EXHIBIT 4.3
SECURITIES PURCHASE AGREEMENT, dated November 19, 1998, by and between
SMARTSERV ONLINE, INC., a Delaware corporation (the "Company"), and each of the
Investors (as defined below).
WHEREAS, the Company desires to issue and sell a total of five units (the
"Units"), each Unit consisting of (i) 8% convertible promissory notes in the
original principal amount of $100,000 in the form of Exhibit 1 hereto ("Notes")
and (ii) warrants to purchase shares of Common Stock, par value $.01 per share,
of the Company ("Common Stock") pursuant to a Warrant Agreement and Warrant in
the form of Exhibit 2 hereto ("Warrants"), on the terms and conditions provided
herein (the "Offering");
WHEREAS, each Investor desires and has agreed to purchase at the Closing
(as defined below) the amount of Units set forth on such Investor's signature
page hereto; and
WHEREAS, the parties desire to set forth their mutual agreements with
respect to the sale and purchase of the Units as herein below set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions.
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As used herein, the following terms shall have the following meanings:
"Business Day" shall mean any day other than a day on which commercial
banks are closed for business in New York.
"Closing" shall mean the closing or closings of the sale of the Units
which shall occur from time to time at the offices of Xxxxxxx Xxxxx Securities
Incorporated, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, pursuant to Sections 2.1,
2.2 and 2.3 hereof.
"Common Stock" shall have the meaning set forth in the preamble
hereto.
"Company" shall have the meaning set forth in the preamble hereto.
"Conversion Price" shall have the meaning set forth in the Notes.
"Escrow Account" shall mean account no. 00000000 at Citibank N.A., 000
X. 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx XX in which each Investor's payment of
Purchase Price is held pursuant to Section 2.2 hereof.
"Escrow Agent" shall mean Piper & Marbury L.L.P.
"Further Placement" shall mean the closing of a private placement of
the Company's securities in which the Company receives gross proceeds of a
minimum of $5,000,000.
"Investor" shall mean each party that has executed a signature page
hereto as an Investor and delivered the Purchase Price set forth thereon to the
Placement Agent by wire transfer of immediately available funds.
"Majority in Interest" shall mean Investors holding Notes, the
outstanding principal amount of which is in excess of 66.67% of the outstanding
principal amount of all Notes sold in this Offering.
"Maturity Date" shall mean the earliest to occur of (i) the closing of
a private placement of securities in which the Company receives gross proceeds
of a minimum of $5,000,000 or (ii) November 15, 1999.
"Notes" shall have the meaning set forth in the preamble hereto.
"Offering" shall have the meaning set forth in the preamble hereto.
"Offering Period" shall mean the initial 90 day period in which the
Placement Agent uses its best efforts to offer the Units and extension by the
Placement Agent for up to an additional 90 days.
"Placement Agent" shall mean Xxxxxxx Xxxxx Securities Incorporated, a
Delaware corporation.
"Public Offering" shall mean an underwritten public offering of equity
securities of the Company pursuant to an effective registration statement under
the Securities Act covering the offer and sale of equity securities of such
entity to the public.
"Purchase Price" shall mean, with respect to the Units, the face
amount of each Note.
"Registrable Shares" shall mean the common stock of the Company issued
upon conversion of the Notes or exercise of the Warrants. Registrable Shares
shall cease to be Registrable Shares when they may be sold under Rule 144(k) and
all requisite steps have been taken to remove any legends or restrictions on
transfer with respect to such Registrable Shares.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Shares pursuant to the provisions of
this Agreement, including the prospectus included therein, any amendment or
supplement thereof, including post-effective amendments, and all exhibits and
all material incorporated by reference in such Registration Statement.
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"SEC" shall mean the United States Securities and Exchange Commission
or any successor thereto.
"Securities" shall mean the Notes, the shares of Common Stock issuable
upon conversion thereof, the Warrants to purchase Common Stock and the shares of
Common Stock issuable upon exercise of the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Units" shall have the meaning set forth in the preamble hereto.
"Warrants" shall have the meaning set forth in the preamble hereto.
2. Sale and Purchase of Units: Payment and Interest: Use of Proceeds.
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2.1 Purchase. Upon the terms and subject to the conditions
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hereof, the Company agrees to sell to each Investor, and each such Investor
agrees to purchase from the Company, the number of Units set forth on such
Investor's signature page hereto at the Closing. The Offering will terminate on
the earliest to occur of (i) expiration of the Offering Period, (ii) the sale of
all of the Units or (iii) the termination of the Offering by the Company. Each
Investor understands and agrees that the Company in its sole discretion reserves
the right to accept or reject this or any other subscription for Units, in whole
or in part, notwithstanding prior receipt by the Investor of notice of
acceptance of this subscription. The Company shall have no obligation hereunder
until the Company shall execute and deliver to the Investor an executed copy of
this Agreement. If this subscription is rejected in whole or the Offering is
terminated by the Company or subscriptions for the Units are not received during
the Offering Period, the Offering will be terminated, no Units will be sold and
all funds received from the Investors will be returned without interest, and
this Agreement shall thereafter be of no further force or effect. If this
subscription is rejected in part, the funds for the rejected portion of this
subscription will be returned without interest, and this Agreement will continue
in full force and effect to the extent this subscription was accepted.
2.2. Escrow of Funds.
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(a) Until Closing, the Purchase Price for the Units (the "Escrow
Amount") will be deposited in the Escrow Account with the Escrow Agent, for the
benefit of the Company. All such funds for subscriptions will be held in the
Escrow Account pursuant to the terms of this Section 2.2. The Company will pay
all fees, if any, related to the establishment and maintenance of the Escrow
Account. Any interest accruing on funds in the Escrow Account shall be utilized
first to reimburse the Company for such fees and the balance shall be
distributed to the Company. The Company and the Placement Agent, as agent for
the Investor, shall send, or cause to be sent, a request that the Escrow Amount
be released at the Closing. The Company hereby agrees that the Placement Agent
shall be solely responsible for the disbursement of the Escrow Amount, and the
Escrow Agent shall be entitled to rely exclusively on such instructions.
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(b) Any notice, demand or request to the Escrow Agent shall be
sufficient only if received within the applicable time period set forth herein,
if any. Notices, demands and requests shall be delivered by facsimile
transmission (provided receipt is confirmed) or hand delivered by courier with
receipt for signature to it (i) if to the Escrow Agent to it at Piper & Marbury
L.L.P., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, facsimile no. (212)
835-6001, Attention: Xxxx X. Xxxxxxx, Esq.; (ii) if to the Company, to it at the
Company's address, Xxx Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, facsimile no.
(000) 000-0000; or (iii) if to the Placement Agent, to it at Xxxxxxx Xxxxx
Securities Incorporated, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, facsimile no. (000) 000-0000, Attention: A. Xxxxxxx Xxxxxx, XX. Notices,
demands and requests from the Escrow Agent to the Company or the Placement Agent
shall be delivered to them at their respective addresses set forth herein, in
the manner aforesaid.
(c) If a dispute arises regarding disposition of all or any
portion of the Escrow Amount held by the Escrow Agent, the Escrow Agent shall,
upon written demand by either the Company or the Placement Agent, deposit the
Escrow Amount plus interest in a federal or state court located in the City of
New York, pending the decision of that court, and shall be entitled to rely upon
the decision of that court with respect to the disposition of the Escrow Amount.
(d) The Escrow Agent shall not be liable for any error of
judgment or for any action taken or omitted by it in good faith, or for any
mistake of fact or law, or for anything which it may do or refrain from doing in
connection herewith, except its own gross negligence or willful misconduct.
(e) The Company and the Investors, jointly and severally, hereby
agree to indemnify the Escrow Agent and hold it harmless from and against any
loss, liability, expenses (including reasonable outside attorneys' fees and
expenses), claim or demand arising out of or in connection with the performance
of its obligations in accordance with the provisions of this Agreement, except
for the gross negligence or willful misconduct of the Escrow Agent. These
indemnities shall survive the resignation of the Escrow Agent or the termination
of this Agreement. Notwithstanding the foregoing, the obligation of the Company
and the Investors to indemnify the Escrow Agent shall in no event exceed the
Escrow Amount.
(f) The Company and the Placement Agent acknowledge that the
Escrow Agent is serving as counsel to the Placement Agent. The Escrow Agent
shall be entitled to represent the Placement Agent in any lawsuit arising out of
the terms of this Agreement.
2.3 Closing. At the Closing, the Company shall deliver to each
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Investor the Units to be purchased by such Investor, appropriately completed and
duly executed to the Company or Placement Agent against payment therefor in an
amount equal to the Purchase Price thereof by transfer pursuant to Section 2.2
herein of such amount from the Escrow Account to such accounts of the Company as
the Company may designate in writing to the Placement Agent.
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2.4 Payment of Principal and Interest on Notes. The outstanding
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principal amount of each Note shall be due on or before the Maturity Date and
shall bear interest from the date of such Note to the date of repayment at the
rate set forth therein, except as set forth in Section 8 hereof. Interest shall
be payable as provided in such Note. Upon each payment under a Note, the Company
shall simultaneously pay all amounts of the same type due under all other Notes.
2.5 Prepayments.
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(a) Principal of the Notes may be prepaid, together with
interest on the amount prepaid, prior to the Maturity Date, without premium or
penalty, upon delivery of irrevocable written notice by the Company delivered
not less than ten (10) days prior to the date of repayment, subject to the
rights of conversion set forth in the Notes. All amounts prepaid pursuant to
this Section 2.5(a) shall be paid to holders of the Notes in proportion to the
outstanding principal amounts.
(b) The Company shall notify the Investors in writing of the
first closing of the Further Placement. At any time during the ten (10) day
period following receipt of such notice, the Investors shall have the right to
require the Company to prepay up to one-half of the original principal amount of
this Note. Within five (5) days after receipt of such notice, the Company shall
pay such principal amount to the Holder.
2.6 Exercise of Warrants. The terms of the Warrants, including the
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termination date of the Warrants, shall be as set forth in the Warrant Agreement
annexed hereto as Exhibit 2 and shall be exercisable by the Investors at any
time during the exercise period thereof for the Conversion Price per share,
subject to anti-dilution adjustments as set forth therein.
2.7 Use of Proceeds. The proceeds from the sale of the Units will be
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used as working capital of the Company and for such other purposes as may be
reasonably acceptable to the Placement Agent, exclusive of repayment of
indebtedness to current executive officers or principal shareholders, except as
authorized by the Placement Agent.
3. Conditions. The Company's obligation to sell and each Investor's
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obligations to purchase Units agreed to be purchased by it shall be subject to
satisfaction of the following conditions, respectively, on or before the
Closing:
3.1 Conditions to Company's Obligations.
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(a) subscriptions for all of the Units offered to be sold by the
Company prior to the Closing shall have been agreed to be purchased at the
Closing and the Purchase Price therefor shall be on deposit in cleared funds in
the Escrow Account; and
(b) each Investor shall have executed the signature page and
Accredited Investor Certification attached hereto.
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3.2 Conditions to Investor's Obligations.
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(a) each of the representations and warranties of the Company
contained in Section 4 hereof shall be true on the date of Closing as though
made on such date;
(b) the Company shall have performed all of its obligations hereunder
to be performed by it on or before the date of Closing;
(c) Placement Agent shall have received, for the benefit of Investors,
a certificate from a duly authorized officer of the Company as to the accuracy
of the matters set forth in (a) and (b) above;
(d) Investor shall have received the Units purchased by it at such
Closing;
(e) Placement Agent shall have received a legal opinion of counsel
addressed to the Investors in form and substance satisfactory to the Placement
Agent as to the matters set forth in Sections 4.1, 4.2, 4.3 and 4.4, subject to
such qualifications and exclusions as may be agreed upon between counsel for the
Placement Agent and counsel for the Company;
(f) there shall be authorized and reserved for issuance, the number of
shares of securities into which (i) the Notes to be sold at such Closing shall
be convertible and (ii) the Warrants to be sold at such Closing shall be
exercisable; and
(g) the Company shall have delivered the Security Agreement in the
form annexed hereto as Exhibit 3.
3.3 Placement Agent's Authorization. Each Investor hereby authorizes
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and directs the Placement Agent to determine, in its sole discretion,
satisfaction of the conditions set forth in Section 3.2 above. Any condition not
so satisfied may be waived in writing by the Placement Agent. Each Investor
agrees to be bound to all such determinations and waivers.
4. Representations, Warranties and Covenants of the Company. To induce
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each Investor to enter into this Agreement and to purchase Units hereunder, the
Company hereby represents, warrants and covenants to each Investor that:
4.1 Organization, Good Standing, etc. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
own its properties and to carry on its business and to execute and deliver this
Agreement and perform its obligations hereunder. The Company is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on the business or
properties of the Company.
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4.2 Corporate Acts and Proceedings. This Agreement has been
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duly authorized by all necessary corporate action on behalf of the Company, has
been duly executed and delivered by authorized officers of the Company and is a
valid and binding agreement on the part of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and to judicial limitations on the enforcement of the remedy of
specific performance and other equitable remedies. All corporate action
necessary to the authorization, creation, issuance and delivery of the
Securities has been taken by the Company or will be taken by the Company on or
prior to the issuance thereof.
4.3 Capitalization and Issuances of Stock.
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(a) The Company has authorized and outstanding capital stock as
set forth under the heading "Capitalization" in its Private Placement Memorandum
dated November 19, 1998 (the "Memorandum"). All outstanding shares of capital
stock of the Company are duly authorized, validly issued and outstanding, fully
paid and nonassessable. Except as set forth in the Memorandum: (i) there are no
outstanding options, stock subscription agreements, warrants or other rights
permitting or requiring the Company or others to purchase or acquire any shares
of capital stock or other equity securities of the Company; (ii) there are no
securities issued or outstanding which are convertible into or exchangeable for
any of the foregoing and there are no contracts, commitments or understandings,
whether or not in writing, to issue or grant any such option, warrant, right or
convertible or exchangeable security; (iii) there are no shares of stock or
other securities of the Company reserved for issuance for any purpose; (iv)
there are no voting trusts or other contracts, commitments, understandings,
arrangements or restrictions of any kind with respect to the ownership, voting
or transfer of shares of stock or other securities of the Company to which the
Company or, to the best of the Company's knowledge, any stockholder of the
Company is a party, including without limitation, any preemptive rights, rights
of first refusal, proxies or similar rights and (v) there is no person who holds
a right to require the Company to register any securities of the Company under
the Securities Act or to participate in any such registration. The issued and
outstanding shares of capital stock of the Company conform to all statements in
relation thereto contained in the Memorandum, and the Memorandum describes all
material terms and conditions thereof. All issuances by the Company of its
securities were exempt from registration under the Act and any applicable state
securities laws or were issued pursuant to a registration statement declared
effective by the SEC under the Securities Act and which registration statement
was available for the sale of the type of securities sold thereunder.
(b) The Securities have been duly authorized and, when issued
and delivered against payment therefor as provided in the Memorandum, will be
validly issued, fully paid and nonassessable. No holder of any of the Securities
will be subject to personal liability solely by reason of being such a holder,
and none of the Securities are subject to preemptive or similar rights of any
stockholder or securityholder of the Company. A sufficient number of authorized
but unissued shares of Common Stock have been reserved for issuance, and will
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continue to be reserved for issuance, upon the conversion of the Notes into
Common Stock and the exercise of the Warrants.
4.4 Non-Contravention. Neither the execution, delivery and performance
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of this Agreement nor the consummation of the transactions contemplated herein
will violate or be in conflict with any provision of the certificate of
incorporation or by-laws of the Company, or violate or be in conflict with any
debt, note, bond, lease, mortgage, indenture, license, obligation, contract,
commitment, franchise, permit, instrument or other agreement or obligation to
which the Company is a party and for which the Company has not received a
waiver, or violate or be in conflict with any law, judgment, decree, order,
regulation or ordinance by which the Company is bound or affected.
4.5 No Brokers or Finders. Except for the Placement Agent, who has
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been retained by the Company, and whose fees and commissions will be paid by the
Company, no person, firm or corporation has or will have, as a result of any act
or omission by the Company, any right, interest or valid claim against the
Company, the Placement Agent or any Investor for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement. The Company will indemnify
and hold each Investor harmless against any and all liability with respect to
any such commission, fee or other compensation which may be payable or
determined to be payable as a result of the actions of the Company in connection
with the transactions contemplated by this Agreement.
4.6 Governmental Authorization; Third Party Consents. No approval,
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consent, compliance, exemption, authorization or other action by, or notice to
or filing with, any governmental authority or any other entity which the Company
has not received, and no lapse of a waiting period, is necessary or required in
connection with the execution, delivery or performance by the Company, or
enforcement against the Company, of this Agreement or the transactions
contemplated hereby.
4.7 Litigation. Except as set forth in the Memorandum, there are no
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legal actions, suits, proceedings, claims or disputes pending, or to the
knowledge of the Company, overtly threatened, at law, in equity, in arbitration
or before any governmental authority in which an adverse determination could
have a material adverse effect on the Company.
4.8 Compliance with Laws. The Company is in compliance in all material
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respects with all laws, ordinances, regulations and orders of all governmental
entities applicable to the Company.
4.9 Taxes
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(a) The Company has filed all returns with respect to all
federal, state, county, local, foreign and other taxes, whether or not measured
in whole or in part by net income (collectively, "Taxes"), required to be filed
through the date hereof in a manner consistent with prior years and all such tax
returns are true and complete in all material respects. The Company
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has paid all Taxes (including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto) that are due through the date
hereof, or that are claimed or asserted by any taxing authority to be due
through the date hereof, with respect to the operations of the Company in each
case except for those Taxes that are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside. With respect to any period for which Tax returns have not yet been
filed, or for which Taxes are not yet due or owing, the Company has no material
liability for Taxes in each case other than Taxes incurred in the ordinary
course of business.
(b) No audit or other proceedings by any court, taxing
authority, or similar person is pending or, to the knowledge of the Company,
overtly threatened with respect to any Taxes due from or with respect to the
operations of the Company or any Tax return filed by or with respect to the
operations of the Company. No assessment of Taxes is proposed against the
Company or its assets.
4.10 Offering Exemption. Assuming the accuracy of the information
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provided by the respective Investors in the respective Agreements and (ii) that
the Placement Agent has complied in all material respects with the provisions of
Regulation D promulgated under the Securities Act, the offer and sale of the
Units pursuant to the terms of this Agreement are exempt from the registration
requirements of the Securities Act and the rules and regulations promulgated
thereunder. The Company is not disqualified from the exemption under Regulation
D by virtue of the disqualifications contained in Rule 505(b)(2)(iii) or Rule
507 under the Securities Act.
5. Representations of the Investor. Each Investor hereby severally and not
jointly represents, warrants and covenants to the Company that:
5.1 None of the Securities are registered under the Securities Act or
any state securities laws. The Investor understands that the offering and sale
of the Units is intended to be exempt from registration under the Securities
Act, by virtue of Section 4(2) and/or Section 4(6) thereof and the provisions of
Regulation D promulgated thereunder, based, in part, upon the representations,
warranties and agreements of the Investor contained in this Agreement.
5.2 The Investor and the Investor's attorney, accountant, Investor
representative and/or tax advisor, if any (collectively, the "Advisors") have
received all documents and other information regarding the Company requested by
the Investor, have carefully reviewed such documents and information requested
by the Investor, and the Investor and the Advisors, if any, have had access to
the same kind of information which would be available in a registration
statement filed by the Company under the Securities Act.
5.3Neither the SEC nor any state securities commission has approved
the Securities, or passed upon or endorsed the merits of the Offering.
5.4The Investor acknowledges that all documents, records, and books
pertaining to the investment in the Units have been made available for
inspection by such Investor and the Advisors.
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5.5The Investor and the Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of the Company concerning the offering of the Units and all
such questions have been answered to the full satisfaction of the Investor and
the Advisors.
5.6In evaluating the suitability of an investment in the Company, the
Investor has not relied upon any representation or other information (oral or
written) other than as contained in documents or answers to questions so
furnished to the Investor or the Advisors by the Company.
5.7The Investor is unaware of, is in no way relying on, and did not
become aware of the offering of the Units through or as a result of any form of
general solicitation or general advertising including, without limitation, any
article, notice, advertisement or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, in
connection with the offering and sale of the Units and is not subscribing for
Units and did not become aware of the offering of the Units through or as a
result of any seminar or meeting to which the Investor was invited by, or any
solicitation of a subscription by, a person not previously known to the Investor
in connection with investments in securities generally.
5.8The Investor has taken no action which would give rise to any claim
by any person for brokerage commissions, finders' fees or the like relating to
this Agreement or the transactions contemplated hereby (other than commissions
to be paid by the Company to the Placement Agent).
5.9The Investor or the Advisors have such knowledge and experience in
financial, tax and business matters, and, in particular, investments in
securities, so as to enable them to utilize the information made available to
them in connection with this Offering to evaluate the merits and risks of an
investment in the Units and to make an informed investment decision with respect
thereto.
5.10 The Investor is not relying on the Company, the Placement Agent
or any of their respective employees or agents with respect to the legal, tax,
economic and related considerations of an investment in the Units, and the
Investor has relied on the advice of, or has consulted with, only his own
Advisors.
5.11 The Investor is acquiring the Units solely for such Investor's
own account for investment and not with a view to resale or distribution
thereof, in whole or in part. The Investor has no agreement or arrangement,
formal or informal, with any person to sell or transfer all or any part of the
Securities, and the Investor has no plans to enter into any such agreement or
arrangement.
5.12 The Investor must bear the substantial economic risks of the
investment in the Units indefinitely because none of the Securities may be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the Securities to the
effect that they have not been registered under the Securities Act or applicable
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state securities laws and appropriate notations thereof will be made in the
Company's stock books. Stop transfer instructions will be placed with the
transfer agent of the Securities. It is not anticipated that there will be any
market for resale of the Units, and such Units will not be freely transferable
at any time in the foreseeable future.
5.13 The Investor has adequate means of providing for such Investor's
current financial needs and foreseeable contingencies and has no need for
liquidity of the investment in the Units.
5.14 The Investor is aware that an investment in the Units involves a
number of very significant risks.
5.15 The Investor meets the requirements of at least one of the
suitability standards for an "accredited investor" as set forth on the
Accredited Investor Certification attached hereto.
5.16 The Investor: (i) if a natural person represents that the
Investor has reached the age of 21 and has full power and authority to execute
and deliver this Agreement and all other related agreements or certificates and
to carry out the provisions hereof and thereof; (ii) if a corporation,
partnership, limited liability company or partnership, association, joint stock
company, trust, unincorporated organization or other entity, represents that
such entity is duly organized, validly existing and in good standing under the
laws of the state of its organization, the consummation of the transactions
contemplated hereby is authorized by, and will not result in a violation of
state law or its charter or other organizational documents, such entity has full
power and authority to execute and deliver this Agreement and all other related
agreements or certificates and to carry out the provisions hereof and thereof
and to purchase and hold the securities constituting the Units, the execution
and delivery of this Agreement has been duly authorized by all necessary action,
this Agreement has been duly executed and delivered on behalf of such entity and
is a legal, valid and binding obligation of such entity, subject to bankruptcy,
etc. and (iii) if executing this Agreement in a representative or fiduciary
capacity, represents that it has full power and authority to execute and deliver
this Agreement in such capacity and on behalf of the subscribing Investor, and
such Investor has full right and power to perform pursuant to this Agreement and
make an investment in the Company, and that this Agreement constitutes a legal,
valid and binding obligation of such entity. The execution and delivery of this
Agreement will not violate or be in conflict with any order, judgment,
injunction, agreement or controlling document to which the Investor is a party
or by which the Investor is bound.
5.17 The Investor represents to the Company that any information which
the Investor has heretofore furnished or furnishes herewith to the Company or
the Placement Agent is complete and accurate in all material respects and may be
relied upon by the Company in determining the availability of an exemption from
registration under federal and state securities laws in connection with this
Offering. The Investor further covenants and agrees that it will notify and
supply corrective information to the Company and the Placement Agent immediately
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upon the occurrence of any change therein occurring prior to the Company's
issuance of the Securities.
5.18 Other than as set forth in this Agreement, no oral or written
representations have been made, or oral or written information furnished, to the
Investor or the Investor's Advisors, if any, in connection with this Offering.
5.19 Within five (5) days after receipt of a request from the Company
or the Placement Agent, the Investor will provide such information and deliver
such documents as may reasonably be necessary to comply with any and all laws
and ordinances to which the Company or the Placement Agent is subject.
6. Restriction on Transfer of Securities.
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6.1 Restrictions. The Securities are only transferable pursuant to (a)
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an offering registered under the Securities Act, (b) Rule 144 under the
Securities Act (or any similar rule then in effect) if such rule is available,
or (c) subject to the conditions specified elsewhere in this Section 6, any
other legally available means of transfer.
6.2 Legend. Each Security shall be endorsed with the following legend:
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"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT THE TRANSFER IS EXEMPT FROM
REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS."
6.3 Removal of Legend. Any legend endorsed on a Security pursuant to
-----------------
Section 6.2 hereof shall be removed, and the Company shall issue a Security
without such legend to the holder of such Security, if such Security is being
disposed of pursuant to a registration statement declared effective under the
Securities Act or pursuant to Rule 144 or any similar rule then in effect or if
such holder provides the Company with an opinion of counsel satisfactory to the
Company to the effect that a transfer of such Security may be made without
registration. In addition, if the holder of such Security delivers to the
Company an opinion of such counsel to the effect that no subsequent transfer of
such Security will require registration under the Securities Act, the Company
shall promptly upon such contemplated transfer deliver new Securities that do
not bear the legend set forth in Section 6.2.
7. Indemnification. The Investor agrees to indemnify and hold harmless the
---------------
Company, the Placement Agent and their respective officers, directors,
employees, agents, control persons and affiliates against all losses,
liabilities, claims, damages, and expenses whatsoever (including, but not
limited to, any and all expenses incurred in investigating,
-12-
preparing, or defending against any litigation commenced or threatened) based
upon or arising out of any actual or alleged false acknowledgment,
representation or warranty, or misrepresentation or omission to state a material
fact, or breach by the Investor of any covenant or agreement made by the
Investor herein or in any other document delivered in connection with this
Agreement.
8. Events of Default.
-----------------
If any of the following events ("Events of Default") shall occur and be
continuing: (a) the Company fails to pay principal or interest on the Notes when
the same shall become due and payable and such failure shall continue for a
period of fifteen (15) days; (b) the failure by the Company to perform any of
its other material obligations hereunder, which failure shall continue for a
period of ten (10) days after receipt of notice thereof by the Company; (c) any
representations or warranties of the Company contained herein shall prove to
have been false in any material respect when made; (d) any proceedings involving
the Company are commenced by or against the Company under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law or statute of the federal government or any state government
and, if such proceedings are instituted against the Company, the Company by any
action or failure to act indicates its approval of, consent to or acquiescence
therein, or an order shall be entered approving the petition in such proceedings
and, within sixty (60) days after the entry thereof, such order is not vacated
or stayed on appeal or otherwise, or shall otherwise have ceased to continue in
effect; then, (i) as to the Events of Default under clauses (a) or (d) above,
the holder of each affected Note may, at its option, declare such Note to be
forthwith due and payable in cash and (ii) as to the Events of Default under
clauses (b) or (c) above, the Majority in Interest may, at its option, declare
all Notes to be forthwith due and payable in cash. Upon any acceleration of a
Note pursuant to the immediately preceding sentence, the Holder thereof may
pursue all remedies available to it at law or equity and all rights available to
it under its Note including, without limitation, the right to convert the Note
into shares of Common Stock. During the pendency of any Event of Default,
interest shall accrue on the outstanding principal amount of each Note at the
default rate of ten (10%) percent per annum.
9. Registration.
-------------
(a) Agreement to Register.
----------------------
(i) In the event that the offering contemplated by the Further
Placement is terminated prior to the receipt of gross proceeds of not less than
$5,000,000 (the "Termination Date"), the Company shall promptly, but in no event
later than 60 days after the Termination Date, prepare and file with the SEC a
Registration Statement covering the resale of the Registrable Shares and use its
best efforts to cause such Registration Statement to become effective within 90
days from the Termination Date. In the event that the Registration Statement
shall not have been declared effective within 105 days from the Termination
Date, the interest rate on the Notes shall increase ten basis points per day
until such Registration Statement has been declared effective.
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(ii) If the holders of Registrable Shares desire to distribute
the Registrable Shares by means of an underwriting, they shall so advise the
Company and shall select an underwriter reasonably acceptable to the Company.
The Company and all holders of Registrable Shares proposing to distribute their
Registrable Shares through such underwriter shall enter into an underwriting
agreement in customary form with the underwriter selected for such underwriting
by the holders of Registrable Shares.
(b) Provisions Applicable to Registration. The following provisions
--------------------------------------
shall apply, as applicable, in connection with the Investors' Registrable Shares
to be included in the Registration Statement pursuant to this Section 9:
(i) Each Investor, if reasonably requested by the Company or by
the underwriter with respect to any Public Offering, shall agree not to sell,
make any short sale of, loan, grant any options for the purchase of, or
otherwise dispose of any Registrable Shares (other than those included in the
Registration Statement) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days), from the effective date of such Registration
Statement, or the commencement of the offering, as applicable, as may be
requested by the underwriters;
(ii) Each Investor shall promptly provide the Company with such
non-confidential and non-proprietary information as it shall reasonably request
and that is available to the Investors in order to prepare the Registration
Statement;
(iii) All reasonable and necessary expenses in connection with
the preparation of theRegistration Statement, including, without limitation, any
and all legal, accounting and filing fees, but not including fees and
disbursements of experts and counsel retained by the Investors or underwriting
discounts and commissions to be paid by the Investors, shall be borne by the
Company; and
(iv) The Company shall use its best efforts to effect such
Registration permitting the saleof such Registrable Shares in accordance with
the intended method or methods of distribution thereof, and pursuant thereto,
the Company shall as expeditiously as possible:
(1) prepare and file with the SEC a
Registration Statement relating to the applicable
Registration on any appropriate form under the Securities
Act, which form shall be available for the sale of the
Registrable Shares in accordance with the intended method or
methods of distribution thereof and use its best efforts to
cause such Registration Statement to become effective and
keep such Registration Statement effective in accordance with
Section 9(b)(iv)(2) below;
(2) prepare and file with the SEC such
amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration
effective until all such Registrable Shares are sold; cause
the prospectus to
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be supplemented by any required prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the
applicable period in accordance with the intended method or
methods of distribution by the sellers thereof as set forth
in such Registration Statement or supplement to the
prospectus; provided, however that the Company may, from time
to time, request that the holders of the Registrable Shares
immediately discontinue the disposition of the Registrable
Shares if the Company determines, in the good faith exercise
of its reasonable business judgment, that the offering and
disposition of the Registrable Shares could materially
interfere with bona fide financing, acquisition or other
material business plans of the Company or would require
disclosure of non-public information, the premature
disclosure of which could materially adversely affect the
Company (it being acknowledged that the Company is not
required to disclose in such request any such transaction,
plan or non-public information), so long as the Company
promptly after the disclosure of such transaction, plan or
non-public information complies with this Section
9(b)(iv)(2).
(3) notify the Investors and the
underwriter, if any, promptly, and (if requested by any such
person) confirm such advice in writing, (A) when the
prospectus or any prospectus supplement or post-effective
amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any
request by the SEC for amendments or supplements to the
Registration Statement or the prospectus or for additional
information, (C) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose, (D) of
the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable
Shares for sale in any jurisdiction or the initiation of any
proceedings for such purpose and (E) subject to the proviso
below, of the happening of any event as a result of which the
prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances then existing and, subject to
Section 9(b)(iv)(2) above, at the request of any such person,
prepare and furnish to such person a reasonable number of
copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing; provided, however, the Company
need not disclose the event if it otherwise has not disclosed
such event to the public.
(4) if requested by the underwriter or an
Investor, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the underwriter
and the Investors agree should be included therein relating
to the plan of distribution with respect to such Registrable
Shares, including, without limitation, the
-15-
purchase price being paid therefor by such underwriters and
with respect to any other terms of the underwritten offering
of the Registrable Shares to be sold in such offering; and
make all required filings of such prospectus supplements or
post-effective amendments as soon as notified of the matters
to be incorporated in such prospectus supplements or
post-effective amendments;
(5) deliver to each Investor and the
underwriters, if any, without charge, as many copies of the
prospectus (including each preliminary prospectus) in
conformity with the requirement of the Securities Act and any
amendments or supplements thereto as such persons may
reasonably request and such other documents as they may
reasonably request to facilitate the prior sale or other
disposition of such Registrable Shares;
(6) prior to any Public Offering of
Registrable Shares, register or qualify or cooperate with the
Investors, or the underwriters, if any, in connection with
the registration or qualification of such Registrable Shares
for offer and sale under the securities or blue sky laws of
such jurisdictions as the Investors or underwriters, if any,
reasonably request in writing and do any and all other acts
or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Shares covered by the
Registration Statement; provided, however, that the Company
shall not be required to qualify to do business in any
jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or
would subject the Company to any tax in any such jurisdiction
where it is not then so subject; and
(7) with a view to making available the
benefits of certain rules and regulations of the SEC which
may at any time permit the sale of Registrable Shares to the
public without registration, during such time as a public
market exists for its equity securities, the Company agrees
to:
a) make and keep public information
available, as those terms are understood and defined in Rule
144 under the Securities Act, at all times after the
effective date of the first registration under the
Securities Act filed by the Company for an offering of its
equity securities to the general public;
b) use its best efforts to file with the
SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"); and
-16-
c) furnish to the Investors forthwith
upon the Investors' request a written statement by the
Company as to the Company's compliance with the reporting
requirements of said Rule 144, and of the Securities Act and
the Exchange Act, a copy of the most recent annual or
quarterly report of the Company and such other reports and
documents of the Company as the Investors may reasonably
request in availing themselves of any rule or regulation of
the SEC allowing a holder to sell any such securities
without registration.
(v) Notwithstanding the provisions of this Section 9 to the
contrary, the Company may require:
(1) The Investors to furnish to the
Company such information regarding the distribution of such
securities as the Company may from time to time reasonably
request in writing, and the Company may limit such
registration rights to situations where a proposed
distribution of Registrable Shares is to be effected
forthwith upon the effectiveness of the Registration
Statement; and
(2) The Investors to covenant that the
Investors have not taken, and will not take, directly or
indirectly, any action designed, or which might reasonably be
expected, to cause or result in, under the Exchange Act or
otherwise, or which has caused or resulted in, stabilization
or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Registrable Shares.
(vi) The Investors agree by acquisition of such Registrable
Shares that, upon receipt of the request referred to in the proviso of Section
9(b)(iv)(2) or of any notice from the Company of the happening of any event of
the kind described in Section 9(b)(iv)(3) hereof (other than as provided in
Section 9(b)(iv)(3)(A) hereof), the Investors shall forthwith discontinue
disposition of Registrable Shares until they are advised in writing by the
Company that the use of the prospectus may be resumed, and have received copies
of any additional or supplemental documents or filings that are incorporated by
reference in the prospectus, and, if so directed by the Company, the Investors
shall deliver to the Company (at the Company's expense) all copies other than
permanent file copies then in the Investors' possession, of the prospectus
covering such Registrable Shares current prior to the time of receipt of such
notice.
(c) Lock-Up. Notwithstanding the effectiveness of the
-------
Registration Statement covering the Registrable Shares, the Investors shall not,
directly or indirectly, offer or sell any Registrable Shares issued upon
conversion or exercise of the Registrable Shares (the "Converted Shares") until
the later of the 90th day after the date of conversion or exercise with respect
to such Converted Shares (the "Trigger Date") and thereafter shall not offer or
sell more than the following percentage of the Converted Shares which have been
the subject of such conversion or exercise during the following periods after
the Trigger Date:
-17-
Days after Trigger Date Percentage of Converted Shares
90-179 25%
180-269 50%
270-359 75%
360 and beyond 100%
(d) Indemnification.
---------------
(i) In the event of a Registration or qualification of any
Registrable Shares under the Securities Act pursuant to the provisions of this
Section 9, the Company shall indemnify and hold harmless the Investors, the
officers and directors of the Investors and each director or officer of any
person or entity who controls the Investors, each underwriter of such
Registrable Shares and each other person or entity who controls the Investors or
such underwriter within the meaning of the Securities Act (collectively, the
"Investor Indemnitees"), from and against any and all losses, claims, damages or
liabilities, joint or several, to which any of the Investor Indemnitees, joint
or several, may become subject under the Securities Act or the applicable
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (x)
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement under which such Registrable Shares were
registered or qualified under the Securities Act, or any amendment or supplement
thereto, any preliminary prospectus or final prospectus contained therein, or
any supplement thereto, or any document prepared and/or furnished to the
Investors incident to the registration or qualification on any Registrable
Shares, or (y) the omission or alleged omission to state in any Registration
Statement a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any prospectus, necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or (z) any violation by the Company of the Securities
Act or state securities or "blue sky" laws applicable to the Company and
relating to action or inaction required of the Company, in connection with such
registration or qualification under such state securities or "blue sky" laws,
and in each case shall reimburse the Investor Indemnitees for any legal or other
expenses reasonably incurred by such the Investor Indemnitees in connection with
investigating or defending any such loss, claim, damage or liability (or action
in respect thereof); provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability (or
action in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement in reliance upon and in conformity with information
furnished to the Company through an instrument duly executed by any of the
Investor Indemnitees; and provided further, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
(or action in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission in such
Registration Statement, which untrue statement or alleged untrue statement or
omission or alleged omission is completely corrected in an amendment or
supplement to the Registration Statement and such Investor Indemnitee thereafter
fails to deliver or cause to be delivered such Registration Statement as so
amended or supplemented prior to or
-18-
concurrently with the sale of the Registrable Shares to the person asserting
such loss, claim, damage or liability (or actions in respect thereof) or expense
after the Company has furnished the Investors with the same.
(ii) In the event of the Registration or qualification of any
Registrable Shares under the Securities Act pursuant to the provisions of this
Section 9, the Investors, severally and not jointly, shall indemnify and hold
harmless the Company, each person who controls the Company within the meaning of
the Securities Act, each officer and director of the Company and any other
Investors from and against any losses, claims, damages or liabilities to which
the Company, such controlling person, any such officer or director or any other
selling holder may become subject under the Securities Act or the applicable
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (x)
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement under which such Registrable Shares were
registered or qualified under the Securities Act, or any amendment or supplement
thereto, or (y) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, which untrue statement or alleged untrue statement or omission
or alleged omission was made therein in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such Investor specifically for use in preparation thereof, and in each case
shall reimburse the Company, such controlling person, each such officer or
director and any other selling holder for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage or liability (or action in respect thereof).
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 9(d) (an "Indemnified Party") of notice of
the commencement of any action or claim relating to any Registration Statement
filed under the provisions of this Section 9 or as to which indemnity may be
sought hereunder, such Indemnified Party shall, if a claim for indemnification
hereunder in respect thereof is to be made against any other party hereto (an
"Indemnifying Party"), give written notice to such Indemnifying Party of the
commencement of such action or claim, but the omission so to notify the
Indemnifying Party will not relieve such person from any liability that such
person may have to any Indemnified Party otherwise than pursuant to the
provisions of this Section 9(d) and shall also not relieve the Indemnifying
Party of such party's obligations under this Section 9(d), except to the extent
that the omission so to notify results in the Indemnifying Party being damaged
solely as a result of the failure to give timely notice. In case any such action
is brought against an Indemnified Party, and such party notifies an Indemnifying
Party of the commencement thereof, the Indemnifying Party shall be entitled (at
such party's own expense) to participate in and, to the extent that the
Indemnifying Party may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense, with counsel satisfactory to such Indemnified
Party, of such action and/or to settle such action and, after notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof, other than the reasonable cost of
investigation; provided, however, that no
-19-
Indemnifying Party and no Indemnified Party shall enter into any settlement
agreement that would impose any liability on such other party or parties without
the prior written consent of such other party or parties, unless such other
party or parties are fully indemnified to such party's satisfaction, as the case
may be, against any such liability.
(iv) If for any reason the indemnification provided for in
this Section 9 is unavailable to an Indemnified Party or is insufficient to hold
it harmless as contemplated by this Section 9, then the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnified Party and the Indemnifying Party, but also the relative fault of the
Indemnified Party and the Indemnifying Party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
10. Miscellaneous.
-------------
10.1 Waivers, Amendments and Approvals. With the written
---------------------------------
consent of a Majority in Interest, the obligations of the Company under this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) and with the written consent of a Majority in
Interest, the Company may enter into a supplementary agreement for the purpose
of adding any provisions of this Agreement; provided, however, that no such
waiver or supplemental agreement shall (a) modify the definition of Majority in
Interest so as to increase the percentage set forth therein; (b) extend the
Maturity Date; (c) decrease the interest payable under the Notes or (d) increase
the Conversion Price, all of which shall require the unanimous consent of the
Investors. Written notice of any such waiver, consent or agreement of amendment,
modification or supplement shall be given to the record holders of the Notes who
have not previously consented thereto in writing.
10.2 Changes, Waivers, etc. Neither this Agreement nor any
---------------------
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought, except to the extent
provided in Section 10.1 hereof.
10.3 Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be made in writing and
shall be deemed to have been duly given and effective: (i) on the date of
delivery, if delivered personally; (ii) on the earlier of the fourth (4th) day
after mailing or the date of the return receipt acknowledgment if mailed,
postage prepaid, by certified or registered mail, return receipt requested; or
(iii) on the date of transmission if sent by facsimile, telecopy, telegraph,
telex or other similar telegraphic communications equipment,
(a) if to Investor, at its address as shown on such
Investor's signature page hereto, or at such other address as such
holder may specify by written notice to the Company, or
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(b) if the Company at Xxx Xxxxxxx Xxxxx, Xxxxxxxx, XX
00000, Attention: President, or at such other address as the Company
may specify by written notice to the investors.
10.4 Survival. The Investor's representations and warranties
--------
set forth herein shall survive the Closing.
10.5 Assignment. All terms and provisions of this Agreement
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
10.6 Governing Law. (a) This Agreement and each Unit issued
-------------
hereunder shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be construed in accordance with the laws of
said State without giving effect to the rules of said State governing the
conflicts of laws.
(b) The Company and the Investors, by accepting Units issued
pursuant to this Agreement, hereby agree that any action, proceeding or claim
against it or them arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of the United States and the State
of New York, located in the City of New York, and shall be irrevocably submitted
to such jurisdiction, which jurisdiction shall be exclusive. The Company and the
Investors hereby irrevocably waive any objection to such exclusive jurisdiction
or inconvenient forum. Any process or summons to be served upon any of the
Company and the Investors (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy thereof, by registered
or certified mail, return receipt requested, postage prepaid, addressed to it at
the address as set forth in Section 10.3 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the party so served in any
action, proceeding or claim. The Company and the Investors agree that the
prevailing party(ies) in any such action or proceeding shall be entitled to
recover from the other party(ies) all of its/their reasonable legal costs and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor. THE COMPANY AND THE INVESTORS AGREE TO WAIVE
THEIR RIGHTS TO A JURY TRIAL ON ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.
10.7 Blue Sky Qualification. The purchase of Units under this
-----------------------
Agreement is expressly conditioned upon the exemption from qualification of the
offer and sale of the Units from applicable federal and state securities laws.
The Company shall be required to qualify this transaction under the securities
laws of any applicable jurisdiction.
10.8 Headings. The headings of the Sections of this Agreement
--------
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.
-21-
10.9 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Entire Agreement. This Agreement, together with the Note
----------------
and the Warrant Agreement, represent the entire agreement among the parties with
respect to the subject matter hereof superseding all prior agreements and
understandings, written or oral.
10.11 Expenses. Each party shall be responsible and shall pay
--------
for all expenses incurred by it in connection with the preparation, negotiation
and execution of this Agreement and the consummation of the transactions
contemplated herein. All costs of enforcement hereof and of the Notes,
including, without limitation, reasonable attorney's fees, shall be borne by the
Company.
10.12 Confidentiality. The Company and Investor each
---------------
acknowledge and agree that this Agreement, and all other agreements and
instruments contemplated hereby, and all of the terms and provisions hereof and
thereof, and information regarding the identity and business activities of each
Investor, shall be confidential and shall not be disclosed by any party without
the consent of the Company and such Investor, except to the extent such
disclosure is a matter of public record or shall be required by applicable law
or stock exchange or listing rule or regulation. In the event any disclosure is
required to be made as aforesaid, the disclosing party shall, to the extent
practicable, notify the Company and the affected Investor, as the case may be,
of the nature and substance thereof (and provide a draft thereof, if in writing)
prior thereto and permit the other to make reasonable comments thereon with
respect to information relating to it.
10.13 Severability. Each provision of this Agreement shall be
------------
considered separable and if for any reason any provision or provisions hereof
are determined to be invalid or contrary to applicable law, such invalidity or
illegality shall not impair the operation of or affect the remaining portions of
this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first stated above.
SMARTSERV ONLINE, INC.
By: ________________________________
Xxxxxx X. Xxxxxx
Chief Financial Officer
[next page is Investor's signature page]
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SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT, DATED
NOVEMBER 19, 1998, AMONG SMARTSERV ONLINE, INC. AND THE INVESTOR
NAMED BELOW, AMONG OTHERS
IN WITNESS WHEREOF, the Investor has executed this Securities
Purchase Agreement this ___ day of ______________, 1998.
----------------- = ---------------
Amount of Notes Purchase Price
being purchased
-----------------
Amount of Warrants
(face amount of
Notes / $.60)
If the Investor is an INDIVIDUAL, and if purchased as JOINT
TENANTS, as TENANTS IN COMMON, or as COMMUNITY PROPERTY:
------------------------------- -------------------------------
Print Name(s) Social Security Number(s)
------------------------------- -------------------------------
Signature(s) of Purchaser(s)
------------------------------- -------------------------------
Date Address
If the Investor is a PARTNERSHIP, CORPORATION or TRUST:
------------------------------- -------------------------------
Name of Partnership, Federal Taxpayer
Corporation or Trust Identification Number
-------------------------------
Date
By:
---------------------------- --------------------------------
Name: State of Organization
Title:
---------------------------- --------------------------------
Address
EACH INVESTOR MUST COMPLETE THE ACCREDITED INVESTOR
CERTIFICATION ON THE NEXT PAGE.
Accredited Investor Certification
---------------------------------
(Please initial the appropriate box(es))
------
____ (i) The Investor is a natural person who had individual income of more
than $200,000 in each of the most recent two years, or joint income
with his/her spouse in excess of $300,000 in each of the most recent
two years, and reasonably expect to reach that same income level for
the current year ("income," for purposes hereof, should be computed as
follows: individual or joint adjusted gross income, as reported (or to
be reported) on a federal income tax return, increased by (1) any
deduction of long-term capital gains under section 1202 of the Internal
Revenue Code of 1986 (the "Code"), (2) any deduction for depletion
under Section 611 et seq. of the Code, (3) any exclusion for interest
under Section 103 of the Code and (4) any losses of a partnership as
reported on Schedule E of Form 1040);
____ (ii) The Investor is a natural person whose individual net worth (i.e.,
total assets in excess of total liabilities), or joint net worth with
his/her spouse, will at the time of purchase of the Units be in excess
of $1,000,000;
____ (iii) The Investor is an investor satisfying the requirements of
Section 501(a)(l), (2) or (3) of Regulation D promulgated under the
Securities Act, which includes but is not limited to, a self-directed
employee benefit plan where investment decisions are made solely by
persons who are "accredited investors" as otherwise defined in
Regulation D.
____ (iv) The Investor is a trust, which trust has total assets in excess of
$5,000,000, which is not formed for the specific purchase of acquiring
the Units offered hereby and whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D
and who has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of an
investment in the Units;
____ (v) The Investor is an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, and
either (a) the investment decision will be made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank, insurance
company or a registered investment advisor; or (b) the employee benefit
plan has total assets in excess of $5,000,000; or (c) the employee
benefit plan is a self-directed plan, within the meaning of Title I of
such act, and the person directing the purchase is an Accredited
Investor;*
*Note. If the undersigned is relying solely on Item (v) for its Accredited
Investor status, please print the name of the person directing the purchase
in the following space and furnish a completed and signed Accredited
Investor Certification for such person.
-----------------------------
____ (vi) The Investor is a director or executive officer of SmartServ
Online, Inc.; or
____ (vii) The Investor is an entity (other than a trust) in which all of
the equity owners meet the requirements of at least one of the above
subparagraphs.
