Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of April
__, 2004, among Xxxxxx Capital Corp., a Nevada corporation (the "Company"), and
the purchasers identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) each Purchaser's obligations
to pay the Subscription Amount have been satisfied or waived (ii) and the
Company's obligations to deliver the Securities have been satisfied or
waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.001 per share, and any securities into which such common stock shall
hereinafter have been reclassified into.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
"Company Counsel" means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP.
"Debentures" means, the 7% Convertible Debentures due thirty-six
months from their date of issuance, issued by the Company to the
Purchasers hereunder, in the form of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to such term
in Section 3.1 hereof.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement in substantially
the form of Exhibit E hereto executed and delivered contemporaneously with
this Agreement.
"Exempt Issuances" the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any
stock or option plan duly adopted by a majority of the non-employee
members of the Board of Directors of the Company or a majority of the
members of a committee of non-employee directors established for such
purpose or (b) securities upon the exercise of or conversion of any
securities issued hereunder, convertible securities, options or warrants
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to
increase the number of such securities (unless such amendment results from
the application of any anti dilution provisions applicable to such
securities).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices at 000 Xxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000, legal counsel to HPC
Capital Management ("HPC").
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h) hereof.
"Liens" shall have the meaning ascribed to such term in Section
3.1(a) hereof.
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"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of
preparation and reasonable attorneys' fees.
"Material Adverse Effect" shall have the meaning assigned to such
term in Section 3.1(b) hereof.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers, in
the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale of the Underlying Shares by each Purchaser as provided for in
the Registration Rights Agreement.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e) hereof.
"Required Minimum" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in
the future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise or conversion in full of all Warrants and
Debentures (including Underlying Shares issuable as payment of interest),
ignoring any conversion or exercise limits set forth therein, and assuming
that the Set Price is at all times on and after the date of determination
75% of the then Set Price on the Trading Day immediately prior to the date
of determination.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h) hereof.
"Securities" means the Debentures, the Warrants and the Underlying
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Set Price" shall have the meaning ascribed to such term in the
Debentures.
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"Subscription Amount" means, as to each Purchaser, the aggregate
amount to be paid for Debentures and Warrants purchased hereunder as
specified below such Purchaser's name on the signature page of this
Agreement and next to the heading "Subscription Amount", in United States
Dollars and in immediately available funds.
"Subsequent Financing" shall have the meaning ascribed to such term
in Section 4.13.
"Subsidiary" means any subsidiary of the Company as set forth on
Schedule 3.1(a) attached hereto.
"Trading Day" means any day during which the Trading Market shall be
open for business.
"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
OTC Bulletin Board, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Debentures, the
Warrants, the Registration Rights Agreement, the Escrow Agreement and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants and issued
and issuable in lieu of the cash payment of interest on the Debentures.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted as reported by
Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern
Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then
listed or quoted on a Trading Market and if prices for the Common Stock
are then reported in the "Pink Sheets" published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser
selected in good faith by the Purchasers and reasonably acceptable to the
Company.
"Warrants" means collectively the Common Stock purchase warrants, in
the form of Exhibit C delivered to the Purchasers at the Closing in
accordance with Section 2.2 hereof, which Warrants shall be exercisable
immediately and for a term of 5 years.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
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ARTICLE II
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $1,000,000
principal amount of the Debentures. Each Purchaser shall deliver to the Company
via wire transfer or a certified check immediately available funds equal to
their Subscription Amount and the Company shall deliver to each Purchaser their
respective Debenture and Warrants as determined pursuant to Section 2.2(a) and
the other items set forth in Section 2.2 issuable at the Closing. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of the Escrow Agent or such other location as the parties shall
mutually agree.
2.2 Conditions to Closing. The Closing shall be subject to the following
conditions and deliveries being met on the
Closing Date:
(a) At or prior to the Closing, unless otherwise indicated below,
the Company shall deliver or cause to be delivered to the Escrow Agent
with respect to each Purchaser the following:
(i) a Debenture with a principal amount equal to such
Purchaser's Subscription Amount, registered in the name of such
Purchaser;
(ii) a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 50% of
such Purchaser's Subscription Amount divided by the Set Price on the
date hereof, with an exercise price equal to $0.10, subject to
adjustment therein;
(iii) a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 50% of
such Purchaser's Subscription Amount divided by the Set Price on the
date hereof, with an exercise price equal to $0.20, subject to
adjustment therein;
(iv) the legal opinion of Company Counsel, in the form of
Exhibit D attached hereto, addressed to the Purchasers; ---------
(v) the Registration Rights Agreement duly executed by the
Company in the form of Exhibit B attached hereto; ---------
(vi) the Escrow Agreement duly executed by the Company; and
(vii) this Agreement, duly executed by the Company.
(b) At or prior to the Closing, each Purchaser shall deliver or
cause to be delivered to the Company the following:
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(i) such Purchaser's Subscription Amount;
(ii) this Agreement, duly executed by such Purchaser;
(iii) the Escrow Agreement duly executed by such Purchaser;
and
the Registration Rights Agreement duly executed by such
Purchaser.
(c) All representations and warranties of the other parties
contained herein shall remain true and correct as of the Closing Date and
all covenants of the other party shall have been performed if due prior to
such date.
(d) From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by
Bloomberg Financial Markets shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades
are reported by such service, or on the Trading Market, nor shall a
banking moratorium have been declared either by the United States or New
York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse
change in, any financial market which, in each case, in the reasonable
judgment of the Purchasers, makes it impracticable or inadvisable to
purchase the Debentures at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any lien, charge, security interest,
encumbrance, right of first refusal or other restriction (collectively,
"Liens"), and all the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights. If the Company has no subsidiaries,
then references in the Transaction Documents to the Subsidiaries shall be
disregarded.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
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of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational
or charter documents. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate: (i) adversely
affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in or be reasonably likely to have or result
in a material adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company
and the Subsidiaries, taken as a whole, or (iii) adversely impair the
Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (i), (ii) or (iii), a "Material
Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder or thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby or
thereby have been duly authorized by all necessary action on the part of
the Company and no further consent or action is required by the Company
other than Required Approvals. Each of the Transaction Documents has been
(or upon delivery will be) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and general principles
of equity. Neither the Company nor any Subsidiary is in violation of any
of the provisions of its respective certificate or articles of
incorporation, by-laws or other organizational or charter documents except
where such violation could not, individually or in the aggregate,
constitute a Material Adverse Effect.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not: (i) conflict
with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational
or charter documents, or (ii) subject to obtaining the Required Approvals,
conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result, in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other
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restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate, have
or result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) the filings
required under Section 4.7, (ii) the filing with the Commission of the
Registration Statement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the Debentures and
Warrants and the listing of the Underlying Shares for trading thereon in
the time and manner required thereby and (iv) the filing of Form D with
the Commission and applicable Blue Sky filings (collectively, the
"Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens. The Company has reserved from
its duly authorized capital stock a number of shares of Common Stock for
issuance of the Underlying Shares at least equal to the Required Minimum
on the date hereof. The Company has not, and to the knowledge of the
Company, no Affiliate of the Company has sold, offered for sale or
solicited offers to buy or otherwise negotiated in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated
with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities to
the Purchasers, or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set forth in the
Disclosure Schedules attached hereto. No securities of the Company are
entitled to preemptive or similar rights, and no Person has any right of
first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Securities,
there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
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exercise, conversion, exchange or reset price under such securities. All
of the outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or authorization
of any stockholder, the Board of Directors of the Company or others is
required for the issuance and sale of the Shares. Except as disclosed in
the SEC Reports, there are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company's capital stock to
which the Company is a party or, to the knowledge of the Company, between
or among any of the Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding
the date hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials being collectively
referred to herein as the "SEC Reports") on a timely basis or has received
a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. The Company has
identified and made available to the Purchasers a copy of all SEC Reports
filed within the 10 days preceding the date hereof. As of their respective
dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto, and fairly
present in all material respects the financial position of the Company and
its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
(i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports: (i) there has been no event, occurrence or
development that has had or that could result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase
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or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option or similar plans.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which: (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or
has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the Commission
any request for confidential treatment of information. There has not been,
and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current
or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(k) Compliance. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, except in each case as
could not, individually or in the aggregate, have or result in a Material
Adverse Effect.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not, individually
or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
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(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries.
Any real property and facilities held under lease by the Company and the
Subsidiaries are held under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses
and other similar rights necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights used
by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights. (p) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. To the best of Company's knowledge, such
insurance contracts and policies are accurate and complete. Neither the
Company nor any Subsidiary has any reason to believe it will not be able
to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as required
to be set forth in the SEC Reports, none of the officers or directors of
the Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to
or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
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accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
such disclosure controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is made
known to the certifying officers by others within those entities,
particularly during the period in which the Company's most recently filed
periodic report under the Exchange Act, as the case may be, is being
prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the date
prior to the filing date of the most recently filed periodic report under
the Exchange Act (such date, the "Evaluation Date"). The Company presented
in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in
Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the Company's
internal controls.
(s) Solvency/Indebtedness. Based on the financial condition of the
Company as of the Closing Date: (i) the fair saleable value of the
Company's assets exceeds the amount that will be required to be paid on or
in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to carry on
its business for the current fiscal year as now conducted and as proposed
to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and
(iii) the current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances which lead it to
believe that it will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one year from
the Closing Date. The SEC Reports set forth as of the dates thereof all
outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $50,000 (other
than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations, whether
or not the same are or should be reflected in the Company's balance sheet
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or the notes thereto, except guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business,
and (c) the present value of any lease payments in excess of $50,000 due
under leases required to be capitalized in accordance with GAAP. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(t) Certain Fees. No brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement,
and the Company has not taken any action that would cause any Purchaser to
be liable for any such fees or commissions. The Company agrees that the
Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of any Person for fees of the
type contemplated by this Section with the transactions contemplated by
this Agreement.
(u) Private Placement. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 3.2(b)-(f), the
offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.
(v) Listing and Maintenance Requirements. The Company's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with
the listing or maintenance requirements of such Trading Market. The
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(w) Registration Rights. The Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the
Commission or any other governmental authority that have not been
satisfied.
(x) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
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limitation as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(y) Seniority. As of the Closing Date, no indebtedness of the
Company is senior to the Debentures in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise,
other than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and capital
lease obligations (which is senior only as to the property covered
thereby).
(z) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might
constitute material, nonpublic information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with
respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof.
(aa) Tax Status. The Company and each of its Subsidiaries has made
or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and each of its
Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed
a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, statue or local tax.
None of the Company's tax returns is presently being audited by any taxing
authority.
(bb) Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that the Purchasers are acting solely
in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any statement made by any
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Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement has
been based solely on the independent evaluation of the Company and its
representatives.
(cc) No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor, to the knowledge of the Company, any
of its directors or officers (i) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising with respect to the sale of the Debentures or the
Warrants, or (ii) made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would require
registration of the Debentures, the Underlying Shares or the Warrants
under the Securities Act or made any "directed selling efforts" as defined
in Rule 902 of Regulation S.
(dd) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by
the Company to arise, between the accountants and lawyers formerly or
presently employed by the Company and the Company is current with respect
to any fees owed to its accountants and lawyers.
(ee) Intentionally Omitted.
(ff) No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or which could violate any
applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of the Trading Market.
(gg) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any corrupt funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or
made by any person acting on its behalf of which the Company is aware)
which is in violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
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(a) Organization; Authority. If the Purchaser is not an individual,
such Purchaser is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and
to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations thereunder. If the Purchaser is
not an individual, the purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of
such Purchaser. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Purchaser if the Purchaser is not
an individual, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of
such Purchaser, enforceable against it in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account and not with a view to or for distributing
or reselling such Securities or any part thereof, without prejudice,
however, to such Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing
contained herein shall be deemed a representation or warranty by such
Purchaser to hold Securities for any period of time or limit such
Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser does not have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants or converts any Debentures it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
If the Purchaser is not an individual, such Purchaser has not been formed
solely for the purpose of acquiring the Securities. Such Purchaser is not
a registered broker-dealer under Section 15 of the Exchange Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
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magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
The Company acknowledges and agrees that each Purchaser does not
make or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth
in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to
the Company or to an Affiliate of a Purchaser, the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.
(b) Each Purchaser, severally and not jointly with the other
Purchasers, agrees to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on any certificate evidencing
Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY
ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
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The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities to a financial
institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel
of the pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At the
appropriate Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
(c) Certificates evidencing the Underlying Shares shall not contain
any legend (including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Underlying Shares pursuant to Rule
144, or (iii) if such Underlying Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission); provided, however,
in connection with the issuance of the Underlying Shares, each Purchaser,
severally and not jointly with the other Purchasers, hereby agrees to
adhere to and abide by all prospectus delivery requirements under the
Securities Act and rules and regulations of the Commission. The Company
shall cause its counsel to issue a legal opinion to the Company's transfer
agent promptly after the Effective Date if required by the Company's
transfer agent to effect the removal of the legend hereunder. If all or
any portion of a Debenture or Warrant is converted or exercised (as
applicable) at a time when there is an effective registration statement to
cover the resale of the Underlying Shares, or if such Underlying Shares
may be sold under Rule 144(k) or if such legend is not otherwise required
under applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Underlying Shares shall be issued free
of all legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c),
it will, no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a certificate
representing Underlying Shares, as applicable, issued with a restrictive
legend (such third Trading Day, the "Legend Removal Date"), deliver or
cause to be delivered to such Purchaser a certificate representing such
shares that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer
set forth in this Section.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $5,000 of Underlying Shares (based on the
VWAP of the Common Stock on the date such Securities are submitted to the
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Company's transfer agent) delivered for removal of the restrictive legend
and subject to this Section 4.1(c), $50 per Trading Day (increasing to
$100 per Trading Day 3 Trading Days after such damages have begun to
accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend. Nothing herein shall limit such
Purchaser's right to pursue actual damages for the Company's failure to
deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue
all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.
4.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. Upon the request
of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.5 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may be required to fulfill its obligations in full under
the Transaction Documents.
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(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors of the Company shall use
commercially reasonable efforts to amend the Company's certificate or
articles of incorporation to increase the number of authorized but
unissued shares of Common Stock to at least the Required Minimum at such
time, as soon as possible and in any event not later than the 75th day
after such date.
(c) The Company shall, if applicable: (i) in the time and manner
required by the Trading Market, prepare and file with such Trading Market
an additional shares listing application covering a number of shares of
Common Stock at least equal to the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing on the Trading Market as soon as possible
thereafter, (iii) provide to the Purchasers evidence of such listing, and
(iv) maintain the listing of such Common Stock on any date at least equal
to the Required Minimum on such date on such Trading Market or another
Trading Market.
4.6 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.7 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date of this Agreement, issue a
press release or file a Current Report on Form 8-K reasonably acceptable to each
Purchaser disclosing all material terms of the transactions contemplated hereby.
The Company and the Purchasers shall consult with each other in issuing any
press releases with respect to the transactions contemplated hereby and neither
the Company nor any Purchaser shall issue any such press release or otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, other than in any registration
statement filed pursuant to the Registration Rights Agreement and filings
related thereto, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide each
Purchaser with prior notice of such disclosure.
4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
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executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables, capital lease obligations and accrued expenses in the ordinary course
of the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.10 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company,
solely as a result of such Purchaser's acquisition of the Securities under this
Agreement and without causation by any other activity, obligation, condition or
liability on the part of, or pertaining to such Purchaser and not to the
purchase of Securities pursuant to this Agreement, the Company will reimburse
such Purchaser, to the extent such reimbursement is not provided for in Section
4.11, for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations (and limitations thereon) of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement except to the extent any covenant or warranty owing to the
Company is breached.
4.11 Indemnification. The Company will indemnify and hold the Purchasers
and their directors, officers, shareholders, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of or relating to: (a) any misrepresentation, breach or
inaccuracy, or any allegation by a third party that, if true, would constitute a
breach or inaccuracy, of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction
Documents; or (b) any cause of action, suit or claim brought or made against
such Purchaser Party and arising solely out of or solely resulting from the
execution, delivery, performance or enforcement of this Agreement or any of the
other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser and not to the
transactions contemplated by this Agreement. The Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any
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investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.
4.12 Shareholders Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under the plan
or in any way could be deemed to trigger the provisions of such plan by virtue
of receiving Securities under the Transaction Documents.
4.13 Participation in Future Financing. From the date hereof until 12
months after the Effective Date, upon any financing by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent
Financing"), each Purchaser shall have the right to participate in up to 100% of
such Subsequent Financing. At least 10 Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing ("Pre-Notice"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a "Subsequent Financing Notice"). Upon the
request of a Purchaser, and only upon a request by such Purchaser, for a
Subsequent Financing Notice, the Company shall promptly, but no later than 1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto. If by 6:30 p.m. (New York City time) on the 10th
Trading Day after all of the Purchasers have received the Pre-Notice,
notifications of the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to provide) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 10th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate. The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason
substantially on terms no more favorable to the Purchasers than those set forth
in such Subsequent Financing Notice within 60 Trading Days after the date of the
initial Subsequent Financing Notice. In the event the Company receives responses
to Subsequent Financing Notices from Purchasers seeking to purchase more than
the aggregate amount of the Subsequent Financing, each such Purchaser shall have
the right to purchase their Pro Rata Portion (as defined below) of the
Subsequent Financing. "Pro Rata Portion" is the ratio of (x) the Subscription
Amount of a participating Purchaser and (y) the sum of the aggregate
Subscription Amount of all participating Purchasers. Notwithstanding the
foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance.
4.14 Prohibition on Subsequent Financings. From the date hereof until 90
days after the Effective Date, other than as contemplated by this Agreement,
neither the Company nor any Subsidiary shall issue or sell any Common Stock or
Common Stock Equivalents. Notwithstanding anything herein to the contrary, the
90 day period set forth in this Section 4.14 shall be extended for the number of
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Trading Days during such period in which (y) trading in the Common Stock is
suspended by any Trading Market, or (z) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Underlying Shares. Notwithstanding anything to the contrary herein, this Section
4.14 shall not apply in respect of an Exempt Issuance. Additionally, in
additional to the limitations set forth herein, from the date hereof until such
time as no Purchaser holds any of the Securities, the Company shall be
prohibited from effecting or enter into an agreement to effect any Subsequent
Financing involving a "Variable Rate Transaction" or an "MFN Transaction" (each
as defined below). The term "Variable Rate Transaction" shall mean a transaction
in which the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time after
the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock. The term "MFN
Transaction" shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
which grants to an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable than those granted to
such investor in such offering.
4.15 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Debentures in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended to
treat for the Company the Debenture holders as a class and shall not in any way
be construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before April ___, 2004; provided that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties).
5.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
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agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day and an electronic confirmation of delivery is
received by the sender, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) three Trading Days
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
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5.9 Governing Law; Venue; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) such document with the same force and effect as if such facsimile
signature page were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
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5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.
5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
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default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only HPC Capital Management, the placement agent to the
transaction. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.
5.19 Liquidated Damages. The Company's obligations to pay any liquidated
damages or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid liquidated
damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such liquidated damages or other
amounts are due and payable shall have been canceled.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
XXXXXX CAPITAL CORP. Address for Notice:
-------------------
By:___________________________ 000 Xxxx Xxxxx Xx.
Name: Xxxxxxx, XX 00000
Title: 000.000.0000 (phone)
000.000.0000 (fax)
With a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxxx
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
000.000.0000 (phone)
000.000.0000 (fax)
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO TKER SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity or Individual:_________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory if not an Individual:______________________________
Title of Authorized Signatory if not an Individual______________________________
Email Address of Authorized Entity or Indivdual:________________________________
Address for Notice of Investing Entity or Individual:
Address for Delivery of Securities for Investing Entity or Individual (if not
same as above):
Subscription Amount:
Shares:
Warrant Shares:
EIN or SSN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
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