CONVERTIBLE PREFERRED STOCK AND COMMON STOCK WARRANT PURCHASE AGREEMENT
THIS CONVERTIBLE PREFERRED STOCK AND COMMON STOCK WARRANT PURCHASE
AGREEMENT (this "AGREEMENT"), dated as of August 8, 2006, is entered into by and
among Sysview Technology, Inc. (formerly Syscan Imaging, Inc.), a Delaware
corporation (the "COMPANY"), and the investors signatory hereto (each such
investor is a "PURCHASER" and all such investors are, collectively, the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), the Company desires to issue and sell to the Purchasers
and the Purchasers, severally and not jointly, desire to purchase from the
Company (i) shares of the Company's Series B Convertible Preferred Stock, par
value $.001 per share (the "PREFERRED STOCK"), which are convertible into shares
of the Company's common stock, par value $.001 per share (the "COMMON STOCK"),
and (ii) warrants to purchase shares of Common Stock as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE CLOSING.
(a) THE CLOSING (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchasers and
the Purchasers shall, severally and not jointly, purchase an aggregate of up to
30,000 shares of Preferred Stock ("SHARES") and certain Common Stock purchase
warrants as described below in this Section for an aggregate purchase price of
up to $3,000,000. The purchase and sale of such securities shall take place at
one or more closings (collectively, the "CLOSING") at the offices of Xxxxxxxxxx
& Xxxxx LLP ("R&P"), The Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, immediately following the execution hereof or such later date or
dates as the parties shall agree. The date of each Closing is hereinafter
referred to as a "CLOSING DATE."
(ii) At each Closing, the parties shall deliver or shall cause
to be delivered the following: (A) the Company shall deliver to each Purchaser
(1) a stock certificate registered in the name of such Purchaser, representing a
number of Shares equal to the quotient obtained by dividing the purchase price
indicated below such Purchaser's name on the signature page to this Agreement
("PURCHASE PRICE") by 100, (2) a Common Stock purchase warrant, in the form of
EXHIBIT C, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire the number of Warrant Shares (as
defined in the Warrant) indicated below such Purchaser's name on the signature
page to this Agreement (collectively, the "WARRANTS"), (3) an executed copy of
this Agreement and an executed Registration Rights Agreement, dated as of the
date hereof, among the Company and the Purchasers, in the form of EXHIBIT B (the
"REGISTRATION RIGHTS AGREEMENT"), (4) Transfer Agent Instructions, in the form
of EXHIBIT D, executed by the Company and delivered to and acknowledged by the
Company's transfer agent (the "TRANSFER AGENT INSTRUCTIONS"), (5) a legal
opinion of R&P, in the form of EXHIBIT E attached hereto, (6) a certified copy
of the certificate of incorporation of the Company, as certified by the
Secretary of State of Delaware, and (7) copies of the executed Lock-Up
Agreements, in the form of EXHIBIT F (the "LOCK-UP AGREEMENTS"), as more fully
described in this Agreement; and (B) each Purchaser shall deliver (1) the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose,
and (2) an executed copy of this Agreement and the Registration Rights
Agreement.
1.2 TERMS OF PREFERRED STOCK. The Preferred Stock shall have the
rights, preferences and privileges set forth in Exhibit A, and shall be
incorporated into a Certificate of Designation (the "CERTIFICATE OF
DESIGNATION") to be filed on or prior to the initial Closing by the Company with
the Secretary of State of Delaware, in form and substance mutually agreed to by
the parties.
1.3 CERTAIN DEFINED TERMS. For purposes of this Agreement, "ORIGINAL
ISSUE DATE" and "TRADING DAY" shall have the meanings set forth in EXHIBIT A and
"BUSINESS DAY" shall mean any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close. A "PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Purchasers:
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(a) ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
SCHEDULE 2.1(a) (collectively, the "SUBSIDIARIES"). Each of the Subsidiaries is
an entity, duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Securities (as defined below) or any of this Agreement, the Registration
Rights Agreement, the Certificate of Designation, the Transfer Agent
Instructions, the Lock-Up Agreements or the Warrants (collectively, the
"TRANSACTION DOCUMENTS"), (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "MATERIAL ADVERSE
EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
subsidiary of the Company (each, a "SUBSIDIARY") is in violation of any of the
provisions of its respective certificate or articles of incorporation, by-laws
or other organizational or charter documents.
(c) CAPITALIZATION. The number of authorized, issued and
outstanding capital stock of the Company is set forth in SCHEDULE 2.1(c). Except
as disclosed in SCHEDULE 2.1(c), the Company owns all of the capital stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of the securities of the Company or any Subsidiary
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company or any Subsidiary by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the Shares
and the Warrants and except as disclosed in SCHEDULE 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Shares, Warrants or Underlying Shares (as hereinafter
defined) will not obligate the Company to issue shares of Common Stock or other
securities to any Person other than the Purchaser and will not result in a right
of any holder of Company's securities to adjust the exercise or conversion or
reset price under such securities.
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(d) ISSUANCE OF THE SHARES AND THE WARRANTS. The Shares and
the Warrants are duly authorized and, when issued and paid for in accordance
with the terms hereof, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "LIENS"). The Company has on the date hereof
and will, at all times while the Shares and the Warrants are outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the holders of the Shares and the Warrants, to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Certificate of Designation and the Warrants. As of the date hereof, the Company
has reserved for issuance the sum of 1,500,000 Warrant Shares and 3,000,000
shares of Common Stock for issuance upon conversion of Shares (the "INITIAL
MINIMUM"). All such authorized shares of Common Stock shall be duly reserved for
issuance to the holders of the Shares and the Warrants. The shares of Common
Stock issuable upon conversion of the Shares and upon exercise of the Warrants
are collectively referred to herein as the "UNDERLYING SHARES." The Shares, the
Warrants and the Underlying Shares are collectively referred to herein as, the
"SECURITIES." When issued in accordance with the Certificate of Designation and
the Warrants, the Underlying Shares will be duly authorized, validly issued,
fully paid and nonassessable, free and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), 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 (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), as could not, individually
or in the aggregate, have or result in a Material Adverse Effect. The business
of the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, could not have or result in a Material Adverse
Effect.
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(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Certificate of
Designation with the Secretary of State of Delaware, (ii) the filings required
pursuant to Section 3.8, (iii) the filing with the Securities and Exchange
Commission (the "COMMISSION") of a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchasers (the "UNDERLYING SHARES
REGISTRATION STATEMENT"), (iv) applicable Blue Sky filings, and (v) in all other
cases where the failure to obtain such consent, waiver, authorization or order,
or to give such notice or make such filing or registration could not have or
result in, individually or in the aggregate, a Material Adverse Effect
(collectively, the "REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Except as described in the SEC Documents, (i) neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving (A) a claim of violation of or
liability under federal or state securities laws or (B) a claim of breach of
fiduciary duty; (ii) the Company does not have pending before the Commission any
request for confidential treatment of information and the Company has no
knowledge of any expected request that would be made prior to the Effectiveness
Date (as defined in the Registration Rights Agreement); and (iii) there has not
been, and to the best of the Company's knowledge there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other charter documents
(each as amended through the date hereof), any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, in each case of
clauses (i), (ii) or (iii) above, except as could not individually or in the
aggregate, have or result in a Material Adverse Effect.
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(i) PRIVATE OFFERING. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration and prospectus delivery
requirements of the Securities Act. Neither the Company nor, to its knowledge,
any Person acting on its behalf has taken or is contemplating taking any action
which could subject the offering, issuance or sale of the Securities to the
registration requirements of the Securities Act including soliciting any offer
to buy or sell the Securities by means of any form of general solicitation or
advertising.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), including pursuant to Section 13(a) or
15(d) thereof, since April 2, 2004 (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC DOCUMENTS" and, together with the
Schedules to this Agreement, the "DISCLOSURE Materials") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required under the Exchange Act. The financial statements
of the Company included in the SEC Documents comply in all material respects
with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments. Since March 31, 2006, except as specifically
disclosed in the SEC Documents, (a) there has been no event, occurrence or
development that has or that could result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or otherwise required to be disclosed in
filings made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not declared
or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock.
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(k) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. No fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other similar Person with respect to the
transactions contemplated by this Agreement, except for Starboard Capital
Markets, LLC which will receive an eight percent (8%) cash commission and
warrants to purchase up to 10% of the number of shares into which the Preferred
Stock sold is initially convertible at an exercise price of $1.50 per share. The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement. The Company shall indemnify and hold harmless the Purchasers,
their employees, officers, directors, agents, and partners, and their respective
Affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and attorney's fees) and expenses suffered in respect of
any such claimed or existing fees, as such fees and expenses are incurred.
Starboard Capital Markets, LLC shall only be entitled to receive the fees
described herein with respect to purchasers introduced to the Company by them.
(m) FORM SB-2 ELIGIBILITY. The Company is eligible to register
securities for resale with the Commission under Form SB-2 promulgated under the
Securities Act.
(n) SENIORITY. Except for the Company's outstanding shares of
Series A Preferred Stock, there is no outstanding class of equity securities of
the Company which is equal to or senior to the Shares in right of payment,
whether upon liquidation or dissolution, or otherwise.
(o) LISTING AND MAINTENANCE REQUIREMENTS. Except as set forth
in the SEC Documents, the Company has not, since April 2, 2004 and, to the best
of its knowledge, for the two years preceding the date hereof, received notice
(written or oral) from the OTC, any stock exchange, market or trading facility
on which the Common Stock is or has been listed (or on which it has been quoted)
to the effect that the Company is not in compliance with the listing or
maintenance requirements of such exchange, market or trading facility. The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.
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(p) PATENTS AND TRADEMARKS. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon the rights of any Person. Except as
specified in SCHEDULE 2.1(p), to the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(q) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except for
the shares of common stock underlying the Company's outstanding shares of Series
A Preferred Stock and warrants issued to the Series A Preferred Stock holders,
as well as the shares of common stock underlying the placement warrants issued
to Starboard Capital Markets, LLC, and their affiliates in connection with the
Company's Series A Preferred Stock offering in March 2005, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which have not been satisfied. No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.
(r) REGULATORY PERMITS. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(s) TITLE. The Company and the Subsidiaries have 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, except for Liens 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 its Subsidiaries. Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and its Subsidiaries are
in compliance and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.
(t) LABOR RELATIONS. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(u) SHAREHOLDERS RIGHTS PLAN. Neither the consummation of the
transactions contemplated hereby nor the issuance of the Underlying Shares will
cause the Purchasers to be deemed an "Acquiring Person" under any existing or
hereafter adopted shareholders rights plan or similar arrangement.
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(v) DISCLOSURE. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All representations and warranties of
the Company contained in this Agreement, and all disclosure provided to the
Purchasers 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 herein and therein, in light of the circumstances under which
they were made, not misleading, except as would otherwise not have a Material
Adverse Effect on the Company.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser hereby for itself and for no other Purchaser represents and warrants
to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except as such enforceability may be limited by, or subject to, any
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and subject to general principles of
equity.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement, the Registration Rights Agreement and the
Warrants, at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute the
Securities.
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(c) PURCHASER STATUS. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, an "ACCREDITED INVESTOR"
as defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) ABILITY OF SUCH PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
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(i) Purchaser acknowledges that Purchaser is aware of the
following Telephone Interpretation in the SEC Manual of Publicly Available
Telephone Interpretations (July 1997):
A.65. Section 5
An issuer filed a Form S-3 registration statement for
a secondary offering of common stock which is not yet
effective. One of the selling shareholders wanted to do a
short sale of common stock "against the box" and cover the
short sale with registered shares after the effective date.
The issuer was advised that the short sale could not be made
before the registration statement becomes effective, because
the shares underlying the short sale are deemed to be sold at
the time such sale is made. There would, therefore, be a
violation of Section 5 if the shares were effectively sold
prior to the effective date.
The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, an opinion of
counsel will be required, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
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NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
MAY BE CONVERTIBLE OR EXERCISABLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THAT EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that the Underlying Shares Registration Statement is declared effective
by the Commission.
(c) The Securities shall not be required to contain any
restrictive legend (including the legend set forth in Section 3.1(b) of this
Agreement): (i) while a registration statement (including the Underlying Shares
Registration Statement) covering the resale of such securities is effective
under the Securities Act; (ii) following any sale of such securities pursuant to
Rule 144 under the Securities Act; (iii) if such securities are eligible for
sale under Rule 144(k) under the Securities Act; or (iv) if such legend is not
required under applicable law, or, in the opinion of the Company's counsel, in
accordance with Rule 502(d) under the Securities Act, or other interpretations
and pronouncements of the Commission. Upon request of the holder, the Company
shall cause its counsel to issue a legal opinion to the Company's transfer agent
promptly to effect the removal of such legend pursuant to the foregoing
sentence. If all or any shares of Preferred Stock or any portion of a Warrant is
converted or exercised (as applicable) at a time when there is an effective
registration statement (including the Underlying Shares Registration Statement)
covering the resale of the Underlying Shares under the Securities Act, or if
such Underlying Shares may be sold under Rule 144(k) or if such legend is not
otherwise required under applicable law, then the certificate evidencing such
Underlying Shares shall be issued free of all restrictive legends. The Company
agrees that at such time as such restrictive legend is not required as provided
in this Section 3.1(c), it will, as soon as practicable following the delivery
by the holder to the Company's transfer agent of the Securities, as the case may
be, deliver or cause to be delivered to such holder replacement Securities free
from all restrictive legends. Unless otherwise required by law or judicial
order, the Company shall not make any notation on its records or give any
instructions to its transfer agent that enlarge the restrictions on transfer set
forth in this Agreement. Certificates for securities subject to legend removal
hereunder shall be transmitted by the transfer agent of the Company to the
holder's prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission (DWAC) system, if the Company's transfer agent is a
participant in such system. The Company agrees to cause its transfer agent to be
a participant in such system (or engage a new transfer agent which is a
participant in such system) within 60 days after the initial Closing.
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3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Shares in
accordance with the terms of the Certificate of Designation, and (ii) exercise
of the Warrants in accordance with their terms, will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Underlying Shares upon (x) conversion of the Shares in accordance with
the terms of the Certificate of Designation, and (y) exercise of the Warrants in
accordance with their terms, is unconditional and absolute, subject to the
limitations set forth herein, in the Certificate of Designation or pursuant to
the Warrants, regardless of the effect of any such dilution.
3.3 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including causing its attorneys to render and deliver any legal opinion required
in order to permit a Purchaser to receive Underlying Shares free of all
restrictive legends and to subsequently sell Underlying Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice having
a similar effect. Upon the request of any such Person, the Company shall deliver
to such Person a written certification of a duly authorized officer as to
whether it has complied with such requirements.
3.4 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
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3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from issuing (a) the number of Underlying Shares as
would then be issuable upon a conversion in full of the Shares, and (b) the
number of Underlying Shares as would then be issuable upon exercise of the
Warrants (the "CURRENT REQUIRED MINIMUM"), in either case, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate or articles of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least such number of shares as reasonably requested
by the Purchasers in order to provide for such number of authorized and unissued
shares of Common Stock to enable the Company to comply with its issuance,
conversion, exercise and reservation of shares obligations as set forth in this
Agreement, the Certificate of Designation and the Warrants (the sum of (x) the
number of shares of Common Stock then outstanding plus all shares of Common
Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (y) the Current Required Minimum, shall be a
reasonable number). In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain stockholder approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later than the earlier to occur of the 60th day after delivery of the proxy
materials relating to such meeting and the 90th day after request by a holder of
Securities to issue the number of Underlying Shares in accordance with the terms
hereof) and (c) within five Business Days of obtaining such stockholder
authorization, file an appropriate amendment to the Company's certificate or
articles of incorporation to evidence such increase.
3.6 RESERVATION AND LISTING OF UNDERLYING SHARES. (a) If, after the
date hereof, the Company shall list the Common Stock on any of the New York
Stock Exchange, American Stock Exchange, NASDAQ National Market or NASDAQ
SmallCap Market (each, a "SUBSEQUENT MARKET"), then the Company shall include in
such listing for the benefit of the Purchasers for issuance upon exercise of the
Warrants and conversion of the Shares a number of shares of Common Stock equal
to not less than the then Current Required Minimum. If the number of Underlying
Shares issuable upon conversion in full of the then outstanding Shares and upon
exercise of the then unexercised portion of the Warrants exceed the number of
Underlying Shares previously listed on account thereof with a Subsequent Market,
then the Company shall take the necessary actions to immediately list a number
of Underlying Shares as equals no less than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Shares in full and upon exercise in
full of the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants, respectively, in such amount as may be required to
fulfill its obligations in full under the Transaction Documents, which reserve
shall equal no less than the then Current Required Minimum.
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3.7 CONVERSION AND EXERCISE OBLIGATIONS AND PROCEDURES. The Company
shall honor conversion of the Shares and exercise of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the Certificate of Designation and Warrants. The
Transfer Agent Instructions, Conversion Notice (as defined in the Certificate of
Designation) and Notice of Exercise under the Warrants set forth the totality of
the procedures with respect to the conversion of the Shares and exercise of the
Warrants, including the form of legal opinion, if necessary, that shall be
rendered to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchasers to convert
their Shares and exercise their Warrants as contemplated in the Certificate of
Designation and the Warrants (as applicable).
3.8 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) by 9:00 a.m. (Eastern Time) on the first Business Day following the initial
Closing Date issue a press release acceptable to the Purchasers disclosing the
transactions contemplated hereby, (ii) file with the Commission a Report on Form
8-K disclosing the transactions contemplated hereby within four Business Days
after the initial Closing Date, and (iii) timely file with the Commission a Form
D promulgated under the Securities Act. The Company shall, no less than two
Business Days prior to the filing of any disclosure required by clauses (ii) and
(iii) above, provide a copy thereof to the Purchasers. The Company and the
Purchasers shall consult with each other in issuing any other press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or stock market or trading facility with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement, filings or
other communications without the prior written consent of the other, except if
such disclosure is required by law or stock market or trading facility
regulation, in which such case the disclosing party shall promptly provide the
other party with prior notice of such public statement, filing or other
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the names of the Purchasers, or include the names of the Purchasers in
any filing with the Commission or any regulatory agency, trading facility or
stock market without the prior written consent of the Purchasers, except to the
extent such disclosure is required by law or stock market regulations or in the
Registration Statement, in which case the Company shall provide the Purchasers
with prior notice of such disclosure.
3.9 USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities, to settle any
outstanding litigation, or to make any loans or advances to any Affiliate.
3.10 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Except in connection
with the sale of all or substantially all of the assets of the Company or
licensing arrangements in the ordinary course of the Company's business, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights, or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchasers.
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3.11 EXCLUSIVITY. The Company shall not issue and sell the Shares
to any Person other than to the Purchasers pursuant to this Agreement.
3.12 SHAREHOLDER RIGHTS PLAN. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "ACQUIRING PERSON" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities or shares of Common Stock under the Transaction Documents.
3.13 LOCK-UP AGREEMENTS. Prior to the initial Closing Date, the Company
and each of Xxxxxx Xx, Xxxxxxx Xxxxxxx and Xxxxx Xxxxx shall have executed and
delivered a lock-up agreement with respect to the shares of Common Stock
issuable upon exercise of the options they received in connection with their
respective employment agreements in April 2005, in the form of EXHIBIT G
3.14 NON-PUBLIC INFORMATION. The Company covenants and agrees that from
and after the initial Closing Date, neither it nor any other Person acting on
its behalf will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transaction in securities of the Company. In complying
with this Section 3.14, the Company shall not be deemed to be in breach of this
Agreement solely because of its failure to provide information to Purchaser
which the Company believes constitutes material non-public information.
3.15 PARTICIPATION IN FUTURE FINANCINGS. (a) From the date hereof until
the one-year anniversary of the Effectiveness Date (as defined in the
Registration Rights Agreement), upon any financing by the Company or any
Subsidiary of Common Stock or Common Stock Equivalents (as defined in EXHIBIT A)
(a "SUBSEQUENT FINANCING"), each Purchaser shall have the right, subject to
Section 3.15(c), to participate in up to 100% of the Subsequent Financing (the
"PARTICIPATION MAXIMUM").
(b) At least five Business Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing ("PRE-NOTICE"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a "SUBSEQUENT FINANCING NOTICE"). Upon the
request of a Purchaser for a Subsequent Financing Notice, the Company shall
promptly, but no later than one Business Day after such request, deliver a
Subsequent Financing Notice to such Purchaser. The Subsequent Financing Notice
shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Financing is proposed to be effected, and attached to
which shall be a term sheet of similar document relating thereto.
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(c) Any Purchaser desiring to participate in such Subsequent
Financing must provide written notice to the Company by not later than 5:30 p.m.
(Eastern Time) on the third Business Day after such Purchaser has received the
Pre-Notice that the Purchaser is willing to participate in the Subsequent
Financing, the amount of such Purchaser's participation, and that the Purchaser
has such funds ready, willing and available for investment on the terms set
forth in the Subsequent Financing Notice. If the Company receives no notice from
a Purchaser as of such fourth Business Day, such Purchaser shall be deemed to
have notified the Company it does not elect to participate.
(d) Each participating Purchaser may elect, in its sole
discretion, in satisfaction of some or all of its participation in the
Subsequent Financing, to exchange some or all of any of its Shares then held by
it for any securities issued in the Subsequent Financing (such exchange to be
made at the same time as, and pursuant to, the closing of the Subsequent
Financing) based on the then-outstanding Stated Value (as defined in EXHIBIT A)
of the Preferred Stock, and the effective price at which such securities are
sold in the Subsequent Financing.
(e) In the event the Company receives responses to the
Subsequent Financing Notices from Purchasers seeking to purchase more than the
aggregate amount of the Subsequent Financing, each such Purchaser shall have the
right to purchase their Pro Rata Portion (as defined below) of the Participation
Maximum. "PRO RATA PORTION" is the ratio of (x) the Purchase Price paid by such
participating Purchaser and (y) the aggregate Purchase Price paid by all
participating Purchasers.
(f) If by 5:30 p.m. (Eastern Time) on the fourth Business Day
after the Purchasers have received the Pre-Notice, notifications by the
Purchasers of their willingness to participate in the Subsequent Financing (or
to cause their designees to participate) is, in the aggregate, less than the
total amount of the Subsequent Financing, then the Company may effect the
remaining portion of such Subsequent Financing on the terms and to the Persons
set forth in the Subsequent Financing Notice.
(g) The Company must provide the Purchasers with a second
Subsequent Financing Notice, and the Purchasers will again have the right of
participation set forth in this Section 3.15, if the Subsequent Financing
subject to the initial Subsequent Financing Notice is not consummated for any
reason on the terms set forth in such Subsequent Financing Notice within 60
calendar days after the date of the initial Subsequent Financing Notice.
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(h) Notwithstanding the foregoing, this Section 3.15 shall not
apply in respect of any shares of Common Stock or Common Stock Equivalents
issued to or to be issued pursuant to: (A) an underwritten public offering of
the Company's securities; (B) employees, consultants, officers or directors of
the Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement approved by the Board of Directors of the Company; (C)
the acquisition of another business entity or business segment of any such
entity by the Company by merger, purchase of substantially all of the assets or
other reorganization whereby the Company will own more than fifty (50%) of the
voting power of such business segment of any such entity; (D) vendors or
customers or to other persons in similar commercial situations with the Company
if such issuance is approved by the Board of Directors; (E) corporate partnering
transactions on terms approved by the Board of Directors; (F) the terms of any
of the Company's preferred stock, warrants or other convertible securities
outstanding on the date hereof; (G) borrowings, direct or indirect, from
financial institutions regularly engaged in the business of lending money,
whether or not presently authorized which include an equity component which is
not a major component of such borrowing; (H) a merger, consolidation,
reorganization, recapitalization, sale of assets, stock purchase, contribution
or other similar transaction that involves the Company, on the one hand, and any
corporation or other entity that controls, directly or indirectly, the Company,
on the other hand; or (I) other non-cash transactions.
3.16 LIMITATION ON FUTURE FINANCINGS. For a period of eighteen
months from the date of this Agreement, the Company shall be prohibited from
effecting or entering into an agreement (other than this Agreement) to effect
any Subsequent Financing involving a Variable Rate Transaction or an MFN
Transaction (each as defined below). The term "VARIABLE RATE TRANSACTION" shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities,
provided there is no floor on the conversion price of such security at the time
of issuance, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity securities or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock, provided there is no floor on the conversion price
of such security at the time of issuance, or (ii) enters into any agreement,
including but not limited to, an equity line of credit, whereby the Company may
sell securities at a future determined price. The term "MFN TRANSACTION" shall
mean a transaction or series of related transactions which grants to an investor
the right to receive additional shares based upon future transactions of the
Company on terms more favorable than those granted to such investor in such
offering.
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ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION. Each Purchaser (including its officers,
directors, employees, affiliates, agents, successors and assigns (each, an
"INDEMNIFIED PARTY")) shall be indemnified and held harmless by the Company for
any and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable
attorneys' fees and expenses) actually suffered or incurred by them (hereinafter
a "LOSS"), arising out of or resulting from the breach of any representation,
warranty, agreement or covenant made by the Company contained in this Agreement.
4.2 INDEMNIFICATION PROCEDURE. The obligations and liabilities of
the Company under this Article IV with respect to Losses arising from claims of
any third party which are subject to the indemnification provided for in this
Article IV ("THIRD PARTY CLAIMS") shall be governed by and contingent upon the
following additional terms and conditions: if an Indemnified Party shall receive
notice of any Third Party Claim, the Indemnified Party shall give the Company
notice of such Third Party Claim promptly after the receipt by the Indemnified
Party of such notice (which notice shall include the amount of the Loss, if
known, and method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises); provided, however, that the failure to provide such
notice shall not release the Company from any of its obligations under this
Article IV except to the extent the Company is materially prejudiced by such
failure and shall not relieve the Company from any other obligation or liability
that it may have to any Indemnified Party otherwise than under this Article IV.
Upon written notice to the Indemnified Party within five (5) days of the receipt
of such notice, the Company shall be entitled to assume and control the defense
of such Third Party Claim at its expense and through counsel of its choice;
provided, however, that, if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable judgment
of such counsel for the same counsel to represent both the Indemnified Party and
the Company, then the Indemnified Party shall be entitled to retain its or his
own counsel in each jurisdiction for which the Indemnified Party reasonably
determines counsel is required, at the expense of the Company. In the event the
Company exercises the right to undertake any such defense against any such Third
Party Claim as provided above, the Indemnified Party shall cooperate with the
Company in such defense and make available to the Company, at the Company's
expense, all witnesses, pertinent records, materials and information in the
Indemnified Party's possession or under the Indemnified Party's control relating
thereto as is reasonably required by the Company. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Company shall cooperate with the Indemnified Party
in such defense and make available to the Indemnified Party, at the Company's
expense, all such witnesses (including himself), records, materials and
information in the Company's possession or under the Company's control relating
thereto as is reasonably required by the Indemnified Party. No such Third Party
Claim may be settled by the Company on behalf of the Indemnified Party without
the prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld); provided, however, in the event that the Indemnified
Party does not consent to any such settlement that would provide it with a full
release from indemnified Losses and would not require it to take, or refrain
from taking, any action, the Company's liability for indemnification shall not
exceed the amount of such proposed settlement. The Indemnified Party will
refrain from any act or omission that is inconsistent with the position taken by
the Company in the defense of a Third Party Claim unless the Indemnified Party
determines that such act or omission is reasonably necessary to protect its own
interest.
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ARTICLE V
MISCELLANEOUS
5.1 FEES AND EXPENSES. Except as otherwise set forth in this Section
5.1 or the Registration Rights Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Securities.
5.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together
with the Exhibits and Schedules thereto and the Transfer Agent Instructions
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section at or prior to 5:00 p.m. (Eastern
Time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 5:00 p.m. (Eastern Time)
on any date and earlier than 11:59 p.m. (Eastern Time) on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as follows:
If to the Company: Sysview Technology, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Executive Officer
With copies to: Xxxxxxxxxx & Xxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
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If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflicts of law thereof.
5.9 SURVIVAL. The representations, warranties, agreements and covenants
of the Company contained herein shall survive the initial Closing for a period
of two years.
5.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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5.11 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.12 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance of each
other's obligations under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
5.13 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock and Common Stock Warrant Purchase Agreement to be duly executed
by their respective authorized signatories as of the date first indicated above.
SYSVIEW TECHNOLOGY, INC.
By: ___________________
Name: Xxxxxx Xx
Title: Chief Executive Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW]
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[PURCHASER SIGNATURE PAGE TO SYSVIEW TECHNOLOGY PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Convertible
Preferred Stock and Common Stock Warrant Purchase Agreement to be duly executed
by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: ____________________
Signature of Authorized Signatory of Purchaser:______________________________
Name of Authorized Signatory: ______________________________________
Title of Authorized Signatory: _______________________________________
Email Address of Authorized Signatory: _______________________________
Address for Notice of Purchaser:
With copies to:
Name of Counsel for Purchaser: ________________________
Address of Counsel for Purchaser:
Address for Delivery of Securities for Purchaser (if different than above):
Purchase Price: $___________
Shares of Preferred Stock: _______________
Number of Warrants: __________________
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CONVERTIBLE PREFERRED STOCK AND COMMON STOCK WARRANT
PURCHASE AGREEMENT
AMONG
SYSVIEW TECHNOLOGY, INC.
AND
THE PURCHASERS SIGNATORY HERETO
DATED AS OF AUGUST 8, 2006
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SCHEDULES TO CONVERTIBLE PREFERRED STOCK AND
COMMON STOCK WARRANT PURCHASE AGREEMENT
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Schedule 2.1(a) - Subsidiaries
Syscan, Inc., a California corporation
Sysview Technology, Inc., a California corporation
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Schedule 2.1(c) - Capitalization
Capital Stock:
Authorized common stock - 50,000,000
Common stock issued and outstanding - 24,592,092
Authorized preferred stock - 2,000,000 Preferred stock issued and outstanding:
Series A Preferred Stock - 16,250 shares
Series B Preferred Stock - 0 shares
Options and Warrants:
2,035,000 options exercisable at $2.00 per share issued pursuant to the
Company's Amended and Restated 2002 Stock Option Plan
200,000 options exercisable at $0.65 per share issued pursuant to the Company's
Amended and Restated 2002 Stock Option Plan
50,000 options exercisable at $0.90 per share exercisable through December 2005
10,000 options exercisable at $2.50 per share exercisable through December 2005
4,000,000 options exercisable at $0.01 per share issued to officers, directors
and consultants exercisable through April 2014.
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