SECURITIES PURCHASE AGREEMENT among ACCESS INTEGRATED TECHNOLOGIES, INC. and THE PURCHASERS REFERRED TO HEREIN
SECURITIES
PURCHASE AGREEMENT
among
ACCESS
INTEGRATED TECHNOLOGIES, INC.
and
THE
PURCHASERS REFERRED TO HEREIN
TABLE
OF CONTENTS
Page
ARTICLE
I
|
DEFINITIONS
|
1
|
1.1
|
Definitions
|
1
|
ARTICLE
II
|
PURCHASE
AND SALE
|
4
|
2.1
|
Closing
|
4
|
2.2
|
Deliveries
|
4
|
2.3
|
Closing
Conditions
|
5
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES
|
6
|
3.1
|
Representations
and Warranties of the Company
|
6
|
3.2
|
Representations
and Warranties of the Purchasers
|
16
|
ARTICLE
IV
|
OTHER
AGREEMENTS OF THE PARTIES
|
19
|
4.1
|
Transfer
Restrictions
|
19
|
4.2
|
Furnishing
of Information
|
20
|
4.3
|
Integration
|
20
|
4.4
|
Securities
Laws Disclosure; Publicity; Confidentiality
|
20
|
4.5
|
Form
D; Blue Sky Filings
|
21
|
4.6
|
Shareholder
Rights Plan
|
21
|
4.7
|
Non-Public
Information
|
21
|
4.8
|
Use
of Proceeds
|
21
|
4.9
|
Indemnification
of Purchasers
|
21
|
4.10
|
Reservation
of Common Stock
|
22
|
4.11
|
Listing
of Common Stock
|
23
|
4.12
|
Equal
Treatment of Purchasers
|
23
|
4.13
|
Short
Sales and Confidentiality After the Date Hereof
|
23
|
4.14
|
Reasonable
Best Efforts
|
24
|
4.15
|
Piggyback
Registrations.
|
24
|
4.16
|
Registration
Procedures.
|
25
|
4.17
|
Participation
in Registrations.
|
27
|
ARTICLE
V
|
MISCELLANEOUS
|
28
|
5.1
|
Termination
|
28
|
5.2
|
Fees
and Expenses
|
28
|
-i-
|
TABLE
OF CONTENTS
(continued)
Page
5.3
|
Entire
Agreement
|
28
|
5.4
|
Notices
|
28
|
5.5
|
Amendments;
Waivers
|
29
|
5.6
|
Headings
|
29
|
5.7
|
Successors
and Assigns
|
29
|
5.8
|
No
Third-Party Beneficiaries
|
29
|
5.9
|
Governing
Law
|
29
|
5.10
|
Survival
|
30
|
5.11
|
Execution
|
30
|
5.12
|
Severability
|
30
|
5.13
|
Rescission
and Withdrawal Right
|
30
|
5.14
|
Replacement
of Securities
|
31
|
5.15
|
Remedies
|
31
|
5.16
|
Payment
Set Aside
|
31
|
5.17
|
Independent
Nature of Purchasers’ Obligations and Rights
|
31
|
5.18
|
Liquidated
Damages
|
32
|
5.19
|
Construction
|
32
|
-ii-
|
This
Securities Purchase Agreement (this “Agreement”) is dated
as of February 9, 2009, among Access Integrated Technologies, Inc., a Delaware
corporation (the “Company”), and each
purchaser 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, an aggregate of 5 shares of Series A 10% Non-Voting Cumulative
Preferred Stock (the “Series A Preferred
Stock”) of the Company as more fully described in this Agreement;
and
WHEREAS,
the Purchasers, severally, and not jointly, wish to purchase from the Company
and the Company wishes to sell and issue to the Purchasers, upon the terms and
conditions stated in this Agreement, the number of shares of Series A Preferred
Stock set forth on each Purchaser's signature page, at a purchase price of
$500,000 per share;
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I DEFINITIONS
1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, 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(k).
“Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person as such terms are
used in and construed under Rule 144 under the Securities
Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such
Purchaser.
“Certificate of
Designations” means the certificate of designations setting forth the
powers, preferences and rights, and the qualifications, limitations and
restrictions of the Series A Preferred Stock, in the form attached as Exhibit B
hereto.
“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) the Purchasers’ obligations to pay the Subscription Amount and
(ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.
“Commission” means the
Securities and Exchange Commission.
“Common Stock” means
the Class A Common Stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter have been
reclassified or changed into.
“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Company Counsel”
means Xxxxxx Xxxx & Xxxxxx LLP.
“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered concurrently
herewith.
“Evaluation Date”
shall have the meaning ascribed to such term in
Section 3.1(s).
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Intellectual Property
Rights” shall have the meaning ascribed to such term in
Section 3.1(p).
“Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, or preemptive
right.
“Majority Holders”
means the holder(s) of a majority of the Shares.
“Material Adverse
Effect” shall have the meaning assigned to such term in
Section 3.1(b).
“Material Permits”
shall have the meaning ascribed to such term in
Section 3.1(n).
“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.
“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.9.
2
“Required Approvals”
shall have the meaning ascribed to such term in
Section 3.1(e).
“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).
“Securities” means the
Shares, the Warrants and the Warrant Shares.
“Securities Act” means
the Securities Act of 1933, as amended.
“Series A Preferred
Stock” means the Series A Callable 10% Non-Voting Cumulative Preferred
Stock of the Corporation, represented by certificates in the form attached as
Exhibit C
hereto.
“Shares” means the
shares of Series A Preferred Stock issued to each Purchaser pursuant to this
Agreement.
“Short Sales” shall
include all “short
sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act.
“Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for the Securities
purchased hereunder as specified on such Purchaser’s signature page, in United
States Dollars and in immediately available funds.
“Subsidiary” means any
material subsidiary of the Company as set forth on Schedule 3.1(a).
“Trading Day” means a
day on which the Common Stock is traded on a Trading Market.
“Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the
New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital
Market, the OTC Bulletin Board, or any other recognized exchange or automated
quotation system.
“Transaction
Documents” means this Agreement, the Warrants and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
“Warrant” means a
warrant to purchase shares of Common Stock, such that each Purchaser shall
receive warrants to purchase 150,000 shares of Common Stock for each share of
Series A Preferred Stock being purchased by that Purchaser, and such warrants
shall have the terms and conditions set forth in Exhibit D attached
hereto.
3
“Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.
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 issue and sell to the Purchasers, and each
Purchaser agrees to purchase, severally and not jointly, the number of Shares
and Warrants set forth on each Purchaser’s signature page, at a purchase price
of $500,000 per Share. Each Purchaser shall deliver to the Company
via wire transfer to the account as specified in writing by the Company
immediately available funds equal to its Subscription Amount and the Company
shall deliver to each Purchaser their respective Shares 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 Sections 2.2 and 2.3, the Closing shall occur at
the offices of Xxxxxx Xxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, or such other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On
the Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) one
or more stock certificates, substantially in the form of Exhibit C attached
hereto, representing the Shares being purchased by such Purchaser, and
registered in the name of such Purchaser, as set forth on each Purchaser’s
signature page;
(iii) Warrants
to purchase such number of shares of Common Stock as is set forth on each
Purchaser’s signature page;
(iv) a
secretary’s certificate, dated as of the Closing Date, certifying as to (A) the
incorporation and good standing of the Company in the State of Delaware based
upon a certificate issued by the Secretary of State of the State of Delaware as
of a date within thirty (30) days of the Closing Date, (B) the Resolutions
(as defined in Section 2.3(b)(iv) below), (C) the Fourth Amended and
Restated Certificate of Incorporation of the Company, as amended, certified as
of a date within ten (10) days of the Closing Date, including a Certificate of
Designations, substantially in the form of Exhibit B attached
hereto, and (D) the bylaws of the Company, each as in effect as of the
Closing Date;
(v) such
other documents relating to the transactions contemplated by the Transaction
Documents as such Purchaser or its counsel may reasonably request.
4
(b)
On the
Closing Date, each Purchaser (or, in the case of (iii), the parties thereto)
shall deliver or cause to be delivered to the Company the
following:
(i) this
Agreement duly executed by such Purchaser;
(ii) such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company;
(iii) such
other documents relating to the transactions contemplated by the Transaction
Documents as the Company or its counsel may reasonably request.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;
(ii) all
obligations, covenants and agreements of the Purchasers required to be performed
at or prior to the Closing Date shall have been performed; and
(iii) the
delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) The
board of directors of the Company shall have approved the transactions
contemplated hereby and shall have adopted resolutions consistent with Section
3.1(c) below and in a form reasonably acceptable to such Purchaser (the “Resolutions”);
(v) the
Certificate of Designations shall have been filed with the Secretary of State of
the State of Delaware;
5
(vi)
there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof.
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 which Disclosure Schedules
shall be deemed a part hereof, the Company hereby represents and warrants as of
the date hereof and as of the Closing Date to each Purchaser as
follows:
(a) Subsidiaries. All
of the direct and indirect Subsidiaries of the Company are set forth on Schedule 3.1(a). Except
as indicated on Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.
(b) Organization and
Qualification. The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse
Effect”) and to the Company’s knowledge no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals. Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company
6
and, when
delivered in accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or
other equitable remedies.
(d) No
Conflicts. Except as set forth on Schedule 3.1(d), the
execution, delivery and performance of the Transaction Documents by the Company,
the issuance and sale of the Securities and the consummation by the Company of
the other transactions contemplated hereby and 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) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii),
such as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.5 of this Agreement or
consents listed on Schedule 3.1(d),
(ii) application(s), if applicable, to each applicable Trading Market for
the issuance and listing of the Warrant Shares for trading thereon in the time
and manner required thereby, and (iii) the filing of Form D with the
Commission and such filings as are required to be made under applicable state
securities laws (collectively, the “Required
Approvals”).
(f) Issuance of the
Securities. The Securities, when issued in accordance with the
terms of the Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the
Company. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Warrant
Shares.
(g) Capitalization. The
capitalization of the Company is as set forth on Schedule 3.1(g). Except
as set forth on Schedule 3.1(g),
the Company has not issued any
7
capital
stock since its most recently filed periodic report under the Exchange Act,
other than pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of Common Stock to
employees pursuant to the Company’s employee stock purchase plan and pursuant to
the conversion or exercise of outstanding Common Stock
Equivalents. 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 set
forth on Schedule 3.1(g),
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 exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. Except as set forth on Schedule 3.1(g), the
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. Except as otherwise
provided in this Agreement, no further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders.
(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Reports”) on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods
involved
8
(“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) No Undisclosed Events,
Liabilities or Developments. Except for the issuance of the
Securities contemplated by this Agreement or as set forth on Schedule 3(i),
no event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made that
has not been publicly disclosed before one (1) Trading Day prior to the
date that this representation is made.
(j) 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 reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice, (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 and (C) expenses incurred in connection with the
transactions contemplated hereunder, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission
any request for confidential treatment of information.
(k) Litigation. Except
as set forth in the SEC Reports or on Schedule 3.1(k),
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) could, if there were an unfavorable decision, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company
nor any Subsidiary, nor any director or officer of the Company nor any director
or officer of any Subsidiary that served as a director or officer of such
Subsidiary following the formation or acquisition of such Subsidiary by the
Company, is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the
Company, there is not
9
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.
(l) Labor
Relations. Except as set forth on Schedule 3.1(l), no
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect. Except for four of
the Subsidiary’s employees, none of the Company’s or its Subsidiaries’ employees
is a member of a union that relates to such employee’s relationship with the
Company, and neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive
officer, to the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating
to employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(m) 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, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment; except in each case as could not
have a Material Adverse Effect.
(n) 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 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.
10
(o)
Title to
Assets. Except as set forth on Schedule 3.1(o), the
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them that is material to the business of the Company and
the Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in compliance.
(p) Intellectual Property
Rights. The Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights, licenses and
other similar intellectual property 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 notice (written or otherwise) that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights of others. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(q) Insurance. The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage. To the best knowledge of the Company, such insurance
contracts and policies are accurate and complete. Neither the Company
nor any Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(r) Transactions with Affiliates
and Employees. Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director,
11
or any
such employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (i) for payment of
salary or consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) for other employee
benefits, including stock option agreements under any stock option plan of the
Company.
(s) Xxxxxxxx-Xxxxx. 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 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 under the Exchange Act and applicable to the Company)
or, to the knowledge of the Company, in other factors that could significantly
affect the Company’s internal controls.
(t) Certain
Fees. The Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
any brokerage or finder’s fees or commissions payable to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person in connection with the transactions contemplated by the Transaction
Documents.
(u) Private
Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by
the Company to the Purchasers as contemplated hereby. The issuance
and sale of the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(v) Investment
Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(w) Registration
Rights. Other than each of the Purchasers or as disclosed in
the Company’s SEC Reports, no Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company.
12
(x)
Listing and Maintenance
Requirements. The Company’s Common Stock is registered
pursuant to Section 12(b) 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.
(y) 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
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(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, non-public
information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement,
furnished by or on behalf of the Company with respect to the representations and
warranties made herein are true and correct in all material respects with
respect to such representations and warranties and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, and when taken as a whole, 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) No Integrated
Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market on which any of the securities of the Company
are listed or designated.
13
(bb)
Solvency. Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder and to the Company’s knowledge, (i) the Company’s fair
saleable value of its 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 for the foreseeable
future. 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 reasonably 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 in respect of Indebtedness of others, whether or not the same are or
should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(cc) Tax
Status. Except for matters that would not, individually or in
the aggregate, have a Material Adverse Effect, the Company and each Subsidiary
has filed all necessary federal, state and foreign income and franchise tax
returns and has paid or accrued all taxes shown as due thereon, and the Company
has no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
(dd) No General
Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered
the Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.
(ee) Foreign Corrupt
Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful
14
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.
(ff) Accountants. The
Company’s accountants are set forth on Schedule 3.1(ff)
of the Disclosure Schedule. To the knowledge of the Company, such
accountants, who have expressed their opinion with respect to the financial
statements to be included in the Company’s Annual Report on Form 10-K for the
year ending March 31, 2007, are a registered public accounting firm as
required by the Securities Act.
(gg) Acknowledgment Regarding
Purchasers’ Purchase of Securities. The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby. The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
(hh) Acknowledgement Regarding
Purchasers’ Trading Activity. Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Section 4.15
hereof), it is understood and agreed by the Company (i) that none of the
Purchasers have been asked to agree, nor, to the knowledge of the Company, has
any Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that
past or future open market or other transactions by any Purchaser, including
Short Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Purchaser, and counter parties
in “derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and
(iv) that each Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative”
transaction. The Company further understands and acknowledges that
(a) one or more Purchasers may engage in hedging activities at various
times during the period that the Securities are outstanding, and (b) such
hedging activities (if any) could reduce the value of the existing stockholders’
equity interests in the Company at and after the time that the hedging
activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
15
(ii)
Manipulation of
Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities (other than for the placement
agent’s placement of the Securities), or (iii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
Each of
the Purchasers acknowledges and agrees that the Company has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this
Section 3.1.
3.2 Representations and
Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, severally represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization;
Authority. Such Purchaser, if an entity, is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(b) Own
Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities for its own
account and not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the Securities Act or any applicable state securities law and
has no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
such Purchaser’s right to sell the Securities in compliance with applicable
federal and state securities laws) in violation of the Securities Act or any
applicable state securities law. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
16
(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 receives the
Warrant Shares it will be, either: (i) an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
Securities Act or (ii) a “qualified institutional buyer” as defined in
Rule 144A(a) under the Securities Act. Such Purchaser was not
organized for the purpose of acquiring the Securities and is not required to be
registered as a broker-dealer under Section 15 of the Exchange
Act.
(d) Experience of Such
Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Such Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.
(e) General
Solicitation. Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(f) Certain Trading
Activities. Such Purchaser has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with such
Purchaser, engaged in any direct or indirect purchases or sales in the
securities of the Company (including, without limitations, any Short Sales
involving the Company’s securities) since the time that such Purchaser was first
contacted by the Company or any other Person regarding the investment in the
Company contemplated by this Agreement. Such Purchaser covenants that
neither it nor any Person acting on its behalf or pursuant to any understanding
with it will engage in any direct or indirect purchases or sales in the
securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed by the
Company in the manner set forth in Section 4.4. Such Purchaser has
maintained, and covenants that until such time as the transactions contemplated
by this Agreement are publicly disclosed by the Company in the manner set forth
in Section 4.4 such Purchaser will maintain, the confidentiality of all
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement. Other than to other Persons party to this Agreement, such
Purchaser has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).
17
(g)
Access to
Information. Such Purchaser acknowledges that it has reviewed
the SEC Reports and the Transaction Documents and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the
Subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospectus sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the Securities. Neither such inquiries nor
any other investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser’s right
to rely on the truth, accuracy and completeness of the SEC Reports and the
Transaction Documents, and the Company’s representations and warranties
contained in the Transaction Documents.
(h) Fees and
Commissions. Such Purchaser has not retained any intermediary
with respect to the transactions contemplated by this Agreement and agrees to
indemnify and hold harmless the Company from any liability for any compensation
to any intermediary retained by such Purchaser and the fees and expenses of
defending against such liability or alleged liability.
(i) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by such Purchaser, the purchase of the Securities and the
consummation by such Purchaser of the other transactions contemplated hereby and
thereby do not and will not (i) if applicable, conflict with or violate any
provision of such Purchaser’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of such Purchaser, 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 debt of such Purchaser or otherwise) or other
understanding to which such Purchaser is a party or by which any property or
asset of such Purchaser is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which such Purchaser is subject (including
federal and state securities laws and regulations), or by which any property or
asset of such Purchaser is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.
(j) Consents. All
consents, approvals, orders and authorizations required on the part of such
Purchaser in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated therein have
been obtained and are effective as of the date hereof.
18
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. Each Purchaser acknowledges and understands,
severally and not jointly, that (i) the Securities may only be disposed of
in compliance with state and federal securities laws and (ii) in connection
with any transfer of Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an affiliate of a Purchaser or
in connection with a pledge as contemplated in Section 4.1, 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. Any transfer or purported transfer of the Securities in
violation of this Section 4.1 shall be void.
The
Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities (and any certificates or
instruments representing the Securities) in the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of legal counsel of the pledgee, secured
party or pledgor shall be required in connection therewith. Further,
no notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company
19
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, with respect to the Warrant Shares, if registered
pursuant to Section 4.15 below, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.
4.2 Furnishing of
Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long
as any Purchaser owns Warrants or Warrant Shares, but only until such holder’s
Warrant Shares may be sold under Rule 144(b)(i), if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the
Securities under Rule 144. The Company further covenants that it
will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.3 Integration. The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4 Securities Laws Disclosure;
Publicity; Confidentiality. No later than 5:30 p.m. eastern
time on the fourth Trading Day following the Closing Date the Company shall
cause a Current Report on Form 8-K to be transmitted to the Commission for
filing, which Form 8-K shall be reasonably acceptable to each Purchaser,
disclose the material terms of the transactions contemplated hereby, and shall
attach forms of the Transaction Documents thereto. The Company and
each Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and no Purchaser shall
issue any such press release or otherwise make any such public statement without
the prior consent 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 Company with prior notice of such
public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with a registration
statement that includes the resale of Warrant Shares under Section 4.15 below
and (ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or
(ii). In the event of a breach of the foregoing covenant by the
Company, any of
20
its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser shall have the right to make public
disclosure in the form of a press release, public advertisement or otherwise, of
such material nonpublic information without the prior approval by the Company,
its Subsidiaries, or any of its or their respective officers, directors,
employees or agents, provided that such Purchaser gives the Company at least two
(2) Trading Days’ notice of its intention to make such public disclosure
and provides such intended disclosure to the Company. No Purchaser
shall have any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, shareholders or agents for any
such disclosure.
4.5 Form D; Blue Sky
Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the Closing and issuance
to the Purchasers pursuant to this Agreement under applicable securities or
“Blue Sky” laws of the states of the United States, and shall provide evidence
of any such action so taken to the Purchasers on or prior to the Closing
Date. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following the Closing
Date.
4.6 Shareholder Rights
Plan. No claim will be made or enforced by the Company or, to
the knowledge of the Company, any other Person that any Purchaser is an
“Acquiring Person” under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.7 Non-Public
Information. The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.8 Use of
Proceeds. Except as set forth on Schedule 4.8 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder in connection with (A) the payment of any existing outstanding
indebtedness set forth on Schedule 4.8, (B) the
expansion of its digital cinema rollout plans, (C) working capital and (D) other
general corporate purposes including acquisitions.
4.9 Indemnification of
Purchasers. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, members, partners, employees and agents
(each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all
21
judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or
malfeasance). If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing. Any Purchaser Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser
Party except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the position
of the Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld, conditioned or delayed; or
(ii) to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by the Purchasers in
this Agreement or in the other Transaction Documents.
4.10 Reservation of Common
Stock.
(a) As
of the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue Warrant Shares pursuant to the Transaction Documents.
(b) If,
on any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than maximum number of issuable Warrant Shares,
then the Board of Directors of the Company shall use commercially reasonable
efforts to promptly amend the Company’s certificate of incorporation to increase
the number of authorized but unissued shares of Common Stock to at least the
maximum number of issuable Warrant Shares.
(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 maximum number of issuable Warrant Shares, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on the
Trading Market promptly
22
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 maximum number of
issuable Warrant Shares on such Trading Market or another Trading
Market.
4.11 Listing of Common
Stock. The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on a Trading
Market, and as soon as reasonably practicable following the Closing, to list, if
applicable, all of the Warrant Shares on such Trading Market. The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Trading Market, it will include in such application all of the
Warrant Shares, and will take such other action as is necessary to cause all of
the Warrant Shares to be listed on such other Trading Market as promptly as
possible. The Company will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market.
4.12 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 dividends on any Shares or redeem any Shares other
than in a manner pro rata to all outstanding Shares. 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 Purchasers 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.
4.13 Short Sales and
Confidentiality After the Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliates acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period after the time such Purchaser
and/or the Company started discussing the transactions contemplated in this
Agreement and ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described in
Section 4.4. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in Section 4.4, such Purchaser will maintain, the confidentiality
of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the
foregoing, no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in Short Sales in the securities of the Company after
the time that the transactions contemplated by this Agreement are first publicly
announced as described in Section 4.4. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement.
23
4.14 Reasonable Best
Efforts. Each party shall use its reasonable best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Section 2.3 of this Agreement.
4.15 Piggyback
Registrations.
(a) Right to
Piggyback. If, during the 30 months following the Closing
Date, the Company proposes to register any of its securities, other than a
Special Registration (as defined below), and the registration form to be filed
may be used for the registration or qualification for distribution of
Securities, the Company will give prompt written notice to the Purchasers of its
intention to effect such a registration (but in no event less than 10 days prior
to the anticipated filing date) and, subject to Section 4.15(d), will include in
such registration all Warrant Shares with respect to which the Company has
received written requests for inclusion therein within five business days after
the date of the Company’s notice (a “Piggyback
Registration”). Any such person that has made such a written request may
withdraw its Warrant Shares from such Piggyback Registration by giving written
notice to the Company and the managing underwriter, if any, on or before the
fifth business day prior to the planned effective date of such Piggyback
Registration. The Company may terminate or withdraw any registration under this
Section 4.15(a) prior to the effectiveness of such registration, whether or not
the Purchasers have elected to include Warrant Shares in such registration.
“Special
Registration” means the registration of (i) equity securities and/or
options or other rights in respect thereof solely registered on Form S-4 or Form
S-8 (or successor forms thereto) or (ii) shares of equity securities and/or
options or other rights in respect thereof to be offered to directors, members
of management, employees, consultants, customers, lenders or vendors of the
Company or its direct or indirect Subsidiaries or in connection with dividend
reinvestment plans.
(b) Underwritten
Registration. If the registration referred to in Section
4.15(a) is proposed to be underwritten, the Company will so advise the
Purchasers as a part of the written notice given pursuant to Section 4.15(a). In
such event, the right of the Purchasers to registration pursuant to this Section
4.15 will be conditioned upon such persons’ participation in such underwriting
and the inclusion of such person’s Warrant Shares in the underwriting, and each
such person will (together with the Company and the other persons distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. If any participating person disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the
Purchasers.
(c) Piggyback Registration
Expenses. The Company will pay all registration expenses in
connection with any Piggyback Registration, whether or not any registration or
prospectus becomes effective or final.
(d) Priority on Primary
Registrations. If a Piggyback Registration relates to an
underwritten primary offering on behalf of the Company, and the managing
underwriters advise the Company that in their reasonable opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold without adversely affecting the marketability of such offering
(including an adverse effect on the per share offering price), the Company will
include in such registration or prospectus only such number of securities
that
24
in the
reasonable opinion of such underwriters can be sold without adversely affecting
the marketability of the offering (including an adverse effect on the per share
offering price), which securities will be so included in the following order of
priority: (i) first, the securities the Company proposes to sell, (ii) second,
Securities of the Purchasers who have requested registration of Securities
pursuant to Sections 4.15, pro rata on the basis of the aggregate number of such
Securities owned by each such person and (iii) third, any other securities of
the Company that have been requested to be so included, subject to the terms of
this Agreement.
4.16 Registration
Procedures. Whenever a Purchaser or any transferee of Warrant Shares has
requested that any Warrant Shares be registered pursuant to Section 4.15 of this
Agreement, the Company will use its reasonable best efforts to effect the
registration and sale of such Warrant Shares as soon as reasonably practicable
in accordance with the intended method of disposition thereof and pursuant
thereto. The Company shall use its reasonable best efforts to, as expeditiously
as possible:
(a) prepare
and file with the Commission a registration statement with respect to such
Warrant Shares, make all required filings with the National Association of
Securities Dealers and the Financial Industry Regulatory Authority and
thereafter use its reasonable best efforts to cause such registration statement
to become effective as soon as reasonably practicable and to remain effective as
provided herein;
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement as may be necessary to keep such registration statement
effective for a period of either (A) not less than (i) six months, (ii) if such
registration statement relates to an underwritten offering, such longer period
as, based upon the opinion of counsel for the underwriters, a prospectus is
required by law to be delivered in connection with sales of Securities by an
underwriter or dealer or (iii) continuously in the case of shelf registration
statements and any shelf registration statement shall be re-filed upon its
expiration (or in each case such shorter period ending on the date that the
securities covered by such shelf registration statement cease to constitute
Warrant Shares) or (B) such shorter period as will terminate when all of the
securities covered by such registration statement have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement (but in any event not before
the expiration of any longer period required under the Securities Act) or
pursuant to Rule 144, and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement, and cause the related
prospectus to be supplemented by any prospectus supplement as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of the securities covered by such registration statement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act;
(c) furnish
to each seller of Warrant Shares covered by such registration statement such
number of copies, without charge, of such registration statement, each amendment
and supplement thereto, including each preliminary prospectus, final prospectus,
any other prospectus (including any prospectus filed under Rule 424, Rule 430A
or Rule 430B under
25
the
Securities Act and any “issuer free writing prospectus” as such term is defined
under Rule 433 promulgated under the Securities Act), all exhibits and other
documents filed therewith and such other documents as such seller or such
managing underwriter may reasonably request including in order to facilitate the
disposition of the Warrant Shares owned by such seller, and upon request a copy
of any and all transmittal letters or other correspondence to or received from,
the Commission or any other governmental entity relating to such
offer;
(d) register
or qualify (or exempt from registration or qualification) such Warrant Shares,
and keep such registration or qualification (or exemption therefrom) effective,
under such other securities or blue sky laws of such jurisdictions as Purchasers
of Securities covered by such registration statement reasonably request and do
any and all other acts and things that may be reasonably necessary or reasonably
advisable to enable such Purchasers to consummate the disposition in such
jurisdictions of the Securities owned by such Purchasers (provided that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subsection, (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction);
(e) notify
each seller of such Warrant Shares covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the discovery of the happening of
any event that makes any statement made in the registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such registration statement, prospectus or documents and, as soon as
reasonably practicable, prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, in the case
of the registration statement, it will not contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, not misleading, and that in the
case of any prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statement
therein, in light of the circumstances in which they were made, not
misleading;
(f) notify
each seller of any Warrant Shares covered by such registration statement (i)
when such registration statement or the prospectus or any prospectus supplement
or post-effective amendment has been filed and, with respect to such
registration statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission for amendments or supplements
to such registration statement or to amend or to supplement such prospectus or
for additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of such registration statement or the
initiation of any proceedings for any of such purposes, (iv) if at any time the
representations and warranties of the Company contained in any corresponding
underwriting agreement cease to be true and correct, and (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction, or the initiation or threatening of any proceeding for such
purpose;
(g) cause
all such Warrant Shares to be listed on the Trading Market on which the Common
Stock is then listed;
26
(h)
provide a
transfer agent and registrar for all such Warrant Shares not later than the
effective date of such registration statement;
(i) in
the case of certificated Warrant Shares, cooperate with the Purchasers of such
Warrant Shares and the managing underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates (not bearing any legends) representing
Warrant Shares to be sold after receiving written representations from each
Purchaser of such Warrant Shares that that the Warrant Shares represented by the
certificates so delivered by such Purchaser will be transferred in accordance
with the registration statement, and enable such Warrant Shares to be in such
denominations and registered in such names as the Purchasers or managing
underwriters, if any, may request at least two business days prior to any sale
of Warrant Shares;
(j) otherwise
use its reasonable best efforts to comply with all applicable rules and
regulations of the Commission and any applicable national securities
exchange;
(k) timely
provide to its security holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(l) in
the event of the issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of any
related prospectus or ceasing trading of any securities included in such
registration statement for sale in any jurisdiction, use every reasonable effort
to promptly obtain the withdrawal of such order;
(m) obtain
any required regulatory approval necessary for the Purchasers to sell Warrant
Shares in an offering; and
(n) as
a condition to registering Warrant Shares, the Company may require each
Purchaser holding Securities as to which any registration is being effected to
furnish the Company with such information regarding such person and pertinent to
the disclosure requirements relating to the registration and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
4.17 Participation in
Registrations.
(a) None
of the Purchasers may participate in any registration hereunder that is
underwritten unless such person (i) agrees to sell its Warrant Shares on the
basis provided in the underwriting arrangements in customary form entered into
pursuant to this Agreement (including pursuant to the terms of any
over-allotment or “green shoe” option requested by the managing underwriter(s),
provided that no such person will be required to sell more than the number of
Warrant Shares that such person has requested the Company to include in any
registration), (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, provided that such
person shall not be required to make any representations or warranties other
than those related to title and ownership of shares and as to the accuracy and
completeness of statements made in a registration statement, prospectus,
offering circular, or other document in reliance upon and in conformity with
written information furnished to the Company or the managing underwriter(s) by
such person, and (iii) cooperates with the Company’s reasonable requests in
connection with such registration or qualification (it
27
being
understood that the Company’s failure to perform its obligations hereunder,
which failure is caused by such person’s failure to cooperate with such
reasonable requests, will not constitute a breach by the Company of this
Agreement). Notwithstanding the foregoing, the liability of any Purchaser
participating in such an underwritten registration shall be limited to an amount
equal to the amount of gross proceeds attributable to the sale of such person’s
Warrant Shares;
(b) Each
person that is participating in any registration hereunder agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 4.16(e) and 4.16(f), such person will forthwith discontinue
the disposition of its Warrant Shares pursuant to the registration statement
until such person receives copies of a supplemented or amended prospectus. In
the event the Company gives any such notice, the applicable time period
mentioned in Section 4.16(b) during which a registration statement is to remain
effective will be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this Section 4.17(b)
to and including the date when each seller of Warrant Shares covered by such
registration statement will have received the copies of the supplemented or
amended prospectus.
ARTICLE
V MISCELLANEOUS
5.1 Termination. This
Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations
hereunder only and without any effect whatsoever on the obligations between the
Company and the other Purchasers, by written notice to the other parties, if the
Closing has not been consummated on or before November 30, 2008; provided, however, 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 agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities.
5.3 Entire
Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4 Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice
or communication is delivered via facsimile or email at the facsimile number or
email address set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile or email at the facsimile number or email address set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading
28
Day,
(c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and each Purchaser who holds Securities 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 Headings. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
5.7 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Majority
Holders. Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to the “Purchasers”. Notwithstanding
anything to the contrary contained in the Transaction Documents, the Purchasers
shall be entitled to pledge the Securities in connection with a bona fide margin
agreement in accordance with Section 4.1 hereof.
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 4.9.
5.9 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and
29
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. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR
ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. 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, warranties, covenants and other agreements contained herein
shall survive the Closing and the delivery of the Shares, Warrants and Warrant
Shares as applicable for the applicable statute of limitations. Each
Purchaser shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
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) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
5.13 Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
30
5.14
Replacement of
Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.
5.15 Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
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 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 Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, 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. 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.
31
5.18
Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.
5.19 Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
(Signature
Pages Follow)
32
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.
ACCESS
INTEGRATED TECHNOLOGIES, INC.
|
Address
for Notice:
Attn:
General Counsel
00
Xxxxxxx Xxx., Xxxxx 000
Xxxxxxxxxx,
X.X. 00000
|
By:
|
/s/ A. Xxxx Xxxx | |
Name:
A. Xxxx Xxxx
Title: CEO
|
With a
copy to (which shall not constitute notice):
Xxxxxx
Xxxx & Xxxxxx LLP
000 Xxxx
Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx Xxxxxxxxx
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
33
[PURCHASER
SIGNATURE PAGES TO ACCESS INTEGRATED TECHNOLOGIES, INC.
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of Purchaser:
|
Xxxxxxx Xxxxxx | |||||
Signature
of Authorized Signatory of Purchaser:
|
/s/ Xxxxxxx Xxxxxx | |||||
Name
of Authorized Signatory:
|
||||||
Title
of Authorized Signatory:
|
||||||
Email
Address of Purchaser:
|
||||||
Address
for Notice of Purchaser:
|
Address
for Delivery of Securities for Purchaser (if not same as above):
Subscription
Amount: $2,000,000
34
EXHIBIT
A
Intentionally
Omitted
A-1
EXHIBIT
B
FORM
OF CERTIFICATE OF DESIGNATIONS
B-1
EXHIBIT
C
FORM
OF SERIES A PREFERRED STOCK CERTIFICATE
C-1
EXHIBIT
D
FORM
OF WARRANT
D-1
ACCESS
INTEGRATED TECHNOLOGIES, INC.
DISCLOSURE
SCHEDULES
Attached
hereto are the Schedules to the Securities Purchase Agreement (the “Agreement”),
by and between Access Integrated Technologies, Inc. (the “Company”) and each
purchaser identified on the signature pages thereto. Capitalized
terms used but not otherwise defined herein have the respective meanings
ascribed to them in the Agreement.
Each
Section referenced in the Schedules is a reference to the corresponding Section
in the Agreement, except as otherwise provided herein; provided, however, that the
inclusion of any matter in any Schedule shall also be deemed to be an inclusion
in any other Schedule, including each representation and warranty to which it
may relate. The inclusion of a matter in the Schedules shall
expressly not be deemed to constitute an admission by the Company, or otherwise
imply, that such matter is material or creates a measure for materiality for the
purposes of the Agreement.
The
Schedules may include additional information not specifically required to be
disclosed pursuant to the Agreement; such information is being provided for
informational purposes only and shall not be deemed to or interpreted to broaden
or otherwise amplify the Company’s representations and warranties, covenants or
agreements contained in the Agreement.
Nothing
in the Schedules shall influence the construction or interpretation of any of
the representations and warranties contained in Agreement. The
headings contained in the Schedules are for convenience of reference only and
shall not be deemed to modify or influence the interpretation of the information
contained in the Schedules or the Agreement.
Schedule
3.1(a)
Subsidiaries
PART I
|
||
Name of Subsidiary
|
Jurisdiction of
Incorporation
|
Percentage of Ownership
By Access Integrated Technologies,
Inc.
|
Access
Digital Media, Inc. (“AccessDM”)
|
Delaware
|
100%
|
Core
Technology Services, Inc.
|
100%
|
|
Hollywood
Software, Inc., d/b/a AccessIt Software
|
California
|
100%
|
FiberSat
Global Services Inc., d/b/a AccessIT Satellite and Support
Services
|
Delaware
|
100%
|
ADM
Cinema Corporation, d/b/a The Pavilion Theatre
|
Delaware
|
100%
|
UniqueScreen
Media, Inc., d/b/a AccessIT Advertising and Creative Services
(“ACS”)
|
Delaware
|
100%
|
Vistachiara
Productions, Inc., d/b/a The Bigger Picture
|
Delaware
|
100%
|
Vistachiara
Entertainment, Inc.
|
Delaware
|
100%
|
Access
Digital Cinema Phase 2 Corp.
|
Delaware
|
100%
|
PART II
|
||
Name of Subsidiary
|
Jurisdiction of
Incorporation
|
Percentage of Ownership
By Hollywood Software,
Inc.
|
PLX
Acquisition Corp.
|
Delaware
|
100%
|
PART III
|
||
Name of Subsidiary
|
Jurisdiction of
Incorporation
|
Percentage of Ownership
By Access Digital Media,
Inc.
|
Christie/AIX,
Inc. (“Christie/AIX”)
|
Delaware
|
100%
|
PART IV
|
||
Name of Subsidiary
|
Jurisdiction of
Incorporation
|
Percentage of Ownership
By Access Digital Cinema Phase 2
Corp.
|
Access
Digital Cinema Phase 2 B/AIX Corp., formerly Access Digital Cinema / Barco
Phase 2 Corp.
|
Delaware
|
100%
|
Pursuant to
the Pledge agreement, dated as of August 1, 2006, between AccessDM and General
Electric Capital Corporation (“GE”), as administrative agent and collateral
agent for certain
Schedule
3.1(a) - Page 1
lenders
under a Credit Agreement, dated as of August 1, 2006, by and among, AccessDM,
the lenders party thereto and GE, as administrative agent and collateral agent
for such lenders (the “Credit Agreement”), AccessDM has granted a security
interest in, and pledged, all of the issued and outstanding capital stock that
it owns in Christie/AIX to GE, as administrative agent and collateral agent for
the lenders under the Credit Agreement.
In
connection with the acquisition by the Company of all of the outstanding capital
stock ACS from the stockholders of ACS (the “ACS Stockholders”) pursuant to a
stock purchase and sale agreement dated July 6, 2006 between the Company, the
ACS Stockholders and Granite Equity Limited Partnership, as Stockholder
Representative (the “ACS Purchase Agreement”), as partial consideration paid by
the Company to the ACS Stockholders the Company issued promissory notes in favor
of the ACS Stockholders in the principal amount of approximately $5.2 million,
of which approximately $431,000 was outstanding as of September 30,
2008.
Schedule
3.1(a) - Page 2
Schedule
3.1(d)
Conflicts
None
Schedule 3.1(d)
Schedule
3.1(g)
Capitalization
Authorized
|
Issued & Outstanding
|
|||||||||
Class
A Common Stock, Par Value $0.001
|
65,000,000 | 27,272,875 | (1) | |||||||
Class
B Common Stock, Par Value $0.001
|
15,000,000 | 733,811 | (2) | |||||||
Total
Common Stock
|
80,000,000 | 28,006,686 | ||||||||
Series
A Preferred Stock, Par Value $0.001
|
20 | 0 | ||||||||
Undesignated
Preferred Stock, Par Value $0.001
|
14,999,980 | 0 | ||||||||
Total
Preferred Stock
|
15,000,000 | 0 | ||||||||
Total
Capital Stock
|
95,000,000 | 28,006,686 | ||||||||
Potentially Issuable (3):
|
||||||||||
AccessIT
Equity Incentive Plan
|
3,700,000 | 3,133,411 | ||||||||
Plus:
reserved, unissued equity instruments
|
545,772 | |||||||||
Warrants
issued in connection with Series A Preferred Stock
|
700,000 | 700,000 | ||||||||
Warrants
issued in connection with July 2005 private placement
|
477,275 | 467,275 | ||||||||
Warrants
issued in connection with the conversion of all Convertible Debentures
Warrants in August 2005
|
760,196 | 760,196 | ||||||||
Total
Potentially Issuable
|
5,637,471 | 5,606,654 | ||||||||
Total
Potentially O/S Shares
|
33,393,120 | |||||||||
(1)
Net of 51,440 shares purchased by the Company and held as treasury
stock.
|
||||||||||
(2)
Class B shares are supervoting 10:1 and are convertible to Class A at any
time on a 1:1 basis.
|
||||||||||
(3)
Excludes shares which may be issued at the Company’s option in payment of
interest pursuant to the 2007 senior notes, and additional interest for
which the Company is obligated to issue shares, ranging from 132,000 to
220,000 shares per quarter until the maturity of the notes in
2011. The amount of such share issuances is not currently
determinable.
|
Schedule
3.1(g)
Schedule
3.1(i)
Undisclosed Events,
Liabilities and Developments
None,
except for disclosures related to the transactions contemplated by this
Agreement.
Schedule
3.1(i)
Schedule
3.1(k)
Litigation
A
subsidiary of the Company, ADM Cinema Corporation (“ADM Cinema”), was named as a
defendant in an action filed on May 19, 2008 in the Supreme Court of the State
of New York, County of Kings by Pavilion on the Park, LLC
(“Landlord”). Landlord is the owner of the premises located at 000
Xxxxxxxx Xxxx Xxxx, Xxxxxxxx, Xxx Xxxx, known as the Pavilion
Theatre. Pursuant to the relevant lease, ADM Cinema leases the
Pavilion Theatre from Landlord and operates it as a movie theatre.
In the
complaint, Landlord alleges that ADM Cinema has violated its obligations under
Article 12 of the lease in that ADM Cinema failed to comply with an Order of the
Fire Department of the City of New York issued on September 24, 2007 calling for
the installation of a sprinkler system in the Pavilion Theatre and that such
violation constitutes an event of default under the lease. Landlord
seeks to terminate the lease and evict ADM Cinema from the premises and to
recover its attorneys’ fees and damages for ADM Cinema’s alleged “holding over”
by remaining on the premises. We believe that we have meritorious defenses
against these claims and we intend to defend our position vigorously. However,
if we do not prevail, any significant loss resulting in eviction may have a
material effect on our business, results of operations and cash
flows.
Schedule
3.1(k)
Schedule
3.1(l)
Labor
Relations
None
Schedule
3.1(l)
Schedule
3.1(o)
Title
None
except as disclosed in SEC Reports.
Schedule
3.1(o)
Schedule
3.1(ff)
Accountants
Xxxxxx,
LLP
Schedule
3.1(ff)
Schedule
3.1(kk)
Employee
Benefits
Employment
Agreements
·
|
Amended
and Restated Employment Agreement, dated March 31, 2008, between the
Company and A. Xxxx Xxxx.
|
·
|
Employment
Agreement, dated as of April 10, 2000, between the Company and Xxxxx
Xxxxxxx.
|
Employee Benefit
Plans
·
|
Second
Amended and Restated 2000 Equity Incentive Plan of the Company, as
amended.
|
·
|
Access
Integrated Technologies, Inc. 401(k)
Plan.
|
·
|
Access
Integrated Technologies, Inc. Medical
Plan.
|
·
|
Access
DM Stock Option Plan.
|
Schedule
3.1(kk)
Schedule
4.8
Use of
Proceeds
Gross
Proceeds
|
$2,000,000.00
|
Less:
|
|
Legal
and other professional fees
|
$25,000.00
|
Finder’s
Fee payable to Green Barn Advisors, LLC
|
$80,000.00
|
Proceeds
for use as described in Section 4.8 of the Agreement
|
$1,895,000.00
|
Schedule
4.8