Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
December 27, 2005, among World Waste Technologies, Inc., a California
corporation (the "Company"), and each purchaser identified on the signature
pages hereto, including purchasers and holders of Existing Securities that
execute this Agreement after the date hereof in accordance with Section 2.1(b)
hereof (each, including its successors and assigns, a "Purchaser" and
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") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company 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 each Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to
be an Affiliate of such Purchaser.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the second Trading Day following the Trading
Day when all conditions precedent to (i) the Purchasers' obligations to
pay their respective Subscription Amounts and (ii) the Company's
obligations to deliver the Debentures and Warrants have been satisfied or
waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.001 per share, and any other class of securities into which such
securities may hereafter have been reclassified or changed into.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Company Counsel" means Xxxx & Xxxxx, 0000 Xxxxxxx Xxxx Xxxx, 00xx
Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
"Debentures" means the 10% Senior Secured Debentures to be issued by
the Company to the Purchasers at the Closing, in the form of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to such term
in Section 3.1.
"Discussion Time" shall have the meaning ascribed to such term in
Section 3.2(f).
"Effective Date" means the date that the initial registration
statement filed by the Company registering the Warrant Shares for resale
is first declared effective by the Commission.
"Evaluation Date" shall have the meaning ascribed to such term in
Section 3.1(r).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder.
"Exchange Offer" shall have the meaning ascribed to such term in
Section 2.1(b).
"Exempt Issuance" means the issuance of (a) shares of Common Stock
or options to employees, officers, consultants or directors of the Company
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange
of any Securities issued hereunder and/or securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the
number of such securities or to decrease the exercise, exchange or
conversion price of any such securities, (c) the exchange of securities
pursuant to the Exchange Offer, (d) securities issued pursuant to
acquisitions or strategic transactions, provided any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the
Company and in which the Company receives benefits in addition to the
investment of funds in the good faith determination of the Board of
Directors of the Company, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities, (d)
shares of Common Stock issued upon conversions, redemptions and additional
shares issued on account of adjustments of the Company's Series A
Preferred Stock or any accrued dividends thereon and securities issued as
consideration to the Series A Preferred Stock holders to obtain consent or
waivers, (e) shares of Common Stock issued in a public offering, (f)
securities issued to financial institutions, equipment leasing companies
or lessors in connection with any commercial credit arrangements,
equipment financings or other similar transactions, or other vendors, (g)
securities issued in connection with the acquisition of intellectual
property or other intangible rights in licensing transactions or otherwise
to existing or potential trade partners; securities issued in connection
with any stock split, recapitalization or similar transaction, (h)
securities issued as dividend or other distribution on the Company's
Series A Preferred Stock, or (i) usual and customary securities issued to
finders or brokers in fund raising transactions.
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"Existing Notes" shall have the meaning ascribed to such term in
Section 2.1(b).
"Existing Securities" shall have the meaning ascribed to such term
in Section 2.1(b).
"Existing Security Holder" shall have the meaning ascribed to such
term in Section 2.1(b).
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"Indebtedness" shall have the meaning ascribed to such term in
Section 3.1(aa).
"Intellectual Property Rights" shall have the meaning ascribed to
such term in Section 3.1(o).
"Knowledge of the Company" shall mean actual awareness of a fact, or
awareness of a fact if a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter, by the Company's management
installed since August 25, 2004.
"Legend Removal Date" shall have the meaning ascribed to such term
in Section 4.1(c).
"Liens" means a lien, charge, security interest, encumbrance, right
of first refusal, preemptive right or other similar restriction.
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"Material Adverse Effect" shall have the meaning assigned to such
term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(m).
"Maximum Rate" shall have the meaning ascribed to such term in
Section 5.17.
"Necessary Existing Securityholder Approval" shall have the meaning
ascribed to such term in Section 2.1(b).
"Participation Maximum" shall have the meaning ascribed to such term
in Section 4.13.
"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.
"Pre-Notice" shall have the meaning ascribed to such term in Section
4.13.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Purchaser Party" shall have the meaning ascribed to such term in
Section 4.11.
"Qualified Purchaser" shall mean any Purchaser that purchases at the
Closing at least $1,000,000 principal amount of Debentures until such
Purchaser no longer holds any Debentures or Warrants.
"Registration Rights Agreement" means a registration rights
agreement among the Company, the Purchasers and the Existing
Securityholders, in the form of Exhibit F attached hereto.
"Restriction Date" shall have the meaning ascribed to such term in
Section 4.15.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Required Minimum" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in
the future pursuant to the Transaction Documents, including any Warrant
Shares issuable upon exercise in full of all Warrants, ignoring any
exercise limits set forth therein.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
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"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Debentures, the Warrants and the Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means a Security Agreement among the Company,
the Purchasers and the Existing Securityholders, in the form of Exhibit D
attached hereto.
"Security Documents" shall mean the Security Agreement, the
Subsidiary Guarantee and any other documents and filing required
thereunder in order to grant the Purchasers a first priority security
interest in the assets of the Company as provided, and subject to the
exceptions set forth in the Security Agreement, including all UCC-1 filing
receipts.
"Short Sales" shall include all "short sales" as defined in Rule 200
of Regulation SHO under the Exchange Act.
"Subscription Amount" means, as to each Purchaser, the aggregate
amount to be paid for Debentures and Warrants purchased hereunder as
specified below such Purchaser's name on the signature page of this
Agreement and next to the heading "Subscription Amount", (a) in United
States Dollars and in immediately available funds by wire transfer to such
accounts as specified in writing by the Company or (b) in exchange for
Existing Securities on a $1 for $1 basis with respect to the Debentures
(including accrued but unpaid interest thereon).
"Subsequent Financing" shall have the meaning ascribed to such term
in Section 4.13.
"Subsequent Financing Notice" shall have the meaning ascribed to
such term in Section 4.13.
"Subsidiary" means any subsidiary of the Company as set forth on
Schedule 3.1(a).
"Subsidiary Guarantee" means a Subsidiary Guarantee, among each of
the Subsidiaries (other than subsidiaries that have no material assets)
and the Purchasers, in the form of Exhibit E attached hereto.
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
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"Trading Market" means any of the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the New
York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Debentures, the
Security Agreement, the Subsidiary Guarantee, the Warrants and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted as reported by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern
Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then
listed or quoted on a Trading Market and if prices for the Common Stock
are then reported in the "Pink Sheets" published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser
selected in good faith by the Qualified Purchasers and reasonably
acceptable to the Company.
"Warrants" means collectively the Common Stock purchase warrants, in
the form of Exhibit C, to be delivered to the Purchasers at the Closing in
accordance with Section 2.2 hereof, which Warrants shall be exercisable
immediately as of the Closing Date and have a term of exercise equal to 4
years from the Closing Date.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) On the Closing Date, upon the terms and subject to the
conditions set forth herein, the Company agrees to sell, and each
Purchaser agrees to purchase in the aggregate, severally and not jointly,
up to $8,265,000 principal amount of Debentures (plus such additional
principal amount of Debentures to take into account any accrued but unpaid
interest through the Closing Date with respect to any Existing Notes) and
Warrants to purchase up to a total of 528,000 shares of Common Stock. At
the Closing, and except as set forth in Section 2.1(b), each Purchaser
shall deliver to the Company via wire transfer or a certified check
immediately available funds equal to their respective Subscription Amount
and the Company shall deliver to each Purchaser their respective Debenture
and Warrants and the parties shall deliver to each other the other items
set forth in Section 2.2 issuable at the Closing. Notwithstanding anything
herein to the contrary, because the Existing Securityholders received
warrants in connection with the issuance of the Existing Notes, no
Existing Shareholders shall receive any Warrants hereunder. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall
occur on the Closing Date at the offices of FW, or such other location as
the parties shall mutually agree.
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(b) In November 2005, the Company issued and sold $4,015,000
aggregate principal amount of senior secured notes (the "Existing Notes"
or the "Existing Securities") together with warrants to purchase up to a
total of 529,980 shares of Common Stock to a number of accredited
investors (the "Existing Securityholders"). The approval of the holders of
at least 75% principal amount of Existing Notes (the "Necessary Existing
Securityholder Approval") is necessary in order for the Company to issue
the Debentures hereunder. Following the date hereof, the Company shall use
commercially reasonable efforts to obtain the Necessary Existing
Securityholder Approval. Additionally, following the date hereof, the
Company shall offer each Existing Securityholder (the "Exchange Offer")
the right to surrender its Existing Notes (together with any accrued but
unpaid interest thereon through the Closing Date) to the Company for
cancellation in exchange for the issuance to such Existing Securityholder
of Debentures in the same aggregate principal amount of the Existing Notes
(together with accrued but unpaid interest thereon) being exchanged. Each
Existing Securityholder that accepts the Exchange Offer shall be required
to execute this Agreement, whereupon such Existing Securityholder shall be
deemed a "Purchaser" hereunder. The Company agrees to keep the Exchange
Offer open until January 27, 2006. Any Existing Securityholder that
accepts the Exchange Offer after the Closing Date shall be required to
execute this Agreement and deliver to the Company the documents and
instruments set forth in Section 2.2, and the Company shall be required to
deliver to such Existing Securityholder the documents set forth in Section
2.3, whereupon such Existing Securityholder shall also be deemed to be a
"Purchaser" hereunder. In addition to the foregoing, subsequent to the
date of this Agreement (but prior to the Closing Date), additional
purchasers of up to an aggregate of $2,000,000 principal amount of
Debentures and Warrants to purchase up to an additional 264,000 shares of
Common Stock may, at the Company's option, execute this Agreement,
whereupon such purchasers shall be deemed to be "Purchasers" hereunder.
2.2 Deliveries.
a) On the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel, reasonably acceptable
to the Qualified Purchasers;
(iii) a Debenture in the principal amount equal to such
Purchaser's Subscription Amount, registered in the name of such
Purchaser;
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(iv) a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 33% of
such Purchaser's Subscription Amount divided by $2.50, with an
exercise price equal to $0.01 per share, subject to adjustment
therein (except that Existing Securityholders shall not receive any
Warrants);
(v) the Registration Rights Agreement, duly executed by the
Company; and
(vi) the Security Agreement, duly executed by the Company,
along with all the Security Documents, including the Subsidiary
Guarantee.
b) On the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount;
(iii) the Registration Rights Agreement, duly executed by such
Purchaser;
(iv) the Security Agreement, duly executed by such Purchaser;
and
(v) with respect to each Purchaser that is an Existing
Securityholder, such Purchaser's Existing Securities for
cancellation.
2.3 Closing Conditions.
a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met or waived by the
Company:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Purchasers
contained herein;
(ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date
shall have been performed; and
(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement.
b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met or waived by each Qualified Purchaser:
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(i) the accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained
herein;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have
been performed in all material respects;
(iii) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof;
(v) the Exchange Offer has been accepted by the holders of at
least $3,515,000 aggregate principal amount of Existing Notes, and
such accepting holders shall have executed this Agreement and
delivered to the Company (to be held by the Company in escrow
pending the Closing) all of the documents and instruments required
to be delivered by such Purchaser under Section 2.2 (b); and
(vi) from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service,
or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities
nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
the Qualified Purchasers, makes it impracticable or inadvisable to
purchase the Debentures at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.
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(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization and Qualification. The Company and 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. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not have or reasonably be
expected to result in (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material
adverse effect on the results of operations, assets, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse
Effect") and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and 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, its board of directors
or its stockholders in connection therewith other than in connection with
the Required Approvals. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the other transactions contemplated hereby and thereby do not and will
not: (i) subject to the Required Approvals, conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or
(ii) conflict with, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary 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), such as could not
have or reasonably be expected to result in a Material Adverse Effect.
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(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section
4.6 and (ii) the filing of Form D with the Commission and such filings as
are required to be made under applicable state securities laws
(collectively, the "Required Approvals").
(f) Issuance of the Warrant Shares. The Warrant Shares, when issued
and upon payment of the exercise price in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The
Company has reserved from its duly authorized capital stock a number of
shares of Common Stock for issuance of the Warrant Shares at least equal
to the Required Minimum on the date hereof.
(g) Capitalization. The capitalization of the Company is as set
forth on Schedule 3.1(g). No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents,
except to the extent any such rights have been waived. Except as a result
of the purchase and sale of the Securities and as set forth on Schedule
3.1(g), 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 exercisable
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 Common
Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Purchasers) and will not result in a right
of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to
the Company's capital stock to which the Company is a party or, to the
Knowledge of the Company, between or among any of the Company's
stockholders.
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(h) SEC Reports; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be
filed by it under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding
the date hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being
collectively referred to herein as the "SEC Reports") on a timely basis or
has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and none
of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports 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 United States generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except
as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects
the financial position of the Company and its consolidated Subsidiaries as
of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments.
(i) Material Changes. Since the date of the latest financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in
a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.
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(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the Knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the Knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or, to the Company's Knowledge, former director or
officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
Knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or, to the Knowledge of the Company, has
been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and
local laws applicable to its business, except in the case of each of (i),
(ii) and (iii) as would not reasonably be expected to have a Material
Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits would not have or
reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Material Permit.
-13-
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries
and Liens for the payment of federal, state or other taxes, the payment of
which is neither delinquent nor subject to penalties. Any real property
and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses
and other similar rights necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have would have a Material Adverse Effect, except for such
items as have yet to be conceived or developed or that are expected to be
available for licensing on reasonable terms from third parties
(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 any Subsidiary violates or
infringes upon the rights of any Person. To the Knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual
Property Rights of others.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage at least equal to
the aggregate Subscription Amount. To the best Knowledge of the Company,
such insurance contracts and policies are accurate and complete in all
material respects. Neither the Company nor any Subsidiary has any reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without
a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and,
to the Knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director
or such employee or, to the Knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$60,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
-14-
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date. The Company and the
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 GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made
known to the certifying officers by others within those entities,
particularly during the period in which the Company's most recently filed
periodic report under the Exchange Act, as the case may be, is being
prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's disclosure controls and procedures as of
the date prior to the filing date of the most recently filed periodic
report under the Exchange Act (such date, the "Evaluation Date"). The
Company presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as
such term is defined in Item 307(b) of Regulation S-K under the Exchange
Act) or, to the Knowledge of the Company, in other factors that could
significantly affect the Company's internal controls.
(s) Certain Fees. No brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the Transaction
Documents. 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 the Transaction
Documents.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Trading Market.
-15-
(u) Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not
be or become an Affiliate of, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(v) Registration Rights. No Person has any right to cause the
Company to effect the registration under the Securities Act of any
securities of the Company.
(w) Listing and Maintenance Requirements. The Company's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to the Knowledge of the
Company is likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common Stock
is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading
Market. 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.
(x) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Articles of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(y) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might
reasonably be deemed to constitute material, nonpublic information. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished by
or on behalf of the Company with respect to the representations and
warranties made herein are true and correct in all material respects with
respect to such representations and warranties 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. 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 Section 3.2
hereof.
-16-
(z) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any Trading Market on which any of the
securities of the Company are listed or designated, except to the extent
that any such integration would not have a Material Adverse Effect.
(aa) Solvency. The SEC Reports set forth as of the dates thereof all
outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $50,000 (other
than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should
be reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the
Company nor any Subsidiary is in default with respect to any Indebtedness.
(bb) Tax Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon, and to the Knowledge of the
Company, no tax deficiency exists which has been asserted or threatened
against the Company or any Subsidiary.
(cc) No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company
has offered the Securities for sale only to the Purchasers and certain
other "accredited investors" within the meaning of Rule 501 under the
Securities Act.
(dd) Foreign Corrupt Practices. Neither the Company, nor to the
Knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as amended
-17-
(ee) Accountants. The Company's accountants are set forth on
Schedule 3.1(ee) of the Disclosure Schedule. To the Knowledge of the
Company, such accountants, who expressed their opinion with respect to the
financial statements included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2004, are a registered public
accounting firm as required by the Securities Act.
(ff) Seniority. As of the Closing Date, no Indebtedness or other
equity of the Company will be senior to the Debentures in right of
payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise, other than Indebtedness secured by purchase
money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to
the property covered thereby).
(gg) No Disagreements with Accountants and Lawyers. There are no
material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants and lawyers
formerly or presently employed by the Company and the Company is current
with respect to any fees owed to its accountants and lawyers.
(hh) Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby. The
Company further acknowledges that no Purchaser is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any
advice given by any Purchaser or any of their respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Purchasers' purchase of
the Securities. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on
the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(ii) Acknowledgement Regarding Purchasers' Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Section 4.15 hereof), it is understood and
agreed by the Company (i) that none of the Purchasers have been asked to
agree, nor has any Purchaser agreed, 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 past or future open market or other
transactions by any Purchaser, including Short Sales, and specifically
including, without limitation, Short Sales or "derivative" transactions,
before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company's
publicly-traded securities; (iii) that each Purchaser, and counter parties
in "derivative" transactions to which any such Purchaser is a party,
directly or indirectly, presently may have a "short" position in the
Common Stock, and (iv) that each Purchaser shall not be deemed to have any
affiliation with or control over any arm's length counter-party in any
"derivative" transaction. The Company further understands and acknowledges
that (a) one or more of the Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the
Warrant Shares deliverable with respect to Warrants are being determined
and (b) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after the
time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute
a breach of any of the Transaction Documents.
-18-
(jj) Manipulation of Price. The Company has not, and to the
Knowledge of the Company, 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) sold, bid
for, purchased, or, paid any compensation for soliciting purchases of, any
of the Securities (other than for the placement agent's placement of the
Securities), or (iii) paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which
it is a party has been duly executed by Purchaser, and when delivered by
such Purchaser in accordance with the terms hereof, will constitute the
valid and legally binding obligation of such Purchaser, enforceable
against it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
-19-
(b) Own Account. Such Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities
as principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in violation
of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of
the Securities Act or any applicable state securities law and has no
arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not
limiting such Purchaser's right to sell the Securities pursuant to a
registration statement or otherwise in compliance with applicable federal
and state securities laws) in violation of the Securities Act or any
applicable state securities law. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on the Closing Date
and on each date on which it exercises any Warrants it will be either: (i)
an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a "qualified
institutional buyer" as defined in Rule 144A(a) under the Securities Act.
Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange 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.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement or as a result of any registration statement of the Company
on Form SB-2 that may be on file with the Commission.
(f) Short Sales and Confidentiality Prior To The Date Hereof. Other
than the transaction contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any disposition,
including Short Sales (but not including the location and/or reservation
of borrowable shares of Common Stock), in the securities of the Company
during the period commencing from the time that such Purchaser first
received a term sheet from the Company or any other Person setting forth
the material terms of the transactions contemplated hereunder until the
date hereof ("Discussion Time"). Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).
-20-
(g) Existing Securities. Each Purchaser that is an Existing
Securityholder further represents and warrants that such Purchaser (i) has
good and marketable title to its Existing Securities, (ii) has the right
to exchange such securities without the consent of any other Person
whatsoever and (iii) upon surrender of its Existing Securities to the
Company for cancellation pursuant to the Exchange Offer such securities
shall be owned by the Company free and clear of any liens, charges,
encumbrances, rights of first refusal or other adverse claims whatsoever.
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to
the Company or to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
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.
-21-
The Company acknowledges and agrees that any Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of its
Securities to a financial institution that is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and who agrees to be bound
by the provisions of this Agreement and, if required under the terms of
such arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of
legal counsel of the pledgee, secured party or pledgor shall be required
in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer
of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder.
(c) Certificates evidencing Warrant Shares shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such
Securities pursuant to Rule 144, or (iii) if such Securities are eligible
for sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission),
provided that with respect to (ii) and (iii) the Purchaser holding the
Warrant Shares provides the Company with the customary representations and
forms required for a Rule 144 transfer opinion. The Company shall cause
its counsel to issue a legal opinion to the Company's transfer agent
promptly after the Effective Date if required by the Company's transfer
agent to effect the removal of the legend hereunder. If all or any portion
of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, or if
such Warrant Shares may be sold under Rule 144(k) or if such legend is not
otherwise required under applicable requirements of the Securities Act
(including judicial interpretations thereof) then such Warrant Shares
shall be issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required under
this Section 4.1(c), it will, no later than five Trading Days following
the delivery by a Purchaser to the Company or the Company's transfer agent
of a certificate representing Warrant Shares, as applicable, issued with a
restrictive legend, together with a copy of the Form 144 filed with the
Commission and a seller's and broker's representation letter (with respect
to Rule 144 sales other than pursuant to Rule 144(k)) (such fifth Trading
Day, the "Legend Removal Date"), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
Certificates for Securities subject to legend removal hereunder shall be
transmitted by the transfer agent of the Company to the Purchasers by
crediting the account of the Purchaser's prime broker with the Depository
Trust Company System.
-22-
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $2,000 of Warrant Shares (based on the VWAP
of the Common Stock on the date such Securities are submitted to the
Company's transfer agent) delivered for removal of the restrictive legend
and subject to this Section 4.1(c), $10 per Trading Day (increasing to $20
per Trading Day 5 Trading Days after such damages have begun to accrue)
for each Trading Day after the Legend Removal Date until such certificate
is delivered without a legend. Nothing herein shall limit such Purchaser's
right to pursue actual damages for the Company's failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.
(e) Each Purchaser severally and not jointly with the other
Purchaser agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that each such Purchaser will sell
any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may 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 obligations under the Transaction
Documents, including without limitation its obligation to issue the Warrant
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.
4.3 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 the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
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4.4 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.5 Exercise Procedures. The form of Notice of Exercise included in the
Warrants set forth the totality of the procedures required of the Purchasers in
order to exercise the Warrants. No additional legal opinion or other information
or instructions shall be required of the Purchasers to exercise their Warrants.
The Company shall honor exercises of the Warrants and shall deliver Warrant
Shares in accordance with the terms, conditions and time periods set forth in
the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company shall, by 5:30 p.m.
Eastern time on the fourth Trading Day following the date hereof, issue a
Current Report on Form 8-K, reasonably acceptable to each Qualified Purchaser
disclosing the material terms of the transactions contemplated hereby, and shall
attach the Transaction Documents thereto. The Company and the Qualified
Purchasers shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company
nor any Purchaser shall issue any such press release or otherwise make any such
public statement without the prior consent of the Company, with respect to any
press release of any Purchaser, or without the prior consent of each Qualified
Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld (the failure of any such party to object within 24
hours to any such press release or public statement shall be deemed acceptance
of such press release or public statement), except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of each Qualified Purchaser, except (i) as required by federal
securities law in connection with the registration statement registering the
resale of the Warrant Shares and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).
4.7 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, to the Knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
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4.9 Use of Proceeds. The Company shall be required to use the net proceeds
from the sale of the Securities hereunder specifically as set forth on Schedule
4.9 hereto.
4.10 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder and except for a Proceeding
which is based upon a breach of such Purchaser's representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by Purchaser which
constitutes fraud, gross negligence, willful misconduct or malfeasance), solely
as a result of such Purchaser's acquisition of the Securities under this
Agreement, the Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. Other than with respect to willful misconduct by a Purchaser in
connection with the acquisition of the Securities, the Company also agrees that
neither the Purchasers nor any such Affiliates, partners, directors, agents,
employees or controlling persons shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company solely as a
result of acquiring the Securities under this Agreement.
4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, members, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action instituted
against a Purchaser, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by such Purchaser of state or federal securities laws or any conduct
by Purchaser which constitutes fraud, gross negligence, willful misconduct or
malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing. Any Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected without the Company's prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.
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4.12 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may be required to fulfill its obligations in full under
the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors of the Company shall use
commercially reasonable efforts to amend the Company's certificate or
articles of incorporation to increase the number of authorized but
unissued shares of Common Stock to at least the Required Minimum at such
time, as soon as possible and in any event not later than the 75th day
after such date.
(c) The Company shall, if applicable: (i) in the time and manner
required by the Trading Market prepare and file with such Trading Market
an additional shares listing application covering a number of shares of
Common Stock at least equal to the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing on the Trading Market as soon as possible
thereafter, (iii) provide to the Purchasers evidence of such listing, and
(iv) maintain the listing of such Common Stock on any date at least equal
to the Required Minimum on such date on such Trading Market or another
Trading Market.
4.13 Participation in Future Financing.
(a) From the date hereof until the earlier of (i) the later of (A)
18 months from the date hereof and (B) the date that the Debentures are no
longer outstanding and (ii) the date that the Company has consummated, in
the aggregate since the date hereof, the sale of at least $12,030,000 of
the Company's securities in one or more Subsequent Financings following
the Closing that are subject to the rights of participation under this
Section 4.13 (provided that the $12,030,000 threshold shall be increased
to up to $16,030,000 if and to the extent additional purchasers become a
party to this Agreement subsequent to the date hereof as provided for in
the last sentence of Section 2.1(b)), upon any financing by the Company or
any of its Subsidiaries of Common Stock or Common Stock Equivalents after
the date hereof (a "Subsequent Financing"), each Purchaser shall have the
right to participate in up to an amount of the Subsequent Financing equal
to the lesser of (i) 100% of the Subsequent Financing and (ii) the
principal amount of such Purchaser's Debentures issued and sold by the
Company pursuant to this Agreement (the "Participation Maximum").
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(b) At least 5 Trading 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. Upon the written request of a Purchaser for the details of
such financing (but subject to the provisions of (c) below), and only upon
such a request by such Purchaser, the Company shall promptly, but no later
than 1 Trading Day after such request, deliver a notice that describes
such details (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 or similar document relating thereto.
(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. (New York City time) on the 5th Trading Day after such Purchaser
has been sent the Pre-Notice that such Purchaser is willing to participate
in the Subsequent Financing, the amount of such Purchaser's participation,
and that such 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 such Purchaser as of 5th Trading Day
after such Purchaser receives the Pre-Notice, such Purchaser shall be
deemed to have notified the Company that it does not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the 5th Trading Day
after all of the Purchasers have been sent the Pre-Notice, notifications
by the Purchasers of their willingness to participate in the Subsequent
Financing (or to cause its 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
set forth in the Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the 5th Trading Day
after all of the Purchasers have been sent the Pre-Notice with respect to
a Subsequent Financing, the Company receives responses to a Subsequent
Financing Notice from Purchasers seeking to purchase, in the aggregate,
more than the aggregate amount of the Subsequent Financing, each such
Purchaser shall have the right to purchase the greater of (a) their Pro
Rata Portion (as defined below) of the Participation Maximum and (b) the
difference between the Participation Maximum and the aggregate amount of
participation by all other Purchasers. "Pro Rata Portion" is the ratio of
(x) the Subscription Amount of Securities purchased on the Closing Date by
a Purchaser participating under this Section 4.13 and (y) the sum of the
aggregate Subscription Amounts of Securities purchased on the Closing Date
by all Purchasers participating under this Section 4.13.
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(f) The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.13, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on substantially the terms set forth in such
Subsequent Financing Notice within 60 Trading Days after the date of the
initial Subsequent Financing Notice.
(g) Notwithstanding anything herein to the contrary, if the Company
effects a Subsequent Financing at any time while the Debentures are
outstanding, each Purchaser may elect, in its sole discretion, to exchange
all or some of the Debentures then held by such Purchaser for any
securities or combination of securities issued in such Subsequent
Financing based on the effective price at which such securities were sold
in such Subsequent Financing. For each $1 principal amount of Debenture
exchanged, such Purchaser shall receive $1 of securities issued in such
Subsequent Financing as if such Purchaser had paid for such securities in
cash. This right to exchange Debentures into new securities shall be in
addition to the Purchasers' rights to participate in the transaction for
cash consideration pursuant to Section 4.13(a) but shall otherwise be
subject to the procedures set forth in this Section 4.13 regarding notice
and closing.
(h) Upon exercise of any of the rights granted to the Purchasers
hereunder, such Purchaser's right shall be conditioned upon the
participating Purchasers entering into the same documents agreed to by the
third party investors in the Subsequent Financing.
(i) Notwithstanding the foregoing, this Section 4.13 shall not apply
in respect to an Exempt Issuance.
(j) Notwithstanding any provision in this Agreement or in any other
Transaction Document to the contrary, provided that the Company complies
with any obligations it has expressly agreed to and rights it has
expressly granted to the Purchasers under the Transaction Documents,
nothing else in any such agreement shall be interpreted to give any of the
Purchasers (acting collectively or individually), the right to take any
action that would block, delay or otherwise hinder the Company's ability
to raise capital through the sale of Common Stock or Common Stock
Equivalents that are not Indebtedness (unless such Indebtedness is used to
prepay the Debentures). Without limiting the generality of the foregoing,
the parties agree and acknowledge that any amendment to the Company's
articles of incorporation, bylaws or other charter documents effectuated
in order to enable the Company to issue Common Stock or Common Stock
Equivalents in a bona fide round of financing (such as the creation of a
new series of preferred stock, an increase in the Company's authorized
shares of any class of capital stock, or any change requested by the
holders of the Company's Series A Preferred Stock to the terms thereof in
order to obtain such holders' consent to such financing) shall in no event
be deemed to be an amendment that materially and adversely affects the
rights of any Purchaser.
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4.14 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Debentures in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended for
the Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers, if more than one, acting in concert or as a group
with respect to the purchase, disposition or voting of Securities or otherwise.
4.15 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliates acting on its behalf or pursuant to any understanding with it
will execute any disposition, including Short Sales (but not including the
location and/or reservation of borrowable shares of Common Stock), in the
securities of the Company during the period after the Discussion Time (as
defined in Section 3.2(f)) and ending on March 23, 2006 (the "Restriction
Date"). Each Purchaser severally and not jointly with the other Purchasers
covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company as described in Section 4.6,
such Purchaser will maintain, the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this
transaction). Each Purchaser understands and acknowledges, severally and not
jointly with any other Purchaser, that the Commission currently takes the
position that coverage of short sales of shares of the Common Stock "against the
box" prior to the Effective Date of the registration statement registering such
Common Stock with the Commission is a violation of Section 5 of the Securities
Act, as set forth in Item 65, Section 5 under Section A, of the Manual of
Publicly Available Telephone Interpretations, dated July 1997, compiled by the
Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the
foregoing, no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in Short Sales in the securities of the Company after
the Restriction Date.
4.16 Piggy-Back Registrations. If at any time prior to the 24-month
anniversary of the Closing Date there is not an effective registration statement
covering all of the Warrant Shares and the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities, then the Company shall send to each Purchaser a written
notice of such determination and, if within fifteen days after the date of such
notice, any such Holder shall so request in writing, the Company shall include
in such registration statement all or any part of such Warrant Shares as such
Holder requests to be registered (if and to the extent such inclusion is
permitted by the rules and regulations of the Commission). The registration
rights of the Purchasers are set forth more fully in the Registration Rights
Agreement.
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ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
January 27, 2006; provided, however, that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties). This
Agreement may be terminated by the Company at any time after January 27, 2006 if
the Company has not obtained the Necessary Existing Securityholder Approval by
such date; provided that the Company has complied with its obligations in
Section 2.1(b) to use commercially reasonable efforts to obtain such approval
and it provides to the Qualified Purchasers, upon their request, documentation
evidencing the same (or if such documentation is not available they represent in
writing that such approval was not obtained despite the Company's compliance
with Section 2.1 (b)).
5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Midsummer Capital, LLC ("Midsummer") up to $10,000, for its actual, reasonable,
out-of-pocket legal fees and expenses. Except as expressly set forth in the
Transaction Documents to the contrary, 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 transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 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 Qualified 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 subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
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5.6 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. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Qualified Purchaser. Any Purchaser may
assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts 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 (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. 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 via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If any party shall commence an action or proceeding
to enforce any provisions of the Transaction Documents, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
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5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery and exercise of the Securities for the
applicable statue of limitations.
5.11 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, it being understood that all parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser 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
Purchaser 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; provided,
however, in the case of a rescission of an exercise of a Warrant, the Purchaser
shall be required to return any shares of Common Stock subject to any such
rescinded exercise notice.
5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
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5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to a Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights 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, 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.
5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
Indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such
Indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, if any, 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, if more than one, as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. 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 (provided that the
action of the holders of at least 30% of the aggregate principal amount of
Debentures is required to call an Event of Default (as defined in the
Debentures) under the Debentures), 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, or been given the opportunity to
be represented by its own separate legal counsel in its review and negotiation
of the Transaction Documents. For reasons of administrative convenience only,
Purchasers and their respective counsel have chosen to communicate with the
Company through FW. FW does not represent all of the Purchasers but only
Midsummer. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.
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5.19 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.20 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
WORLD WASTE TECHNOLOGIES, INC. Address for Notice:
-------------------
By:
--------------------------------------------
Name:
Title:
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO WDWT SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser: ________________________________________________________
Signature of Authorized Signatory of Purchaser: ________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Purchaser:________________________________________________
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount:
Warrant Shares:
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Annex A
CASH CLOSING STATEMENT
Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase for new cash consideration up to
$8,265,000 of Debentures and Warrants from World Waste Technologies, Inc. (the
"Company"). All funds will be wired into a trust account maintained by Xxxxxxx
Xxxxxxxxx, LLP, counsel to Midsummer. All funds will be disbursed in accordance
with this Closing Statement.
Disbursement Date: January ___, 2006
--------------------------------------------------------------------------------
I. PURCHASE PRICE
Gross Proceeds to be Received in Trust $
II. DISBURSEMENTS
Midsummer Capital $
$
$
$
$
Total Amount Disbursed: $
WIRE INSTRUCTIONS:
To: _____________________________________
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