis, Xxxxxx & Xxxxxxxx LLP to
represent it in connection with the Transaction Documents, that such its
interests may not necessarily coincide with the interests of the other Buyers,
and that each Buyer has consulted with, or has had the opportunity to consult
with, its own legal counsel and has not relied on Shartsis, Xxxxxx & Xxxxxxxx
LLP for legal counsel in connection with this transaction.
p. Exculpation. Each Buyer acknowledges that it is not relying upon
any person, firm or corporation, other than the Company and its officers and
directors, in making its investment or decision to invest in the Company. Each
Buyer agrees that no Buyer nor the respective controlling person, officers,
directors, partners, agents or employees of any Buyer shall be liable to any
other Buyer for any action heretofore or hereafter taken or omitted to be taken
by any of them in connection with the purchase or sale of the Securities or the
execution of or performance under any of the Transaction Documents..
* * * * * *
20
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
WinWin Gaming, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman and
Chief Executive Officer
21
BUYERS:
Xxx Xxxxxxx Private Opportunities Fund L.P.
By: /s/ Xxxxxxx Xxx Xxxxxxx
----------------------------------------
Name: Xxxxxxx Xxx Xxxxxxx
Title:
22
SECURITIES PURCHASE AGREEMENT
BUYER SIGNATURE PAGE AND JOINDER AGREEMENT
By executing this page in the space provided, the undersigned hereby
agrees (i) that the undersigned is a "Buyer," as defined in the Securities
Purchase Agreement, dated February 25, 2005, among WinWin Gaming, Inc. and the
initial Buyers party thereto (as amended, modified and supplemented from time to
time, the "Agreement"), (ii) that the undersigned is a party to the Agreement
for all purposes and is obligated with respect to the purchase of the number of
Securities specified on the amended Schedule of Buyers dated as of the date
hereof (a copy of which is attached hereto) and (iii) that the undersigned is
bound by all of the terms and conditions of the Agreement.
For Individuals:
________________________________________
Print Name Above
________________________________________
Sign Name Above
For Entities:
Print Name Above
By:
-------------------------------------
Name:
Title:
23
SCHEDULE OF BUYERS
As of February 25, 2005
Investor's (and Investor's Number of
Representative's, if any) Address Offered Number of Purchase
Investor's Name and Facsimile Number Shares Warrants Price
--------------- -------------------- ------ -------- -----
Xxx Xxxxxxx Private
Opportunities Fund As provided in
L.P. c/o Xxx Xxxxxxx Capital Management 4,000,000 Warrant $2,000,000
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Fax: 000-000-0000
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: 000-000-0000
--------------------------------------------------------------------------------
24
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(g) Material Changes
Schedule 3(h) Litigation
Schedule 3(z) Key Executives and Directors
Schedule 4(d) Use of Proceeds
EXHIBITS
Exhibit A Form of Warrant
Exhibit B Form of Lock Up
Exhibit C Form of Company Counsel Opinion
Exhibit D Form of Irrevocable Transfer Agent Instructions
25
