EXHIBIT 10.13
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
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January 30, 2004, among eLinear, Inc., a Delaware corporation (the "Company"),
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and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers"); and
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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 each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company in the aggregate, up to $2,500,000 shares of Common Stock and
Warrants on the Closing Date.
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
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3.1(j).
"Affiliate" means any Person that, directly or indirectly through one
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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
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Stock and the Warrants pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the Transaction
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Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers' obligations to
pay the Subscription Amount and (ii) the Company's obligations to deliver
the Securities have been satisfied or waived.
"Closing Price" means on any particular date (a) the last reported
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closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if
there is no such price on such date, then the closing bid price on the
Trading Market on the
date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 PM
(New York time) for the closing bid price for regular session trading on
such day), or (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 Securities and Exchange Commission.
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"Common Stock" means the common stock of the Company, $0.02 par value
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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
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Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
"Company Counsel" means Xxxxxx & Xxxxxxxxx, P.C.
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"Disclosure Schedules" means the Disclosure Schedules of the Company
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delivered concurrently herewith.
"Effective Date" means the date that the Registration Statement is
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first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000 Xxxxxxxxx
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Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"Intellectual Property Rights" shall have the meaning ascribed to such
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term in Section 3.1(o).
"Liens" means a lien, charge, security interest, encumbrance, right of
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first refusal, preemptive right or other restriction.
"Material Adverse Effect" shall have the meaning ascribed to such term
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in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
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Section 3.1(m).
"Per Share Purchase Price" equals $2.00, subject to adjustment for
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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,
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incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
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(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
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Agreement, dated as of the date of this Agreement, among the Company and
each Purchaser, in the form of Exhibit A hereto.
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"Registration Statement" means a registration statement meeting the
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requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares and the Warrant Shares.
"Required Approvals" shall have the meaning ascribed to such term in
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Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
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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
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3.1(h).
"Securities" means the Shares, the Warrants and the Warrant Shares.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" means the shares of Common Stock issued or issuable to each
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Purchaser pursuant to this Agreement.
"Subscription Amount" means, as to each Purchaser, the amounts set
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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
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forth on Schedule 3.1(a) of the Disclosure Schedule.
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"Trading Day" means (i) a day on which the Common Stock is traded on a
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Trading Market, or (ii) if the Common Stock is not quoted on a Trading
Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices).
"Trading Market" means the following markets or exchanges on which the
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Common Stock is listed or quoted for trading on the date in question: the
OTC Bulletin Board, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Warrants and the
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Registration Rights Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"Warrants" means the Common Stock Purchase Warrants issued to the
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Purchasers pursuant to Sections 2.2(a)(iii) - (iv).
"Warrant Shares" means the shares of Common Stock issuable upon
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exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, each Purchaser shall purchase from
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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 and
(b) the Warrants as determined pursuant to Sections 2.2(a)(iii) - (iv). The
aggregate Subscription Amounts for Shares sold hereunder shall be up to
$2,500,000. Upon satisfaction of the conditions set forth in Section 2.2, the
Closing shall occur at the offices of FW or such other location as the parties
shall mutually agree.
2.2 Closing Conditions; Deliveries.
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(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) within 3 Trading Days of the Closing Date, 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) within 3 Trading Days of the Closing Date, a Warrant,
registered in the name of such Purchaser, exercisable immediately upon
issuance for a term of 5 years with an exercise price equal to $3.00,
pursuant to which such Purchaser shall have the right to acquire up to
the number of shares of Common Stock equal to 50% of the Shares to be
issued to such Purchaser, which Warrant shall otherwise in the form of
Exhibit C attached hereto;
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(iv) within 3 Trading Days of the Closing Date, a Warrant,
registered in the name of such Purchaser, exercisable immediately upon
issuance until the earlier of (Y) the 1 year anniversary of the
Effective Date and (Z) the earlier of the 2 year anniversary of the
Closing, which warrant shall have an exercise price equal to $2.50,
pursuant to which such Purchaser shall have the right to acquire up to
the number of shares of Common Stock equal to 50% of the Shares to be
issued to such Purchaser, which Warrant shall otherwise in the form of
Exhibit D attached hereto;
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(v) the Registration Rights Agreement duly executed by the
Company; and
(vi) a legal opinion of Company Counsel, in the form of
Exhibit B attached hereto.
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(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 as of the Closing Date.
(d) All obligations, covenants and agreements of the parties
required to be performed at or prior to the Closing Date shall have been
performed.
(e) From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission, and, at any
time prior to the Closing Date, trading in securities generally as reported
by Bloomberg Financial Markets shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of
such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Shares at the such Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:
(a) Subsidiaries. All of the subsidiaries of the Company are set
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forth on Schedule 3.1(a) of the Disclosure Schedule. The Company owns,
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directly or indirectly, all of the capital stock or other equity interests
of each Subsidiary free and clear of any Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities. If the Company has no
subsidiaries, then references in the Transaction Documents to the
Subsidiaries will be disregarded.
(b) Organization and Qualification. Except as set forth in
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Schedule 3.1(b), 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.
Neither the Company nor any Subsidiary is in material violation or default
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of
the Company and the Subsidiaries is duly qualified to conduct business and
is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or 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
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Effect") and no Proceeding has been instituted in any such jurisdiction
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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
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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 in
connection therewith other than in connection with the Required Approvals.
Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors'
rights generally and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies.
(d) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company, 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 asset of
the Company or any Subsidiary is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary
is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company or a Subsidiary is bound
or affected, or (iv) conflict with or 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 or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required
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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 and Warrant Shares for trading thereon
in the time and manner required thereby, and (iv) the filing of Form D
with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the "Required Approvals").
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(f) Issuance of the Securities. The Securities are duly
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authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens. The issuance of the Shares is not subject to
any preemptive or similar rights to subscribe for or purchase securities.
The Company has reserved from its duly authorized capital stock the maximum
number of shares of Common Stock issuable pursuant to this Agreement and
the Warrants.
(g) Capitalization. Except as set forth Schedule 3.1(g), the
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capitalization of the Company is as described in the Company's most recent
periodic report filed with the Commission. The Company has not issued any
capital stock since such filing 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 Securities
and except as set forth in the SEC Reports or in 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 Securities will not
obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required
for the issuance and sale of the Shares. Except as disclosed in the SEC
Reports, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company's capital stock to which the
Company is a party or, to the knowledge of the Company, between or among
any of the Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has filed all
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reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding
the date hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the "SEC Reports"). As of
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their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that if
any SEC Report was later amended, only the final amendment of such report
shall be considered in evaluating the representations set forth in the
prior sentence and the following two sentences. The financial statements of
the Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise
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specified in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) Material Changes. Since the date of the latest audited
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financial statements included within the SEC Reports, except as disclosed
in the SEC Reports, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice 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 stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending
before the Commission any request for confidential treatment of
information.
(j) Litigation. Except as disclosed in the SEC Reports and
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Schedule 3(j), there is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"Action") which (i) adversely affects or challenges the legality, validity
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or enforceability of any of the Transaction Documents or the Securities or
(ii) could, if there were an unfavorable decision, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor
any Subsidiary, nor any director or officer 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 or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
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knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
(l) Compliance. Except as disclosed in the SEC Reports, neither
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the Company nor any Subsidiary (i) is in default under or in violation of
(and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of
a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business except in each case as
could not have a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess
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all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not have or reasonably be
expected to result in a Material Adverse Effect ("Material Permits"), and
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neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(n) Title to Assets. Except as se forth on Schedule 3.1(n), the
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Company and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them that is material to the business of the
Company and the Subsidiaries and good and marketable title in all personal
property owned by them that is material to the business of the Company and
the Subsidiaries, in each
case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the
use made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes,
the payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. To the knowledge of the Company and
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each Subsidiary, 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
that are necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have or reasonably be expected to result in a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Neither the Company nor
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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 do not violate or infringe
the Intellectual Property Rights of others.
(p) Insurance. The Company and the Subsidiaries are insured by
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insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged. 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.
(q) Transactions With Affiliates and Employees. Except as set
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forth in the SEC Reports, none of the officers or directors of the Company
and, to the knowledge of the Company, none of the employees of the Company
is presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$60,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is
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in material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of
2002 which are applicable to it as of the Closing Date. The Company and
each of its subsidiaries maintains 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. The Company has established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company
and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its subsidiaries,
is made known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-KSB or
10-QSB, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of end of the filing period prior to the filing date of the
Form 10-QSB for the quarter ended September 30, 2003 (such date, the
"Evaluation Date"). The Company presented in its most recently filed Form
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10-KSB or Form 10-QSB the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as
such term is defined in Item 307(b) of Regulation S-K under the Exchange
Act) or, to the Company's knowledge, in other factors that could
significantly affect the Company's internal controls.
(s) Certain Fees. The Purchasers shall have no obligation with
-------------
respect to any brokerage or finder's fees or commissions 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.
(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
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Trading Market.
(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. The Company shall conduct
its business in a manner so that it will not become subject to the
Investment Company Act.
(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 Requirements. The Company's Common
---------------------------------------
Stock is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with
the listing or maintenance requirements of such Trading Market. The Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(x) Application of Takeover Protections. The Company and its
--------------------------------------
Board of Directors have taken all necessary action, if any, in order to
render inapplicable to the transactions contemplated by the Transaction
Documents any poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of
its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Securities and
the Purchasers' ownership of the Securities.
(y) Disclosure. Other than the terms of the transaction
----------
contemplated by this Agreement, 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 Disclosure Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct in all material respects 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.
(z) No Integrated Offering. Except as set forth in Schedule
------------------------
3.1(z), assuming the accuracy of the Purchasers' representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation
system on which any of the securities of the Company are listed or
designated.
(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 Securities 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) [Intentionally Omitted].
(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. Assuming the representations made in
---------------------
Section 3.2 are true and correct, 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. Assuming the
representations made in Section 3.2 are true and correct, 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.
(ff) Accountants. The Company's accountants are set forth on
-----------
Schedule 3.1(ff) of the Disclosure Schedule. To the Company's knowledge,
-----------------
such accountants, who the Company expects will express their opinion with
respect to the financial statements to be included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2003, are independent
accountants as required by the Securities Act.
(gg) Acknowledgment Regarding Purchasers' Purchase of Shares. The
-------------------------------------------------------
Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby. The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by
any Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to the Purchasers' purchase of the Shares. The Company
further represents to each Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation of
the transactions contemplated hereby by the Company and its
representatives.
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
------------------
Securities are "restricted securities" and have not been registered under
the Securities Act or any applicable state securities law and is acquiring
the Securities as principal for its own account and not with a view to or
for distributing or reselling such Securities or any part thereof, has no
present intention of distributing any of such Securities and has no
arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not
limiting such Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal
and state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. Such Purchaser does not
have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
-----------------
Securities, it was, and at the date hereof it is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
----------------------------
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
---------------------
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(f) Broker-Dealer Status. Except as set forth on the Purchaser's
---------------------
signature page hereto, Purchaser is not a registered broker-dealer or
affiliated with a registered broker-dealer.
(g) Short Sales. Purchaser represents that prior to execution of
------------
this Agreement, neither it nor its affiliates have made any net short sales
of, or granted any option for the purchase of or entered into any hedging
or similar transaction with the same economic effect as a net short sale,
in the Common Stock.
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Restriction on Sales, Short Sales and Hedging Transactions. The
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder. In furtherance of the foregoing:
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or
Rule 144, to the Company, 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, the form and substance of which opinion shall
be reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree
in writing to be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES 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 SECURITIES 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.
The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities
to a financial institution that is an "accredited investor" as defined in
Rule 501(a) under the Securities Act and who agrees to be bound by the
provisions of this Agreement and the Registration Rights Agreement and, if
required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor
shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the
Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities 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.
(c) Certificates evidencing the Shares and Warrant 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 or Warrant Shares pursuant to
Rule 144, or (iii) if such Shares or Warrant 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. If all or any portion
of a Warrant is exercised at a time when there is an effective registration
statement to cover the resale of the Warrant Shares, such Warrant Shares
shall be issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required under
this Section 4.1(c), it will, no later than five Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent of a
certificate representing Shares or Warrant Shares, as the case may be,
issued with a restrictive legend (such date, the "Legend Removal Date"),
-------------------
deliver or cause to be delivered to such Purchaser a certificate
representing such Securities that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Shares or Warrant Shares (based on
the Closing Price of the Common Stock on the date such Securities are
submitted to the
Company's transfer agent) subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such damages
have begun to accrue) for each Trading Day after the Legend Removal Date
until such certificate is delivered. Nothing herein shall limit such
Purchaser's right to pursue actual damages for the Company's failure to
deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue
all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
(e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and each Purchaser agrees to deliver the
documents set forth in Schedule 4.1(e) evidencing such compliance.
(f) Until the date that each Purchaser holds less than 20% of the
Shares initially purchased hereunder by such Purchaser or two years from
the Effective Date, the Company shall not undertake a reverse 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
---------------------------
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
-----------
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
--------------------------------------
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 each Purchaser disclosing the material terms of the transactions contemplated
hereby. The Company and each Purchaser shall consult with each other in issuing
any press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, 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 Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.6 Non-Public Information. The Company covenants and agrees that
-----------------------
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.7 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 Securities
hereunder for working capital purposes (including, without limitation, payment
of broker or finders' fees in connection with the transactions contemplated
hereby) 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.
4.8 Reimbursement. If any Purchaser becomes involved in any capacity
-------------
in any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
4.9 Indemnification of Purchasers. The Company will indemnify and
-------------------------------
hold the Purchasers and their directors, officers, shareholders, partners,
employees and agents (each, a "Purchaser Party") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to: (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents, other
than directly resulting from the gross negligence or willful misconduct of the
Purchasers. The Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.
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 and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.
4.11 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 for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
4.12 Participation in Future Financing. From the date hereof until 12
-----------------------------------
months after the Effective Date, the Company shall not effect a financing of its
Common Stock or Common Stock Equivalents (a "Subsequent Financing") unless (i)
the Company delivers to each of such Purchasers a written notice at least 5
Trading Days prior to the closing of such Subsequent Financing (the "Subsequent
Financing Notice") of its intention to effect such Subsequent Financing, which
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing is proposed to be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (ii) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the fifth (5th) Trading Day after its receipt
of the Subsequent Financing Notice of its willingness to provide (or to cause
its designee to provide), subject to completion of mutually acceptable
documentation, all or part of such financing to the Company on the same terms
set forth in the Subsequent Financing Notice. If one or more Purchasers shall
fail to so notify the Company of their willingness to participate in the
Subsequent Financing, the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice; provided that the Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of first refusal set forth above in this Section 4.12, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial Subsequent Financing Notice with
the Person identified in the Subsequent Financing Notice. In the event the
Company receives responses to Subsequent Financing Notices from Purchasers
seeking to purchase more than the financing sought by the Company in the
Subsequent Financing such Purchasers shall have the right to purchase their Pro
Rata Portion (as defined below) of the Common Stock or Common Stock Equivalents
to be issued in such Subsequent Financing. "Pro Rata Portion" is the ratio of
(x) such Purchaser's Subscription Amount and (y) the aggregate sum of all of the
Subscription Amounts. Notwithstanding the foregoing, this Section 4.12 shall not
apply in respect of the issuance of (a) shares of Common Stock or options to
employees, consultants, officers or directors of the Company pursuant to any
stock or option plan duly adopted by a majority of the non-employee members of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose or (b)
securities upon the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement.
4.13 Subsequent Equity Sales. From the date hereof until 90 days after
-----------------------
the Effective Date, neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common Stock Equivalents; provided, however, the 90 day period
set forth in this Section 4.14 shall be extended for the number of Trading Days
during such period in which (y) trading in the Common Stock is suspended by any
Trading Market, or (z) following the Effective Date, the Registration Statement
is not effective or the prospectus included in the Registration Statement may
not be used by the Purchasers for the resale of the Shares and Warrant Shares.
Notwithstanding the foregoing, this Section 4.14 shall not apply in respect of
the issuance of (a) shares of Common Stock or options to employees, consultants,
officers or directors of the Company pursuant to any stock or option plan duly
adopted by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose or (b) securities upon the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses of
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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 sale of the
Securities.
5.2 Entire Agreement. The Transaction Documents, together with the
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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
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required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
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 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 U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
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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.
5.5 Construction. The headings herein are for convenience only, do not
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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
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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 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 Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
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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,
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validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, New York 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. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by delivering a copy thereof via overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto (including its affiliates, agents, officers, directors and
employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.9 Survival. The representations and warranties herein shall survive
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the Closing and delivery of the Shares and Warrant Shares.
5.10 Execution. This Agreement may be executed in two or more
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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 Replacement of Securities. If any certificate or instrument
---------------------------
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.13 Remedies. In addition to being entitled to exercise all rights
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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.
5.14 Payment Set Aside. To the extent that the Company makes a payment
-----------------
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.15 Independent Nature of Purchasers' Obligations and Rights. The
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obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Ram Capital Resources. 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.
(Signature Page Follows)
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.
ELINEAR, INC.
Address for Notice:
-------------------
By:_______________________________________
Name:
Title:
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
[PURCHASER SIGNATURE PAGES TO ELIN 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: ____________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: ____________________________________
Title of Authorized Signatory: ___________________________________
Email Address of Authorized Signatory: _________________________________________
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount:
Shares:
Warrant Shares:
EIN Number: [WE SUGGEST YOU PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
