Exhibit 4.53
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"),
dated as of November 18, 2004, is entered into by and among x.Xxxxxxx
Corporation, a Delaware corporation (the "COMPANY"), and the investors signatory
hereto (each such investor is a "PURCHASER" and all such investors are,
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 (the "SECURITIES
ACT"), as amended, the Company desires to issue and sell to the Purchasers and
the Purchasers, severally and not jointly, desire to purchase from the Company
(i) shares of the Company's 8% Series EE Convertible Preferred Stock, par value
$.001 per share (the "PREFERRED STOCK"), which are convertible into shares of
the Company's common stock, par value $.001 per share (the "COMMON STOCK"), and
(ii) certain other securities of the Company as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
(a) The Closing (i) Subject to the terms and conditions set forth in
this Agreement the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase an aggregate of up to
20,000 shares of Preferred Stock ("SHARES") and certain Common Stock purchase
warrants as described below in this Section for an aggregate purchase price of
up to $2,000,000. The purchase and sale of such securities shall take place at
one or more closings (collectively, the "CLOSING") at the offices of Higham,
XxXxxxxxx & Xxxxxxx LLP ("HM&D"), 15, Enterprise, Xxxxx 000, Xxxxx Xxxxx,
Xxxxxxxxxx 00000, immediately following the execution hereof or such later date
as the parties shall agree. The date of the Closing is hereinafter referred to
as the "CLOSING DATE."
(ii) At the Closing, the parties shall deliver or shall cause to be
delivered the following: (A) the Company shall deliver to each Purchaser (1) a
stock certificate registered in the name of such Purchaser, representing a
number of Shares equal to the quotient obtained by dividing the purchase price
indicated below such Purchaser's name on the signature page to this Agreement by
100, (2) a Common Stock purchase warrant, in the form of Exhibit C, registered
in the name of such Purchaser, pursuant to which such Purchaser shall have the
right to acquire the number of Warrant Shares (as defined in the Warrant)
indicated below such Purchaser's name on the signature page to this Agreement
(collectively, the "WARRANTS"), (3) an executed copy of this Agreement and an
executed Registration Rights Agreement, dated as of the date hereof, among the
Company and the Purchasers, in the form of Exhibit B (the "REGISTRATION RIGHTS
AGREEMENT") and (4) Transfer Agent Instructions, in the form of Exhibit E,
executed by the Company and delivered to and acknowledged by the Company's
transfer agent (the "TRANSFER AGENT INSTRUCTIONS"); and (B) each Purchaser shall
deliver (1) the purchase price indicated below such Purchaser's name on the
signature page to this Agreement in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose or, with the consent of the Company, through conversion
of outstanding indebtedness, and (2) an executed copy of this Agreement and
Registration Rights Agreement.
1.2 Terms of Preferred Stock. The Preferred Stock shall have the rights
preferences and privileges set forth in Exhibit A, and shall be incorporated
into a Certificate of Designation (the "CERTIFICATE OF DESIGNATION") to be filed
prior to the Closing by the Company with the Secretary of State of Delaware, in
form and substance mutually agreed to by the parties.
1.3 Certain Defined Terms. For purposes of this Agreement, "ORIGINAL ISSUE
DATE" and "TRADING DAY" shall have the meanings set forth in Exhibit A and
"BUSINESS DAY" shall mean any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of California are authorized or required by law or other governmental
action to close. A "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.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively, the "SUBSIDIARIES"). 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. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Securities (as
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defined below) or any of this Agreement, the Registration Rights Agreement, the
Certificate of Designation, the Transfer Agent Instructions or the Warrants
(collectively, the "TRANSACTION DOCUMENTS"), (y) have or result in a material
adverse effect on the results of operations, assets, prospects, or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under any of the Transaction Documents (any of (x), (y) or (z),
a "MATERIAL ADVERSE EFFECT").
(b) 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 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. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents.
(c) Capitalization. The number of authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). Except as
disclosed in Schedule 2.1(c), the Company owns all of the capital stock of each
Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of the securities of the Company or any Subsidiary
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company or any Subsidiary by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the Shares
and the Warrants and except as disclosed in Schedule 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Shares, Warrants or Underlying Shares (as hereinafter
defined) will not obligate the Company to issue shares of Common Stock or other
securities to any Person other than the Purchaser and will not result in a right
of any holder of Company's securities to adjust the exercise or conversion or
reset price under such securities.
(d) Issuance of the Shares and the Warrants. The Shares and the
Warrants are duly authorized and, when issued and paid for in accordance with
the terms hereof, will be duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "LIENS"). The Company has on the date hereof and will, at
all times while the Shares and the Warrants are outstanding, maintain an
adequate reserve of duly authorized shares of Common Stock, reserved for
issuance to the holders of the Shares and the Warrants, to enable it to perform
its conversion, exercise and other obligations under this Agreement, the
Certificate of Designation and the Warrants. As of the date hereof, the Company
has reserved for issuance the sum of _________ Warrant Shares and _________
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shares of Common Stock for issuance upon conversion of Shares and payment of
dividends thereon in shares of Common Stock (the "INITIAL MINIMUM"). All such
authorized shares of Common Stock shall be duly reserved for issuance to the
holders of the Shares and the Warrants. The shares of Common Stock issuable upon
conversion of the Shares and upon exercise of the Warrants are collectively
referred to herein as the "UNDERLYING SHARES." The Shares, the Warrants and the
Underlying Shares are collectively referred to herein as, the "SECURITIES." When
issued in accordance with the Certificate of Designation and the Warrants, the
Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other 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), as could not, individually
or in the aggregate, have or result in a Material Adverse Effect. The business
of the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, could not have or result in a Material Adverse
Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Certificate of
Designation with the Secretary of State of Delaware, (ii) the filings required
pursuant to Section 3.9, (iii) the filing with the Securities and Exchange
Commission (the "COMMISSION") of a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchasers (the "UNDERLYING SHARES
REGISTRATION STATEMENT"), (iv) applicable Blue Sky filings, and (v) in all other
cases where the failure to obtain such consent, waiver, authorization or order,
or to give such notice or make such filing or registration could not have or
result in, individually or in the aggregate, a Material Adverse Effect
(collectively, the "REQUIRED APPROVALS").
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(g) Litigation; Proceedings. 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 or any of its
Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Except as described in the SEC Documents, (i) neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving (A) a claim of violation of or
liability under federal or state securities laws or (B) a claim of breach of
fiduciary duty; (ii) the Company does not have pending before the Commission any
request for confidential treatment of information and the Company has no
knowledge of any expected such request that would be made prior to the
Effectiveness Date (as defined in the Registration Rights Agreement); and (iii)
there has not been, and to the best of the Company's knowledge there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which has
not been waived which, 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, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act. Neither the
Company nor, to its knowledge, any Person acting on its behalf has taken or is
contemplating taking any action which could subject the offering, issuance or
sale of the Securities to the registration requirements of the Securities Act
including soliciting any offer to buy or sell the Securities by means of any
form of general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC DOCUMENTS" and, together with
the Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents 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
Documents, when filed, contained any untrue statement of a material fact or
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omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as required under the Exchange Act. The
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since September 30, 2004, except as
specifically disclosed in the SEC Documents, (a) there has been no event,
occurrence or development that has or that could result in a Material Adverse
Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or otherwise
required to be disclosed in filings made with the Commission, (c) the Company
has not altered its method of accounting or the identity of its auditors and (d)
the Company has not declared or made any payment or distribution of cash or
other property to its stockholders or officers or directors (other than in
compliance with existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. No fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other similar Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
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shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Form S-3 Eligibility. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under the
Securities Act. The "Public Float" of the Common Stock is approximately
165,960,545 shares on the date hereof.
(n) Seniority. Except for the Series D Preferred Stock, no
outstanding class of equity securities of the Company is senior to the Shares in
right of payment, whether upon liquidation or dissolution, or otherwise.
(o) Listing and Maintenance Requirements. Except as set forth in the
SEC Documents, the Company has not, in the two years preceding the date hereof
received notice (written or oral) from the OTC, any stock exchange, market or
trading facility on which the Common Stock is or has been listed (or on which it
has been quoted) to the effect that the Company is not in compliance with the
listing or maintenance requirements of such exchange, market or trading
facility. 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.
(p) Patents and Trademarks. The Company and its Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights which
are necessary or material for use in connection with their respective businesses
as described in the SEC Documents and which the failure to so have would have a
Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS"). To
the best knowledge of the Company, neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or its Subsidiaries violates or infringes upon the rights of any Person.
Except as specified in Schedule 2.1(p), to the best 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.
(q) Registration Rights; Rights of Participation. Except as
disclosed in Section 6(c) of the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which have not been satisfied. 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.
(r) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
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in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(s) Title. The Company and the Subsidiaries have good and marketable
title to all personal property owned by them which is material to the business
of the Company and its 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 interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and its Subsidiaries are in compliance
and do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(t) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(u) Shareholders Rights Plan. Neither the consummation of the
transactions contemplated hereby nor the issuance of the Underlying Shares will
cause the Purchasers to be deemed an "Acquiring Person" under any existing or
hereafter adopted shareholders rights plan or similar arrangement.
(v) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or its agents or
counsel with any information that constitutes or might constitute material
non-public information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
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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.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement, the Registration Rights Agreement and the Warrants, at all times to
sell or otherwise dispose of all or any part of such Securities pursuant to an
effective registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any period of time. 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 the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and at each exercise date
under its respective Warrants, it will be, an "ACCREDITED INVESTOR" as defined
in Rule 501(a) under the Securities 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.
(e) Ability of such Purchaser to Bear Risk of 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.
(f) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials 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 Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. 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 Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
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(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to 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.
(h) Reliance. Such Purchaser understands and acknowledges that (i)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
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 this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, 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. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
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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.
The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that the Underlying Shares Registration Statement is declared effective
by the Commission.
3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Underlying Shares upon (i) conversion of the Shares in accordance with
the terms of the Certificate of Designation, and (ii) exercise of the Warrants
in accordance with their terms, will result in dilution of the outstanding
shares of Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligation to issue
Underlying Shares upon (x) conversion of the Shares in accordance with the terms
of the Certificate of Designation, and (y) exercise of the Warrants in
accordance with their terms, is unconditional and absolute, subject to the
limitations set forth herein, in the Certificate of Designation or pursuant to
the Warrants, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own 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 Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchasers own Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. 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 Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
causing its attorneys to render and deliver any legal opinion required in order
to permit a Purchaser to receive Underlying Shares free of all restrictive
legends and to subsequently sell Underlying Shares under Rule 144 upon receipt
of a notice of an intention to sell or other form of notice having a similar
effect. Upon the request of any such Person, the Company shall deliver to such
Person a written certification of a duly authorized officer as to whether it has
complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers.
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3.5 Increase in Authorized Shares. If on any date the Company would be, if
a notice of conversion or exercise (as the case may be) were to be delivered on
such date, precluded from issuing (a) the number of Underlying Shares as would
then be issuable upon a conversion in full of the Shares, and (b) of the number
of Underlying Shares as would then be issuable upon exercise of the Warrants
(the "CURRENT REQUIRED MINIMUM"), in either case, due to the unavailability of a
sufficient number of authorized but unissued or reserved shares of Common Stock,
then the Board of Directors of the Company shall promptly prepare and mail to
the stockholders of the Company proxy materials requesting authorization to
amend the Company's certificate or articles of incorporation to increase the
number of shares of Common Stock which the Company is authorized to issue to at
least such number of shares as reasonably requested by the Purchasers in order
to provide for such number of authorized and unissued shares of Common Stock to
enable the Company to comply with its issuance, conversion, exercise and
reservation of shares obligations as set forth in this Agreement, the
Certificate of Designation and the Warrants (the sum of (x) the number of shares
of Common Stock then outstanding plus all shares of Common Stock issuable upon
exercise of all outstanding options, warrants and convertible instruments, and
(y) the Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the earlier to occur of the
60th day after delivery of the proxy materials relating to such meeting and the
90th day after request by a holder of Securities to issue the number of
Underlying Shares in accordance with the terms hereof) and (c) within five
Business Days of obtaining such stockholder authorization, file an appropriate
amendment to the Company's certificate or articles of incorporation to evidence
such increase.
3.6 Reservation and Listing of Underlying Shares. (a) If, after the date
hereof, the Company shall list the Common Stock on any of the New York Stock
Exchange, American Stock Exchange, NASDAQ National Market or NASDAQ SmallCap
Market (each, a "SUBSEQUENT MARKET"), then the Company shall include in such
listing for the benefit of the Purchasers for issuance upon exercise of the
Warrants and conversion of the Shares a number of shares of Common Stock equal
to not less than the then Current Required Minimum. If the number of Underlying
Shares issuable upon conversion in full of the then outstanding Shares, as
payment of dividends thereon, and upon exercise of the then unexercised portion
of the Warrants exceed the number of Underlying Shares previously listed on
account thereof with a Subsequent Market, then the Company shall take the
necessary actions to immediately list a number of Underlying Shares as equals no
less than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon conversion of the Shares in full and upon exercise in full of
the Warrants in accordance with this Agreement, the Certificate of Designation
and the Warrants, respectively, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
12
3.7 Conversion and Exercise Obligations and Procedures. The Company shall
honor conversion of the Shares and exercise of the Warrants and shall deliver
Underlying Shares in accordance with the respective terms, conditions and time
periods set forth in the Certificate of Designation and Warrants. The Transfer
Agent Instructions, Conversion Notice (as defined in the Certificate of
Designation) and Notice of Exercise under the Warrants set forth the totality of
the procedures with respect to the conversion of the Shares and exercise of the
Warrants, including the form of legal opinion, if necessary, that shall be
rendered to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchasers to convert
their Shares and exercise their Warrants as contemplated in the Certificate of
Designation and the Warrants (as applicable).
3.8 Certain Securities Laws Disclosures; Publicity. The Company shall: (i)
on the Closing Date issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the transactions contemplated hereby within four
Business Days after the Closing Date, and (iii) timely file with the Commission
a Form D promulgated under the Securities Act. The Company shall, no less than
two Business Days prior to the filing of any disclosure required by clauses (ii)
and (iii) above, provide a copy thereof to the Purchasers. The Company and the
Purchasers shall consult with each other in issuing any other press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or stock market or trading facility with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement, filings or
other communications without the prior written consent of the other, except if
such disclosure is required by law or stock market or trading facility
regulation, in which such case the disclosing party shall promptly provide the
other party with prior notice of such public statement, filing or other
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the names of the Purchasers, or include the names of the Purchasers in
any filing with the Commission or any regulatory agency, trading facility or
stock market without the prior written consent of the Purchasers, except to the
extent such disclosure is required by law or stock market regulations, in which
case the Company shall provide the Purchasers with prior notice of such
disclosure.
3.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
3.10 Transfer of Intellectual Property Rights. Except in connection with
the sale of all or substantially all of the assets of the Company or licensing
arrangements in the ordinary course of the Company's business, the Company shall
not transfer, sell or otherwise dispose of any Intellectual Property Rights, or
allow any of the Intellectual Property Rights to become subject to any Liens, or
fail to renew such Intellectual Property Rights (if renewable and it would
otherwise lapse if not renewed), without the prior written consent of the
Purchasers.
13
3.11 Exclusivity. The Company shall not issue and sell the Shares to any
Person other than to the Purchasers.
3.12 Shareholder Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "ACQUIRING PERSON" under
any shareholders 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 or shares of Common Stock under the Transaction Documents.
3.13 Trading Restrictions. At no time during the 15 days immediately prior
to the date hereof has such Purchaser engaged in or effected, in any manner
whatsoever, directly or indirectly, in any "Short Sale" (as defined herein. Each
Purchaser further agrees that as long as such Purchaser holds Shares, such
Purchaser will not enter into any Short Sales. For purposes hereof, a "SHORT
SALE" by a Purchaser shall mean a marked "short sale" of Common Stock by such
Purchaser that is made at a time when there is no equivalent offsetting long
position in the Common Stock held by such Purchaser. For purposes of determining
whether there is an equivalent offsetting long position in the Common Stock held
by a Purchaser, Underlying Shares issuable upon exercises of Warrants and upon
delivered Conversion Notices under the Shares shall be deemed to be held long by
such Purchaser.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. Except as otherwise set forth in the Registration
Rights Agreement, 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 stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents, together with
the Exhibits and Schedules thereto and the Transfer Agent Instructions 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.
4.3 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 (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (Pacific Time) on
a Business Day, (ii) the Business Day after the date of transmission, if such
14
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Agreement later than 6:30 p.m. (Pacific Time) on any
date and earlier than 11:59 p.m. (Pacific Time) on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) 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 follows:
If to the Company: x.Xxxxxxx Corporation
00000 Xxxxxxx Xxxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Executive Officer
With copies to: Higham, McConnell& Xxxxxxx LLP
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any 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 accruing to it thereafter.
4.5 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.
4.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
15
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 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.
4.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City and County of San Diego, 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 the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper. 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.
4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion or
exercise (as the case may be) of the Shares and of the Warrants for a period of
one year.
4.10 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) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Severability. In case any one or more of the provisions of this
Agreement shall 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 affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
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4.12 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 of each
other's obligations 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 agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is 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 with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
17
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
X.XXXXXXX CORPORATION
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW]
18
[NAME OF PURCHASER]
By:_____________________________________
Name:
Title:
Purchase Price: $ [ ]
Number of Warrants: [ ]
Address for Notice:
[NAME OF PURCHASER]
[ADDRESS OF PURCHASER]
With copies to:
[NAME OF COUNSEL FOR PURCHASER]
[ADDRESS OF COUNSEL FOR PURCHASER]
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
AMONG
X.XXXXXXX CORPORATION
AND
THE INVESTORS SIGNATORY HERETO
DATED AS OF NOVEMBER 18, 2004
Convertible Preferred Stock
Purchase Agreement
Schedule 2.1(c)
CAPITALIZATION TABLE
Outstanding as of November 1, 2004:
Issued and
Authorized Outstanding
Common Stock 200,000,000 165,139,512
Preferred Stock
Series D 5,000,000 ________
Warrants to purchase common stock - ________
(see schedule 6(c) to Registration
Rights Agreement)
Stock options on common stock 14,000,000 ________
1994 ISO/NSO Plan
