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SECURITIES PURCHASE AGREEMENT
By and Among
XCEED, INC.,
XXXXXXXX XXXXXX,
and
CERTAIN OTHER STRATEGIC INVESTORS
APRIL 30, 1999
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of the 30th
day of April 1999, (the "Effective Date"), is by and among Xceed, Inc., a
Delaware corporation (the "Company"), Xxxxxxxx Xxxxxx (the "Initial Investor")
and those investors that may hereafter execute this Agreement and who shall be
listed on Schedule A hereto, as the same may be amended from time to time (the
"Subsequent Investors"). The Initial Investor and Subsequent Investors may be
individually referred to hereinafter as an "Investor" and collectively as the
"Investors."
RECITALS:
WHEREAS, the authorized capital stock of the Company consists of 30,000,000
shares of common stock, par value $.01 per share (the "Common Stock") and
125,000 shares of preferred stock, par value $.08 per share (the "Preferred
Stock");
WHEREAS, there are issued and outstanding, as of the Effective Date,
16,888,623 shares of Common Stock and no shares of Preferred Stock;
WHEREAS, the Company has undertaken to offer and sell, pursuant to Rule 506
of Regulation D ("Regulation D") under the Securities Act of 1933, as amended
(the "Securities Act"), up to 976,562 shares of Common Stock and warrants,
exercisable to purchase up to 976,562 shares of Common Stock, substantially in
the form attached hereto as Exhibit A (the "Warrants") for aggregate
consideration of up to $10,000,000 as set forth on Schedule A hereto upon the
terms and subject to the conditions set forth herein (the "Offering");
WHEREAS, the Company has determined to offer and sell the shares of Common
Stock and the Warrants (collectively, the "Securities") in the Offering only to
"accredited investors" as set forth in Rule 501(a) of Regulation D;
WHEREAS, each Investor has represented to the Company, as hereinafter set
forth, that such Investor is an "accredited investor" as set forth in Rule
501(a) of Regulation D; and
WHEREAS, each Investor has determined to purchase from the Company and the
Company has determined to sell to each such Investor the number of shares of
Common Stock and Warrants respectively set forth across from each Investor's
name on Schedule A hereto upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein, the Company and the Investors, each
intending to be legally bound hereby, agree as follows:
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ARTICLE I
TERMS OF OFFERING; CLOSINGS
1.1 Purchase and Sale of Securities. Upon the terms and subject to the
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conditions set forth herein, on the Initial Closing Date (as hereinafter
defined) and on each Subsequent Closing Date (as hereinafter defined), each
Investor shall purchase from the Company and the Company shall sell to each such
Investor, the shares of Common Stock and Warrants set forth opposite the name of
such Investor on Schedule A hereto in exchange for the payment to the Company by
each such Investor of the consideration set forth opposite the name of such
Investor on Schedule A.
1.2 Closing. The offer and sale of the Securities (the "Offering") shall
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close incrementally, with the first of such closings to occur and be conditioned
upon the purchase by the Initial Investor, upon execution hereof, a minimum of
488,281 shares of Common Stock (the "Initial Closing Date"). Subsequent
closings shall occur periodically hereafter, up to and through the close of
business on May 30, 1999, upon execution of this Agreement and payment by
Subsequent Investors of the consideration for the shares of the Common Stock as
shall be set forth on Schedule A hereto, as the same may be amended from time to
time to include Subsequent Investors (the "Subsequent Closing Dates").
In consideration of the agreement by the Initial Investor to purchase the
488,281 shares of Common Stock upon execution hereof, the Company has agreed to
issue to the Initial Investor, all of the Warrants as set forth of Schedule A
hereto. Upon receipt of the aggregate consideration payable by the Initial
Investor on the Initial Closing Date and any Subsequent Investors on Subsequent
Closing Dates, as set forth on Schedule A hereto, the Company shall deliver to
the such Investors, respectively, certificates representing the shares of Common
Stock (and in the case of the Initial Investor, certificates representing the
Warrants).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company represents
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and warrants to the Investors as follows:
(a) Authorization. The execution, delivery and performance of this
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Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the board of directors of the Company.
The Company has taken all necessary corporate action and has all of the
necessary corporate power to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the officers of the Company on behalf of the Company
and, assuming
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that this Agreement is the valid and binding obligation of the Investors, is the
valid and binding obligation of the Company.
(b) Organization. The Company is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Delaware. The
Company has the corporate power and authority to own and lease its properties
and assets, and to carry on its business as it is now being conducted. The
Company is duly qualified to do business as a foreign corporation in each
jurisdiction where it owns or leases real property or conducts business, except
where the failure to be so qualified would not have a material adverse effect on
the business, operations, earnings, prospects, assets or condition (financial or
otherwise) of the Company.
(c) Capitalization. The authorized capital stock of the Company as of
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the date hereof is as set forth in the recitals hereto. The outstanding shares
of Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable. As of the date hereof, the number of shares of Common Stock
that the Company is authorized to issue is adequate and the Company has reserved
for issuance a sufficient number of shares of Common Stock to permit the Company
to fulfill its obligations hereunder. Upon payment for the Securities as
contemplated herein (and payment of the aggregate exercise price for the shares
of Common Stock underlying the Warrants), the Securities (and the shares of
Common Stock issuable upon exercise of the Warrants) will be duly authorized,
validly issued, fully paid and nonassessable
(d) Non-Contravention; Consents. Neither the execution and delivery of
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this Agreement, nor consummation of the transactions contemplated hereby, does
or will: (i) violate or conflict with any provision of the Certificate Of
Incorporation or Bylaws of the Company (the "Formation Documents"); (ii) violate
or conflict with any material provision of any mortgage, lien, lease, agreement,
permit, indenture, license, instrument, law, order, arbitration award, judgment
or decree to which the Company is a party or by which it or the property or
assets which are material to its business or operation are bound, the effect of
any of which violation would have a material adverse effect on the business,
assets, operations, earnings, prospects (financial or otherwise) of the Company;
(iii) violate or conflict with any other restriction to which the Company is
subject or by which any of the property or assets which are material to the
business or operation of the Company may be bound, the effect of any of which
violation or conflict would have a material adverse effect on the business,
assets, operations, earnings, prospects (financial or otherwise) of the Company;
or (iv) constitute an event permitting termination of any agreement to which the
Company is subject by any other party thereto, if in any such circumstance such
termination could have a materially adverse on the ability of the Company to
fulfill its respective obligations hereunder. Other than as provided herein, no
consent, authorization, order or approval of, or filing or registration with,
any governmental commission, board or other regulatory body is required in
connection with the execution, delivery and performance of the terms of this
Agreement by the Company and consummation by the Company of any of the
transactions contemplated hereby.
(e) Compliance with Applicable Law. The Company is in compliance, as
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of the date hereof, with all applicable foreign, federal, state and local laws,
statutes, ordinances, rules and regulations, including without limitation, the
Securities Act and the Securities
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Exchange Act of 1934, as amended (the "Exchange Act"), except where the failure
to comply with which would not have a material adverse effect on the business,
assets, operations, earnings, prospects or financial condition of the Company.
The Company is in compliance with the rules and regulations of all governmental
agencies having authority over its business or its operations, except where the
failure to comply with which would not have a material adverse effect on the
business, operations, earnings, prospects, assets or financial condition of the
Company.
2.2 Representations and Warranties of the Investors. Each Investor,
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severally and not jointly, represents and warrants to the Company as follows:
(a) Authorization. If the Investor is an individual, such Investor is
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over 21 years of age and has all of the requisite power and authority to execute
this Agreement and to perform hereunder. If the Investor is a corporation,
limited liability company, trust, partnership or other entity that is not an
individual, it has been duly formed, validly exists and is in good standing in
the jurisdiction of its formation, such Investor has not been organized for the
specific purpose of purchasing the Securities (unless all beneficial owners of
such Investor are Accredited Investors) and such investor is authorized and is
not in any respect prohibited from purchasing the Securities. If the Investor is
purchasing the Securities in a fiduciary capacity for another person or entity,
including without limitation a corporation, partnership, trust or any other
entity, such Investor has been duly authorized and empowered to execute this
Agreement and the person for whom such Investor is acting as fiduciary: (i)
fulfills all the requirements for purchase of the Securities as such
requirements are set forth herein; (ii) concurs in the purchase of the
Securities; and (iii) agrees to be bound by the obligations, representations,
warranties and covenants contained herein. Upon the request of the Company, the
Investor will provide true, complete and current copies of all relevant
documents creating the Investor, authorizing its investment in the Securities
and/or evidencing the satisfaction of the foregoing.
(b) Investment Purpose. The Investor: (i) is acquiring the Securities
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solely for such Investor's own account for investment purposes only and not with
a view toward resale or distribution, either in whole or in part; (ii) has no
contract, undertaking, agreement or other arrangement, in existence or
contemplated, to sell, pledge, assign or otherwise transfer the Securities to
any other person or entity; and (iii) agrees not to sell or otherwise transfer
such Securities unless and until such transaction is subsequently registered
under the Securities Act and any applicable securities laws or unless an
exemption from any applicable registration requirement is available.
(c) Receipt of Information. The Investor has received full and fair
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disclosure and has carefully read in entirety: (i) the Formation Documents; (ii)
the Annual Reports on Form 10-K, the Quarterly Reports on Form 10-Q and the
Current Reports on Form 8-K filed under the Exchange Act by the Company with the
Securities and Exchange Commission (the "Commission") for and during the
Company's two most recent fiscal years; (iii) any and all information necessary
to verify the accuracy and completeness of the representations, warranties and
covenants made by the Company herein; and (iv) written or verbal answers to all
questions submitted to the Company regarding an investment in the Company. The
Investor has relied only on this information and has not been furnished with any
other documents, offering literature, memorandum or prospectus. Such Investor
represents that the information that the Company has made available to such
Investor is all of the information which such Investor deemed material to
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making an informed investment decision in connection with the purchase of the
Securities. The Investor acknowledges that the Company has afforded such
Investor the opportunity to ask questions of and receive answers from the
Company and other persons acting on its behalf, concerning the terms and
conditions of the Offering and to obtain any additional information necessary to
verify the accuracy of the information disclosed to the Investor. Further, the
Investor represents that no statement, printed material or inducement was given
or made by the Company or anyone on its behalf which is contrary to the
information otherwise disclosed to such Investor.
(d) Restrictions. Such Investor understands that: (i) the Securities
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(and the shares of Common Stock underlying the Warrants) have not been the
subject of registration under the Securities Act or any other securities laws;
(ii) the Securities (and the shares of Common Stock underlying the Warrants) may
not be sold or otherwise transferred unless such sale or transfer is registered
under the Securities Act (and any applicable securities laws) or unless
exemptions from such registration requirements are available; (iii) a legend
will be placed on any certificate or certificates evidencing the Securities (and
the shares of Common Stock underlying the Warrants) stating that such securities
have not been registered under the Securities Act and that such securities are
subject to restrictions on transferability and sale; and (iv) the Company has no
obligation to register the offer, sale or resale of the Securities (or the
shares of Common Stock underlying the Warrants) or to assist the Investor in
obtaining an exemption from applicable registration requirements except as set
forth herein. The Investor agrees not to sell or otherwise transfer the
Securities (or the shares of Common Stock underlying the Warrants) without
compliance with the terms of this Agreement, the Securities Act and all
applicable securities laws.
(e) Accredited Investor Status. The Investor is an "accredited
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investor" as set forth in Rule 501(a) of Regulation D, a copy of which is
attached hereto under cover of Exhibit B. The Investor: (i) has such knowledge
and experience in financial and business matters that such Investor is capable
of evaluating the merits and risks of an investment in the Securities (and the
shares of Common Stock underlying the Warrants); and (ii) is able to bear the
economic risk of losing the Investor's entire investment in the Securities (and
the shares of Common Stock underlying the Warrants).
(f) Risks. The Investor is familiar with the nature and extent of the
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risks inherent in investments in securities that have not been the subject of
registration under the Securities Act and in the business in which the Company
engages and has determined that an investment in the Securities (and the shares
of Common Stock underlying the Warrants) is consistent with such Investor's
investment objectives and income prospects.
(g) No General Solicitation. The Securities were not offered to the
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Investor by means of any general solicitation, publicly disseminated
advertisement or sales literature.
(h) No Governmental Review. Such Investor understands that: (i) the
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Offering has not been reviewed by any governmental body or agency; (ii) if
required by the laws or regulations of any applicable jurisdiction, the Offering
will be submitted to the appropriate authorities of such state(s) for
registration or exemption therefrom; and (iii) the documents used in connection
with the Offering have not been reviewed or approved by any regulatory agency or
government department, nor has any such agency or
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government department made any finding or determination as to the fairness of
the terms of the Offering.
(i) Information Provided by the Investors. All of the information
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which the Investor has provided to the Company concerning such Investor, such
Investor's financial position and such Investor's knowledge of financial and
business matters is correct and complete as of the date hereof. The Investor
agrees that financial and other information provided to the Company concerning
such Investor may be disclosed by the Company to any persons or entities that
may enter into a transaction with the Company. The Investor further agrees, if
requested by the Company or its authorized representative, to provide bank
references or other confirming information concerning the Investor's financial
condition as may be reasonably requested by the Company.
2.3 Survival of Representations and Warranties. The representations and
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warranties set forth in this Agreement shall survive the execution and delivery
of this Agreement.
ARTICLE III
REGISTRATION RIGHTS
3.1 Definitions. As used in this section:
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(a) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
(b) the term "Registrable Securities" means: (i) the shares of Common
Stock issuable in the Offering; (ii) the shares of Common Stock underlying the
Warrants; and (iii) any capital stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement of, the
shares of Common Stock referred to in Subsections 4.1(b)(i) through (iii) above;
(c) the term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof; and
(d) the number of shares of "Registrable Securities then outstanding"
shall be determined by adding the number of shares of Common Stock outstanding
which are Registrable Securities, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which upon
issuance would be Registrable Securities.
(e) the term "Affiliate" shall have the meaning ascribed to it under
Rule 405 of the Securities Act.
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3.2 Piggy-Back Rights.
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(a) Inclusion in Registration. If, during the six months following the
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Effective Date (the "Piggy-Back Period"), the Company shall determine to file a
registration statement relating to the offer and sale of any of its securities
(other than the registration statement which the Company currently intends to
file relating to the securities issued by the Company in connection with recent
business acquisitions and other than a registration statement on Form S-4 or
Form S-8 or their successor forms) which would permit inclusion of any
Registrable Securities, the Company will:
(i) promptly give to the Holders written notice thereof, which shall
include a list of the jurisdictions, if any, in which the Company intends to
qualify such securities under the applicable blue sky or other state securities
laws (the "Piggy-Back Notice"); and
(ii) subject to subsection (b) below, include in such registration
(and any related qualification under blue sky laws or other compliance) and in
any underwriting involved therein, all of the Registrable Securities specified
in a written request made by a Holder, within thirty (30) calendar days after
receipt of the Piggy-Back Notice from the Company.
(b) Underwriting. If the subject registration relates to an
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underwritten offering, the Company shall so advise the Holders as a part of the
Piggy-Back Notice. In such event, the right of a Holder to registration pursuant
hereto shall be conditioned upon such Holder's participation in and agreement
with the terms of such underwriting. Each Holder shall (together with the
Company and the other stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter (or underwriters) selected for underwriting by the Company and shall
use their best efforts to arrange for all documents and opinions required to be
delivered thereunder in respect of their participation as selling stockholders
to be delivered. Notwithstanding any other provision of this Agreement, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten or otherwise included in the subject registration
statement, the Registrable Securities proposed to be included in such
registration may be limited in whole or in part by the underwriter and the
Holders may be prohibited from selling any of their Registrable Securities for a
period of time following the effective date of the registration statement, as
required by the underwriter. In the event that the underwriter so limits the
number of securities permitted to be included in the registration statement, to
the extent that shares of Common Stock owned by Xxxxxx Xxxxx are permitted to be
included in such registration statement, the Holders shall be entitled to
include therein the percentage of the total number of shares of Common Stock
owned by stockholders of the company (the "Permitted Shares") derived by: (i)
dividing the number of shares of Common Stock owned by the Holders by (ii) the
sum of the number of shares of Common Stock owned by the Holders and the number
of shares of Common Stock held by Xx. Xxxxx multiplied by (iii) the number of
shares of Permitted Stock (the "Formula"). By way of example, if the Permitted
Stock is 50,000 shares of Common Stock and Xx. Xxxxx owns 100,000 shares of
Common Stock and the Holders own 7,000 shares of Common Stock, the Formula is as
follows: (7,000 divided by 107,000) multiplied by 50,000, which equals 3,271
shares of Permitted Stock. Holders shall be permitted to participate in
proportion to their respective percentages of ownership of the aggregate of
Registrable
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Securities. If any of the Holders or any officer, director or other stockholder
disapproves of the terms of any such underwriting, he may elect not to
participate or to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities not withdrawn from
such underwriting shall be withdrawn from such registration.
(c) Number and Transferability. The Holders shall be entitled to have
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their shares included in an unlimited number of registrations pursuant to this
Subsection 3.2(c). The piggy-back registration rights granted pursuant hereto
shall be assignable by the Holders, in whole or in part, to the extent otherwise
permitted herein and subject to the rights of first refusal granted in Section
4.1.
3.3 Demand Registration.
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(a) Demand for Registration. In the event that the Company does not
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file a registration statement during the Piggy-Back Period or the Holders are
unable to include their Registrable Securities in a registration statement filed
by the Company during the Piggy-Back Period due to the limitations that may be
imposed by underwriters as contemplated hereunder, upon delivery to the Company
of a written request (the "Demand Notice") from the Holder or Holders of an
aggregate of at least 51% of the Registrable Securities then outstanding and
entitled to registration hereunder (the "Initiating Holders") demanding that the
Company effect a registration, qualification or compliance with respect to all
or a part of the Registrable Securities, the Company will, within five (5)
business days of the receipt thereof, give written notice of its receipt of the
Demand Notice (the "Registration Notice") to all Holders and shall, within sixty
(60) calendar days of its receipt of such Demand Notice, file a registration
statement (on a form deemed appropriate by the Company's counsel) with the
Commission including all of the Registrable Securities which the Holders shall
request in writing (given within twenty (20) calendar days of receipt of the
Registration Notice given by the Company pursuant hereto) to be included in such
registration and the Company shall use its best efforts to cause such
registration statement to be filed and to become effective no later than 120
calendar days after the receipt of such request.
The demand registration rights granted pursuant hereto shall be
assignable by the Holders, in whole or in part, to the extent otherwise
permitted herein and subject to the rights of first refusal granted in
Section 4.
(b) Underwriting. If the Initiating Holders intend to distribute the
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Registrable Securities covered by such request by means of an underwriting, they
shall so advise the Company as a part of the request made by such Holders
pursuant to Subsection 3.3(a). The Company shall enter into an agreement in
customary form for a secondary distribution with the underwriter (or
underwriters) selected by such Initiating Holders for such underwriting,
provided such underwriters are reasonably acceptable to the Company, but the
Company shall not be required to pay any commission to the underwriter in
respect of the sale of Registrable Securities.
If the Company requests inclusion of the securities of another
stockholder (the "Stockholder Securities") in any registration affected pursuant
to a Demand Notice, the Holders shall include the Stockholder Securities in the
underwriting and may condition such offer on
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acceptance by such other stockholders of the provisions of this section. The
Company shall (together with all other stockholders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter (or underwriters)
selected for such underwriting by the Initiating Holders reasonably acceptable
to the Company. Notwithstanding any other provision of this section, if the
subject underwriter advises the Holders in writing that marketing factors
require a limitation on the number of shares to be underwritten, the Stockholder
Securities may be limited by reason of the underwriter's marketing limitation to
the extent required by the underwriter, provided that, the Company shall be
entitled to include in the total number of shares permitted by the underwriter
to be included in the underwriting (the "Underwritten Securities") that
percentage of the Underwritten Securities derived by (i) dividing the number of
Stockholder Securities by (ii) the sum of the number of Stockholder Securities
and the number of shares of Common Stock owned by the Holders multiplied by
(iii) the number of Underwritten Securities. Registrable Securities or any other
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. If any other
stockholder who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holders. The securities so withdrawn shall also be withdrawn from registration.
If the underwriter has not limited the number of Registrable Securities or other
securities to be underwritten, the Company may include securities for its own
account in such registration if the underwriter so agrees and if the number of
Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
3.4 Expenses of Registration. All expenses incurred in connection with the
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registration, qualification or compliance with this Section 3 including, without
limitation, all registration, filing and qualification fees, accounting fees and
printing expenses, fees and disbursements of counsel for the Company and
expenses incidental to or required by such registration shall be borne by the
Company. Underwriting discounts and commissions shall be borne and paid ratably
by the Holders of the Registrable Securities included in any such registration.
3.5 Registration Procedures. In the case of each registration effected by
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the Company pursuant hereto, the Company shall:
(a) Notify each Holder as to the filing of the registration statement
and of all amendments or supplements thereto filed prior to the effective date
of said registration statement;
(b) Notify each Holder, promptly after it shall receive notice
thereof, of the time when said registration statement becomes effective or when
any amendment or supplement to any prospectus forming a part of said
registration statement has been filed;
(c) Notify each Holder promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
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(d) Prepare and promptly file with the Commission and promptly notify
each Holder of the filing of any amendments or supplements to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at any time when a prospectus relating to the Registrable
Securities is required to be delivered under the Securities Act, any event with
respect to the Company shall have occurred as a result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made, in the light of the circumstances under which
they were made, not misleading; and, in addition, prepare and file with the
Commission, promptly upon the written request of a Holder, any amendments or
supplements to such reasonably necessary or advisable in connection with the
distribution of the Registrable Securities;
(e) Advise each Holder promptly after the Company shall receive notice
or obtain knowledge of the issuance of any stop order by the Commission
suspending the effectiveness of any such registration statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its best efforts to prevent the issuance of any stop order or
obtain its withdrawal promptly if such stop order should be issued;
(f) Use its best efforts to qualify as soon as reasonably practicable
the Registrable Securities included in the registration statement for sale under
applicable securities or blue sky laws of such states and jurisdictions within
the United States as shall be reasonably requested by any Holder; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business, to become subject to taxation or to file a
consent to service of process generally in any of the aforesaid states or
jurisdictions; and
(g) Furnish each Holder, as soon as available, with copies of any
registration statement and each preliminary or final prospectus, or supplement
or amendment required to be prepared pursuant hereto, all in such quantities as
any Holder may from time to time reasonably request.
At its expense, the Company shall keep such registration effective:
(i) for a period of 120 calendar days; or (ii) until each Holder has completed
the distribution described in the registration statement relating thereto,
whichever first occurs.
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3.6 Indemnification.
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(a) The Company shall indemnify each Holder, each of its officers,
directors and general and limited partners, and its Affiliates, on whose behalf
registration, qualification or compliance has been effected pursuant to this
Section 3, and each underwriter and each Affiliate thereof (individually, each
may be referred to hereinafter as a "Holder Indemnified Party" and collectively,
the "Holder Indemnified Parties"), against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each Holder Indemnified Party, for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided, however, that the
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Company shall not be liable to any Indemnified Party in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Indemnified Party and stated to be specifically
for use therein.
(b) Each of the Holders shall, if Registrable Securities held by them
are included in the securities as to which such registration, qualification or
compliance is being effected, severally and not jointly, indemnify the Company,
each of its directors and officers who sign such registration statement, each
Affiliate of the Company, each underwriter, if any, of the Company's securities
covered by such registration statement, each other Holder and each Affiliate
thereof (the "Company Indemnified Parties") against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company Indemnified Parties for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein.
(c) Each Holder Indemnified Party and each Company Indemnified Party
entitled to indemnification under this Section 3.7 (each, an "Indemnified
Party") shall give notice to the individual or entityt required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim
12
or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party, and
the Indemnified Party may participate in such defense at such party's expense,
and; provided further that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 3.6. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of the Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
3.7 Information about the Investors. Each Holder shall promptly furnish to
-------------------------------
the Company such information regarding itself, its Affiliates or subsidiaries
and the distribution proposed by it as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this section.
3.8 Conditions to Registration. As a condition to the Company's obligation
--------------------------
hereunder to cause a registration statement to be filed or Registrable
Securities to be included in a registration statement, each Holder shall provide
such information and execute such documents as may reasonably be required in
connection with such registration. In addition, the Company shall not be
obligated to file a registration statement, include Registrable Securities in a
registration statement hereunder or maintain effectiveness of a registration
statement, if: (i) the Company shall have received opinions of counsel
reasonably satisfactory to each Holder and the Company to the effect that the
proposed disposition of such Registrable Securities may be effected without
registration under the Securities Act; or (ii) the Registrable Securities may
then be sold pursuant to Rule 144 under the Securities Act.
3.9 Rule 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission which may permit the sale of the
restricted securities to the public without registration, the Company agrees to
use its best efforts to: (a) make and keep public information available as
contemplated by Rule 144 under the Securities Act; and (b) file with the
Commission in a timely manner all reports and other documents required to be
filed by the Company under the Exchange Act.
13
ARTICLE IV
RIGHTS OF FIRST REFUSAL
4.1 Rights of First Refusal.
-----------------------
(a) For a period of three (3) years following the Effective Date, if
an Investor (other than the Initial Investor) proposes to sell, transfer or
otherwise convey any of the Securities or the shares of Common Stock underlying
the Warrants (the "Proposed Transfer"), such Investor (the "Transferring
Investor") shall promptly deliver to the Initial Investor and the Company
written notice of the Proposed Transfer (the "Transfer Notice"), setting forth
in reasonable detail: (i) the price and material terms of the Proposed
Transfer; (ii) the amount of the Securities (or shares of Common Stock
underlying the Warrants) proposed to be transferred; and (iii) such other
information as the Initial Investor and the Company may reasonably request in
order to evaluate the terms of the Proposed Transfer. The Initial Investor
shall thereupon have the right, for a period of thirty (30) calendar days
following delivery of the Transfer Notice (the "First Refusal Period"), to
purchase all or any portion of the Securities (and the shares of Common Stock
underlying the Warrants) designated in the Transfer Notice at the last
transaction price per share of the Company's securities as quoted by the Nasdaq
National Market System (or such other exchange or quotation bureau on which the
securities are then traded or quoted) on the last business day immediately
preceding the date on which the Initial Investor notifies the Transfer Investor
of its intention to purchase such Securities (the "Acceptance Notice"). The
Initial Investor must deliver the Acceptance Notice to the Transferring Investor
on or prior to expiration of the First Refusal Period. Failure by the Initial
Investor to deliver the Acceptance Notice shall constitute an election by the
Initial Investor not to purchase any of the Securities (or the shares of Common
Stock underlying the Warrants) designated in the Transfer Notice.
(b) In the event that the Initial Investor declines to purchase the
Securities (or the shares of Common Stock underlying the Warrants) designated in
the Transfer Notice (or otherwise fails to deliver the Acceptance Notice prior
to the expiration of the First Refusal Period), the Company shall thereupon have
the right, for a period of thirty (30) calendar days thereafter, to purchase any
or all of such securities upon the same terms set forth in Subsection 4.1(a)
above. If the Company declines to purchase the Securities (or the shares of
Common Stock underlying the Warrants) designated in the Transfer Notice, the
Transferring Investor may then, for a period of ninety (90) calendar days
thereafter, sell, transfer or otherwise convey any of such securities as set
forth in the Transfer Notice, subject to applicable laws, rules and regulations.
An election by the Initial Investor or the Company not to purchase the
Securities (or the shares of Common Stock underlying the Warrants) as described
herein shall not affect the rights of first refusal provided herein with respect
to subsequent Proposed Transfers by a Transferring Investor. Any transfer of
Securities by a Transferring Investor without first giving the Transfer Notice
shall be deemed to be null and void and of no legal force or effect whatsoever.
14
ARTICLE V
INDEMNIFICATION AND CLAIMS
5.1 Indemnification. In addition to the indemnification provided in
---------------
Section 3.6, each of the Investors hereby agrees, severally but not jointly, to
indemnify and hold harmless the Company and its officers, directors, employees,
agents and affiliates from and against any and all damages, losses, costs,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees) which they, or any of them, may incur by reason of such Investor's failure
to fulfill any of the terms and conditions of this Agreement or by reason of
such Investor's breach of any of the representations and warranties of such
Investor set forth herein. This Agreement and the representations and warranties
contained herein shall be binding upon the Investor's heirs, executors,
administrators, representatives, successors and assigns. THE COMPANY HAS BEEN
ADVISED THAT THE INDEMNIFICATION OF THE COMPANY, ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES IS DEEMED TO BE VOID AS AGAINST PUBLIC POLICY
AND UNENFORCEABLE IN SOME JURISDICTIONS.
ARTICLE VI
MISCELLANEOUS
6.1 Fees and Expenses. The Company and the Investors shall respectively
-----------------
pay the their own expenses incident to negotiation, execution, delivery and
performance of the terms of this Agreement and the consummation of the
transactions contemplated hereby, other than the expenses of registration
referred to in Article III which shall be borne by the Company as set forth
therein.
6.2 Modification, Amendments and Waiver. The Company and the Investors may
-----------------------------------
amend, modify or otherwise waive any provision of this Agreement by unanimous
consent, provided that such consent and any amendment, modification or waiver is
in writing and is signed by the Company and each of the Investors.
6.3 Assignment. Neither the Company nor any Investors shall have the
----------
authority to assign its respective rights or obligations under this Agreement
without the prior written consent of the other parties hereto; except that the
Company may assign its rights and obligations under this Agreement to any
successor in interest without the prior consent of the Investors.
6.4 Burden and Benefit. This Agreement shall be binding upon and, to the
------------------
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective successors and assigns; provided that, in the event of a
default by the Company of any of its obligations hereunder, the sole and
exclusive recourse and remedy of the Investors with respect to such default
shall be against the Company and its assets; under no circumstances shall any
officer, director, stockholder or affiliate of the Company be liable in law or
equity for any obligations of the Company which result from such a default
hereunder.
15
6.5 Brokers. The Investors represent and warrant to the Company that there
-------
are no brokers or finders entitled to any brokerage or finder's fee or other
commission or fee based upon arrangements made by or on behalf of the Investors
or any other person in connection with this Agreement or any of the transactions
contemplated hereby. The Company represents and warrants to the Investors that
no broker or finder is entitled to any brokerage or finder's fee or other
commission or fee based upon arrangements made by or on behalf of the Company in
connection with this Agreement or any of the transactions contemplated hereby.
6.6 Entire Agreement. This Agreement and the schedules, exhibits, lists
----------------
and other documents referred to herein contain the entire agreement among the
Company and the Investors with respect to the transactions contemplated hereby
and supersede all prior agreements with respect thereto, whether written or
oral.
6.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
6.8 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission or telex, or sent by commercial expedited
delivery service or registered or certified mail (return receipt requested),
postage prepaid, addressed as follows:
(a) If to an Investor, to the address listed for such Investor on
Schedule A hereto, with copies as directed to counsel for such Investor; and
(b) If to the Company, to the attention of Xx. Xxxxxx X. Xxxxx or Xx.
Xxxxx Xxxxxxx at Xceed, Inc., 000 Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000
or via facsimile to (000) 000-0000, with a copy to Akin, Gump, Strauss, Xxxxx &
Xxxx LLP, 0000 Xxx Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, X.X. 00000, to the
attention of Xxxxxxxx X. Xxxxxx, Esq. or via facsimile at (000) 000-0000; or
to such other persons or addresses as may be designated in writing by the party
to receive such notice. If sent as aforesaid, the date any such notice shall be
deemed to have been delivered on the date of transmission of a facsimile or
telex, the calendar day after delivery to a commercial overnight delivery
service, or five calendar days after delivery into a United States Postal
facility.
6.9 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which shall constitute one agreement.
6.10 Rights Cumulative. All rights, powers and privileges conferred
-----------------
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
16
6.11 Severability of Provisions. The provisions of this Agreement shall be
--------------------------
considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
6.12 Headings. The headings set forth in the articles and sections of this
--------
Agreement and in the exhibits and the schedules to this Agreement are inserted
for convenience of reference only and shall not be deemed to constitute a part
hereof.
* * * * *
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed, delivered and effective as of the date and year first above
written.
XCEED, INC.
By: /s/Xxxxx Xxxxxxx
----------------
Xxxxx Xxxxxxx, Chairman and Chief
Strategic Officer
THE INITIAL INVESTOR
/s/Xxxxxxxx Xxxxxx
------------------
Xxxxxxxx Xxxxxx
THE SUBSEQUENT INVESTORS
/s/Xxxx Xxxxxxx /s/Xxx X. Xxxxxxxx, Xx. Revocable Trust
--------------- ---------------------------------------
Xxxx Xxxxxxx Xxx X. Xxxxxxxx, Xx. Revocable Trust
/s/Xxxx Xxxxxx /s/Xxxx X. Xxxxxx
-------------- -----------------
Xxxx Xxxxxx Xxxx X. Xxxxxx
/s/Xxxx Xxxxxxxx /s/SilverWild Enterprises, Inc.
---------------- --------------------------------
Xxxx Xxxxxxxx SilverWild Enterprises, Inc.
/s/Xxxxxxx X. Xxxxxxx /s/AGR Halifax Fund, Ltd.
--------------------- -------------------------
Xxxxxxx X. Xxxxxxx AGR Halifax Fund, Ltd.
/s/Xxxxx Xxxxx /s/Xxxxxx X. Xxxxxxx
-------------- --------------------
Xxxxx Xxxxx Xxxxxx X. Xxxxxxx
18
THE SUBSEQUENT INVESTORS
(continued)
/s/Xxxxxx X. Xxxxxx /s/Xxxxxx Xxxxxx
------------------- ----------------
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx
19
SCHEDULE A
----------
TO
--
SECURITIES PURCHASE AGREEMENT
-----------------------------
Shares of
Name And Address Number of Shares of Common Stock Consideration
of Investor Common Stock Acquired Underlying Warrants Paid
-------------------------------- ------------------------ ----------------------- -------------------
Xxxxxxxx Xxxxxx 488,281 976,562 $ 5,000,000
Xxx X. Xxxxxxxx, Xx. Revocable 97,656 None $ 1,000,000
Trust dated 11/25/96
AGR Halifax Fund, Ltd. 78,125 None $ 800,000
Xxxx Xxxxxxx 48,828 None $ 500,000
Xxxx Xxxxxx 48,828 None $ 500,000
Xxxx Xxxxxx 48,828 None $ 500,000
Xxxx Xxxxxxxx 48,828 None $ 500,000
Xxxxxxx X. Xxxxxxx 48,828 None $ 500,000
SilverWild Enterprises, Inc. 36,621 None $ 375,000
Xxxxxx Xxxxxx 12,207 None $ 125,000
Xxxxx X. Xxxxx 9,766 None $ 100,000
Xxxxxx X. Xxxxxxx 7,324 None $ 75,000
Xxxxxx X. Xxxxxx 2,442 None $ 25,000
------------------------ ----------------------- -------------------
Totals 976,562 976,562 $10,000,000
20
EXHIBIT A
---------
TO
--
SECURITIES PURCHASE AGREEMENT
-----------------------------
21
EXHIBIT B
---------
INVESTOR SUITABILITY STANDARDS
------------------------------
A purchase of the Securities pursuant to the attached Securities Purchase
Agreement involves a high degree of risk and is suitable only for persons of
substantial financial means who have no need for liquidity in their investments.
The offer, offer for sale, and sale of the Securities are intended to be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Act") pursuant to Regulation D promulgated thereunder ("Regulation D") or
another exemption thereunder and are intended to be exempt from the registration
requirements of applicable state securities laws.
Rule 501(a) of Regulation D defines an "accredited investor" as follows:
(1) Any bank as defined in Section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Act whether acting in its individual or fiduciary capacity; any broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in Section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; any Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000, or, if a self-
directed plan, with investment decisions made solely by persons that are
accredited investors;
(2) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose or acquiring the securities offered, with total
assets in excess of $5,000,000;
(4) Any director, executive officer or general partner of the issuer of the
securities being offered or sold, or any director, executive officer or general
partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of $200,000
in each of the two (2) most recent years or joint income with that person's
spouse in excess of $300,000
22
in each of those years and has a reasonable expectation of reaching the same
income level in the current year;
(7) Any trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited investors.
23
