Exhibit 10.57
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
November 7, 2003, among First Virtual Communications, Inc., a Delaware
corporation (the "Company"), and the purchasers identified on the Schedule of
Purchasers attached hereto (each a "Purchaser" and collectively the
"Purchasers"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act, and Rule 506
promulgated thereunder, the Company desires to issue and sell to the Purchasers,
and each Purchaser, severally and not jointly, desires to purchase from the
Company in the aggregate, up to $12,000,000 of Common Stock and Warrants on the
Closing Date. Capitalized terms used herein and not otherwise defined are
defined in Section 1.1 below.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in
Section 3.1(j).
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law
or other governmental action to close.
"Closing" means the closing of the purchase and sale of the
Common Stock and the Warrants pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchasers' obligations to pay the Subscription Amount and (ii) the
Company's obligations to deliver the Securities have been satisfied or
waived.
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"Closing Price" means on any particular date (a) the last
reported closing bid price per share of Common Stock on such date on
the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
time), or (b) if there is no such price on such date, then the closing
bid price on the Trading Market on the date nearest preceding such date
(as reported by Bloomberg L.P. at 4:15 PM (New York time) for the
closing bid price for regular session trading on such day), or (c) if
the Common Stock is not then listed or quoted on the Trading Market and
if prices for the Common Stock are then reported in the "pink sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported, or (d) if the shares of Common Stock are not then publicly
traded the fair market value of a share of Common Stock as determined
by an appraiser selected in good faith by the Purchasers of a majority
in interest of the Shares then outstanding.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.001
par value per share, and any securities into which such common stock
may hereafter be reclassified.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Company Counsel" means Xxxxxx Godward LLP with offices
located at 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, XX 00000-0000.
"Disclosure Schedules" means the Disclosure Schedules
delivered concurrently herewith.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit B hereto executed and delivered
contemporaneously with this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000.
"Intellectual Property Rights" shall have the meaning ascribed
to such term in Section 3.1(o).
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"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction created
by or upon the Company.
"Material Adverse Effect" shall have the meaning ascribed to
such term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such
term in Section 3.1(m).
"Per Share Purchase Price" equals $1.79(1), subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that
occur after the date of this Agreement and prior to the Closing Date.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by the Purchasers of the Shares and the Warrant
Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company
and each Purchaser, in the form of Exhibit A hereto.
"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Shares, the Warrants and the Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
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1 The lesser of (i) 100% of the Closing Price on the date immediately
prior to the date hereof (if signed before the close of market) and
(ii) 100% of the average of the 5 Closing Prices immediately prior to
the date hereof, or, if permitted, such lower price as is possible to
qualify for a fair market value transaction under the rules of the
Trading Market, plus, in each case, $0.0625 per share as required by
Nasdaq for the Warrant Shares.
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"Shares" means the shares of Common Stock issued or issuable
to each Purchaser pursuant to this Agreement.
"Subscription Amount" means, as to each Purchaser, the amounts
set forth below such Purchaser's signature block on the signature page
hereto, in United States dollars and in immediately available funds.
"Subsidiary" shall mean the subsidiaries of the Company, if
any, set forth on Schedule 3.1(a).
"Trading Day" means (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not listed
on a Trading Market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or
(iii) if the Common Stock is not quoted on the OTC Bulletin Board, a
day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Escrow
Agreement, the Warrants and the Registration Rights Agreement.
"Warrants" means the Common Stock Purchase Warrants, in the
form of Exhibit C, issuable to the Purchasers at the Closing, which
warrants shall be exercisable immediately upon issuance for a term of 5
years and have an exercise price equal to $1.79(2).
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, each Purchaser shall purchase
from the Company, severally and not jointly with the other Purchasers, and the
Company shall issue and sell to each Purchaser, (a) a number of Shares equal to
such Purchaser's Subscription Amount divided by the Per Share Purchase Price and
(b) the Warrants as determined pursuant to Section 2.2(a)(iii). The aggregate
Subscription Amounts for Shares sold hereunder shall be up to $12,000,000. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of the Escrow Agent, or such other location as the parties shall
mutually agree.
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2 The Per Share Purchase Price.
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2.2 Closing Conditions; Deliveries.
(a) On the Closing Date, the Company shall deliver or
cause to be delivered to the Escrow Agent with respect to each
Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a certificate evidencing a number of Shares
equal to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price, registered in the name of such Purchaser;
(iii) a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to
acquire up to the number of shares of Common Stock equal to one half of
the Shares to be issued to such Purchaser at the Closing;
(iv) the Registration Rights Agreement duly
executed by the Company;
(v) the Escrow Agreement duly executed by the
Company; and
(vi) a legal opinion of Company Counsel, in the
form of Exhibit D attached hereto.
(b) On the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Escrow Agent the following:
(i) this Agreement duly executed by such
Purchaser;
(ii) such Purchaser's Subscription Amount by wire
transfer to the account of the Escrow Agent;
(iii) the Escrow Agreement duly executed by such
Purchaser; and
(iv) the Registration Rights Agreement duly
executed by such Purchaser.
(c) All representations and warranties of the other party
contained herein shall remain true and correct as of the Closing Date.
(d) All obligations, covenants and agreements of the
parties required to be performed at or prior to the Closing Date shall
have been performed.
(e) On or prior to the Closing Date, the Company shall
have received confirmation from the Trading Market that no stockholder
vote is required in connection with the Closing or the Company shall
have complied with such stockholder vote requirement.
(f) From the date hereof to the Closing Date, trading in
the Common Stock shall not have been suspended by the Commission, and,
at any time prior to the Closing
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Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak
or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse
change in, any financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Shares at the such Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set
forth under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:
(a) Subsidiaries. All of the subsidiaries of the Company
are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. If the Company
has no subsidiaries, then references in the Transaction Documents to
the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company
and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and
is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a material
adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and
the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company's ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii)
or (iii), a "Material Adverse Effect") and no Proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
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(c) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith
other than in connection with the Required Approvals. Each Transaction
Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement
of creditors' rights generally and (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company, the issuance and sale of
the Securities and the consummation by the Company of the other
transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other
organizational or charter documents currently in effect, or (ii)
conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse
of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary currently is
a party or by which any property or asset of the Company or any
Subsidiary currently is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company
or a Subsidiary currently is subject (including federal and state
securities laws and regulations), or by which any property or asset of
the Company or a Subsidiary currently is bound or affected, or (iv)
conflict with or violate the terms of any agreement by which the
Company or any Subsidiary currently is bound or to which any property
or asset of the Company or any Subsidiary currently is bound or
affected; except in the case of each of clauses (ii) and (iii), such as
could not have or reasonably be expected to result in a Material
Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) filings
required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, (iii) application(s)
to each applicable Trading Market for the listing of the
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Shares and Warrant Shares for trading thereon in the time and manner
required thereby, and (iv) the filing of Form D with the Commission and
such filings as are required to be made under applicable state
securities laws (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The issuance of the Shares
is not subject to any preemptive or similar rights to subscribe for or
purchase securities. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.
(g) Capitalization. The capitalization of the Company is
as described in the Company's most recent periodic report filed with
the Commission. The Company has not issued any capital stock since such
filing other than pursuant to the exercise of employee stock options
under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock
purchase plan and pursuant to the conversion or exercise of outstanding
Common Stock Equivalents outstanding. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the
Securities or in connection with the granting of options to employees,
officers and directors of the Company pursuant to any stock option plan
duly adopted by the Board of Directors of the Company, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving
any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock. The issue and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and
none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the
issuance and sale of the Shares. Except as disclosed in the SEC
Reports, there are no stockholders agreements, voting agreements or
other similar agreements with respect to the Company's capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Securities Act
and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the
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foregoing materials, including the exhibits thereto, being collectively
referred to herein as the "SEC Reports") on a timely basis or has
received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included
in the SEC Reports complied in all material respects with applicable
accounting requirements and the rules and regulations of the Commission
with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as
of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
(i) Material Changes. Except as set forth in the SEC
Reports, since the date of the latest audited financial statements
included within the SEC Reports, except as disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has
not altered its method of accounting, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate,
except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for
confidential treatment of information.
(j) Litigation. Except as disclosed in the SEC Reports,
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental
or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) could, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect. Except as disclosed
in the SEC Reports, neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action
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involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. Except as
disclosed in the SEC Reports, there has not been, and to the knowledge
of the Company, there is not pending or contemplated, any investigation
by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or,
to the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(l) Compliance. Except as disclosed in the SEC Reports,
neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation
of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business except in each case as could not have a
Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could not
have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) Title to Assets. Except as set forth in the SEC
Reports, the Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material
to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each
case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company
and the Subsidiaries and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases of which the Company and the Subsidiaries are in
compliance.
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(o) Patents and Trademarks. To the knowledge of the
Company and each Subsidiary, the Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for
use in connection with their respective businesses as described in the
SEC Reports and which the failure to so have could have or reasonably
be expected to result in a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Except as disclosed in the SEC
Reports, neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are
enforceable and do not violate or infringe the Intellectual Property
Rights of others.
(p) Insurance. The Company and the Subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in
the businesses in which the Company and the Subsidiaries are engaged.
Neither the Company nor any 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 without a
significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as
set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or
any Subsidiary (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 entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 other
than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Internal Accounting Controls. The Company and each of
the Subsidiaries maintains 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 GAAP and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific 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. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,
including the Subsidiaries, is made known to the certifying officers by
others
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within those entities, particularly during the period in which the
Company's most recently filed period report under the Exchange Act, as
the case may be, is being prepared. The Company's certifying officers
have evaluated the effectiveness of the Company's controls and
procedures as of a date within 90 days prior to the filing date of the
most recently filed periodic report under the Exchange Act (such date,
the "Evaluation Date"). The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in
the Company's internal controls (as such term is defined in Item 307(b)
of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the
Company's internal controls. The Company maintains and will continue to
maintain a standard system of accounting established and administered
in accordance with GAAP and the applicable requirements of the Exchange
Act.
(s) Certain Fees. No brokerage or finder's fees or
commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions
contemplated by this Agreement, other than to Xxxx Capital Partners,
LLC. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(t) Private Placement. Assuming the accuracy of the
Purchasers representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.
(u) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Shares,
will not be or be an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company
shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(v) Registration Rights. No Person has any right to cause
the Company to effect the registration under the Securities Act of any
securities of the Company.
(w) Listing and Maintenance Requirements. The Company's
Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received
any notification that the Commission is contemplating terminating such
registration. Except as set forth in the SEC Reports, the Company has
not, in the 12 months preceding the date hereof, received notice from
any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market.
12
(x) Application of Takeover Protections. The Company and
its Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.
(y) Disclosure. Other than the terms of the transaction
contemplated by this Agreement, the Company confirms that, neither the
Company nor any other Person acting on its behalf has provided any of
the Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information;
provided, however, that the Company makes no representation with
respect to any information provided to the Purchasers by Xxxx Capital
Partners, LLC. The Company understands and confirms that the Purchasers
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, furnished by or on behalf of the Company are true and
correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(z) No Integrated Offering. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2,
neither the Company, nor any of its affiliates, nor 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 cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable shareholder 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.
(aa) Solvency. Based on the financial condition of the
Company as of the Closing Date after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities hereunder,
(i) the Company's fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or
13
in respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(bb) Form S-3 Eligibility. The Company is eligible to
register the resale of its Common Stock by the Purchasers under Form
S-3 promulgated under the Securities Act and the Company hereby
covenants and agrees to use its commercially reasonable best efforts to
maintain its eligibility to use Form S-3 until the Registration
Statement covering the resale of the Shares shall have been filed with,
and declared effective by, the Commission.
(cc) Taxes. Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and each Subsidiary
has filed all necessary federal, state and foreign income and franchise
tax returns and has paid or accrued all taxes shown as due thereon, and
the Company has no knowledge of a tax deficiency which has been
asserted or threatened against the Company or any Subsidiary.
(dd) General Solicitation. Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the
Shares by any form of general solicitation or general advertising. The
Company has offered the Shares for sale only to the Purchasers and
certain other "accredited investors" within the meaning of Rule 501
under the Securities Act.
(ee) Foreign Corrupt Practices. Neither the Company, nor
to the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any corrupt
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law, or
(iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ff) Accountants. To the Company's knowledge,
PriceWaterhouseCoopers LLP, the Company's accountants, who the Company
expects will express their opinion with respect to the financial
statements to be included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2003, are independent accountants as
required by the Securities Act and the rules and regulations
promulgated thereunder.
(gg) Acknowledgment Regarding Purchasers' Purchase of
Shares. The Company acknowledges and agrees that each of the Purchasers
is acting solely in the capacity of an arm's length purchaser with
respect to the Transaction Documents and the transactions contemplated
hereby. The Company further acknowledges that no Purchaser is acting as
a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice
14
given by any Purchaser or any of their respective representatives or
agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Purchasers' purchase of
the Shares. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.
3.2 Representations and Warranties of the Purchasers. Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by the
Transaction Agreements have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each
Transaction Document to which it is party has been duly executed by
such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with
its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Investment Intent. Such Purchaser understands that
the Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof, has no present intention
of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such
Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities hereunder
in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities (this representation and warranty
not limiting such Purchaser's right to sell the Securities pursuant to
the Registration Statement or otherwise in compliance with applicable
federal and state securities laws).
(c) Purchaser Status. At the time such Purchaser was
offered the Securities, it was, and at the date hereof and on the
Closing Date it is an "accredited investor" as defined in Rule 501(a)
under the Securities Act. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.
15
(d) Experience of Such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not
purchasing the Securities as a result of any advertisement, article,
notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or
radio or presented at any seminar or any other general solicitation or
general advertisement.
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer
of Securities, other than pursuant to an effective registration
statement or Rule 144 (as to any transfer pursuant to Rule 144,
provided that the holder thereof provides the Company with such
documents as may be reasonably requested by the Company to give effect
to the transfer and comply with applicable laws), to the Company or to
an Affiliate of a Purchaser, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall
have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities
in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
16
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and who
agrees to be bound by the provisions of this Agreement and the
Registration rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will
execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights Agreement,
the preparation and filing of any required post-effective amendment to
the Registration Statement to appropriately amend the list of Selling
Stockholders thereunder.
(c) The Company shall, upon request and subject to
Section 4(e) below, and assuming the Purchaser is not an Affiliate of
the Company, promptly reissue certificates evidencing the Shares and
Warrant Shares without any legend (including the legend set forth in
Section 4.1(b)), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such
Shares or Warrant Shares pursuant to Rule 144, provided that the holder
thereof provides the Company with such documents as may be reasonably
requested by the Company to give effect to the transfer and comply with
applicable laws, or (iii) if such Shares or Warrant Shares are eligible
for sale under Rule 144(k), or (iv) if, in the opinion of counsel to
the Company, such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company
shall cause its counsel (which may be in-house counsel) to issue a
legal opinion to the Company's transfer agent promptly after the
Effective Date if required by the Company's transfer agent to effect
the removal of the legend hereunder. Subject to the foregoing, if all
or any portion of a Warrant is exercised at a time when there is an
effective registration statement to cover the resale of the Warrant
Shares, such Warrant Shares shall be issued free of all legends. The
Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will
promptly, but in no event later than five Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent
of a certificate representing Shares or Warrant Shares, as the case may
be, issued with a restrictive legend and, if the sale or transfer is
made pursuant to Rule 144, any other required documentation that are
reasonable and customary for
17
such sales or transfers (such fifth Trading Day after such delivery,
the "Legend Removal Date"), deliver or cause to be delivered to such
Purchaser a certificate representing such Securities that is free from
all restrictive and other legends, unless the Purchaser is an Affiliate
of the Company. Unless the Purchaser is an Affiliate of the Company,
the Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section.
(d) In addition to such Purchaser's other available
remedies, the Company shall pay to a Purchaser, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Shares or Warrant
Shares (based on the Closing Price of the Common Stock on the date such
Securities are submitted to the Company's transfer agent) subject to
Section 4.1(c), $5 per Trading Day (increasing to $10 per Trading Day
five (5) Trading Days after such damages have begun to accrue) for each
Trading Day after the fifth Trading Day following the Legend Removal
Date until such certificate is delivered. Nothing herein shall limit
such Purchaser's right to pursue actual damages for the Company's
failure to deliver certificates representing any Securities as required
by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.
(e) Each Purchaser, severally and not jointly with the
other Purchasers, agrees that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company's reliance that the Purchaser will
sell any Securities pursuant to either the registration requirements of
the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.
18
4.4 Securities Laws Disclosure; Publicity. The Company shall, by
8:30 a.m. Eastern time on the Trading Day following the Closing Date, issue a
press release or file a Current Report on Form 8-K, in each case reasonably
acceptable to each Purchaser disclosing the transactions contemplated hereby.
The Company and each Purchaser shall consult with each other in issuing any
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release or otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent of
each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
the registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii) and (iii) except
that the Transaction Documents will be filed with the Company's SEC Reports.
Notwithstanding anything herein to the contrary, any party to this Agreement
(and any employee, representative, or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided, however, that such disclosure may not be made to the extent
reasonably necessary to comply with any applicable federal or state securities
laws. For the purposes of the foregoing sentence, (i) the "tax treatment" of a
transaction means the purported or claimed federal income tax treatment of the
transaction, and (ii) the "tax structure" of a transaction means any fact that
may be relevant to understanding the purported or claimed federal income tax
treatment of the transaction.
4.5 Shareholders Rights Plan. No claim will be made or enforced by
the Company or, to the knowledge of the Company, any other Person that any
Purchaser is an "Acquiring Person" under any shareholders rights plan or similar
plan or arrangement in effect or hereafter adopted by the Company, or that any
Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the Purchasers. The Company
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.6 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital
19
purposes and not for the satisfaction of any portion of the Company's debt
(other than payment of trade payables in the ordinary course of the Company's
business and prior practices and periodic installment payments under outstanding
indebtedness), to redeem any Company equity or equity-equivalent securities or
to settle any outstanding litigation.
4.8 Indemnification of Purchasers.
(a) The Company will indemnify and hold the Purchasers
and their directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys' fees and costs of investigation that
any such Purchaser Party may suffer or incur as a result of or relating
to: (a) any misrepresentation, breach or inaccuracy on the part of the
Company of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim
brought or made against such Purchaser Party and arising solely out of
or solely resulting from the Purchaser's execution, delivery,
performance or enforcement of this Agreement or any of the other
Transaction Documents, other than directly resulting from the gross
negligence or willful misconduct of the Purchasers. The Company will
reimburse such Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such
expenses are incurred.
(b) Promptly after receipt by any Purchaser Party (the
"Indemnified Person") of notice of any demand, claim or circumstances
which would or might give rise to a claim or the commencement of any
action, proceeding or investigation in respect of which indemnity may
be sought pursuant to Section 4.8, such Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the
defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person, and shall assume the payment
of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the
Company of its obligations hereunder except to the extent that the
Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such
counsel; or (ii) in the reasonable judgment of counsel to such
Indemnified Person representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. The Company shall not be liable for any settlement of any
proceeding effected without its written consent, which consent shall
not be unreasonably withheld, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Company shall
indemnify and hold harmless such Indemnified Person from and against
any loss or liability (to the extent stated above) by reason of such
settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld,
the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or
could
20
have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Person from all liability
arising out of such proceeding.
4.9 Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue Shares pursuant
to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.10 Listing of Common Stock. The Company hereby agrees to use
commercially reasonable efforts to maintain the listing of the Common Stock on a
Trading Market, and as soon as reasonably practicable following the Closing (but
not later than the earlier of the Effective Date and the first anniversary of
the Closing Date) to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.
4.11 Equal Treatment of Purchasers. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
is also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the initial sale of the Securities to the
Purchasers.
5.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
21
5.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 6:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto on a
day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the second Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.
5.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
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.
5.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser. Any Purchaser may
assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.7 No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
5.8 Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of California, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of San Francisco. Each party hereto hereby
22
irrevocably submits to the 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 (including with respect to the
enforcement of any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by delivering a copy thereof via overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto (including its affiliates, agents, officers,
directors and employees) hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence an action or proceeding to
enforce any provisions of a Transaction Document, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its
attorneys' fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
5.9 Survival. The representations and warranties herein shall
survive the Closing and delivery of the Shares and Warrant Shares.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, required by the Company's transfer agent. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Securities.
23
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
5.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser was introduced to the Company by Xxxx Capital Partners,
LLC, which has acted solely as agent for the Company and not for any Purchaser.
Each Purchaser has been represented by its own separate legal counsel in their
review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only the placement agent, Xxxx Capital Partners, LLC. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
(Signature Page Follows)
24
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
FIRST VIRTUAL COMMUNICATIONS, INC. Address for Notice:
By: /s/ Xxxxxx Xxxx
----------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Financial Officer Attn:
Tel:
Fax:
With copy to (which shall not constitute notice):
Xxxxxx Godward LLP
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxx
With a copy to for benefit of Placement Agent:
Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
[PURCHASER] Address for Notice:
By: _____________________________________
Name:
Title: Attn:
Subscription Amount: $
[FVCX SPA SIGNATURE PAGE CONTINUED]
SCHEDULE OF PURCHASERS
NAME OF PURCHASER NUMBER OF SHARES NUMBER OF WARRANTS
----------------- ---------------- ------------------
Lagunitas Partners LP 837,989 418,994
X. Xxxxxxxxx XxXxxxx 111,732 55,806
Xxx X. Xxxxxx & Xxxxx X. Xxxxxx 111,732 55,866
Xxxxxx & McBaine International 279,330 139,665
Special Situations Fund III, L.P. 553,771 276,885
Special Situations Cayman Fund L.P. 178,911 89,455
Special Situations Technology Fund L.P. 17,039 8,519
Special Situations Technology Fund II L.P. 102,235 51,117
MicroCapital Fund L.P. 391,061 195,530
MicroCapital Fund Ltd. 167,598 83,799
Bonanza Fund 139,655 69,832
Firelake Strategic Technology Fund, L.P. 837,989 418,994
Agile Partners, LP 279,3320 139,665
Behavioral Financial Fund Ltd. 782,123 391,061
Jurika Family Trust 167,598 83,799
JMK Investment Partners, L.P. 167,598 83,799
Encinal Crossover Fund 83,799 41,899
Xxxx X. Xxxxxxx XXX Rollover 200,000 100,000
Palisades Master Fund L.P. 279,330 139,665
Xxxxxx X. Xxxx 11,174 5,587
Xxxxxx Xxxx Xxxxxxxxxxxxxxx 11,174 5,587
Xxxx X. Xxxxx 11,174 5,587
Xxxxxxx X. Xx 8,380 4,190
Xxxxx X. Xxxxx 1,676 838
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 6, 2003, by and among First Virtual Communications,
Inc., a Delaware corporation (the "Company"), and the purchasers signatory
hereto (each such purchaser, a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
ARTICLE I.
DEFINITIONS.
Capitalized terms used and not otherwise defined herein that are defined in the
Purchase Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Date" means, with respect to the Registration
Statement required to be filed hereunder, the earlier of (a) the 90th
calendar day following the date of the Filing Date, and (b) the fifth
Trading Day following the date on which the Company is notified by the
Commission that the Registration Statement will not be reviewed or is
no longer subject to further review and comments.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set fort in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the Registration
Statement required to be filed hereunder, the 30th calendar day
following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened in
writing.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference in such Prospectus.
"Registrable Securities" means all of the Shares and the
Warrant Shares, together with any shares of Common Stock issued or
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing;
provided, however, that a security ceases to be a Registrable Security
when it: (i) has been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by
the Registration Statement, or (ii) has been transferred in compliance
with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144
(or any successor provision thereto).
"Registration Statement" means the registration statements
required to be filed hereunder, including (in each case) the
Prospectus, amendments and supplements to the registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in the registration
statement.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such
Rule.
"Rule 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such
Rule.
ARTICLE II.
REGISTRATION.
2.1 On or prior to the Filing Date, the Company shall prepare and
file with the Commission the Registration Statement covering the resale of all
of the Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement required hereunder shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case the Registration shall be on
another appropriate form in accordance herewith). The Registration Statement
required hereunder shall contain (except if otherwise directed by the Holders)
substantially the "Plan of Distribution" attached hereto as Annex A. Subject to
the terms of this Agreement, the Company shall use commercially reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event
not later than the Effectiveness Date, and shall use commercially reasonable
efforts to keep the Registration Statement continuously effective, subject to
Sections 3(c), 3(i) and 6(d) below, under the Securities Act until the date when
all Registrable Securities covered by the Registration Statement have been sold
or may be sold without volume restrictions pursuant to Rule 144(k) as determined
by the counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company's transfer agent and the
affected Holders (the "Effectiveness Period").
2.2 If: (i) a Registration Statement is not filed on or prior to
the Filing Date (if the Company files a Registration Statement without complying
with Section 3(a), the Company shall not be deemed to have satisfied this clause
(i)), or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed," or is not subject to further review (unless the Company
provides notice to the Holders of a circumstance contemplated by Section
3(c)(vi) that would make it appropriate to suspend the filing of the
Registration Statement and the related Prospectus for a reasonable period of
time not to exceed 10 Trading Days), or (iii) prior to the date when such
Registration Statement is first declared effective by the Commission, the
Company fails to file a pre-effective amendment and otherwise respond in writing
to comments made by the Commission in respect of such Registration Statement
within 15 Trading Days after the receipt of comments by or notice from the
Commission that such amendment is required in order for a Registration Statement
to be declared effective, or (iv) a Registration Statement filed or required to
be filed hereunder is not declared effective by the Commission on or before the
Effectiveness Date, or (v) after a Registration Statement is first declared
effective by the Commission, it ceases for any reason to remain continuously
effective as to all Registrable Securities for which it is required to be
effective, or the Holders are not permitted to utilize the Prospectus therein to
resell such Registrable Securities, for in any such case 15 consecutive days but
no more than an aggregate of 30 days during any 12 month period (which need not
be consecutive Trading Days)(any such failure or breach being referred to as an
"Event," and for purposes of clause (i) or (iv) the date on which such Event
occurs, or for purposes of clause (ii) the date on which such five Trading Day
period (or, if there is a delay in filing as a result of a circumstance
contemplated by Section 3(c)(vi), 10 Trading Day period) is exceeded, or for
purposes of clause (iii) the date which such 15 Trading Day period is exceeded,
or for purposes of clause (v) the date on which such 15 or 30 day period, as
applicable, is exceeded being referred to as "Event Date"), then in addition to
any other rights the Holders may have hereunder or under applicable law: (x) on
each such Event Date the Company shall pay to each Holder an amount in cash, as
liquidated damages and not as a penalty, equal to 1.5% of the aggregate purchase
price paid by such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder; and (y) on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 1.5% of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement
for any Registrable Securities then held by such Holder; provided, however, that
under no circumstances shall the Company be required to pay hereunder to any
Holder during any one month period in excess of an aggregate of 1.5% of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement
for any Registrable Securities then held by such Holder. If the Company
fails to pay any liquidated damages pursuant to this Section 2(b) in full within
10 Trading Days after the date payable, the Company will pay interest thereon at
a rate of 15% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to the Holder, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The liquidated damages pursuant to the terms hereof shall
apply on a daily pro-rata basis for any portion of a month prior to the cure of
an Event.
ARTICLE III.
REGISTRATION PROCEDURES
In connection with the Company's registration obligations hereunder,
the Company shall:
3.1 Not less than five Trading Days prior to the filing of the
Registration Statement or two days prior to the filing of any related Prospectus
or any amendment or supplement thereto, the Company shall, (i) furnish to the
Holders copies of all such documents proposed to be filed (including documents
incorporated or deemed incorporated by reference to the extent requested by such
Person) which documents will be subject to the review of such Holders, and (ii)
cause its officers and directors, counsel and independent certified public
accountants to respond to such reasonable inquiries as shall be necessary, in
the reasonable opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities then held by all Holders shall reasonably object in good faith,
provided that the Company is notified of such objection in writing prior to the
date 2 Trading Days after the Holders have been so furnished copies of such
documents proposed to be filed. If the Company fails to file a Registration
Statement or any such prospectus or any amendments or supplements thereto so as
to give rise to an Event contemplated by Section 2(b) as a result of the Holders
objection to the filing of the Registration Statement, the Company shall not be
required to pay any liquidated damages contemplated by Section 2(b) with respect
to such Event for any delay resulting from the Holder's objection to such
filing.; provided, however, if it is later determined that such objections were
reasonable and in good faith, the Company shall be required to pay such
liquidated damages contemplated by Section 2(b) with respect to such Event.
3.2 (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) reasonable
efforts to respond as promptly as reasonably practicable to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and, as promptly as reasonably possible, upon request, provide
the Holders true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
3.3 Notify the Holders of Registrable Securities to be sold as
promptly as reasonably possible and (if requested by any such Person) confirm
such notice in writing promptly following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (B) the Commission notifies the Company that
there will be a "review" of the Registration Statement and if the Commission
comments in writing on the Registration Statement (the Company shall upon
request provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or Prospectus or for
additional information with respect to the Registration Statement; (iii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
(vi) of the occurrence or existence of a pending corporate development or other
material non-public information concerning the Company that, in the reasonable
discretion of the Company, makes it appropriate to suspend the availability of
the Registration Statement and the related Prospectus.
3.4 Use commercially reasonable efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as reasonably practicable.
3.5 Furnish to each Holder, without charge, at least one conformed
copy of the Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
3.6 Upon request, promptly deliver to each Holder, without charge,
as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request in connection with resales by the Holder of Registrable
Securities. Subject to the terms of this Agreement, the Company hereby consents
to the use of such Prospectus and each amendment or supplement thereto by each
of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto,
except after the giving of any notice pursuant to clauses (ii) through (vii) of
Section 3(c).
3.7 Prior to any resale of Registrable Securities by a Holder, use
its commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from the Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each such Registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified, subject
the Company to any material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any such
jurisdiction.
3.8 If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement and applicable state and federal securities
laws, of all restrictive legends, and to enable such Registrable Securities to
be in such denominations and registered in such names as any such Holders may
request.
3.9 Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(ii) through (vi) of Section 3(c) above to suspend the use of the use of any
Prospectus until the requisite changes to such Prospectus have been made, then
the Holders shall suspend use of such Prospectus. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as
is practicable. The Company shall be entitled to exercise its right under this
Section 3(i) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of liquidated damages pursuant to Section
2(b), for a period not to exceed 60 consecutive days or for multiple periods not
to exceed 90 days in the aggregate in any 12 month period.
3.10 Comply with all applicable rules and regulations of the
Commission.
3.11 The Company may require each Holder to furnish to the Company
a certified statement as to the number of shares of Common Stock beneficially
owned by such Holder and the person thereof that has voting and dispositive
control over the Shares. During any periods that the Company is unable to meet
its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to furnish such
information within three Trading Days of the Company's request, any liquidated
damages that are accruing at such time or that result from such delay shall be
tolled and any Event that may otherwise occur solely because of such delay shall
be suspended, until such information is delivered to the Company.
ARTICLE IV.
REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
Trading Market on which the Common Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them, each
Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
agents and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, pursuant to which Registrable Securities were registered under the
Securities Act or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent,
but only to the extent, that (i) such untrue statements or omissions or alleged
untrue statements or omissions are based upon information regarding such Holder
furnished in writing to the Company by such Holder for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (ii) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(d). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
5.2 Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based upon: (x) such Holder's failure
to comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
(i) to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such Holder
to the Company for inclusion in the Registration Statement or such Prospectus or
(ii) to the extent that (1) such untrue statements or omissions are based upon
information regarding such Holder furnished in writing to the Company by such
Holder for use therein, or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and approved in writing by such Holder for use in
the Registration Statement (it being understood that the Holder has approved
Annex A hereto for this purpose), such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (2) in the case of an occurrence of an
event of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of
an outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective and prior to the receipt
by such Holder of the Advice contemplated in Section 6(d). In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the gross proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
5.3 Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall reasonably believe that a material conflict of interest is likely to exist
if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party; provided, that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such fees and
expenses applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the relative faults
of the parties.
5.4 Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed
to include, subject to the limitations set forth in this Agreement, any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud by
such Holder.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
ARTICLE VI.
MISCELLANEOUS
6.1 Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
6.2 No Piggyback on Registrations. Except as set forth on Schedule
6(b) attached hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in a Registration Statement other than the Registrable Securities, and
the Company shall not after the date hereof enter into any agreement providing
any such right to any of its security holders. Except as set forth on Schedule
6(b), no Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company. The Company shall not
file any other registration statement (other than a registration statement on
Form S-8) until after the Effective Date.
6.3 Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
6.4 Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(c), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement or
until it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as promptly as it practicable. The Company agrees and acknowledges
that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).
6.5 Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
6.6 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each Holder of the then outstanding Registrable Securities.
6.7 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be made in
accordance with the provisions of the Purchase Agreement.
6.8 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. Each Holder may
assign their respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
6.9 Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
6.10 Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
with the provisions of the Purchase Agreement.
6.11 Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
6.12 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
6.13 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
6.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.
*************************
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
FIRST VIRTUAL COMMUNICATIONS, INC.
By: ________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[PURCHASER'S SIGNATURE PAGE TO FVCX RRA]
[PURCHASER]
By: ________________________________________
Name:
Title:
SCHEDULE 6(b)
The Company has outstanding obligations to register securities of the
Company as follows: (i) the Company is obligated to register 642,921 shares of
Common Stock that were issued to Net One Systems Co., Ltd. ("Net One") in early
October 2003 pursuant to that certain Equity Investment Agreement dated
September 30, 2003 by and between the Company and Net One; (ii) the Company has
certain obligations pursuant to that certain Registration Rights Agreement dated
as of June 2000, by and between the Company and Vulcan Inc., to register the
shares of common stock issuable upon conversion of the Series A Preferred Stock
and upon exercise of a warrant to purchase common stock held by Vulcan, Inc.;
(iii) the Company has certain obligations pursuant to that certain Registration
Rights Agreement dated as of April 12, 2002, by and among the Company and the
investors referenced therein, and (iv) the Company is obligated to register any
shares that may be issued to Xxxxx Xxxxxxxxx, Executive Chairman of the
Company's Board of Directors, pursuant to that certain Private Equity Line
Financing Agreement dated as of April 14, 2003 between the Company and Xx.
Xxxxxxxxx. The Company intends to include the 642,921 shares issued to Net One
pursuant to the Equity Investment Agreement referenced above on the Registration
Statement.
ANNEX A
Plan of Distribution
The Selling Stockholders (the "Selling Stockholders") of the common
stock ("Common Stock") of First Virtual Communications, Inc. (the "Company") and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on the Nasdaq SmallCap
Market or any other stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers, which may include long sales or
short sales effected after the effective date of the prospectus of
which this registration statement is a part;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- "at the market" or through market makers or into an existing market for
the shares
- broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise; or
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
In connection with the sale of our common stock or interests therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial
institutions, which may in turn engage in short sales of the common stock in the
course of hedging the positions they assume. The Selling Stockholders may also
sell shares of our common stock short and deliver these securities to close out
their short positions, or loan or pledge the common stock to broker-dealers that
in turn may sell these securities. The Selling Stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which require the delivery
to such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each of the Selling
Stockholders have informed the Company that it does not have any agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. Some of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares, including all reasonable
costs and expenses incurred by us or the Selling Stockholders and all
registration and filing fees and legal fees and accounting fees.
The Company has agreed to indemnify the Selling Stockholders and
certain control and other related persons related to the foregoing persons
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act. The Selling Stockholders have agreed to indemnify the
Company in certain circumstances, as well as certain related persons, against
certain liabilities, including liabilities under the Securities Act.
The Selling Stockholders are not obligated to, and there is no
assurance that the Selling Stockholders will, sell any or all of the shares
being offered by this prospectus.
The Company has agreed with the Selling Stockholders to keep the
registration statement effective until the shares being offered by this
prospectus may be sold without registration or restriction pursuant to Rule
144(k) promulgated under the Securities Act, or, if earlier, until the
distribution contemplated in this prospectus has been completed.
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of November 6, 2003, by and
among First Virtual Communications, Inc., a corporation incorporated under the
laws of Delaware (the "Company"), the purchasers signatory hereto (each a
"Purchaser" and together the "Purchasers"), and Xxxxxxx Xxxxxxxxx LLP, with an
address at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 (the "Escrow
Agent"). CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS
SET FORTH IN THE SECURITIES PURCHASE AGREEMENT REFERRED TO IN THE FIRST RECITAL.
W I T N E S S E T H:
WHEREAS, the Purchasers will be purchasing from the Company, severally and not
jointly with the other Purchasers, up to $12,000,000 of Common Stock and
Warrants on the Closing Date as set forth in the Securities Purchase Agreement
(the "Purchase Agreement") dated the date hereof between the Purchasers and the
Company, which securities will be issued under the terms contained herein and in
the Purchase Agreement; and
WHEREAS, it is intended that the purchase of the securities be consummated in
accordance with the requirements set forth in Regulation D promulgated under the
Securities Act of 1933, as amended; and
WHEREAS, the Company and the Purchasers have requested that the Escrow Agent
hold the Subscription Amounts in escrow until the Escrow Agent has received the
Release Notice in the form attached hereto from the Company and each Purchaser;
NOW, THEREFORE, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I.
TERMS OF THE ESCROW
1.1 The parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase
of up to $12,000,000 of Common Stock and Warrants, in the aggregate, as
contemplated by the Purchase Agreement.
1.2 Upon the Escrow Agent's receipt of the aggregate Subscription
Amounts for the Closing into its master escrow account, together with executed
counterparts of this Agreement, the Purchase Agreement and the Registration
Rights Agreement, it shall telephonically advise the Company, or the Company's
designated attorney or agent, of the amount of funds it has received into its
master escrow account.
1.3 Wire transfers to the Escrow Agent shall be made as follows:
STERLING NATIONAL BANK
000 0XX XXXXXX
XXX XXXX, XX 00000
Account Name: Xxxxxxx Xxxxxxxxx LLP
ABA ROUTING NO: 000000000
ACCT NO: 0000000000
Remark: fvcx/[FUND NAME]
(a) The Company, promptly following being advised by the Escrow
Agent that the Escrow Agent has received the Subscription Amounts for the
Closing along with facsimile copies of counterpart signature pages of the
Purchase Agreement, Registration Rights Agreement and this Agreement from each
Purchaser, shall deliver to the Escrow Agent the stock certificates and Warrants
evidencing the Securities to be issued to each Purchaser at the Closing together
with:
(i) the Company's executed counterpart of the Purchase
Agreement;
(ii) the Company's executed counterpart of the
Registration Rights Agreement;
(iii) the executed opinion of Xxxxxx Godward LLP, in the
form of Exhibit C to the Purchase Agreement;
(iv) a warrant, issued to Xxxx Capital Partners, LLC, to
purchase up to a number of shares of Common Stock equal to 8% of the Shares
purchased at the Closing and an exercise price equal to 120% of the Per Share
Purchase Price, and have a term of five years ("XXXX Warrant"); and
(v) the Company's original executed counterpart of this
Escrow Agreement.
(b) In the event that the foregoing items are not in the Escrow
Agent's possession within five (5) Trading Days of the Escrow Agent notifying
the Company that the Escrow Agent has custody of the Subscription Amount for the
Closing, then each Purchaser shall have the right to demand the return of their
portion of the Subscription Amount.
(c) Once the Escrow Agent receives a Release Notice in the form
attached hereto as Exhibit X executed by the Company and each Purchaser, it
shall (a) wire 93% of the aggregate Subscription Amounts to the Company's
account listed in Section 1.7 below, and (b) wire the remaining 7% of the
aggregate Subscription Amounts per the written instructions of Xxxx Capital
Management. Wire transfers to the Company shall be made per the written
instructions of the Company to the Escrow Agent.
(d) Once the funds (as set forth above) have been sent per the
Company's instructions, the Escrow Agent shall then arrange to have the Shares,
the Purchase Agreement, the Registration Rights Agreement, the Warrants, Xxxx
Warrant, the Escrow Agreement and the opinion of counsel delivered to the
appropriate parties.
ARTICLE II.
MISCELLANEOUS
2.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act.
2.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent as set forth in the Purchase
Agreement.
2.3 This Escrow Agreement shall be binding upon and shall inure to
the benefit of the permitted successors and permitted assigns of the parties
hereto.
2.4 This Escrow Agreement is the final expression of, and contains
the entire agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by a party's agent duly authorized in writing or as
otherwise expressly permitted herein.
2.5 Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if all parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
2.6 The parties hereto expressly agree that this Escrow Agreement
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Any action to enforce, arising out of,
or relating in any way to, any provisions of this Escrow Agreement shall only be
brought in a state or Federal court sitting in New York City.
2.7 The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, each Purchaser and
the Escrow Agent.
2.8 The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be personally liable
for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent
while acting in good faith and in the absence of gross negligence, fraud and
willful misconduct, and any act done or omitted by the Escrow Agent pursuant to
the advice of the Escrow Agent's attorneys-at-law shall be conclusive evidence
of such good faith, in the absence of gross negligence, fraud and willful
misconduct.
2.9 The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other person
or corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any
such order, judgment or decree, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person, firm or corporation by reason of such
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
2.10 The Escrow Agent shall not be liable in any respect on account
of the identity, authorization or rights of the parties executing or delivering
or purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder in the absence of gross negligence,
fraud and willful misconduct.
2.11 The Escrow Agent shall be entitled to employ such legal
counsel and other experts as the Escrow Agent may deem necessary properly to
advise the Escrow Agent in connection with the Escrow Agent's duties hereunder,
may rely upon the advice of such counsel, and may pay such counsel reasonable
compensation; provided that the costs of such compensation shall be borne by the
Escrow Agent. The Escrow Agent has acted as legal counsel for Xxxx Capital
Management ("XXXX") and may continue to act as legal counsel for XXXX from time
to time, notwithstanding its duties as the Escrow Agent hereunder. The Company
and the Purchasers consent to the Escrow Agent in such capacity as legal counsel
for XXXX and waive any claim that such representation represents a conflict of
interest on the part of the Escrow Agent. The Company understands that XXXX and
the Escrow Agent are relying explicitly on the foregoing provision in entering
into this Escrow Agreement.
2.12 The Escrow Agent's responsibilities as escrow agent hereunder
shall terminate if the Escrow Agent shall resign by giving written notice to the
Company and the Purchasers. In the event of any such resignation, the Purchasers
and the Company shall appoint a successor Escrow Agent and the Escrow Agent
shall deliver to such successor Escrow Agent any escrow funds and other
documents held by the Escrow Agent.
2.13 If the Escrow Agent reasonably requires other or further
instruments in connection with this Escrow Agreement or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
2.14 It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned, or by a final
order, decree or judgment or a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such proceedings or
(2) to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the City of New York in accordance with the
applicable procedure therefore
2.15 The Company and each Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties
or performance of the Escrow Agent hereunder or the transactions contemplated
hereby or by the Purchase Agreement other than any such claim, liability, cost
or expense to the extent the same shall have been determined by final,
unappealable judgment of a court of competent jurisdiction to have resulted from
the gross negligence, fraud or willful misconduct of the Escrow Agent.
************************
EXHIBIT C
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of
date first written above.
FIRST VIRTUAL COMMUNICATIONS, INC.
By:______________________________________
Name:
Title:
ESCROW AGENT:
XXXXXXX XXXXXXXXX LLP
By:______________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[PURCHASER'S SIGNATURE PAGE TO RCG ESCROW]
[PURCHASER]
By: _____________________________________
Name:
Title:
[PURCHASERS' SIGNATURE PAGE FOLLOWS]
EXHIBIT X TO
ESCROW AGREEMENT
RELEASE NOTICE
The UNDERSIGNED, pursuant to the Escrow Agreement, dated as of November __,
2003, among First Virtual Communications, Inc., the Purchasers signatory thereto
and Xxxxxxx Xxxxxxxxx LLP, as Escrow Agent (the "Escrow Agreement"; capitalized
terms used herein and not defined shall have the meaning ascribed to such terms
in the Escrow Agreement), hereby notify the Escrow Agent that each of the
conditions precedent to the purchase and sale of the Shares set forth in the
Securities Purchase Agreement have been satisfied. The Company and the
undersigned Purchaser hereby confirm that all of their respective
representations and warranties contained in the Purchase Agreement remain true
and correct and authorize the release by the Escrow Agent of the funds and
documents to be released at the Closing as described in the Escrow Agreement.
This Release Notice shall not be effective until executed by the Company and the
Purchasers.
This Release Notice may be signed in one or more counterparts, each of which
shall be deemed an original.
IN WITNESS WHEREOF, the undersigned have caused this Release Notice to be duly
executed and delivered as of this __ day of November, 2003.
FIRST VIRTUAL COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
EXHIBIT C
FORM OF WARRANT
ARTICLE I.
TITLE TO WARRANT
Prior to the Termination Date and subject to compliance with applicable laws and
Section 7 of this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed. The
transferee shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
ARTICLE II.
AUTHORIZATION OF SHARES
The Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon exercise
of the purchase rights represented by this Warrant, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
ARTICLE III.
EXERCISE OF WARRANT
(a) Subject to Section 3(c) below, exercise of the
purchase rights represented by this Warrant may be made at any time or
times on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of such Holder
appearing on the books of the Company); provided, however, within 5
Trading Days of the date said Notice of Exercise is delivered to the
Company, the Holder shall have surrendered this Warrant to the Company
and the Company shall have received payment of the aggregate Exercise
Price of the shares thereby purchased (and all taxes required to be
paid by the Holder, if any, pursuant to Section 5 prior to the issuance
of such shares) by wire transfer or cashier's check drawn on a United
States bank. Certificates for shares purchased hereunder shall be
delivered to the Holder within 3 Trading Days from the delivery to the
Company of the Notice of Exercise Form by facsimile copy, surrender of
this Warrant and payment of the aggregate Exercise Price as set forth
above ("Warrant Share Delivery Date). This Warrant shall be deemed to
have been exercised on the later of the date the Notice of Exercise is
delivered to the Company by facsimile copy, the date the Exercise Price
(and all taxes required to be paid by the Holder, if any, pursuant to
Section 5 prior to the issuance of such shares) is received by the
Company, and the date the Warrant is surrendered to the Company (or
evidence of loss, theft or destruction thereof and security or
indemnity reasonably satisfactory to the Company) (the later date, the
"Exercise Date"). The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the close of business on the Exercise
Date. If the Company fails to
deliver to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 3(a) by the third Trading Day
following the Warrant Share Delivery Date, then the Holder will have
the right to rescind such exercise. In addition to any other rights
available to the Holder, if the Company fails to deliver to the Holder
a certificate or certificates representing the Warrant Shares pursuant
to an exercise by the seventh Trading Day after the Warrant Share
Delivery Date, and if after such day the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Holder of
the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (1) pay in cash to the
Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A)
the number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder.
For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
attempted exercise of shares of Common Stock with an aggregate sale
price giving rise to such purchase obligation of $10,000, under clause
(1) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the
Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a
Holder's right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant as required pursuant to the terms
hereof.
(b) If this Warrant shall have been exercised in part,
the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant.
(c) [AT CLOSING HOLDER MAY ELECT, BY NOTATION ON ITS
SIGNATURE PAGE, TO EXCLUDE THIS PROVISION FROM ITS WARRANT] The Company
shall not effect any exercise of this Warrant, and the Holder shall not
have the right to exercise any portion of this Warrant, pursuant to
Section 3(a) or otherwise, to the extent that after giving effect to
such issuance after exercise, the Holder (together with the Holder's
affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to such
issuance. For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by the Holder and its affiliates
shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination
of such sentence is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by
the Holder or any of its affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Warrants) subject to
a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 3(c), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act. To the extent that
the limitation contained in this Section 3(c) applies, the
determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder) and of which a portion of this
Warrant is exercisable shall be in the sole discretion of such Holder,
and the submission of a Notice of Exercise shall be deemed to be such
Holder's determination of whether this Warrant is exercisable (in
relation to other securities owned by such Holder) and of which portion
of this Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For purposes of
this Section 3(c), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company's most recent Form 10-Q
or Form 10-K, as the case may be, (y) a more recent public announcement
by the Company or (z) any other notice by the Company or the Company's
transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the
Company shall within two Trading Days confirm orally and in writing to
the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder or its
affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. The provisions of this Section 3(c) may
be waived by the Holder upon, at the election of the Holder, not less
than 61 days' prior notice to the Company, and the provisions of this
Section 3(c) shall continue to apply until such 61st day (or such later
date, as determined by the Holder, as may be specified in such notice
of waiver).
(d) If at any time after one year from the date of
issuance of this Warrant there is no effective Registration Statement
registering the resale of the Warrant Shares by the Holder, this
Warrant may also be exercised at such time by means of a "cashless
exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the Closing Price on the Trading Day immediately
preceding the date of such election;
(B) = the Exercise Price of the Warrants, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of
the Warrants in accordance with the terms of this
Warrant.
(e) Subject to the provisions of this Section 3, if after
the first anniversary of the Initial Exercise Date each VWAP (as
defined below) for any twenty consecutive Trading Days (the
"Measurement Price") (such period commencing only after such
anniversary date) exceeds the then Exercise Price (as adjusted under
this Warrant) by 200% (the "Threshold Price"), then the Company may,
within three Trading Days of such period, call for cancellation of all
or any portion of this Warrant for which a Notice of Exercise has not
yet been delivered (such right, a "Call"). To exercise this right, the
Company must deliver to the Holder an irrevocable written notice (a
"Call Notice"), indicating therein the portion of the unexercised
portion of this Warrant to which such notice applies. If the conditions
set forth below for such Call are satisfied from the period from the
date of the Call Notice through and including the Call Date (as defined
below), then any portion of this Warrant subject to such Call Notice
for which a Notice of Exercise shall not have been received by the
Company from and after the date of the Call Notice will be cancelled at
6:30 p.m. (New York City time) on the 10th Trading Day after the date
of the Call Notice is received by the Holder (such date, the "Call
Date"). Any unexercised portion of this Warrant to which the Call
Notice does not pertain, if any, will be unaffected by such Call
Notice. In furtherance thereof, the Company covenants and agrees that
it will honor all Notices of Exercise with respect to Warrant Shares
subject to a Call Notice that are tendered from the time of delivery of
the Call Notice on the Call Date. The parties agree that any Notice of
Exercise delivered following a Call Notice shall first reduce to zero
the number of Warrant Shares subject to such Call Notice prior to
reducing the remaining Warrant Shares available for purchase under this
Warrant. For example, if (x) this Warrant then permits the Holder to
acquire 100 Warrant Shares, (y) a Call Notice pertains to 75 Warrant
Shares, and (z) prior to the Call Date the Holder tenders a Notice of
Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the
right under this Warrant to acquire 25 Warrant Shares will be
automatically cancelled, (2) the Company, in the time and manner
required under this Warrant, will have issued and delivered (or be
required to issue and deliver) to the Holder 50 Warrant Shares in
respect of the exercises following receipt of the Call Notice, and (3)
the Holder may, until the Termination Date, exercise this Warrant for
cash by payment of the aggregate Exercise Price then in effect for 25
Warrant Shares (subject to adjustment as herein provided and subject to
subsequent Call Notices and the other terms and conditions of this
Warrant). Subject again to the provisions of this Section 3, the
Company may deliver subsequent Call Notices for any portion of this
Warrant for which the Holder shall not have delivered a Notice of
Exercise. Notwithstanding anything to the contrary set forth in this
Warrant, the Company may not require the cancellation of this Warrant
pursuant to this Section 3(d) (and any Call Notice will be void),
unless, from the beginning of the 20 consecutive Trading Days used to
determine whether the Common Stock has achieved the Threshold Price
through the Call Date, (i) the Company shall have honored in accordance
with the terms of this Warrant all Notices of Exercise delivered prior
to the Call Date, (ii) the Registration Statement shall be effective as
to all Warrant Shares and the prospectus thereunder available for use
by the Holder for the resale of all such Warrant Shares (and the
Company is not aware of any event or occurrence that would make it
appropriate for the Company to suspend the effectiveness of the
Registration Statement), (iii) the Warrant Shares shall be listed or
quoted for trading on the Principal Market and trading in the Common
Stock shall not have been suspended
(and the Company is not then aware of any event or occurrence that
would required trading to be suspended) and (iv) such issuance would be
permitted in full without violating the limitations set forth in
Section 3(c).
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a trading day
from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board,
the volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board; (c) if the
Common Stock is not then listed or quoted on the OTC Bulletin Board and
if prices for the Common Stock are then reported in the "Pink Sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share
of Common Stock as determined by an independent appraiser selected in
good faith by the Purchasers and reasonably acceptable to the Company.
ARTICLE IV.
NO FRACTIONAL SHARES OR SCRIP
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in an amount equal
to such fraction multiplied by the Exercise Price.
ARTICLE V.
CHARGES, TAXES AND EXPENSES
Issuance of certificates for Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event certificates for Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
ARTICLE VI.
CLOSING OF BOOKS
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
ARTICLE VII.
TRANSFER, DIVISION AND COMBINATION.
(a) Subject to compliance with any applicable securities
laws and the conditions set forth in Sections 1 and 7(e) hereof and to
the provisions of Section 4.1 of the Purchase Agreement, this Warrant
and all rights hereunder are transferable, in whole or in part
(provided that if the Warrant is being transferred in part, the portion
of this Warrant being transferred shall represents the right to
purchase at least 100,000 Warrant Shares (or such lesser amount
comprising the entire number of Warrant Shares then underlying this
Warrant and subject to adjustment as provided herein), upon surrender
of this Warrant at the principal office of the Company, together with a
written assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and compliance with the conditions
referenced in the preceding sentence, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
(b) Subject to compliance with Section 7(a), as to any
transfer which may be involved in such division or combination, (i)
this Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together
with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or
attorney, and (ii) the Company shall execute and deliver a new Warrant
or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its
own expense (other than transfer taxes) the new Warrant or Warrants
under this Section 7.
(d) The Company agrees to maintain, at its aforesaid
office or at the offices of a designated agent, books for the
registration and the registration of transfer of the Warrants.
(e) At the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the Company will require,
as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions
and reasonably acceptable to the Company) to the effect that such
transfer may be made without registration under the Securities Act and
under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment
letter in form and substance acceptable to the Company, (iii) that the
transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act and
(iv) such other documents as may be reasonably requested by the Company
to give effect to the transfer and comply with applicable laws.
ARTICLE VIII.
NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the
delivery of the Exercise Notice, the surrender of this Warrant, the payment of
the aggregate Exercise Price to the Company, the Warrant Shares so purchased
shall be and be deemed to be issued to such Holder as the record owner of such
shares as of the close of business on the Exercise Date as determined in
accordance with Section 3(a).
ARTICLE IX.
LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
The Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or
stock certificate, if mutilated, the Company will make and deliver a new Warrant
or cause to be delivered a stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
ARTICLE X.
SATURDAYS, SUNDAYS, HOLIDAYS, ETC.
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday, Sunday
or a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
ARTICLE XI.
ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF
WARRANT SHARES; STOCK SPLITS, ETC.
The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of any of the events described in the next sentence. In the
event the Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in prior to the date upon
which such event described in clauses (i) through (iv) of this Section 3(a)
shall become effective. Upon each such adjustment of the kind and number of
Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security equal to (x) the result obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment divided by (y) the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
ARTICLE XII.
REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS
In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all of its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), to be received by or distributed to the holders of Common Stock of
the Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
ARTICLE XIII.
VOLUNTARY ADJUSTMENT BY THE COMPANY
The Company may at any time during the term of this Warrant reduce the
then current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
ARTICLE XIV.
NOTICE OF ADJUSTMENT
Whenever the number of Warrant Shares or number or kind of securities
or other property purchasable upon the exercise of this Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall give notice thereof to
the Holder, which notice shall state the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
ARTICLE XV.
NOTICE OF CORPORATE ACTION
If at any time:
(a) the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for
or purchase any evidences of its indebtedness, any shares of stock of
any class or any other securities or property, or to receive any other
right, or
(b) there shall be any capital reorganization of
the Company, any reclassification or recapitalization of the capital
stock of the Company or any consolidation or merger of the Company
with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company to,
another corporation or,
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 10 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 10
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify, to the extent
known by the Company, (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right, the date on which the
holders of Common Stock shall be entitled to any such dividend, distribution or
right, and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their Warrant Shares
for securities or other property deliverable upon such disposition, dissolution,
liquidation or winding up. Each such written notice shall be sufficiently given
if addressed to Holder at the last address of Holder appearing on the books of
the Company and delivered in accordance with Section 17(d).
ARTICLE XVI.
AUTHORIZED SHARES
The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.
ARTICLE XVII.
MISCELLANEOUS
17.1 Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.
17.2 Restrictions. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
17.3 Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder as determined by a
court of law, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
17.4 Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered in accordance with the notice provisions of the Purchase Agreement.
17.5 Limitation of Liability. Subject to Section 3(d), no provision
hereof, in the absence of any affirmative action by Holder to exercise this
Warrant or purchase Warrant Shares,
and no enumeration herein of the rights or privileges of Holder, shall give rise
to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
17.6 Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
17.7 Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
17.8 Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
17.9 Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
17.10 Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: November __, 2003
FIRST VIRTUAL COMMUNICATIONS, INC.
By: ___________________________________
Name:
Title:
NOTICE OF EXERCISE
To: First Virtual Communications, Inc.
1. The undersigned hereby elects to purchase ________
Warrant Shares of First Virtual Communications, Inc. pursuant to the terms of
the attached Warrant (only if exercised in full), and tenders herewith payment
of the exercise price in full, together with all applicable transfer taxes, if
any.|
2. Payment shall take the form of (check applicable
box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares
as is necessary, in accordance with the formula set
forth in subsection 3(d), to exercise this Warrant
with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise
procedure set forth in subsection 3(d).
3. Please issue a certificate or certificates
representing said Warrant Shares in the name of the undersigned or in such other
name as is specified below:
____________________________________
The Warrant Shares shall be delivered to the following:
____________________________________
____________________________________
____________________________________
(4) Accredited Investor. The undersigned is an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[PURCHASER]
By: ______________________________
Name:
Title:
Dated: ________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed:__________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
EXHIBIT D
FORM OF OPINION
November 12, 2003
The Purchasers Named
on Exhibit A Hereto
RE: FIRST VIRTUAL COMMUNICATIONS, INC.
Ladies and Gentlemen:
We have acted as counsel for First Virtual Communications, Inc., a Delaware
corporation (the "Company") in connection with the negotiation of the Securities
Purchase Agreement dated as of November 7, 2003, by and between you (the
"PURCHASERS") and the Company (the "PURCHASE AGREEMENT"), which provides for the
issuance and sale by the Company of Common Stock and warrants to purchase Common
Stock (the "WARRANTS") on the Closing Date, and the Escrow Agreement (the
"ESCROW AGREEMENT") and the Registration Rights Agreement between the Purchasers
and the Company, each dated as of November 7, 2003 (the "REGISTRATION RIGHTS
AGREEMENT") (collectively with the Purchase Agreement, the Escrow Agreement, the
Warrants and the Registration Rights Agreement, the "AGREEMENTS"). This opinion
is furnished to you pursuant to Section 2.2(a)(vi) of the Purchase Agreement.
All terms used herein have the meanings defined for them in the Purchase
Agreement unless otherwise defined herein.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Purchase Agreement by the various parties and originals or
copies certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters (the "CERTIFICATE"), and (iii) such other investigation,
if any, that we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreements), where authorization, execution and delivery
are prerequisites to the effectiveness of such documents. We have also assumed:
that all individuals executing and delivering documents had the legal capacity
to so execute and deliver; that you have received all documents you were to
receive under the Agreements; that the Agreements are obligations binding upon
you; if you are a corporation or other entity, that you have filed any required
California franchise or income tax returns and have paid any required California
franchise or income taxes; that there are no extrinsic agreements or
understandings among the parties to the Agreements that would modify or
interpret the terms of the Agreements or the respective rights or obligations of
the parties thereunder; and that there are no extrinsic agreements or
understandings among the parties to the Material Agreements (as defined below)
that would modify or interpret the terms of any Material Agreement or the
respective rights or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California and the General
Corporation Law of the State of Delaware. We note that the parties to the Escrow
Agreement have designated the laws of the State of New York as the laws
governing the Escrow Agreement. Accordingly, with your permission, our opinions
in paragraphs 2 and 3 below as to the validity, binding effect and
enforceability of the Escrow Agreement are premised upon the result that would
be obtained if a California court were to apply the internal laws of the State
of California (notwithstanding the designation of the laws of the State of New
York) to the interpretation and enforcement of the Escrow Agreement. In
addition, we express no opinion on the enforceability of the parties' choice of
law. We express no opinion as to whether the laws of any particular jurisdiction
apply, and no opinion to the extent that the laws of any jurisdiction other than
those identified above are applicable to the subject matter hereof. We are not
rendering any opinion as to compliance with any antitrust law, rule or
regulation or any antifraud law, rule or regulation relating to securities, or
to the sale or issuance thereof.
Our opinion in paragraph 1 below as to the good standing of the Company as a
domestic corporation in the state of Delaware is based solely upon our review of
certifications we received from the Secretary of State of the State of Delaware
that the Company is in good standing in such state. We have made no further
investigation.
With regard to our opinions in paragraphs 2 and 3 below, we express no opinion
as to whether the performance by the Company of its indemnity and contribution
obligations under the Purchase Agreement and the Registration Rights Agreement
complies with any applicable federal securities laws or the laws of the states
of California or Delaware relating to indemnification and contribution.
With regard to our opinion in paragraph 3 below with respect to material
defaults under any Material Agreement, we have relied solely upon (i)
representations of an officer of the Company contained in the Certificate, and
(iii) an examination of the Material Agreements. We have made no further
investigation.
With regard to our opinion in paragraph 4 below concerning preemptive or similar
rights with respect to the issuance and purchase of the Shares and Warrants, we
have relied solely upon (i) representations of officers of the Company contained
in the Certificate, and (ii) an examination of the Company's Certificate of
Incorporation and Bylaws. We have made no further investigation. In addition,
with regard to our opinion in paragraph 4 below, we have assumed full payment by
the Purchasers of the purchase price of the Shares, Warrants and Warrant Shares.
Our opinions in paragraph 6 below with respect to the outstanding capital stock
of the Company are based solely upon our review a certificate of the Company's
transfer agent. We have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business and to own, lease and
operate its properties and assets as described in the Company's SEC Reports.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and to issue the Shares,
the Warrants and the Warrant Shares. Each of the Agreements has been duly
executed and delivered by the Company and each of the Agreements constitutes
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as rights to indemnity under
Section 4.8 of the Purchase Agreement and Section 5 of the Registration Rights
Agreement may be limited by applicable laws and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.
3. The execution and delivery of the Agreements by the Company and the
issuance of the Shares and the Warrants, do not, and if issued to the Purchasers
on the date hereof, the issuance of the Warrant Shares would not, (i) result in
a violation of the Company's Certificate of Incorporation or Bylaws; (ii)
constitute a material default under any agreement to which the Company is bound
and which agreement is included as an exhibit filed pursuant to Item 601(b)(4)
or Item 601(b)(10) of Regulation S-K to the SEC Reports (the "MATERIAL
AGREEMENTS"), or (iii) result in a violation of any federal or state law, rule
or regulation applicable to the Company, except for such violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
4. Assuming (a) the accuracy of the representations and warranties of the
Purchasers and the Company contained in the Purchase Agreement, and (b) the due
performance by each of the Company and the Purchasers of the covenants and the
agreements set forth in the Purchase Agreement, respectively, it being
understood that this opinion is not expressed as to any subsequent resale of any
Shares and Warrants, as of the date hereof, the issuance of the Shares and the
Warrants in accordance with the Purchase Agreement are exempt from registration
under the Securities Act and the issuance of the Warrant Shares, if issued to
the Purchasers on the date hereof, would be exempt from registration under the
Securities Act. When so issued, the Shares and the Warrant Shares will be duly
and validly issued, fully paid and nonassessable, and free of any preemptive or
similar rights contained in the Company's Certificate of Incorporation or
Bylaws.
5. We have not been engaged to devote substantive attention to any claims,
actions, suits, proceedings or investigations that are pending against the
Company or its properties, or against any officer or director of the Company in
his or her capacity as such, that are not disclosed in the SEC Reports. To our
knowledge, except as set forth in the SEC Reports, the Company is not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality that would prohibit the
issuance of the Shares and the Warrants pursuant to the Purchase Agreement.
6. Immediately prior to the issuance of the Shares, the authorized capital
stock of the Company consists of 100,000,000 shares of Common Stock, $.001 par
value, of which 8,778,903 shares are issued and outstanding and 5,000,000 shares
of Preferred Stock, .001 par value, of which 27,437 shares are designed as
Series A Convertible Preferred Stock, all of which are issued and outstanding.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm or entity without our prior
written consent.
Very truly yours,
XXXXXX GODWARD LLP
