EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of April 2, 2004
(this "Agreement"), is entered into by and between XXXXXXXX TECHNOLOGIES, INC.,
a Florida corporation with headquarters located at #207, 00 Xxxxxxx Xxxx,
Xxxxxxxxxx, XX 00000 (the "Company"), and each individual or entity named on a
signature page hereto (as used herein, each such signatory is referred to as the
"Buyer") (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer [each, an
"Other Buyer"] under such agreement and the Transaction Agreements, as defined
below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales to accredited investors
afforded, INTER alia, by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Section
4(2) of the 1933 Act; and
WHEREAS, the Buyer desires to purchase and the Company desires
to sell, upon the terms and conditions set forth in this Agreement, the number
of shares specified on the Buyer's signature page of this Agreement (the
"Purchased Shares") of the Company's Common Stock, $0.0001 par value ("Common
Stock") in consideration for the payment by Purchaser to the Company of $0.60
per share (the "Per Share Purchase Price"), or the aggregate amount specified on
the Buyer's signature page (the "Purchase Price"); and
WHEREAS, in connection with the Purchaser's purchase of the
Purchased Shares, the Company will issue to the Purchaser the Warrants (as
defined below), which Warrants may be exercised for the purchase of shares of
Common Stock (the "Warrant Shares");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE OF SECURITIES. On the Closing Date (as defined
below), the Company shall sell and deliver to the Buyer, and the Buyer agrees to
purchase from the Company, the Purchased Shares and the Warrants (collectively,
the "Purchased Securities") in consideration for the Purchase Price. The
aggregate Purchase Price of all Buyers is $2,000,000 (the "Total Purchase
Price").
-1-
b. CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred
to in the relevant provision, another Person who or which controls or is
controlled by or is under common control with such specified Person.
"Bid Price" shall mean the 4:00 P.M. closing bid price of the
Common Stock (in U.S. Dollars) on the Principal Trading Market on the relevant
Trading Day(s), as reported by the Reporting Service.
"Buyer Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Buyer
pursuant to Rule 405 under the 1933 Act or Section 20 of the 0000 Xxx.
"Buyer's Allocable Share" means the fraction, of which the
numerator is the Buyer's Purchase Price and the denominator is the Total
Purchase Price.
"Certificates" means (i) the certificates representing the
Purchased Shares and (ii) the relevant Warrants, each duly executed by the
Company and issued on the Closing Date in the name of the Buyer.
"Closing Date" means the date of the closing of the purchase
and sale of the Purchased Securities.
"Company Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as defined below).
"Effective Date" means the date the Registration Statement
covering the Registrable Securities is declared effective by the SEC.
"Escrow Agent" means the escrow agent identified in the Joint
Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions").
"Escrow Funds" means the Purchase Price delivered to the
Escrow Agent as contemplated by Sections 1(c) and (d) hereof.
"Escrow Property" means the Escrow Funds and the Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.
"Finder" means West Hastings, Ltd.
"Holder" means the Person holding the relevant Securities at
the relevant time.
-2-
"Last Audited Date" means June 30, 2003.
"Majority in Interest of the Holders" means one or more
Holders whose respective Purchase Prices aggregate more than fifty percent (50%)
of the Total Purchase Price.
"Material Adverse Effect" means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(w) adversely affect the legality, validity or enforceability of the Securities
or any of the Transaction Agreements, (x) have or result in a material adverse
effect on the results of operations, assets, prospects, or condition (financial
or otherwise) of the Company and its subsidiaries, taken as a whole, (y)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Agreements or the transactions
contemplated thereby, or (z) materially and adversely affect the value of the
rights granted to the Buyer in the Transaction Agreements.
"New Common Stock" means shares of Common Stock and/or
securities convertible into, and/or other rights exercisable for, the issuance
of Common Stock, which are offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or
lender (howsoever denominated) in a New Transaction.
"New Transaction" means the offer or sale of New Common Stock
in a capital raising or other financing transaction by or on behalf of the
Company to a New Investor in a transaction offered or consummated after the date
hereof; provided, however, that it is specifically understood that the term "New
Transaction" does not include (1) the sale of the Purchased Shares to the Buyer
and the Other Buyers, (2) the issuance of Common Stock upon the exercise or
conversion of options, warrants or convertible securities outstanding on the
date hereof or in connection with a put exercised by the Company pursuant to the
terms of an equity line agreement in effect on the date hereof, and (3) the
issuance of options or warrants hereafter granted to employees or consultants
for compensatory purposes or the issuance of Common Stock upon the exercise of
such options or warrants.
"Person" means any living person or any entity, such as, but
not necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin
Board or such other market on which the Common Stock is principally traded at
the relevant time, but shall not included the "pink sheets."
"Registrable Securities" shall have the meaning ascribed to it
in the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement in the form annexed hereto as ANNEX IV as executed by the Buyer and
the Company simultaneously with the execution of this Agreement.
-3-
"Registration Statement" means an effective registration
statement covering the Registrable Securities.
"Reporting Service" means Bloomberg LP or if that service is
not then reporting the relevant information regarding the Common Stock, a
comparable reporting service of national reputation selected by a Majority in
Interest of the Holders and reasonably acceptable to the Company.
"Securities" means the Purchased Shares, the Warrants and the
Warrant Shares.
"Shares" means the shares of Common Stock representing any or
all of the Purchased Shares and the Warrant Shares.
"State of Incorporation" means Florida.
"Trading Day" means any day during which the Principal Trading
Market shall be open for business.
"Transaction Agreements" means the Securities Purchase
Agreement, the Registration Rights Agreement, the Joint Escrow Instructions, and
the Warrants, and includes all ancillary documents referred to in those
agreements.
"Transfer Agent" means, at any time, the transfer agent for the Company's Common
"Warrant Shares" means the shares of Common Stock issuable upon exercise of the
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer shall pay the Purchase Price by delivering
immediately available good funds in United States Dollars to the Escrow Agent no
later than the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Buyer to the Escrow Agent of the Purchase Price, the
Company shall deliver the Certificates to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the
Company, subject to acceptance by the Escrow Agent, agrees to all of the terms
and conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
d. METHOD OF PAYMENT. Payment into escrow of the relevant
Purchase Price shall be made by wire transfer of funds to:
-0-
Xxxx xx Xxx Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Buyer by Xxxxxxx
& Prager LLP]
Re: Xxxxxxxx March 04 Transaction
For: [Name of Buyer]
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Securities
pursuant to an effective registration statement or otherwise in compliance with
the 1933 Act, the Buyer is purchasing the Securities for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Securities by the
Buyer shall be made pursuant to registration of the relevant Securities under
the 1933 Act or pursuant to an exemption from registration.
d. The Buyer understands that the Securities are being offered
and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Securities.
e. The Buyer and its advisors, if any, have been furnished
with or have been given access to all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
-5-
sale of the Purchased Shares and the Warrants which have been requested by the
Buyer, including those set forth on in any annex attached hereto. The Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management and have received complete and satisfactory answers
to any such inquiries. Without limiting the generality of the foregoing, the
Buyer has also had the opportunity to obtain and to review the Company's filings
on XXXXX listed on ANNEX VI hereto (the documents listed on such Annex VI, to
the extent available on XXXXX or otherwise provided to the Buyer as indicated on
said Annex VI, collectively, the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or the Finder or any of their respective officers, directors and
employees or any of their respective attorneys or agents or the Finder, except
as specifically set forth herein. The Finder is a third party beneficiary of
this provision.
h. The 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.
i. This Agreement and the other Transaction Agreements to
which the Buyer is a party, and the transactions contemplated thereby, have been
duly and validly authorized, executed and delivered on behalf of the Buyer and
are valid and binding agreements of the Buyer enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer as of the Closing Date that, except as otherwise provided
in the ANNEX V or in the Company's SEC Documents:
a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Purchased Shares, the Warrants or the Shares. No party other has a currently
exercisable right of first refusal which would be applicable to any or all of
the transactions contemplated by the Transaction Agreements.
b. STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
-6-
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.
c. AUTHORIZED SHARES. The authorized capital stock of the
Company consists of (i) 500,000,000 shares of Common Stock, $.0001 par value per
share, of which approximately 10,631,851 shares are outstanding as of the date
hereof, and (ii) 5,000,000 shares of Preferred Stock, $.0001 per share, of
which, as of the date hereof, (x) there are 30,000 shares of Series A
authorized, all of which are outstanding, (y) there are 8,000 shares of Series C
authorized, of which 2,374 shares are outstanding, and (z) there are 40,000
shares of Series C authorized, of which 20,096 shares are outstanding. All
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the Shares. As of the Closing Date, the Shares shall have been duly
authorized by all necessary corporate action on the part of the Company, and,
when issued on the Closing Date or upon exercise of the Warrants in accordance
with their terms, will be duly and validly issued, fully paid and non-assessable
and will not subject the Holder thereof to personal liability by reason of being
such Holder.
d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each
of the other Transaction Agreements, and the transactions contemplated thereby,
have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement is, and the
Warrants and each of the other Transaction Agreements, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and each of the other Transaction Agreements by the Company, the
issuance of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Warrants and the other
Transaction Agreements do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under (i) the certificate of incorporation or by-laws of the Company, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, including any listing agreement
for the Common Stock except as herein set forth, or (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have or result in a Material Adverse Effect.
-7-
f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the shareholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since March 1, 2003, the Company has timely filed all
requisite forms, reports and exhibits thereto required to be filed by the
Company with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date,
there has been no material adverse change and no Material Adverse Effect, except
as disclosed in the Company's SEC Documents. Since the Last Audited Date, except
as provided in the Company's SEC Documents, the Company has not (i) incurred or
become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past
practices; (ii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other tangible assets, or
canceled any debts owed to the Company by any third party or claims of the
Company against any third party, except in the ordinary course of business
consistent with past practices; (v) waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of existing business; (vi) made any increases in employee compensation,
except in the ordinary course of business consistent with past practices; or
(vii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment.
i. FULL DISCLOSURE. To the best of the Company's knowledge,
there is no fact known to the Company (other than general economic conditions
known to the public generally or as disclosed in the Company's SEC Documents)
that has not been disclosed in writing to the Buyer that would reasonably be
expected to have or result in a Material Adverse Effect.
j. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company before or by any governmental authority or nongovernmental
department, commission, board, bureau, agency or instrumentality or any other
person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
any of the Transaction Agreements. The Company is not aware of any valid basis
for any such claim that (either individually or in the aggregate with all other
such events and circumstances) could reasonably be expected to have a Material
Adverse Effect. There are no outstanding or unsatisfied judgments, orders,
decrees, writs, injunctions or stipulations to which the Company is a party or
by which it or any of its properties is bound, that involve the transaction
contemplated herein or that, alone or in the aggregate, could reasonably be
expect to have a Material Adverse Effect.
-8-
K. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
Section 3(e) hereof, no Event of Default (or its equivalent term), as defined in
the respective agreement to which the Company or its subsidiary is a party, and
no event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.
L. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR
EVENTS. To the Company's knowledge, none of the following has occurred during
the past five (5) years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal
agent or similar officer was appointed by a court for the
business or property of such Company Control Person, or any
partnership in which he was a general partner at or within two
years before the time of such filing, or any corporation or
business association of which he was an executive officer at
or within two years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal
proceeding or is a named subject of a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
(3) Such Company Control Person was the subject of any order,
judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him from, or otherwise limiting, the
following activities:
(i) acting, as an investment advisor, underwriter,
broker or dealer in securities, or as an affiliated
person, director or employee of any investment
company, bank, savings and loan association or
insurance company, as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other
Person regulated by the Commodity Futures Trading
Commission ("CFTC") or engaging in or continuing any
conduct or practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of federal or state
securities laws or federal commodities laws;
-9-
(4) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such Company Control Person to
engage in any activity described in paragraph (3) of this item, or to
be associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the
Company's knowledge, the Company has no liabilities or obligations other than
those disclosed in the Transaction Agreements or the Company's SEC Documents or
those incurred in the ordinary course of the Company's business since the Last
Audited Date, or which individually or in the aggregate, do not or would not
have a Material Adverse Effect. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
n. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since September 1, 2003, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
o. DILUTION. The number of shares issuable on the Closing Date
and upon exercise of the Warrants may have a dilutive effect on the ownership
interests of the other shareholders (and Persons having the right to become
shareholders) of the Company. The Company's executive officers and directors
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they have such a potential dilutive effect. The board of
directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Warrant Shares upon
exercise of the Warrants is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company, and the Company will honor such obligations,
including honoring every Notice of Exercise (as contemplated by the Warrants),
unless the Company is subject to an injunction (which injunction was not sought
by the Company) prohibiting the Company from doing so.
-10-
p. FEES TO BROKERS, FINDERS AND OTHERS. Except for payment of
the Finder's Compensation (as defined below) to the Finder, payment of which is
the sole responsibility of the Company, the Company has taken no action which
would give rise to any claim by any Person for brokerage commission, finder's
fees or similar payments by Buyer relating to this Agreement or the transactions
contemplated hereby. Buyer shall have no obligation with respect to such fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this paragraph that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred. The term
"Finder's Compensation" means, in connection with the consummation of the
transactions contemplated by this Agreement, the consideration contemplated by
the Joint Escrow Instructions.
q. CONFIRMATION. The Company confirms that all statements of
the Company contained herein shall survive acceptance of this Agreement by the
Buyer. The Company agrees that, if any events occur or circumstances exist prior
to the Closing Date or the release of the Purchase Price to the Company which
would make any of the Company's representations, warranties, agreements or other
information set forth herein materially untrue or materially inaccurate as of
such date, the Company shall immediately notify the Buyer and the Escrow Agent
in writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Purchased Securities have not been and are not being registered under the
provisions of the 1933 Act and, except as provided in the Registration Rights
Agreement or otherwise included in an effective registration statement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such 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 used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other Person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
-11-
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that,
until such time as the relevant Shares have been registered under the 1933 Act,
as contemplated by the Registration Rights Agreement, and sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective registration statement, the certificates and other instruments
representing any of the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
c. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Securities to the Buyer
under any United States laws and regulations applicable to the Company, or by
any domestic securities exchange or trading market, and to provide a copy
thereof to the Buyer promptly after such filing.
d. REPORTING STATUS. So long as the Buyer owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable
action under its control to ensure that adequate current public information with
respect to the Company, as required in accordance with Rule 144(c)(2) of the
1933 Act, is publicly available, and 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 permit such termination. The Company will take
all reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it at least through the date which is sixty (60) days after the
date on which all of the Warrants have been exercised or have expired.
e. USE OF PROCEEDS. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for Finder's Compensation in
connection with the sale of the Securities or legal and escrow fees contemplated
by the Joint Escrow Instructions) for general corporate purposes.
f. WARRANTS. The Company agrees to issue to the Buyer on the
Closing Date transferable warrants (the "Warrants"), for the purchase of one (1)
share of Common Stock for each Purchased Share. The exercise price of the
Warrants (the "Exercise Price") will be equal to $1.25, subject to adjustment as
provided in the Warrant. The Warrants will expire on the last day of the
calendar month in which the third annual anniversary of the relevant Closing
Date occurs. Each of the Warrants shall be in the form annexed hereto as ANNEX
I. The Warrant Shares shall be subject to the provisions of the Registration
Rights Agreement.
-12-
g. CERTAIN AGREEMENTS.
(i) (A) The Company covenants and agrees that, except for the
sale of Purchased Securities to the Other Buyers and subject to the other
provisions of this Section 4(g) and Section 4(h), during the period (the
"Pre-Effective Date Period") from the Closing Date and continuing through and
including the Effective Date, it will not, without the prior written consent of
a Majority in Interest of the Holders in each instance, enter into any
subsequent or further offer or sale of New Common Stock in a New Transaction.
(B) In the event there is a New Transaction during
the Pre-Effective Date Period which breaches the provisions of the preceding
subparagraph (i)(A) of this Section 4(g),
(1) the Per Share Purchase Price shall be adjusted to an amount (the
"Adjusted Per Share Purchase Price") equal to the lower of (x) $0.40
per share (subject to adjustment in the same manner as the Exercise
Price of the Warrant is adjusted)(1) or (y) the lower of (I) the lowest
fixed purchase price of any shares of the New Common Stock contemplated
in the New Transaction or (II) the lowest conversion price which would
be applicable under the terms of the New Transaction;
(2) the Company will issue to the Holder additional shares of Common
Stock ("Additional Shares") equal to the excess, if any, of (x) (I) the
Purchase Price divided by (II) the Adjusted Per Share Purchase Price,
over (y) the number of Purchased Shares and Additional Shares
previously issued, if any;
(3) the number of Warrants issued shall be adjusted to equal the number
of shares equal to (x) (I) the higher of one hundred percent (100%) or
(II) the Alternative Warrant Percentage (as defined below), of (y) the
Purchase Price divided by the Adjusted Per Share Purchase Price;
(4) if the exercise price of the warrants, option or similar instrument
(howsoever denominated; collectively, "New Transaction Warrants")
included in the New Transaction (the "New Transaction Exercise Price")
is lower than the then effective Exercise Price on the Warrants, the
Exercise Price of the Warrants shall be adjusted to equal the New
Transaction Exercise Price; and
------------------
(1) The Buyer has given the Company certain limited consents to certain New
Transactions as to which the provisions of this clause (x) would not apply. Such
limited consents are set forth in Annex VII attached hereto.
-13-
(5) if the provisions of the New Transaction Warrant are more
beneficial to the holder of such instrument than the corresponding
terms of the Warrant,(2) or if the terms which are beneficial to the
Company in the Warrant are not included in the corresponding instrument
in the New Transaction, then, unless waived by the Holder, the Warrant
terms shall be modified to reflect similar terms (based on the original
issue date of the Warrants).
(ii) (A) The Company covenants and agrees that, except for the
sale of Purchased Securities to the Other Buyers and subject to the other
provisions of this Section 4(g) and Section 4(h), during the period (the "New
Transaction Period") from the Effective Date and continuing through and
including the Final Lock-up Date (as defined below), it will not, without the
prior written consent of a Majority in Interest of the Holders in each instance,
enter into a New Transaction where either the lowest fixed purchase price of any
shares of the New Common Stock contemplated in the New Transaction is below the
Threshold Price (as defined below) or the lowest conversion price which would be
applicable under the terms of the New Transaction is below the Threshold Price.
The term "Threshold Price" means $0.60 per share (subject to adjustment in the
same manner as the Exercise Price of the Warrant is adjusted). The term "Final
Lock-up Date" means the date which is one hundred eighty (180) days after the
Effective Date, but not counting for such purposes the days, if any, during
which sale of Registrable Securities was suspended after the Effective Date.(3)
(B) In the event there is a New Transaction during
the New Transaction Period which breaches the provisions of the preceding
subparagraph (ii)(A) of this Section 4(g),
(1) the Per Share Purchase Price shall be adjusted to an amount (the
"Post Effective Date Adjusted Per Share Purchase Price") equal to the
lower of (x) the lowest fixed purchase price of any shares of the New
Common Stock contemplated in the New Transaction or (y) the lowest
conversion price which would be applicable under the terms of the New
Transaction;
(2) the Company will issue to the Holder additional shares of Common
Stock ("Additional Shares") equal to the excess, if any, of (x) (I) the
Purchase Price divided by (II) the Post Effective Date Adjusted Per
Share Purchase Price, over (y) the number of Purchased Shares and
Additional Shares previously issued, if any;
-----------------
(2) Without limiting the foregoing, by way of example: the expiration date of
the instrument in the New Transaction is more than three years from its original
issue date.
(3) By way of illustration: If the sale of Registrable Securities was suspended
for ten (10) days in the interim, the applicable Final Lock-up Date will be one
hundred ninety (190) days after the Effective Date. If on the 188th day after
the Effective Date, the sale of Registrable Securities was suspended again for
five (5) days, the Final Lock-up Date will be one hundred ninety-five (195) days
after the Effective Date.
-14-
(3) the number of Warrants issued shall be adjusted to equal the number
of shares equal to (x) (I) the higher of one hundred percent (100%) or
(II) the Alternative Warrant Percentage (as defined below), of (y) the
Purchase Price divided by the Post Effective Date Adjusted Per Share
Purchase Price;
(4) if the exercise price of the warrants, option or similar instrument
(howsoever denominated; a "New Transaction Warrant") included in the
New Transaction (the "New Transaction Exercise Price") is lower than
the then effective Exercise Price on the Warrants, the Exercise Price
of the Warrants shall be adjusted to equal the New Transaction Exercise
Price; and
(5) if the provisions of the New Transaction Warrant are more
beneficial to the holder of such instrument than the corresponding
terms of the Warrant,(4) or if the terms which are beneficial to the
Company in the Warrant are not included in the corresponding instrument
in the New Transaction, then, unless waived by the Holder, the Warrant
terms shall be modified to reflect similar terms (based on the original
issue date of the Warrants).
(iii) The term "Alternative Warrant Percentage" means (x) the
number of shares which are eligible to be purchased under the New Transaction
Warrants, divided by (y) the aggregate of the shares of New Common Stock issued
or issuable in such transaction (excluding the shares issuable on exercise of
the New Transaction Warrants).
(iv) The foregoing provisions of Section 4(g) do not apply to
the issuance of New Common Stock in connection with a Person's exercise of
conversion or other rights it may have under documents executed and transactions
consummated prior to the date of this Agreement.
(v) Nothing in the foregoing provisions reflects either an
obligation on the part of any Buyer to participate in any New Transaction or a
limitation on any Buyer from participating in any New Transaction.
(vi) Any of the foregoing provisions of this Section 4(g) or
any other provision of this Agreement (including but not limited to Section 4(h)
hereof) or any of the other Transaction Agreements to the contrary
notwithstanding, the Company shall not engage in any offers, sales or other
transactions of its securities which would adversely affect the exemption from
registration available for the transactions contemplated by the Transaction
Agreements.
h. RIGHT OF FIRST REFUSAL.
(i) The following provisions apply to a New Transaction (other
than a Specified Transaction, as defined below) made during the period
----------------
(4) Without limiting the foregoing, by way of example: the expiration date of
the instrument in the New Transaction is more than three years from its original
issue date.
-15-
commencing on the date hereof and continuing through the end of the New
Transaction Period (the "Right of First Refusal Period"). These provisions are
in addition to, and not in lieu of, the provisions of Section 4(g).
(ii) Before offering or consummating any such New Transaction
with a New Investor during the Right of First Refusal Period, the Company shall
give written notice (a "New Transaction Notice") to the Buyer and each Other
Buyer summarizing all of the terms of such offer (a "New Transaction Offer").
The Buyer shall have the right (the "Right of First Refusal"), exercisable by
written notice (a "Right of First Refusal Exercise Notice") given to the
Company, by fax, mail, or other delivery, by the close of business on the tenth
business day after the Buyer's receipt of the New Transaction Notice (the "Right
of First Refusal Expiration Date"), to participate in all or any part of the New
Transaction Offer on the terms so specified.
(iii) If there is more than one Buyer, the Buyer's right to
participate shall initially be limited to the Buyer's Allocable Share, such that
if there is more than one Buyer signatory to this Agreement, the provisions of
this paragraph (g) shall apply pro rata among them (based on their relative
Buyer's Allocable Shares), except that, to the extent any such Buyer does not
exercise its Right of First Refusal in full (a "Declining Buyer"), the remaining
Buyer or Buyers who or which have exercised their own Right of First Refusal in
full, shall have the right (pro rata among them based on their relative Buyer's
Allocable Shares, if more than one) to exercise all or a portion of such
Declining Buyer's unexercised Right of Refusal. To exercise this right, the
Buyer should indicate in the Right of First Refusal Notice the additional dollar
amount (over the Buyer's Allocable Share) which the Buyer is willing to
participate in the New Transaction.
(iv) In order for the Buyer's exercise of the Right of First
Refusal to be effective, the Buyer and the Other Buyers who exercise their
Rights of First Refusal shall have, in the aggregate, agreed to take up the
entire New Transaction.
(v) If, and only if, the Buyer and the Other Buyers in the
aggregate do not exercise the Right of First Refusal in full, the Company may
consummate the New Transaction with any New Investor on the terms specified in
the New Transaction Offer within thirty (30) days of the Right of First Refusal
Expiration Date (such thirtieth day, the "New Transaction Expiration Date"),
even if the New Transaction Expiration Date is after the expiration of the Right
of First Refusal Period.
(vi) If the terms of the New Transaction to be consummated
with such New Investor differ from the terms specified in the New Transaction
Offer so that the terms are more beneficial in any respect to the New Investor,
the Company shall give the Buyer a New Transaction Offer relating to the terms
of the New Transaction, as so changed, and the Buyer's Right of First Refusal
and the preceding terms of this paragraph (g) shall apply with respect to such
changed terms.
(vii) The term "Specified Transaction" means a New Transaction
meeting any one or more of the following conditions: (1) the issuance of Common
Stock or securities exercisable for or convertible into Common Stock in
connection with a merger, acquisition or other business combination or a
strategic partnering or joint venture transaction or the exercise or conversion
of such securities; (2) the issuance of Common Stock or securities exercisable
-16-
for or convertible into Common Stock in connection with the settlement of claims
which are the subject of law suits, arbitrations and similar proceedings or the
conversion or exercise of such securities, or (3) the issuance of warrants to
equipment lessors in connection with capital lease transactions or the exercise
of such warrants.
i. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, a number of
shares (the "Minimum Available Shares") at least equal to one hundred ten
percent (110%) of the number of shares issuable upon exercise of all outstanding
Warrants held by all Holders (in each case, whether such Warrants were
originally issued to the Holder, the Buyer or to any other party). For the
purposes of such calculations, the Company should assume that all Warrants were
then issued and exercisable, in each case without regard to any restrictions
which might limit any Holder's right to exercise any of the Warrants held by any
Holder.
j. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties
agrees that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects. In furtherance of the foregoing, the
Company will provide to the Buyer drafts of the applicable text of any filing
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least two
(2) business days before such filing will be made) and will not include in such
filing any statement or statements or other material to which the other party
reasonably objects. Notwithstanding the foregoing, each of the parties hereby
consents to the inclusion of the text of the Transaction Agreements in filings
made with the SEC (but any descriptive text accompanying or part of such filing
shall be subject to the other provisions of this paragraph).
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, except as required by law, with
respect to the Securities, other than the stop transfer instructions to give
effect to Section 4(a) hereof, it will give the Transfer Agent no instructions
inconsistent with instructions to issue Common Stock representing the Purchased
Shares and from time to time upon exercise of the Warrants in such amounts as
specified from time to time by the Company to the Transfer Agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Holder in
connection therewith. Except as so provided, the Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Agreements. Nothing in this
Section shall affect in any way the Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of the Securities. If the Buyer
provides the Company with an opinion of counsel reasonably satisfactory to the
-17-
Company that registration of a resale by the Buyer of any of the Securities in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Purchased Shares or of the Warrant Shares, promptly instruct the
Transfer Agent to issue one or more certificates for Common Stock without legend
in such name and in such denominations as specified by the Buyer.
b. Subject to the provisions of this Agreement, the Company
will permit the Buyer to exercise its right to exercise the Warrants in the
manner contemplated by the Warrants.
c. In lieu of delivering physical certificates representing
the Common Stock issuable upon exercise of a Warrant or at the request of the
Holder with respect to the Purchased Shares or Warrant Shares previously issued,
provided the Transfer Agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, upon request of the Holder
and its compliance with the provisions contained in this paragraph, so long as
the certificates therefor do not bear a legend and the Holder thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause the Transfer Agent to electronically
transmit to the Holder the Common Stock issuable upon exercise of the Warrant or
in replacement of Purchased Shares or Warrant Shares previously issued by
crediting the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system.
d. The Company shall assume any fees or charges of the
Transfer Agent or Company counsel regarding (i) the removal of a legend or stop
transfer instructions with respect to Registrable Securities, and (ii) the
issuance of certificates or DTC registration to or in the name of the Holder or
the Holder's designee or to a transferee as contemplated by an effective
Registration Statement.
e. The Company will authorize the Transfer Agent to give
information relating to the Company directly to the Buyer or the Buyer's
representatives upon the request of the Buyer or any such representative, to the
extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Buyer in connection with a Notice of
Exercise, or (ii) the number of outstanding shares of Common Stock of all
shareholders as of a current or other specified date. At the request of the
Buyer, the Company will provide the Buyer with a copy of the authorization so
given to the Transfer Agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. The closing of the purchase and issuance of Purchased
Securities shall occur on the Closing Date at the offices of the Escrow Agent
and shall take place no later than 3:00 P.M., New York time, on such day or such
other time as is mutually agreed upon by the Company and the Buyer.
-18-
c. Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Funds to the Company
and to others and to release the other Escrow Property on the relevant Closing
Date upon satisfaction of the conditions set forth in Sections 7 and 8 hereof
and as provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Purchased Securities to the Buyer pursuant to this Agreement on the Closing
Date is conditioned upon:
a. The execution and delivery of this Agreement by the Buyer
on or before the Closing Date;
b. Delivery by the Buyer to the Escrow Agent by the Closing
Date of good funds as payment in full of an amount equal to the Purchase Price
in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations
and warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Purchased Securities on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company on or before the Closing Date;
b. Delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement;
c. On such Closing Date, each of the Transaction Agreements
executed by the Company on or before such date shall be in full force and effect
and the Company shall not be in default thereunder;
-19-
d. The accuracy in all material respects on such Closing Date
of the representations and warranties of the Company contained in this
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
e. On such Closing Date, the Buyer shall have received an
opinion of counsel for the Company, dated such Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer, substantially to the effect set
forth in ANNEX III attached hereto;
f. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
g. From and after the date hereof to and including the Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii), no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market
that, in the reasonable judgment of the Buyer, makes it impracticable or
inadvisable to purchase the Securities.
9. INDEMNIFICATION AND REIMBURSEMENT.
a. (i) The Company agrees to indemnify and hold harmless the
Buyer and its officers, directors, employees, and agents, and each Buyer Control
Person from and against any losses, claims, damages, liabilities or expenses
incurred (collectively, "Damages"), joint or several, and any action in respect
thereof to which the Buyer, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Buyer Control Person becomes
subject to, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Company contained in this Agreement, as such Damages
are incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement or failure to deliver a prospectus, if
required.
(ii) The Company hereby agrees that, if the Buyer,
other than by reason of its gross negligence or willful misconduct (in each
case, as determined by a non-appealable judgment to such effect), (x) becomes
involved in any capacity in any action, proceeding or investigation brought by
any shareholder of the Company, in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or if the Buyer is impleaded in any such action,
proceeding or investigation by any Person, or (y) becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisdiction, against or
involving the Company or in connection with or as a result of the consummation
-20-
of the transactions contemplated by this Agreement or the other Transaction
Agreements, or (z) is impleaded in any such action, proceeding or investigation
by any Person, then in any such case, the Company shall indemnify, defend and
hold harmless the Buyer from and against and in respect of all losses, claims,
liabilities, damages or expenses resulting from, imposed upon or incurred by the
Buyer, directly or indirectly, and reimburse such Buyer for its reasonable legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Buyer, any such Affiliate and any such
Person.
b. All claims for indemnification by any Indemnified Party (as
defined below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of
which any Person claiming indemnification under any provision of this Section
(an "Indemnified Party") might seek indemnity under paragraph (a) of this
Section is asserted against or sought to be collected from such Indemnified
Party by a Person other than a party hereto or an Affiliate thereof (a "Third
Party Claim"), the Indemnified Party shall deliver a written notification,
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of this Section
against any Person (the "Indemnifying Party"), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by
such failure of the Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under this Section and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to
this paragraph (b) of this Section, then the Indemnifying Party shall
have the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying
-21-
Party, such Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party shall
not be indemnified in full pursuant to paragraph (a) of this Section).
The Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this
subparagraph (x), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be
necessary or appropriate protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in contesting any
Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this subparagraph (x), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under paragraph (a) of this
Section with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to paragraph (b) of this Section, or if
the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within the
Dispute Period, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings
shall be prosecuted by the Indemnified Party in a reasonable manner and
in good faith or will be settled at the discretion of the Indemnified
Party (with the consent of the Indemnifying Party, which consent will
not be unreasonably withheld). The Indemnified Party will have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party
Claim which the Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this subparagraph (y), if the Indemnifying
Party has notified the Indemnified Party within the Dispute Period that
-22-
the Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such Third
Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in subparagraph(z) below, the
Indemnifying Party will not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this subparagraph (y) or
of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense
or settlement controlled by the Indemnified Party pursuant to this
subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under paragraph
(a) of this Section or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party with respect to
such Third Party Claim, the amount of Damages specified in the Claim
Notice shall be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on
demand, as and when incurred. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty
(30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
(ii) In the event any Indemnified Party should have a
claim under paragraph (a) of this Section against the Indemnifying Party that
does not involve a Third Party Claim, the Indemnified Party shall deliver a
written notification of a claim for indemnity under paragraph (a) of this
Section specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "Indemnity Notice") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under paragraph (a) of this Section and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
-23-
c. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive
a trial by jury in any action, proceeding or counterclaim brought by either of
the Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on FORUM
NON CONVENIENS, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Buyer for
any reasonable legal fees and disbursements incurred by the Buyer in enforcement
of or protection of any of its rights under any of the Transaction Agreements.
b. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
g. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
-24-
h. 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 or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
12. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by domestic or international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000 Attn: CFO
with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxx Xxxx.
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
-25-
BUYER: At the address set forth on the signature page of this Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs. 00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
and the Buyer's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Certificates
and the payment of the Purchase Price, and shall inure to the benefit of the
Buyer and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
-26-
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer (if an entity, by one of its officers thereunto duly authorized) as of
the date set forth below.
PURCHASED SHARES _______________________
PURCHASE PRICE: $______________________
SIGNATURES FOR BUYERS
IN WITNESS WHEREOF, the undersigned represents that the
foregoing statements are true and correct and that it has caused this Securities
Purchase Agreement to be duly executed on its behalf as of the date first above
written.
________________________________ ___________________________________
Address Printed Name of Buyer
________________________________
By:_________________________________
Telecopier No.__________________ (Signature of Authorized Person)
____________________________________
Printed Name and Title
________________________________
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
XXXXXXXX TECHNOLOGIES, INC.
By: ________________________
Title: Xxxxxx Xxxxxx, President
-27-
ANNEX I FORM OF WARRANT
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE
ANNEX VI COMPANY'S SEC DOCUMENTS AVAILABLE ON XXXXX
ANNEX VII LIMITED CONSENTS OF BUYERS TO CERTAIN NEW TRANSACTIONS
-28-
