SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
January 27, 2005, among Zone4Play, Inc., a Nevada 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 (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company, in the aggregate, up to 4 million shares of Common Stock (as
defined below) on the Closing Date (as defined below).
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, 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(j).
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 144. 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.
"Closing" means the closing of the purchase and sale of the Common Stock
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 (a) the Purchasers' obligations to pay the Subscription
Amount and (b) the Company's obligations to deliver the Shares have been
satisfied or waived.
"Closing Price" means on any particular date (a) the last reported closing
price per share of Common Stock on such date on the Trading Market (as reported
by Bloomberg L.P. ), or (b) if there is no such price on such date, then the
closing price on the Trading Market on the date nearest preceding such date (as
reported by Bloomberg L.P., (c) if the Common Stock is not then listed or quoted
on the Trading Market and if prices for the Common Stock are then reported in
the "pink sheets" published by the Pink Sheets LLC (formerly the National
Quotation Bureau Incorporated (or a similar organization or agency succeeding to
its functions of reporting prices)), the most recent bid price per share of the
Common Stock so reported, or (d) if the shares of Common Stock are not then
publicly traded, the fair market value of a share of Common Stock as determined
by a qualified independent appraiser selected in good faith by the Purchasers of
a majority in interest of the Shares then outstanding.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.001 par value per
share, and any securities into which such common stock may hereafter be
reclassified.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
shares of Common Stock, including without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time convertible
into or exchangeable for, or otherwise entitles the holder thereof to receive,
shares of Common Stock.
"Company Counsel" means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, with offices
at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Tel: (000) 000-0000,
Fax: (000) 000-0000.
"Disclosure Schedules" means the Disclosure Schedules of the Company
attached hereto and incorporated herein.
"Effective Date" means the date that a Registration Statement is first
declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Intellectual Property Rights" shall have the meaning ascribed to such
term in Section 3.1(o).
"Liens" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other similar restriction.
"Material Adverse Effect" shall have the meaning ascribed to such term in
Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in Section
3.1(m).
"OTCBB" means the Over-The-Counter Bulletin Board.
"Per Share Purchase Price" equals $1.50, subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.
"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 legal 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).
2
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares or a portion thereof (as provided for in
the Registration Rights Agreement).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of this Agreement, by and among the Company and each
Purchaser, in the form of Exhibit A hereto.
"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 Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Subscription Amount" means, as to each Purchaser, the amounts set forth
below such Purchaser's signature block on the signature page hereto, in United
States dollars and in immediately available funds.
"Subsidiary" shall mean the subsidiaries of the Company, if any, set forth
on Schedule 3.1(a).
"TRP" shall mean Xxxxxx Xxxx & Priest LLP with offices located at 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
"Trading Day" means a day on which the Common Stock is traded on a Trading
Market.
"Trading Market" means each of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: OTCBB,
the American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement and the Registration Rights
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, each and every Purchaser shall purchase
from the Company, severally and not jointly with the other Purchasers, and the
Company shall issue and sell to each Purchaser, (a) a number of Shares equal to
such Purchaser's Subscription Amount divided by the Per Share Purchase Price.
The aggregate Subscription Amounts for Shares sold hereunder shall be up to
$6,000,000. Upon satisfaction or waiver of the conditions set forth in Sections
2.2(a), (b), (c) and (d), the Closing shall occur at the offices of TRP or such
other location as the parties shall mutually agree.
3
2.2 Deliveries; Closing Conditions.
(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) a copy of duly executed irrevocable instructions, which
shall be satisfactory in form and substance to each of the
Purchasers, to the Company's transfer agent instructing the transfer
agent to deliver, on an expedited basis, a certificate evidencing a
number of Shares equal to such Purchaser's Subscription Amount
divided by the Per Share Purchase Price, registered in the name of
such Purchaser;
(iii) the Registration Rights Agreement duly executed by the
Company; and
(iv) a legal opinion of Company Counsel, in the form of
Exhibit B attached hereto.
(b) On the Closing Date, each Purchaser 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; and
(iii) the Registration Rights Agreement duly executed by such
Purchaser.
(c) All representations and warranties of the other party contained
herein shall remain true and correct in all material respects as of the Closing
Date and all covenants of the other party shall have been performed if due prior
to such date.
(d) From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally shall not have been suspended or limited on any
Trading Market, nor shall a general commercial banking moratorium have been
declared either by the United States or New York State authorities, nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of Purchasers representing a majority of the Subscription
Amounts made by all Purchasers, makes it impracticable or inadvisable to
purchase the Shares at the Closing.
4
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as otherwise set
forth under the corresponding section of the Disclosure Schedules attached
hereto, 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 for Mix TV, in which the
Company owns a 50.1% interest, 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 such securities. If
the Company has no subsidiaries, then references in the Transaction Documents to
the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction 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 except where failure to be so qualified, organized or
have such power and authority would not reasonably be expected to have a
Material Adverse Effect (as defined below). 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, would 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 or
financial condition 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
knowledge of the Company, 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 execute and deliver this Agreement and to
consummate the transactions contemplated by each of the Transaction Documents to
which it is a party and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by the Company of each of the Transaction
Documents to which it is a party 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 in
connection therewith other than in connection with the Required Approvals. Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and legally 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, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) as the
rights to indemnification or contribution hereunder and thereunder may be
limited by applicable law.
5
(d) No Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents to which it is a party, the issuance and
sale of the Shares and the consummation by the Company of the other transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
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 material asset of the Company or any
Subsidiary is bound, 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 (iv) violate the terms of any agreement by
which the Company or any Subsidiary is bound or to which any property or asset
of the Company or any Subsidiary is bound; except in the case of each of clauses
(ii), (iii) and (iv), such as would 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 4.4 of this Agreement, (ii)
the filing with the Commission of the Registration Statement, (iii)
application(s) to each applicable Trading Market for the listing of the Shares
for trading thereon in the time and manner required thereby, (iv) the filing of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws, (v) any other filings required to be made
pursuant to the terms of the Registration Rights Agreement, and (vi) the notices
set forth on Schedule 3.1(e) (collectively, the "Required Approvals").
6
(f) Issuance of the Shares. The Shares have been duly authorized
and, when issued and paid for in accordance with the terms of the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents and under applicable federal
and state securities laws. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement.
(g) Capitalization. Since September 30, 2004, the Company has not
issued any capital stock 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
outstanding. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Shares, and except for warrants and shares issuable to certain
advisors listed on Schedule 3.1(g), 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 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 were issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any shareholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares. Except as disclosed
in the SEC Reports, there are no shareholders 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 shareholders.
(h) SEC Reports; Financial Statements. Except as set forth in
Schedule 3.1(h), the Company has filed all reports required to be filed by it
under the Exchange Act, including without limitation, those filed pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the
foregoing materials, including the exhibits thereto, 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 Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply as to form 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 ("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.
7
(i) Material Changes. Since December 31, 2003, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that would reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
shareholders 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.
(j) Litigation. There is no action, suit, inquiry, notice of
violation or proceeding pending or, to the knowledge of the Company, threatened,
nor, to the knowledge of the Company, is any investigation pending or
threatened, against 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) challenges the legality, validity or
enforceability of any of the Transaction Documents or the Shares or (ii) would,
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 to the
knowledge of the Company, any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company or any Subsidiary which would reasonably be expected to result in a
Material Adverse Effect.
8
(l) 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 written notice of a claim that it is in default under, 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 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, except in
each case as would not have a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would 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 written notice of proceedings relating to the
revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good,
marketable and fee simple title to all real property owned by them that is
material to the business of the Company and the Subsidiaries and valid 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
and no landlord for any such real property or facility has notified the Company
or any such Subsidiary that any of them are in default under any such lease.
(o) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
would have a Material Adverse Effect (collectively, the "Intellectual Property
Rights"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
known existing infringement by another Person of any of the Intellectual
Property Rights of others which would have a Material Adverse Effect.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company believes are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. 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.
9
(q) Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports and in Schedule 3.1(q), none of the officers or directors of
the Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, 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 benefits under benefit or pension plans sponsored by the Company,
including without limitation stock option agreements under any stock option plan
of the Company.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 which
are applicable to it as of the Closing Date. To the extent required by
applicable law, the Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. To
the extent required by applicable law, 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. To the extent required by applicable law, the Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of the end of the period covered by its most recently filed
periodic report under the Exchange Act (the date of such evaluation, the
"Evaluation Date"). To the extent required by applicable law, 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 and
since the Evaluation Date, there have been no significant changes in the
Company's internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) or, to the best of the Company's knowledge, in
other factors that could significantly affect the Company's internal controls.
(s) Certain Fees. Other than as set forth in footnote 1 in Schedule
3.1(g), no brokerage or finder's fees or commissions are or will be payable by
the Company or any Subsidiary to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. To the knowledge of the
Company, the Purchasers shall have no obligation with respect to any fees or
with respect to any claims made against the Company 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.
10
(t) 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 Shares by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Shares hereunder does not contravene the rules and regulations of the Trading
Market.
(u) Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Shares, will not be or be
an Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(v) Registration Rights. Except as set forth in Schedule 3.1 (v), no
person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(w) Listing and Maintenance Requirement. The Company's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any written notification that the Commission is
contemplating terminating such registration.
(x) Application of Takeover Protections. The Company and its Board
of Directors have taken no action, to render inapplicable any 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 the Company's issuance of the Shares and the Purchasers' ownership of
the Shares and there is no 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).
(y) Disclosure. Except as set forth in Schedule 3.1(y) and except
for terms of the Transaction Documents and the fact that the Company is
considering consummating the transactions contemplated therein, the Company
confirms that, neither the Company 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 Schedules to
this Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with respect to
such representations and warranties and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.
11
(z) 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 Shares 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
the Trading Market.
(aa) 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 Shares hereunder, (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. 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).
(bb) Form SB-2 Eligibility. The Company is eligible to register the
resale of its Common Stock by the Purchasers under Form SB-2 promulgated under
the Securities Act.
(cc) Taxes. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in 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) General Solicitation. Neither the Company nor any person acting
on behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. The Company has offered the Shares
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 corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
12
(ff) Auditor. The Company's auditors are set forth on Schedule
3.1(ff) of the Disclosure Schedule. To the Company's knowledge, such auditors
are independent auditors as required by the Securities Act.
(gg) Acknowledgment Regarding Purchasers' Purchase of Shares. 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.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date 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 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 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 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) Investment Intent. Such Purchaser understands that the Shares
are "restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Shares as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Shares or any part thereof, has no
present intention of distributing any of such Shares and has no arrangement or
understanding with any other persons regarding the distribution of such Shares
(this representation and warranty not limiting such Purchaser's right to sell
the Shares pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws). Such Purchaser is acquiring
the Shares 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 Shares.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares, it was, and at the date hereof it is an "accredited investor" under the
Securities Act.
13
(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 Shares, 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 Shares and, at the present time,
is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Shares as a result of any advertisement, article, notice or other communication
regarding the Shares 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) Purchasers Acting Individually. Such Purchaser is acting
severally as an individual and is not acting together with any other Person or
other Purchaser as a group.
(g) Opportunity to Conduct Due Diligence. Such Purchaser was granted
the opportunity to conduct due diligence prior to entering into the transactions
contemplated by this Agreement.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Each of the Purchasers hereby acknowledges that the Shares may
only be disposed of in compliance with state and federal securities laws. In
connection with any transfer of Shares 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(b), 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 such opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Shares under the Securities Act. As a condition of any such
transfer, any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement, as applicable.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Shares in the following form:
THESE SHARES 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. THESE SHARES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT.
14
(c) 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 Shares 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 the Registration Rights Agreement and, if required under the terms
of such arrangement, such Purchaser may transfer pledged or secured Shares 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 will execute and deliver such reasonable documentation as a pledgee
or secured party of Shares may reasonably request in connection with a pledge or
transfer of the Shares, including, if the Shares are subject to registration
pursuant to the Registration Rights Agreement, 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.
(d) Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of
such Shares pursuant to Rule 144, or (iii) if such Shares are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue a legal opinion to the Company's transfer agent promptly
after the Effective Date if required by the Company's transfer agent to effect
the removal of the legend hereunder. The Company agrees that following the
Effective Date or at such time as such legend is no longer required under this
Section 4.1(d), it will, no later than seven (7) Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent of a
certificate representing Shares, issued with a restrictive legend (such date,
the "Legend Removal Date"), deliver or cause to be delivered to such Purchaser a
certificate representing such Shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
15
(e) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages and not
as a penalty, for each $1,000 of Shares (based on the Closing Price of the
Common Stock on the date certificate(s) representing such Shares are submitted
to the Company's transfer agent) subject to Section 4.1(d), $5 per Trading Day
(increasing to $10 per Trading Day ten (10) Trading Days after such damages have
begun to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered to such Purchaser. Nothing herein shall limit such
Purchaser's right to pursue actual damages for the Company's failure to deliver
certificates representing any Shares as required by the Transaction Documents,
and such Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
(f) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from certificates
representing Shares as set forth in this Section 4.1 is predicated upon the
Company's reliance that the Purchaser will sell any Shares pursuant to either
the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
(g) Until 45 days after the Effective Date, the Company shall not
undertake a reverse or forward stock split or reclassification of the Common
Stock without the prior written consent of the Purchasers holding a majority in
interest of the Shares.
4.2 Furnishing of Information. As long as any Purchaser owns Shares, 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 Shares, if the Company is no longer required to file reports
pursuant to the Exchange Act (or if such filings are not otherwise generally
available on the Internet free of charge), it will prepare and furnish to the
Purchasers (upon receipt of a written request) and make publicly available in
accordance with Rule 144(c) such information as is required for the Purchasers
to sell the Shares under Rule 144. The Company further covenants that it will
take such further action as any holder of Shares may reasonably request, all to
the extent required from time to time to enable such Person to sell such Shares
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 Shares in a manner that would require the registration under the
Securities Act of the sale of the Shares to the Purchasers or that would be
integrated with the offer or sale of the Shares 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.
16
4.4 Securities Laws Disclosure; Publicity. Provided that the Company has
received each item required to be delivered by each Purchaser pursuant to
Section 2.2(b), the Company shall, by 9:00 a.m. Eastern time on the Trading Day
following the Closing Date, issue a press release or file a Current Report on
Form 8-K in each case reasonably acceptable to Xxxxx, Xxxx & Xxxxx Investments,
a division of Robeco USA, LLC ("WPG"), disclosing the material terms of the
transactions contemplated hereby. Neither the Company nor any Purchaser shall
issue any press release with respect to the transaction contemplated hereby or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of WPG, with respect to any press release of the Company, which
consent shall not unreasonably be withheld, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication;
provided, however, that only such portions of any press release to be issued by
the Company that specifically reference the transactions contemplated by the
Transaction Documents shall be provided to WPG and be subject to their prior
consultation and approval. 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 the registration statement
contemplated by the Registration Rights Agreement 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).
4.5 Shareholders 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 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 Shares under the Transaction Documents.
4.6 Non-Public Information. Except as may be required to comply with the
terms and conditions of this Agreement, 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.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Shares hereunder for
general corporate and strategic purposes, including, but not limited to, working
capital and in connection with acquisitions, joint ventures and other similar
transactions, 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.
17
4.8 Indemnification of Purchasers. Subject to the provisions of this
Section 4.8, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including without limitation
all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to (a) any 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 (i) a Purchaser, or any of them or their respective Affiliates or (ii) a
Purchaser Party, by any shareholder of the Company who is not an Affiliate of
such Purchaser or Purchaser Party, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Purchaser's representation, warranties, covenants or agreements
under the Transaction Documents or any agreements or understandings such
Purchaser or a Purchaser Party may have with any such shareholder or any
violations by the Purchaser or a Purchaser Party of state or federal securities
laws or any conduct by such Purchaser or a Purchaser Party 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 an Purchaser Party effected without the Company's prior written
consent, which shall not be unreasonably withheld 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.
4.9 Reservation of Common Stock. 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 Shares pursuant to this
Agreement.
4.10 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 (but
not later than the earlier of the Effective Date and the first anniversary of
the Closing Date) to list all of the 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 Shares ,
and will take such other action as is necessary to cause all of the Shares to be
listed on such other Trading Market as promptly as possible. The Company will
take all action commercially reasonable and necessary to (a) continue the
listing and trading of its Common Stock on a Trading Market and (b) comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of such Trading Market.
4.11 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. 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 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 Shares or otherwise.
18
4.12 Delivery of Shares After Closing. The Company shall deliver, or cause
to be delivered, the Shares purchased by each Purchaser to such Purchaser within
three (3) Trading Days of the Closing Date.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. 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, except that the Company shall pay up
to an aggregate of $20,000 for the fees and expenses of TRP incurred in
connection with the transactions contemplated hereby. The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Shares.
5.2 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.
5.3 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 (a) the date of transmission, if
such notice or communication is delivered via facsimile with confirmation of
receipt at the facsimile number set forth on the signature pages attached hereto
prior to 6:30 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 with confirmation of receipt at the facsimile number set forth on
the signature pages attached hereto on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the second Trading
Day following the date of mailing, if sent by a nationally recognized overnight
courier service in the United States, 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.
5.4 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 Purchaser 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.
19
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto 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 each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Shares, provided such transferee agrees in
writing to be bound, with respect to the transferred Shares, by the provisions
hereof that apply to the "Purchasers."
5.7 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, except as otherwise set forth in Section 4.8.
5.8 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 New
York, 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 of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
this Agreement, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys fees and expenses and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.9 Survival. The representations and warranties herein shall survive the
Closing and delivery of the Shares until the third anniversary hereof.
20
5.10 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) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 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.
5.12 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.
5.13 Replacement of Shares. If any certificate or instrument evidencing
any Shares 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 Shares.
5.14 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.
5.15 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.
21
5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.
5.17 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.
(Signature Pages Follow)
22
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.
ZONE4PLAY, INC. Address for Notice:
------------------
By: /s/ Xxxxxx Xxxxxx 000 Xxxxx Xxxx
------------------------------ Xxxxxxxxxx, XX 00000
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
With a copy to (which shall not constitute notice):
SICHENZIA XXXX XXXXXXXX XXXXXXX LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
23
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: Woodmont Investments Ltd.
------------------------------------------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxx X. Xxxxxxx
-------------------------
Name of Authorized Signatory: Xxx X. Xxxxxxx
--------------------------------------------------
Title of Authorized Signatory: Portfolio Manager
-------------------------------------------------
Address for Notice of Investing Entity:
c/o Xx Xxxxxx / Xxxxx Capital
000 X. 00xx Xxxxxx / x/x Xxxx Xxxxx
Xxx Xxxx, XX 00000 / 000 Xxxx Xxx, 00xx Xxxxx
/ Xxx Xxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Woodmont Investments
c/o Xx Xxxxxx
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
Subscription Amount: $43,906.50
Shares: $29.271 ($1.50/share)
EIN Number:
[SIGNATURE PAGES CONTINUE]
24
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: Sagiv Shiv
-------------------------------------------------------
Signature of Authorized Signatory of Investing Entity: /s/ Sagiv Shiv
-------------------------
Name of Authorized Signatory: Sagiv Shiv
--------------------------------------------------
Title of Authorized Signatory: Individual
-------------------------------------------------
Address for Notice of Investing Entity:
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $15,000
Shares: 10,000
EIN Number:
[SIGNATURE PAGES CONTINUE]
25
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: Xxxxx Partners LP
------------------------------------------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxx Xxxxxxxxxx
-------------------------
Name of Authorized Signatory: Xxxxxx Xxxxxxxxxx
--------------------------------------------------
Title of Authorized Signatory: Managing Member
-------------------------------------------------
Address for Notice of Investing Entity:
Sedna Capital Management
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $119,740.50
Shares: 79,827 ($1.50/share)
EIN Number:
[SIGNATURE PAGES CONTINUE]
26
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: Xxxxx Partners (QP) LP
------------------------------------------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxx Xxxxxxxxxx
-------------------------
Name of Authorized Signatory: Xxxxxx Xxxxxxxxxx
--------------------------------------------------
Title of Authorized Signatory: Managing Member
-------------------------------------------------
Address for Notice of Investing Entity:
Sedna Capital Management
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Address for Delivery of Shares for Investing Entity (if not same as above):
Subscription Amount: $86,352.00
Shares: 57,568 ($1.50/share)
EIN Number:
[SIGNATURE PAGES CONTINUE]
27
SCHEDULES TO
SECURITIES PURCHASE AGREEMENT
dated as of January 27, 2005 by and, among Zone4Play, Inc., a Nevada corporation
(the "Company"), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a "Purchaser" and collectively the
"Purchasers")
Schedule 3.1(a)
Subsidiaries of the Company.
1. The following companies are wholly-owned subsidiaries of the Company:
Zone4Play (UK), Ltd.
Zone4Play (Israel), Ltd.
2. The Company owns a 50.1% interest in Mix TV, Ltd.
Schedule 3.1(e)
Notices Required of the Company
None
SCHEDULE 3.1(g)
Warrants and Shares to be Issued to Certain Advisors
The following warrants and shares are to be issued:
To Punk Xxxxxx pursuant to an agreement on August 19, 2004 25,000 warrants at
$.80 per share
To Benchmark Consulting pursuant to an agreement on December 16, 2004
50,000 shares
To Portfolio PR pursuant to an agreement on July 14, 2004.
8,824 shares for the fourth quarter of 2004 and thereafter $7500 worth of shares
per quarter until June 30, 2005
To Punk Xxxxxx pursuant to an agreement on August 19, 2004 Up to 80,000 warrants
at $1.50 per share(1)
----------
(1) This does not include cash fee paid to Punk Xxxxxx & Company as placement
agent on December 23, 2004 in the aggregate amount of 6% cash of the gross
proceeds.
SCHEDULE 3.1(h)
SEC Reports
As part of the SEC's comments on the Company's registration statement the
Company filed with the SEC on Form SB-2 on November 3, 2004, the SEC advised the
Company that it did not intend to declare the Form SB-2 effective until the
Company had filed an appropriate Form 8-K and any comments issued in connection
with that 8-K had been cleared. The SEC noted that because the 8-K should
include disclosure equivalent to a Form 10 or 10-SB, the SEC would subject it to
the SEC's standards of review selection and the SEC may issue substantive
comments in connection with that review.
The SEC noted that the Company entered into a reverse merger with Old Goat
Enterprises, Inc. as described in the Form 8-K filed February 6, 2004. To be the
successor issuer to the reporting obligation under Rule 12g-3(a) under the
Exchange Act, Rule, 12b-2 under the Exchange Act requires "the direct
acquisition of the assets comprising a going business." A "blank check" company
such as Old Goat Enterprises does not satisfy that criteria. The SEC permits
"back door" registration under the Exchange Act where a formerly non-reporting
company first presents disclosure in a Commission filing about itself after
completion of a merger transaction. However, when the formerly non-reporting
company mergers with a "blank check' company, it must file, within 15 days of
the succession, a Form 10 or Form 10Q-SB, which include at a minimum complete
audited and pro forma financial statements required by these forms. Other
information about the accounting survivor such as a management's discussion and
analysis, business description and management should also be provided.
The Company filed a Form 8-K with the SEC in response to this request on
December 21, 2004
Other late filings of the Company include:
o Form 10-QSB for the quarter ended December 31, 2002 (File No. 333-91356)
o Form 10-QSB for the quarter ended September 30, 2003 (File No. 333-91356)
SCHEDULE 3.1(q)
Transactions with Affiliates
The Company, Two Way TV and Xxxxxx.xxx (UK), Ltd. have entered into a contract
for deployment of fixed odds service on the UK cables under the Winner brand
whereby the revenues of the venture will be split as follows: each of the
Company and Two Way have a 45% share and Winner has a 10% share. Xxxxxx Xxxxxx,
who is the Company's Chief Executive Officer, owns 60 % of Xxxxxx.xxx (UK), Ltd.
Half of these Xxxxxx.xxx shares, 30%, are being held in trust on behalf of other
shareholders by Xx. Xxxxxx.
SCHEDULE 3.1(v)
Registration Rights
To Punk Xxxxxx pursuant to an agreement on August 19, 2004
25,000 shares with registration rights
To Benchmark Consulting on December 16, 2004
50,000 shares with piggyback registration rights
To Portfolio PR on July 14, 2004.
8,824 shares for the fourth quarter of 2004 and thereafter $7500 worth of shares
per quarter until June 30, 2005 with piggyback registration rights
To Punk Xxxxxx pursuant to an agreement on August 19, 2004 Up to 80,000 shares
with registration rights
Xxxxx Xxxx & Xxxxx on August 12, 2004
1,650,000 shares with registration rights
SCHEDULE 3.1(ff)
The Company's Auditors
Xxxx Xxxxx Xxxxxx & Kasierer a member of Ernst & Young Global
Tel Aviv, Israel
SCHEDULE 4.7
Use of Proceeds
None
