Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July 31, 2007,
by and among Xxxxx.xxx Corporation, a Delaware corporation, with headquarters
located at Xxx Xxxxxxxxxx Xxxxx, Xxxxxxxx X, Xxxxxx, Xxxxxxxxxx, 00000 (the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and Rule 506 of
Regulation D ("REGULATION D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate number of
shares of the Common Stock, par value $0.00001 per share, of the Company (the
"COMMON STOCK"), set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers (which aggregate amount for all Buyers together shall be
2,356,900 shares of Common Stock and shall collectively be referred to herein as
the "COMMON SHARES"), (ii) warrants, in substantially the form attached hereto
as Exhibit A (the "SERIES A WARRANTS"), to acquire up to that number of
additional shares of Common Stock set forth opposite such Buyer's name in column
(4) of the Schedule of Buyers (as exercised, collectively, the "SERIES A WARRANT
SHARES") and (iii) warrants in substantially the form attached hereto as Exhibit
A (the "SERIES B WARRANTS", together with the Series A Warrants, the "WARRANTS")
to acquire up to that number of shares of Common Stock set forth opposite such
Buyer's name in column (5) on the Schedule of Buyers (as exercised,
collectively, the "SERIES B WARRANT SHARES," and together with the Series A
Warrant Shares, the "WARRANT SHARES").
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights with respect to the Common Shares, and the Warrant Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
D. The Common Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the "SECURITIES".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.
(a) Purchase of Common Shares and Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to
each Buyer, and each Buyer severally, but not jointly, agrees to purchase from
the Company on the Closing Date (as defined below), (A) the number of Common
Shares as is set forth opposite such Buyer's name in column (3) on the Schedule
of Buyers, along with (B) Series A Warrants to acquire up to that number of
Series A Warrant Shares as is set forth opposite such Buyer's name in column (4)
on the Schedule of Buyers and (C) Series B Warrants to acquire up to that number
of Series B Warrant Shares as is set forth opposite such Buyer's name in column
(5) on the Schedule of Buyers (the "CLOSING"). The Closing shall occur on the
Closing Date at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
(b) Purchase Price. The purchase price for the Common Shares and
related Warrants to be purchased by each Buyer at the Closing shall be the
amount set forth opposite such Buyer's name in column (6) of the Schedule of
Buyers (the "PURCHASE PRICE") which shall be equal to the amount of $5.50 per
Common Share and the related Warrants.
(c) Closing Date. The date and time of the Closing (the "CLOSING
DATE") shall be 10:00 a.m., New York City Time, on the date hereof (or such
other date and time as is mutually agreed to by the Company and each Buyer).
(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its
respective Purchase Price to the Company for the Common Shares and Warrants to
be issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer (A) one or more stock certificates,
evidencing the number of Common Shares such Buyer is purchasing as is set forth
opposite such Buyer's name in column (3) of the Schedule of Buyers, (B) a Series
A Warrant pursuant to which such Buyer shall have the right to acquire such
number of Warrant Shares as is set forth opposite such Buyer's name in column
(4) of the Schedule of Buyers, and (C) a Series B Warrant pursuant to which such
Buyer shall have the right to acquire such number of Warrant Shares as is set
forth opposite such Buyer's name in column (5) of the Schedule of Buyers, in all
cases duly executed on behalf of the Company and registered in the name of such
Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the
Common Shares and the Warrants and (ii) upon exercise of the Warrants will
acquire the Warrant Shares issuable upon exercise thereof, in the ordinary
course of business for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act and such Buyer does
not have a present arrangement to effect any distribution of the Securities to
or through any person or entity; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
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(b) Accredited Investor Status. Such Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a
high degree of risk and is able to afford a complete loss of such investment.
Such Buyer has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as provided
in the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, "RULE 144");
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account or other
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loan secured by the Securities and such pledge of Securities shall not be deemed
to be a transfer, sale or assignment of the Securities hereunder, and no Buyer
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document (as defined below), including,
without limitation, this Section 2(f); provided, that in order to make any sale,
transfer or assignment of Securities, such Buyer and its pledgee makes such
disposition in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
(g) Legends. Such Buyer understands that the certificates or other
instruments representing the Common Shares and the Warrant Shares and, until
such time as the resale of the Common Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Warrant Shares, except as set
forth below, shall bear any legend as required by the "blue sky" laws of any
state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (B) AN OPINION OF COUNSEL IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company ("DTC"), if, unless otherwise required
by state securities laws, (i) such Securities are registered for resale under
the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such
holder provides the Company with an opinion of counsel reasonably satisfactory
to the Company, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act and that such legend is no longer
required, or (iii) such holder provides the Company with reasonable assurance
that the Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule 144A. The Company shall be responsible for the fees of its transfer agent
and all DTC fees associated with such issuance. If the Company shall fail for
any reason or for no reason to issue to the holder of the Securities within
three (3) Trading Days after the occurrence of any of (i) through (iii) above, a
certificate without such legend to the holder or to issue such Securities to
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such holder by electronic delivery at the applicable balance account at DTC, and
if on or after such Trading Day the holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the holder of such Securities that the holder anticipated receiving
without legend from the Company (a "BUY-IN"), then the Company shall, within
three (3) Business Days after the holder's request and in the holder's
discretion, either (i) pay cash to the holder in an amount equal to the holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "BUY-IN PRICE"), at which point the Company's
obligation to deliver such unlegended Securities shall terminate, or (ii)
promptly honor its obligation to deliver to the holder such unlegended
Securities as provided above and pay cash to the holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price (as defined in the
Warrants) on the date of exercise.
(h) Validity; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(i) No Conflicts. The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer, except
in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of such
Buyer to perform its obligations hereunder.
(j) Residency. Such Buyer is a resident of that jurisdiction specified
below its address on the Schedule of Buyers.
(k) Prohibited Transactions. Since the Buyer was approached by the
Company or the Placement Agent with respect to the transactions contemplated
hereby, neither such Buyer nor any Person acting on behalf of or pursuant to any
understanding with such Buyer has, directly or indirectly, effected or agreed to
effect any short sale, whether or not against the box, established any "put
equivalent position" (as defined in Rule 16a-1(h) under the Exchange Act) with
respect to the Common Stock, granted any other right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derived any significant
part of its value from the Common Stock or otherwise sought to hedge its
position in the Securities (but not including any actions to secure available
shares to borrow in order to effect short sales or similar transactions in the
future) (each, a "PROHIBITED TRANSACTION"). Prior to the earliest to occur of
(i) the termination of this
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Agreement or (ii) the date of the 8-K Filing as described in Section 4(i), such
Buyer shall not, and shall cause any Person acting on behalf of or pursuant to
any understanding with such Buyer not to, engage, directly or indirectly, in a
Prohibited Transaction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. Each of the Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power and authorization to own their properties and
to carry on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "MATERIAL
ADVERSE EFFECT" means any material adverse effect on the business, properties,
assets, operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5), the Warrants
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "TRANSACTION DOCUMENTS") and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Common Shares and the Warrants and the reservation for issuance and the
issuance of the Warrant Shares issuable upon exercise of the Warrant have been
duly authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents have been duly
executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(c) Issuance of Securities. The Common Shares and the Warrants are
duly authorized and, upon issuance in accordance with the terms hereof, shall be
validly issued and free from all taxes, liens and charges with respect to the
issue thereof and the Common Shares
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shall be fully paid and nonassessable with the holders being entitled to all
rights accorded to a holder of Common Stock. As of the Closing Date, the Company
shall have duly authorized and reserved for issuance a number of shares of
Common Stock which equals the number of Warrant Shares. The Company shall, so
long as any of the Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Capital Stock,
solely for the purpose of effecting the exercise of the Warrants, 120% of the
number of shares of Common Stock issuable upon exercise of the Warrants. Upon
exercise in accordance with the Warrants, the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The offer and issuance by the Company of
the Securities is exempt from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Common Shares and the Warrants and the reservation for issuance
and issuance of the Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation (as defined below) or Bylaws (as defined below) of
the Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of The NASDAQ Capital Market (the "PRINCIPAL MARKET") applicable to the Company
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected.
(e) Consents. The Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing
Date. The Company and its Subsidiaries are unaware of any facts or circumstances
that might prevent the Company from obtaining or effecting any of the
registration, application or filings pursuant to the preceding sentence. The
Company is not in violation of the listing requirements of the Principal Market
and has no knowledge of any facts that would reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an "affiliate" of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner" of more
than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "1934 ACT")). The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the
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Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by a
Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has engaged Xxxx Xxxxx
Financial Inc. as placement agent (the "AGENT") in connection with the sale of
the Securities. Other than the Agent, the Company has not engaged any placement
agent or other agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries, any
of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges that the
number of Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue the Warrant Shares upon exercise of the Warrants in accordance with this
Agreement and the Warrants, in each case, is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. 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 Certificate of Incorporation or the laws of
the State of Delaware which is or could become applicable to any Buyer as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and any Buyer's ownership
of the Securities. The
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Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company.
(k) SEC Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the 1934 Act (all of the foregoing
filed prior to the date hereof or prior to the date of the Closing, and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC DOCUMENTS"). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of the SEC Documents not
available on the XXXXX system. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
(l) Absence of Certain Changes. Except as disclosed in Schedule 3(l),
since December 31, 2006, there has been no material adverse change and no
material adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries. Except as disclosed in Schedule 3(l), since December 31, 2006,
the Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $500,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $500,000. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), "INSOLVENT" means, with respect to any Person (as defined in Section 3(s))
(i) the present fair saleable value of such Person's assets is less than the
amount required to pay such Person's total Indebtedness (as defined in Section
3(s)), (ii) such
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Person is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii) such
Person intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) such Person has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted.
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Company nor
its Subsidiaries is in violation of any term of or in default under the
Certificate of Incorporation or Bylaws or their organizational charter or
certificate of incorporation or bylaws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in violation of any of the rules, regulations or requirements of the
Principal Market and has no knowledge of any facts or circumstances that would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. During the two (2) years prior to the date
hereof, (i) the Common Stock has been designated for quotation or listed on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(o) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
10
(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.
(q) Transactions With Affiliates. Except as set forth on Schedule
3(q), none of the officers, directors or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for ordinary course services as employees, officers or 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 such officer, director or
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any such officer, director, or employee has a
substantial interest or is an officer, director, trustee or partner.
(r) Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (y) 30,000,000 shares of Common Stock,
of which as of the date hereof, 11,784,656 shares are issued and outstanding,
4,411,736 shares are reserved for issuance pursuant to the Company's employee
incentive plan and other options and warrants outstanding and no shares are
reserved for issuance pursuant to securities (other than the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common Stock and
(z) 10,000,000 shares of preferred stock, par value $0.00001 per share, of which
as of the date hereof, no shares are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as set forth on Schedule 3(r): (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries; (iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness (as
defined in Section 3(s)) of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company or any of its
Subsidiaries; (v) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement);
(vi) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or
11
agreement; and (ix) the Company and its Subsidiaries have no liabilities or
obligations required to be disclosed in the SEC Documents (as defined herein)
but not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company's or any Subsidiary's respective businesses and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect. The Company has furnished or made available to the Buyer upon
such Buyer's request, true, correct and complete copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "CERTIFICATE OF INCORPORATION"), and the Company's Bylaws, as amended and
as in effect on the date hereof (the "BYLAWS"), and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock and
the material rights of the holders thereof in respect thereto.
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the aggregate,
in a Material Adverse Effect, or (iv) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. For purposes of this Agreement: (x) "INDEBTEDNESS" of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) "CONTINGENT OBLIGATION" means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "PERSON" means
12
an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(t) Absence of Litigation. Except as set forth on Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, the Common Stock or any of its Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors,
whether of a civil or criminal nature or otherwise. The matters set forth on
Schedule 3(t) would not have a Material Adverse Effect.
(u) Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Except as set forth on Schedule 3(u), neither the Company nor any
Subsidiary has been refused any insurance coverage sought or applied for.
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 at a cost that would not have a Material Adverse
Effect.
(v) Employee Relations. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company or any such Subsidiary that such officer intends to leave the Company or
any such Subsidiary or otherwise terminate such officer's employment with the
Company or any such Subsidiary. No executive officer of the Company, to the
knowledge of the Company or any of its Subsidiaries, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(w) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company and any of its Subsidiaries are held by them under
valid, subsisting and enforceable
13
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.
(x) Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
businesses as now conducted. None of the Company's Intellectual Property Rights
have expired or terminated, or are expected to expire or terminate within three
years from the date of this Agreement. The Company does not have any knowledge
of any infringement by the Company or its Subsidiaries of Intellectual Property
Rights of others. There is no claim, action or proceeding being made or brought,
or to the knowledge of the Company, being threatened, against the Company or any
of its Subsidiaries regarding its Intellectual Property Rights. The Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "ENVIRONMENTAL LAWS" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i) has made
or filed all federal, foreign and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any
14
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
(bb) Internal Accounting and Disclosure Controls. The Company and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Company maintains disclosure controls and procedures (as such term is defined in
Rule 13a-15 under the 0000 Xxx) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed in to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is accumulated and communicated to the Company's management,
including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions
regarding required disclosure. During the twelve months prior to the date hereof
neither the Company nor any of its Subsidiaries have received any notice or
correspondence from any accountant relating to any potential material weakness
in any part of the system of internal accounting controls of the Company or any
of its Subsidiaries.
(cc) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(dd) Manipulation of Price. The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) other than the Agent sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Securities, or (iii) other
than the Agent paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(ee) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to each Buyer
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.
(ff) Investment Company Status. The Company is not, and upon
consummation of the sale of the Securities will not be, an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal
15
underwriter" for, an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
(gg) Acknowledgement Regarding Buyers' Trading Activity. Except as is
set forth in Section 2(k), it is understood and acknowledged by the Company (i)
that none of the Buyers have been asked by the Company or its Subsidiaries to
agree, nor has any Buyer agreed with the Company or its Subsidiaries, to desist
from purchasing or selling, long and/or short, securities of the Company, or
"derivative" securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) that any Buyer, and counterparties in
"derivative" transactions to which any such Buyer is a party, directly or
indirectly, presently may have a "short" position in the Common Stock, and (iii)
that each Buyer shall not be deemed to have any affiliation with or control over
any arm's length counterparty in any "derivative" transaction. The Company
further understands and acknowledges that (a) one or more Buyers may engage in
hedging and/or trading activities at various times during the period that the
Securities are outstanding and (b) such hedging and/or trading activities, if
any, can reduce the value of the existing stockholders' equity interest in the
Company both at and after the time the hedging and/or trading activities are
being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement or any of
the documents executed in connection herewith. The Company is not aware of any
of the aforementioned hedging and/or trading activities of any of the Buyers.
The Company may not be informed of, and will not monitor, any such
aforementioned hedging and/or trading activities by one or more Buyers in the
future.
(hh) U.S. Real Property Holding Corporation. The Company is not, has
never been, and so long as any Securities remain outstanding, shall not become,
a U.S. real property holding corporation within the meaning of Section 897 of
the Internal Revenue Code of 1986, as amended, and the Company shall so certify
upon Buyer's request.
(ii) Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the "BHCA") and to regulation by the Board of Governors of the
Federal Reserve System (the "FEDERAL RESERVE"). Neither the Company nor any of
its Subsidiaries or Affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting securities
or twenty-five percent or more of the total equity of a bank or any entity that
is subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
(jj) No Additional Agreements. The Company does not have any agreement
or understanding with any Buyer with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.
(kk) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their respective
agents or counsel with any information that constitutes or could reasonably be
expected to constitute material, nonpublic information. The Company understands
and confirms that each of the Buyers will rely on the foregoing representations
in effecting transactions in securities of the Company. All disclosure
16
provided to the Buyers regarding the Company, its business and the transactions
contemplated hereby, including the 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 the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Company during the twelve (12) months preceding the date of this Agreement did
not at the time of release contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any Subsidiary or either of
its or their respective business, properties, prospects, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company's reports
filed under the Exchange Act of 1934, as amended, are being incorporated into an
effective registration statement filed by the Company under the 1933 Act). The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to
satisfy each of the covenants and the conditions to be satisfied by it as
provided in Sections 5, 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company, on or before the
Closing Date, shall take such action as the Company shall reasonably determine
is necessary in order to obtain an exemption for or to qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.
(c) Reporting Status. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the Common
Shares and Warrant Shares and none of the Warrants are outstanding (the
"REPORTING PERIOD"), the Company shall timely file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Securities for general corporate purposes, including general and
administrative expenses, and in
17
connection with acquisitions and not for (i) the repayment of any outstanding
Indebtedness of the Company or any of its Subsidiaries, or (ii) the redemption
or repurchase of any of its or its Subsidiaries' equity securities.
(e) Financial Information. The Company agrees to send the following to
each Investor during the Reporting Period (i) unless the following are filed
with the SEC through XXXXX and are available to the public through the XXXXX
system, within one (1) Business Day after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile copies or email copies of all press releases issued
by the Company or any of its Subsidiaries, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders. As used herein, "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
(f) Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stock's authorization for listing on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
(g) Fees. The Company shall reimburse Xxxxxx Bay Capital Management LP
(a Buyer) or its designee(s) (in addition to any other expense amounts paid to
any Buyer prior to the date of this Agreement) for all reasonable costs and
expenses, incurred in connection with the transactions contemplated by the
Transaction Documents (including all reasonable legal fees and disbursements in
connection therewith, documentation and implementation of the transactions
contemplated by the Transaction Documents and due diligence in connection
therewith) in an amount not to exceed $10,000, which amount may be withheld by
such Buyer from its Purchase Price at the Closing. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or broker's commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby, including,
without limitation, any fees or commissions payable to the Agent. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney's fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or
18
assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f) of this
Agreement; provided that an Investor and its pledgee shall be required to comply
with the provisions of Section 2(f) of this Agreement in order to effect a sale,
transfer or assignment of Securities to such pledgee. The Company hereby agrees
to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.
(i) Disclosure of Transactions and Other Material Information. The
Company shall, on or before 8:30 a.m., New York City time, on the first Business
Day after the date of this Agreement, (A) issue a press release (the "PRESS
RELEASE") reasonably acceptable to the Buyers disclosing all material terms of
the transactions contemplated hereby and (B) file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act, and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all
schedules to this Agreement), the form of Warrant and the Registration Rights
Agreement) as exhibits to such filing (including all attachments, the "8-K
FILING"). From and after the issuance of the Press Release, no Buyer shall be in
possession of any material, nonpublic information received from the Company, any
of its Subsidiaries or any of its respective officers, directors, employees or
agents, that is not disclosed in the Press Release. The Company shall not, and
shall cause each of its Subsidiaries and each of their respective officers,
directors, employees and agents, not to, provide any Buyer with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the Press Release without the express written consent of
such Buyer. If a Buyer has, or believes it has, received any such material,
nonpublic information regarding the Company or any of its Subsidiaries from the
Company, any of its Subsidiaries or any of the respective officers, directors,
or agents, other than as requested in writing by such Buyer, it may provide the
Company with written notice thereof. The Company shall, within five (5) Trading
Days of receipt of such notice, make public disclosure of such material,
nonpublic information. In the event of a breach of the foregoing covenant by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, or agents.
No Buyer shall have any liability to the Company, its Subsidiaries, or any of
its or their respective officers, directors, employees, stockholders or agents
for any such disclosure. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations, including the applicable rules and regulations of the Principal
Market (provided that in the case of clause (i) each Buyer shall be consulted by
the Company in connection with any such press release or other public disclosure
prior to its release). Without the prior written consent of any applicable
Buyer, neither the Company nor any of its Subsidiaries or affiliates
19
shall disclose the name of such Buyer in any filing, announcement, release or
otherwise, unless such disclosure is required by law, regulation.
(j) Additional Registration Statements. Until the date that is
forty-five days from the Effective Date (as defined in the Registration Rights
Agreement), the Company will not file a registration statement (other than on
Form S-8 or solely to register shares of Common Stock issued pursuant to an
acquisition with non-affiliated third parties on an arm's length basis, the
primary purpose of which is not to raise additional capital (the "ACQUISITION
SHARES") under the 1933 Act relating to securities that are not the Securities.
Until the Effective Date, the Company will not file a registration statement
under the 1933 Act relating to Acquisition Shares.
(k) Corporate Existence. So long as any Buyer beneficially owns any
Warrants, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose common stock is quoted on or listed for trading on the Principal Market,
The NASDAQ Global Market, The NASDAQ Global Select Market or The New York Stock
Exchange, Inc.
(l) Reservation of Shares. So long as any Buyer owns any Warrants, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance no less than 120% of the number of shares
of Common Stock issuable upon exercise of the Warrants then outstanding (without
taking into account any limitations on the exercise of the Warrants set forth in
the Warrants).
(m) Additional Issuances of Securities.
(i) For purposes of this Section 4(m), the following definitions
shall apply.
(1) "COMMON STOCK EQUIVALENTS" means, collectively, Options
and Convertible Securities.
(2) "CONVERTIBLE SECURITIES" means any stock or securities
(other than Options) convertible into or exercisable or exchangeable for
Common Stock.
(3) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(ii) From the date hereof until ninety days after the Effective
Date (as defined in the Registration Rights Agreement) (the "TRIGGER DATE"), the
Company will not, directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or its Subsidiaries'
equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for shares of Common Stock or
20
Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a "SUBSEQUENT PLACEMENT").
(iii) The restrictions contained in subsection (ii) of this
Section 4(m) shall not apply in connection with the issuance of any Excluded
Securities (as defined in the Warrants).
(n) Variable Securities; Dilutive Issuances. For so long as any
Warrants remain outstanding, the Company shall not, in any manner, issue or sell
any rights, warrants or options to subscribe for or purchase Common Stock or
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed price unless
the conversion, exchange or exercise price of any such security cannot be less
than the then applicable Exercise Price (as defined in the Warrants) with
respect to the Common Stock into which any Warrant is exercisable. This
provision shall not prohibit the Company from issuing or selling any securities
that contain customary anti-dilution provisions. For long as any Warrants remain
outstanding, the Company shall not, in any manner, enter into or affect any
Dilutive Issuance or Underwritten Dilutive Issuance (each as defined in the
Warrants) if the effect of such Dilutive Issuance is to cause, or, but for the
Securities Limitations (as defined below), would cause, the Company to be
required to issue upon exercise of any Warrant any shares of Common Stock in
excess of that number of shares of Common Stock which the Company may issue upon
exercise of the Warrants without breaching the Company's obligations under the
rules or regulations of the Principal Market, in each case without giving effect
to (y) the limitations on exercise contained in the Warrants, and (z) the
application of any Exercise Floor Price (as defined in the Warrants) (the
"SECURITIES LIMITATIONS").
(o) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(p) Closing Documents. On or prior to fourteen (14) calendar days
after the Closing Date, the Company agrees to deliver, or cause to be delivered,
to each Buyer and Xxxxxxx Xxxx & Xxxxx LLP a complete closing set of the
Transaction Documents, Securities and any other document required to be
delivered to any party pursuant to Section 7 hereof or otherwise.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Common Shares and the
Warrants, in which the Company shall record the name and address of the Person
in whose name the Common Shares and the Warrants have been issued (including the
name and address of each transferee), the number of Common Shares held by such
Person, the number of Warrant Shares issuable upon exercise of the Warrants held
by such Person and the number of Common Shares held by such Person. The Company
shall keep the register open and available at all times during business hours
for inspection of any Buyer or its legal representatives.
21
(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at DTC,
registered in the name of each Buyer or its respective nominee(s), for the
Common Shares, and the Warrant Shares issued at the Closing or upon exercise of
the Warrants in such amounts as specified from time to time by each Buyer to the
Company upon exercise of the Warrants in the form of Exhibit C attached hereto
(the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5(b), and stop transfer instructions to give effect to Section
2(g) hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(g), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer
involves Common Shares or Warrant Shares sold, assigned or transferred pursuant
to an effective registration statement or pursuant to Rule 144, the transfer
agent shall issue such Securities to the Buyer, assignee or transferee, as the
case may be, without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach
of its obligations under this Section 5(b) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Common
Shares and the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the Purchase
Price (less, in the case of Xxxxxx Bay Capital Management LP, the amounts
withheld pursuant to Section 4(g)) for the Common Shares and the related
Warrants being purchased by such Buyer and each other Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
(iii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date which shall be true and correct as
of such specified date), and such Buyer shall have performed,
22
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Common Shares
and the related Warrants at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for each Buyer's sole benefit and may be waived by such
Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:
(i) The Company shall have executed and delivered to such Buyer
(i) each of the Transaction Documents and (ii) the Common Shares (in such
amounts as such Buyer shall request) and the related Warrants (in such amounts
as such Buyer shall request) being purchased by such Buyer at the Closing
pursuant to this Agreement.
(ii) Such Buyer shall have received the opinion of Xxxxx &
Xxxxxx, LLP the Company's outside counsel ("COMPANY COUNSEL"), dated as of the
Closing Date, in substantially the form of Exhibit D attached hereto.
(iii) The Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit C attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(iv) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each of its
operating Subsidiaries in such corporation's state of incorporation issued by
the Secretary of State of such state of incorporation as of a date within 10
days of the Closing Date.
(v) The Company shall have delivered to such Buyer a certificate
evidencing the Company's qualification as a foreign corporation and good
standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business and is required to so
qualify, as of a date within 10 days of the Closing Date.
(vi) The Common Stock (I) shall be listed on the Principal Market
and (II) shall not have been suspended, as of the Closing Date, by the SEC or
the Principal Market from trading on the Principal Market nor shall suspension
by the SEC or the Principal Market have been threatened, as of the Closing Date,
either (A) in writing by the SEC or the Principal Market or (B) by falling below
the minimum listing maintenance requirements of the Principal Market.
(vii) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within 10 days of the Closing Date.
23
(viii) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in
effect at the Closing, in the form attached hereto as Exhibit E.
(ix) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date which shall be true and correct as of such specified date) and the
Company shall have performed, satisfied and complied in all respects with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such Buyer
in the form attached hereto as Exhibit F.
(x) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five days of the Closing Date.
(xi) The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Common Shares and the Warrants.
(xii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Closing shall not have occurred with
respect to a Buyer on or before five (5) Business Days from the date hereof due
to the Company's or such Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, this if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching Buyers for
the expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts
24
sitting in the City of New York, Borough of Manhattan for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of Common Shares representing at least a majority of the
amount of the Common Shares, or, if prior to the Closing Date, the Buyers listed
on the Schedule of Buyers as being obligated to purchase at least a majority of
the amount of the Common Shares. No provision hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Common Shares then outstanding. 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 also is offered to all of the parties to the Transaction
Documents, holders of
25
Common Shares or holders of the Warrants, as the case may be. The Company has
not, directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement, no
Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company or otherwise.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Xxxxx.xxx Corporation
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx X
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (___) -
Attention: Xxxx Xxxxxx
Email: XXxxxxx@xxxxx.xxx
If to the Transfer Agent:
U.S. Stock Transfer Corp.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
Email: Xxxxx@xxxxxxx.xxx
If to a Buyer, to its address, facsimile number and email address set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Email: xxxxxxx.xxxxx@xxx.xxx
26
or to such other address, facsimile number and/or email address and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Common Shares or the Warrants. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of Common Shares representing at least a
majority of the number of the Common Shares, including by merger or
consolidation. A Buyer may assign some or all of its rights hereunder without
the consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9
shall survive the Closing and the delivery and exercise of Securities, as
applicable. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which
27
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the
Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (iii) the
status of such Buyer or holder of the Securities as an investor in the Company.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
(l) No Strict Construction. 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.
(m) Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
(n) Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Buyer exercises a right, election, demand or
option under a Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then such Buyer may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights
(o) Payment Set Aside. To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the
28
Buyers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, foreign, state
or federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
(p) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
[SIGNATURE PAGE FOLLOWS]
29
IN WITNESS WHEREOF, each Buyer and the Company have caused its respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
COMPANY:
XXXXX.XXX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: CEO
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
BUYERS:
XXXXXX BAY FUND LP
By: /s/ Xxxx Xxxx
------------------------------------
Name: Xxxx Xxxx
Title: Principal and Portfolio Manager
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
BUYERS:
XXXXXX BAY OVERSEAS FUND, LTD.
By: /s/ Xxxx Xxxx
------------------------------------
Name: Xxxx Xxxx
Title: Principal and Portfolio Manager
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
ENABLE GROWTH PARTNERS LP
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Principal
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
ENABLE OPPORTUNITY PARTNERS LP
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Principal
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
XXXXXX DIVERSIFIED STRATEGY
MASTER FUND LLC, ENA
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Principal
[Signature Page to Securities Purchase Agreement]
SCHEDULE OF BUYERS
(4) (5)
(3) NUMBER OF NUMBER OF (7)
(2) NUMBER OF SERIES A SERIES B (6) LEGAL REPRESENTATIVE'S
(1) ADDRESS AND COMMON WARRANT WARRANT PURCHASE ADDRESS AND
BUYER FACSIMILE NUMBER SHARES SHARES SHARES PRICE FACSIMILE NUMBER
----- ---------------------------------- --------- --------- --------- ---------- --------------------------------
Xxxxxx Bay Fund, 000 Xxxxxxxx, 00xx Xxxxx 430,000 86,000 86,000 $2,365,000 Xxxxxxx Xxxx & Xxxxx LLP
LP Xxx Xxxx, Xxx Xxxx 00000 000 Xxxxx Xxxxxx
Attention: Xxxx Xxxx Xxx Xxxx, Xxx Xxxx 00000
May Xxx Attention: Xxxxxxx Xxxxx,
Facsimile: 000-000-0000 Esq.
Telephone: 000-000-00000 Facsimile: (000) 000-0000
Residence: United States Telephone: (000) 000-0000
E-mail: xxxxx@xxxxxxxxxxxxxxxx.xxx Email: Xxxxxxx.Xxxxx@xxx.xxx
xxxx@xxxxxxxxxxxxxxxx.xxx
Xxxxxx Xxx 000 Xxxxxxxx, 00xx Xxxxx 926,900 185,380 185,380 $5,097,950 Xxxxxxx Xxxx & Xxxxx LLP
Overseas Fund, Xxx Xxxx, Xxx Xxxx 00000 000 Xxxxx Xxxxxx
Ltd. Attention: Xxxx Xxxx Xxx Xxxx, Xxx Xxxx 00000
May Xxx Attention: Xxxxxxx Xxxxx,
Facsimile: 000-000-0000 Esq.
Telephone: 000-000-00000 Facsimile: 212) 593-5955
E-mail: xxxxx@xxxxxxxxxxxxxxxx.xxx Telephone: (000) 000-0000
xxxx@xxxxxxxxxxxxxxxx.xxx Email: Xxxxxxx.Xxxxx@xxx.xxx
Enable Growth Xxx Xxxxx Xxxxxxxx, Xxxxx 000 000,000 170,000 170,000 $4,675,000 Xxx Xxxxx Xxxxxxxx, Xxxxx
Xxxxxxxx XX Xxx Xxxxxxxxx, XX 00000 255
Attention: Xxxx Xxxxxxx Xxx Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000 Attention: Xxxx Xxxxxxx
Telephone 000-000-0000 Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxxx.xxx Telephone 000-000-0000
Email:xxxxxxxx@xxxxxxxxxxxxx.xxx
Enable Xxx Xxxxx Xxxxxxxx, Xxxxx 000 000,000 20,000 20,000 $ 550,000 Xxx Xxxxx Xxxxxxxx, Xxxxx
Xxxxxxxxxxx Xxx Xxxxxxxxx, XX 00000 255
Partners LP Attention: Xxxx Xxxxxxx Xxx Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000 Attention: Xxxx Xxxxxxx
Telephone 000-000-0000 Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxxx.xxx Telephone 000-000-0000
Email:xxxxxxxx@xxxxxxxxxxxxx.xxx
Xxxxxx Xxx Xxxxx Xxxxxxxx, Xxxxx 000 00,000 10,000 10,000 $ 275,000 Xxx Xxxxx Xxxxxxxx, Xxxxx
Xxxxxxxxxxx Xxx Xxxxxxxxx, XX 00000 255
Strategy Master Attention: Xxxx Xxxxxxx Xxx Xxxxxxxxx, XX 00000
Fund LLC, Ena Facsimile: 000-000-0000 Attention: Xxxx Xxxxxxx
Telephone 000-000-0000 Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxxx.xxx Telephone 000-000-0000
Email:xxxxxxxx@xxxxxxxxxxxxx.xxx
[Signature Page to Securities Purchase Agreement]
EXHIBITS
Exhibit A-1 Form of Series A Warrant
Exhibit A-2 Form of Series B Warrant
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Irrevocable Transfer Agent Instructions
Exhibit D Form of Company Counsel Opinion
Exhibit E Form of Secretary's Certificate
Exhibit F Form of Officer's Certificate
SCHEDULES
Schedule 3(a) - List of Subsidiaries
Schedule 3(l) - Absence of Certain Changes
Schedule 3(q) - Transactions with Affiliates
Schedule 3(r) - Equity Capitalization
Schedule 3(s) - Indebtedness and Other Contracts
Schedule 3(t) - Absence of Litigation
Schedule 3(u) - Insurance
