EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July 1,
2005, is made by and among PDG Environmental, Inc., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), and each of the
purchasers (individually, a "PURCHASER" and collectively the "PURCHASERS") set
forth on the execution pages hereof (each, an "EXECUTION PAGE" and collectively
the "EXECUTION PAGES").
BACKGROUND
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. Upon the terms and conditions stated in this Agreement, the Company
desires to issue and sell to the Purchasers, and each Purchaser desires to
purchase, units (the "UNITS"), each Unit consisting of: (i) one (1) share of the
Company's Series C Convertible Preferred Stock, par value $0.01 per share (the
"INITIAL PREFERRED STOCK"), which shall have the rights, preferences and
privileges set forth in the form of Certificate of Designation, Preferences and
Rights attached hereto as Exhibit A (the "CERTIFICATE OF DESIGNATION"), and
shall be convertible into shares of the Company's common stock, par value $0.02
per share (the "COMMON STOCK"), as set forth in the Certificate of Designation;
(ii) (A) warrants, in the form attached hereto as Exhibit B1, to acquire
initially two hundred and fifty (250) shares of Common Stock at an exercise
price of One Dollar and Eleven Cents ($1.11) per share and (B) warrants, in the
form attached hereto as Exhibit B2, to acquire initially two hundred and fifty
(250) shares of Common Stock at an exercise price of One Dollar and Thirty-Three
Cents ($1.33) per share (the "INITIAL WARRANTS"); and (iii) warrants, in the
form attached hereto as Exhibit C (the "PREFERRED WARRANTS"), to acquire (A) one
quarter (0.25) of a share of the Company's Series C Convertible Preferred Stock,
par value $0.01 per share (the "ADDITIONAL PREFERRED STOCK" and, together with
the Initial Preferred Stock, the "PREFERRED STOCK"), and (B) additional warrants
to acquire initially (x) sixty two and one-half (62.5) shares of Common Stock at
an exercise price of One Dollar and Eleven Cents ($1.11) per share and (y) sixty
two and one-half (62.5) shares of Common Stock at an exercise price of One
Dollar and Thirty-Three Cents ($1.33) per share (the "ADDITIONAL WARRANTS" and,
together with the Initial Warrants, the "WARRANTS"). The shares of Common Stock
issuable upon conversion of or otherwise pursuant to the Preferred Stock
(without giving effect to the limitations set forth in Article XV of the
Certificate of Designation) are referred to herein as the "CONVERSION SHARES"
and the shares of Common Stock issuable upon exercise of or otherwise pursuant
to the Warrants (without giving effect to the limitations in Section 10 of the
Warrant) are referred to herein as the "WARRANT SHARES." The Preferred Stock,
the Preferred Warrants, the Warrants, the Conversion Shares and the Warrant
Shares are collectively referenced herein as the "SECURITIES" and each of them
may individually be referred to herein as a "SECURITY."
C. In connection with the Closing pursuant to this Agreement, the parties
hereto will execute and deliver a Registration Rights Agreement, in the form
attached hereto as Exhibit D (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to
which the Company has agreed to provide certain registration rights under the
Securities Act and the rules and regulations promulgated thereunder, and
applicable state securities laws. This Agreement, the Certificate of
Designation, the Preferred Warrants, the Warrants, and the Registration Rights
Agreement are collectively referred to herein as the "TRANSACTION DOCUMENTS."
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers,
intending to be legally bound, hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
(a) Purchase and Sale of Securities. Subject to the terms and conditions
hereof, at the Closing (as defined in Section 1(b) below), the Company shall
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
shall purchase from the Company, such number of Units as is set forth on such
Purchaser's Execution Page, for a purchase price (as to each Purchaser, the
"PURCHASE PRICE") per Unit equal to One Thousand Dollars ($1,000).
(b) The Closing. Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7 below, the closing of the transactions
contemplated hereby (the "CLOSING") shall take place at the offices of Drinker
Xxxxxx & Xxxxx LLP at One Xxxxx Square, 00xx & Xxxxxx Xxxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000 at 10:00 a.m., Philadelphia, Pennsylvania time, on the date
hereof, or such other time or place as the Company and the Purchasers may
mutually agree (the "CLOSING DATE").
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Each Purchaser severally, but not jointly, represents and warrants to the
Company as of the date of this Agreement and as of the Closing Date as follows:
(a) Purchase for Own Account, Etc. Such Purchaser is purchasing the
Securities for such Purchaser's own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Such Purchaser understands that such
Purchaser must bear the economic risk of this investment indefinitely, unless
the Securities are registered pursuant to the Securities Act and any applicable
state securities or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of registering the
resale of any such Securities other than as contemplated by the Registration
Rights Agreement. Notwithstanding anything in this Section 2(a) to the contrary,
by making the representations herein, such Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration requirements under
the Securities Act.
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(b) Accredited Investor Status. Such Purchaser is an "Accredited Investor"
as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Purchaser understands that the Securities
are being offered and sold to such Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Securities.
(d) Information. Such Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been specifically requested by such Purchaser or its counsel. Neither such
inquiries nor any other investigation conducted by such Purchaser or its counsel
or any of its representatives shall modify, amend or affect such Purchaser's
right to rely on the Company's representations and warranties contained in
Section 3 below. Such Purchaser understands that such Purchaser's investment in
the Securities involves a high degree of risk.
(e) Governmental Review. Such Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
(f) Authorization; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Purchaser and are valid and binding agreements of such Purchaser
enforceable against such Purchaser in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and general principles of equity.
(g) Residency. Such Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
(h) Short Sales. Such Purchaser has not engaged in short sales of the
Company's stock at any time leading up to the transaction contemplated by this
Agreement.
Each Purchaser's representations and warranties made in this Article 2 are
made solely for the purpose of permitting the Company to make a determination
that the offer and sale of the Securities pursuant to this Agreement comply with
applicable U.S. federal and state securities laws and not for any other purpose.
Accordingly, the Company may not rely on such representations and warranties for
any other purpose. No Purchaser has made or hereby makes any other
representations or warranties, express or implied, to the Company in connection
with the transactions contemplated hereby.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Disclosure Schedule executed and delivered by the
Company to each Purchaser (the "DISCLOSURE SCHEDULE"), the Company represents
and warrants to each Purchaser as of the date of this Agreement and as of the
Closing Date as follows:
(a) Organization and Qualification. The Company and each of its direct and
indirect subsidiaries (collectively, the "SUBSIDIARIES") is a corporation duly
organized and existing in good standing under the laws of the jurisdiction in
which it is incorporated or organized, and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company and each of its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature
of the business conducted by it makes such qualification necessary and where the
failure so to qualify or be in good standing would have a Material Adverse
Effect. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" means any
effect which, individually or in the aggregate with all other effects,
reasonably would be expected to be materially adverse to (i) the Securities,
(ii) the ability of the Company to perform its obligations under this Agreement
or the other Transaction Documents or (iii) the business, operations,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents, to issue and sell the Units
in accordance with the terms hereof, to issue the Additional Preferred Stock and
the Additional Warrants upon exercise of the Preferred Warrants in accordance
with the terms thereof, to issue the Conversion Shares upon conversion of the
Preferred Stock in accordance with the terms thereof and to issue the Warrant
Shares upon exercise of the Warrants in accordance with the terms thereof; (ii)
the execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Units and the issuance and reservation for issuance of the
Additional Preferred Stock, the Additional Warrants, the Conversion Shares and
the Warrant Shares) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or any committee of the Board of Directors is required, and (iii)
this Agreement constitutes, and, upon execution and delivery by the Company of
the other Transaction Documents, such Transaction Documents will constitute,
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and general principles of equity. Neither the
execution, delivery or performance by the Company of its obligations under this
Agreement or the other Transaction Documents, nor the consummation by it of the
transactions contemplated hereby or thereby (including, without limitation, the
issuance of the Units or the issuance or reservation for issuance of the
Additional Preferred Stock, the Additional Warrants, the Conversion Shares or
the Warrant Shares) requires any consent or authorization of the Company's
stockholders.
(c) Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares
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issuable and reserved for issuance pursuant to the Company's stock option plans,
the number of shares issuable and reserved for issuance pursuant to securities
(other than the Preferred Stock, the Preferred Warrants and the Warrants)
exercisable or exchangeable for, or convertible into, any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Preferred Stock and exercise of the Preferred Warrants and the Warrants is
set forth in Section 3(c) of the Disclosure Schedule. All of such outstanding
shares of capital stock have been, or upon issuance in accordance with the terms
of any such exercisable, exchangeable or convertible securities will be, validly
issued, fully paid and non-assessable. No shares of capital stock of the Company
(including the Preferred Stock, the Conversion Shares and the Warrant Shares)
are subject to preemptive rights or any other similar rights of the stockholders
of the Company. Except for the Securities and as set forth in Section 3(c) of
the Disclosure Schedule, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
nor are any such issuances, contracts, commitments, understandings or
arrangements contemplated, (ii) there are no contracts, commitments,
understandings or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the Securities Act (except the Registration Rights Agreement); (iii) there
are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem or otherwise acquire
any security of the Company or any of its Subsidiaries; and (iv) the Company
does not have any shareholder rights plan, "poison pill" or other anti-takeover
plans or similar arrangements. Section 3(c) of the Disclosure Schedule sets
forth all of the securities or instruments issued by the Company or any of its
Subsidiaries that contain anti-dilution or similar provisions, and, except as
and to the extent set forth thereon, the sale and issuance of the Securities
will not trigger any anti-dilution adjustments to any such securities or
instruments. The Company has furnished to each Purchaser true and correct copies
of the Company's Certificate of Incorporation as in effect on the date hereof
("CERTIFICATE OF INCORPORATION"), the Company's Bylaws as in effect on the date
hereof (the "BYLAWS"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company, all of which instruments and agreements are set forth in Section
3(c) of the Disclosure Schedule. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or any such Subsidiary.
(d) Issuance of Securities. The Units (and the securities comprising the
Units) are duly authorized and, upon issuance in accordance with the terms of
this Agreement, (i) will be validly issued, fully paid and non-assessable and
free from all taxes, liens, security interests, claims and encumbrances, (ii)
will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person, except as set
forth in Section 3(d) of the Disclosure Schedule, and (iii) will not impose
personal liability on the holder thereof. The Conversion Shares, the Warrant
Shares and the Additional Preferred Stock are duly authorized and reserved for
issuance, and, upon conversion of the Preferred Stock and exercise
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of the Warrants and the Preferred Warrants, as applicable, in accordance with
the terms thereof, (x) will be validly issued, fully paid and non-assessable,
and free from all taxes, liens, security interests, claims and encumbrances, (y)
will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person, except as set
forth in Section 3(d) of the Disclosure Schedule, and (z) will not impose
personal liability upon the holder thereof.
(e) No Conflicts; Consents. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Units and the issuance and
reservation for issuance of the Additional Preferred Stock, the Additional
Warrants, the Conversion Shares and the Warrant Shares) will not (i) result in a
violation of the Certificate of Incorporation or Bylaws, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment (including, without limitation, the triggering of any anti-dilution or
similar provisions), acceleration or cancellation of, any agreement, indenture
or instrument to which the Company or any of its Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including United States federal and state securities laws, rules and
regulations and rules and regulations of any self-regulatory organizations to
which either the Company or its securities are subject) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except, with respect to
clauses (ii) and (iii), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not, individually or in
the aggregate, have a Material Adverse Effect). Except (w) as may be required
under the Securities Act in connection with the performance of the Company's
obligations under the Registration Rights Agreement, (x) for the filing of a
Form D with the SEC, (y) as may be required for compliance with applicable state
securities or "blue sky" laws, or (z) as otherwise set forth in Section 3(e) of
the Disclosure Schedule, the Company is not required to obtain any consent,
approval, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory agency or
other third party (including, without limitation, pursuant to any Material
Contract (as defined in Section 3(g) below)) in order for it to execute, deliver
or perform any of its obligations under this Agreement or any of the other
Transaction Documents.
(f) Compliance. The Company is not in violation of its Certificate of
Incorporation, Bylaws or other organizational documents and no Subsidiary is in
violation of any of its organizational documents. Neither the Company nor any of
its Subsidiaries is in default (and no event has occurred that with notice or
lapse of time or both would put the Company or any of its Subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party (including, without limitation, the Material
Contracts), except for actual or possible violations, defaults or rights that
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries are not being conducted, and
shall not be conducted so long as any Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either individually or in the
aggregate have not had and would not have a Material
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Adverse Effect. Neither the Company, nor any of its Subsidiaries, nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of his actions for, or on behalf
of, the Company or any Subsidiary, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity, made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds, violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee. The Company
and its Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate federal, state, provincial or foreign regulatory authorities
that are material to the conduct of its business, and neither the Company nor
any of its Subsidiaries has received any notice of proceeding relating to the
revocation or modification of any such certificate, authorization or permit.
(g) SEC Documents, Financial Statements. Since December 31, 2003, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, the "SEC
DOCUMENTS"). The Company has delivered or made available to each Purchaser true
and complete copies of the SEC Documents. As of their respective dates, the SEC
Documents (i) complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and (ii) did not contain any untrue statement of a material fact or omit 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. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings made prior
to the date hereof). As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except as may be otherwise indicated in such financial statements or
the notes thereto or, in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal, immaterial
year-end audit adjustments). Except as set forth in the financial statements of
the Company included in the Select SEC Documents (as defined below), the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business with non-affiliated third parties subsequent
to the date of such financial statements and (ii) obligations under contracts
and commitments incurred in the ordinary course of business with non-affiliated
third parties and not required under GAAP to be reflected in such financial
statements, which liabilities and obligations referred to in clauses (i) and
(ii), individually or in
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the aggregate, are not material to the condition (financial or otherwise) or
operating results of the Company. To the extent required by the rules and
regulations of the SEC applicable thereto, the Select SEC Documents contain a
complete and accurate list of all material contracts (as defined in Item
601(b)(10) of Regulation S-K) to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary is bound or to which any of the
properties or assets of the Company or any Subsidiary is subject (each, a
"MATERIAL CONTRACT"). Except as set forth in the Select SEC Documents, none of
the Company, its Subsidiaries or, to the best knowledge of the Company, any of
the other parties thereto is in breach or violation of any Material Contract,
which breach or violation would have a Material Adverse Effect. For purposes of
this Agreement, "SELECT SEC DOCUMENTS" means the Company's (A) Proxy Statement
for its 2004 Annual Meeting, (B) Annual Report on Form 10-K for the fiscal year
ended January 31, 2005 (the "2005 ANNUAL REPORT") and (C) Current Reports on
Form 8-K filed since January 31, 2005.
(h) Internal Accounting Controls. Except as set forth on Section 3(h) of
the Disclosure Schedule, 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-14 and 15d-14) for the Company and designed
such disclosures 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 Annual Report on Form 10-K or Quarterly Report on
Form 10-Q, 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 a date within 90 days prior to the filing date of the 2005
Annual Report and the Company's most recently filed Quarterly Report on Form
10-Q (each such date, an "EVALUATION DATE"). The Company presented in the 2005
Annual Report and its most recently filed Quarterly Report on Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the respective
Evaluation Date. Since the Evaluation Date for the 2005 Annual Report, 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.
(i) Absence of Certain Changes. Except as set forth in the Select SEC
Documents, since January 31, 2005, there has been no change or development
giving rise to a Material Adverse Effect. The Company has not taken any steps,
and does not currently expect to take any steps, to seek protection pursuant to
any bankruptcy or receivership law, nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings with respect to the Company or
any of its Subsidiaries.
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(j) Transactions With Affiliates. Except as set forth in the Select SEC
Documents, none of the officers, directors, or employees of the Company or any
of its Subsidiaries is presently a party to any transaction with the Company or
any of its Subsidiaries (other than for ordinary course services solely in their
capacity as officers, directors or employees), 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 such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
(k) Absence of Litigation. Except as set forth in the Select SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body (including, without limitation, the SEC) pending or, to the knowledge of
the Company or any of its Subsidiaries, threatened against or affecting the
Company, any of its Subsidiaries, or any of their respective directors or
officers in their capacities as such. There are no facts known to the Company or
its Subsidiaries which, if known by a potential claimant or governmental
authority, could reasonably serve as the basis for a claim or proceeding which,
if asserted or conducted with results unfavorable to the Company or any of its
Subsidiaries, could reasonably be expected to have a Material Adverse Effect.
(l) Intellectual Property. Each of the Company and its Subsidiaries owns
or is duly licensed (and, in such event, has the unfettered right to grant
sublicenses) to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted and as presently contemplated to be
conducted in the future. Section 3(l) of the Disclosure Schedule sets forth a
list of all Intangibles owned and/or used by the Company in its business. To the
knowledge of the Company and its Subsidiaries, neither the Company nor any
Subsidiary of the Company infringes or is in conflict with any right of any
other person with respect to any third party Intangibles. Neither the Company
nor any of its Subsidiaries has received written notice of any pending conflict
with or infringement upon such third party Intangibles. Neither the Company nor
any of its Subsidiaries has entered into any consent agreement, indemnification
agreement, forbearance to xxx or settlement agreement with respect to the
validity of the Company's or its Subsidiaries' ownership of or right to use its
Intangibles and there is no reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company and its Subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. No person is infringing on or violating the Intangibles owned or used
by the Company or its Subsidiaries.
(m) Title. The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and merchantable title to all
personal property owned by
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them that is material to the business of the Company and its Subsidiaries, in
each case free and clear of all liens, security interests, encumbrances and
defects except for (i) liens for current taxes not yet delinquent, (ii) liens
imposed by law and incurred in the ordinary course of business for obligations
not past due to carriers, warehousemen, laborers, materialmen and the like, and
(iii) for liens in respect of pledges or deposits under workers' compensation
laws or similar legislation, none of which, individually or in the aggregate,
materially affect the value of such property or materially interfere with the
use made and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(n) Tax Status. Except as set forth in the Select SEC Documents, the
Company and each of its Subsidiaries has made or filed all foreign, U.S.
federal, state, provincial and local income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to any statute of limitations relating to the assessment or
collection of any foreign, federal, state, provincial or local tax. None of the
Company's tax returns is presently being audited by any taxing authority.
(o) Key Employees. Each of the Company's directors and officers and any
Key Employee (as defined below) is currently serving the Company in the capacity
disclosed in the Select SEC Documents. No Key Employee is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its Subsidiaries to any material liability with respect to any
of the foregoing matters. No Key Employee has, to the knowledge of the Company
and its Subsidiaries, any intention to terminate or limit his employment with,
or services to, the Company or any of its Subsidiaries, nor is any such Key
Employee subject to any constraints which would cause such employee to be unable
to devote his full time and attention to such employment or services. For
purposes of this Agreement, "KEY EMPLOYEE" means the persons listed in Section
3(o) of the Disclosure Schedule and any individual who assumes or performs any
of the duties of a Key Employee.
(p) Employee Relations. Except as set forth in Section 3(p) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is involved
in any material union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. The Company and its
Subsidiaries believe that their relations with their employees are good. No
executive officer (as defined in Rule 501(f) of the Securities Act) has notified
the Company that such officer intends to leave the Company or otherwise
terminate such officer's
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employment with the Company. The Company and its Subsidiaries are in compliance
with all federal, state, local and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, result in a Material Adverse Effect.
(q) Insurance. The Company and each of its Subsidiaries has in force fire,
casualty, product liability and other insurance policies, with extended
coverage, sufficient in amount to allow it to replace any of its material
properties or assets which might be damaged or destroyed or sufficient to cover
liabilities to which the Company may reasonably become subject, and such types
and amounts of other insurance with respect to its business and properties, on
both a per occurrence and an aggregate basis, as are customarily carried by
persons engaged in the same or similar business as the Company. No default or
event has occurred that could give rise to a default under any such policy.
(r) Environmental Matters. There is no environmental litigation or other
environmental proceeding pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened by any governmental regulatory authority or others
with respect to the current or any former business of the Company or any of its
Subsidiaries or any partnership or joint venture currently or at any time
affiliated with the Company or any of its Subsidiaries. No state of facts exists
as to environmental matters or Hazardous Substances (as defined below) that
involves the reasonable likelihood of a material capital expenditure by the
Company or any of its Subsidiaries that may otherwise have a Material Adverse
Effect. No Hazardous Substances have been treated, stored or disposed of, or
otherwise deposited, in or on the properties owned or leased by the Company or
any of its Subsidiaries or by any partnership or joint venture currently or at
any time affiliated with the Company or any of its Subsidiaries in violation of
any applicable environmental laws. The environmental compliance programs of the
Company and each of its Subsidiaries comply in all respects with all
environmental laws, whether foreign, federal, state, provincial or local,
currently in effect. For purposes of this Agreement, "HAZARDOUS SUBSTANCES"
means any substance, waste, contaminant, pollutant or material that has been
determined by any governmental authority to be capable of posing a risk of
injury to health, safety, property or the environment.
(s) Solvency. Based on the financial condition of the Company as of the
Closing Date, (i) the fair saleable value of the Company's assets exceeds the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
-11-
(t) Bulletin Board. The Common Stock is currently quoted on the Nasdaq
Over-the-Counter Bulletin Board (the "BULLETIN BOARD"). The Company is not in
violation of the quotation eligibility requirements of the Bulletin Board, does
not reasonably anticipate that the Common Stock will be removed from quotation
on the Bulletin Board for the foreseeable future, and has not received any
notice regarding the possible removal from quotation of the Common Stock on the
Bulletin Board. The Company has secured the quotation of the Conversion Shares
and Warrant Shares on the Bulletin Board and on each other national securities
exchange, automated quotation system or over-the-counter market upon which
shares of Common Stock are currently listed or quoted (subject to official
notice of issuance).
(u) Form S-2 Eligibility. The Company is eligible to register the resale
of its Common Stock on a registration statement on Form S-2 under the Securities
Act. There exist no facts or circumstances that would prohibit or delay the
preparation and filing of a registration statement on Form S-2 with respect to
the Registrable Securities (as defined in the Registration Rights Agreement).
The Company has no basis to believe that its past or present independent public
auditors will withhold their consent to the inclusion, or incorporation by
reference, of their audit opinion concerning the Company's financial statements
which are included in the Registration Statement required to be filed pursuant
to the Registration Rights Agreement.
(v) Anti-Takeover Provisions. The Company and its board of directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under its
Certificate of Incorporation or the laws of the state of its incorporation
(including, without limitation, Section 203 of the Delaware General Corporation
Law, as amended) which is or could become applicable to any Purchaser as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and any and all Purchaser's
ownership of the Securities.
(w) Acknowledgment Regarding Each Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that each Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby, and
that no Purchaser is (i) an officer or director of the Company, (ii) an
"affiliate" of the Company (as defined in Rule 144 under the Securities Act
(including any successor rule, "RULE 144")) or (iii) to the knowledge of the
Company, a "beneficial owner" of more than five percent (5%) of the Common Stock
(as defined for purposes of Rule 13d-3 of the Exchange Act). 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 or the
other Transaction Documents and the transactions contemplated hereby and
thereby, and any advice given by a Purchaser or any of its representatives or
agents in connection with this Agreement or the other Transaction Documents and
the transactions contemplated hereby and thereby is merely incidental to such
Purchaser's purchase of the Securities. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(x) No General Solicitation or Integrated Offering. Neither the Company
nor any distributor participating on the Company's behalf in the transactions
contemplated hereby (if
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any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation" (as such term is defined in Regulation D)
with respect to any of the Securities being offered hereby. 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 require registration
of the Securities being offered hereby under the Securities Act or cause this
offering of Securities to be integrated with any prior offering of securities of
the Company for purposes of the Securities Act, which result of such integration
would require registration under the Securities Act, or any applicable
stockholder approval provisions.
(y) No Brokers. Except as set forth in Section 3(y) of the Disclosure
Schedule, the Company has taken no action that would give rise to any claim by
any person for brokerage commissions, finder's fees or similar payments by any
Purchaser relating to this Agreement or the transactions contemplated hereby.
(z) Acknowledgment Regarding Securities. The number of Conversion Shares
issuable upon conversion of the Preferred Stock and the number of Warrant Shares
issuable upon exercise of the Warrants may increase in certain circumstances.
The Company's directors and executive officers have studied and fully understand
the nature of the Securities being sold hereunder. The Company acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred Stock
in accordance with the terms thereof and the Warrant Shares upon the exercise of
the Warrants in accordance with the terms thereof is absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders and the availability of remedies provided for in
any of the Transaction Documents relating to a failure or refusal to issue
Conversion Shares or Warrant Shares. Taking the foregoing into account, the
Company's Board of Directors has determined in its good faith business judgment
that the issuance of the Units hereunder and the consummation of the other
transactions contemplated hereby are in the best interests of the Company and
its stockholders.
(aa) Foreign Corrupt Practices. Neither the Company, any of its
Subsidiaries nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any Subsidiary, has
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity, (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee (including without limitation any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment), or (iii) violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended.
(bb) Customers and Suppliers. Since January 1, 2005, no supplier of the
Company or its Subsidiaries has canceled, materially modified, or otherwise
terminated its relationship with the Company or its Subsidiaries or decreased
materially its supply of the services or products of the Company or its
Subsidiaries, nor does any supplier have, to the Company's knowledge, any plan
or intention to do any of the foregoing. The Company has no reason to believe
that any of its or its Subsidiaries' suppliers will experience a manufacturing
disruption, a failure to dedicate adequate resources to the production, assembly
or testing of the Company's or its Subsidiaries' products, or financial
instability, or that any such supplier will be unable to successfully transition
its manufacturing capabilities to the future needs of the Company and its
Subsidiaries.
-13-
(cc) Disclosure. All information relating to or concerning the Company
and/or any of its Subsidiaries set forth in this Agreement or provided or
otherwise made available to the Purchasers pursuant to Section 2(d) hereof or
otherwise in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading.
4. COVENANTS.
(a) Best Efforts. The parties shall use their respective best efforts
timely to satisfy each of the conditions described in Sections 6 and 7 of this
Agreement.
(b) Form D; Blue Sky Laws. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and provide a copy
thereof to each Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to each Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date. The Company shall issue a press release (the "PRESS RELEASE")
describing in reasonable detail the transactions contemplated hereby and such
other matters as had previously been discussed by the Purchasers and the
Company, as soon as practicable on or after the date hereof, but in no event
later than the commencement of the first trading day following the date hereof.
The Press Release shall be subject to prior review and comment from the
Purchasers. Within two days after the Closing Date, the Company shall file a
Form 8-K with the SEC concerning this Agreement and the transactions
contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
as exhibits to such Form 0-X (xxx "0-X XXXXXX"). From and after the Press
Release, the Company hereby acknowledges that no Purchaser shall be in
possession of any material nonpublic information received from the Company, any
of its Subsidiaries or, to the best of the Company's knowledge, any of its or
their respective directors, officers, employees, affiliates, stockholders,
agents and representatives, that is not disclosed in the Press Release. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective directors, officers, employees, affiliates, stockholders,
agents and representatives not to, provide any Purchaser or its directors,
officers, employees, affiliates, stockholders, agents or representatives with
any material nonpublic information regarding the Company or any of its
Subsidiaries from and after the Press Release without the express written
consent of such Purchaser; provided, however, that a Purchaser that exercises
its rights under Section 4(m) hereof shall be deemed to have given such express
written consent. In the event the covenant in the preceding sentence is breached
for any reason, whether or not as a result of the fault or nonfeasance of the
Company, the Company shall, as promptly as practicable and in no event later
than the first business day after becoming aware of such breach, disclose all
such material nonpublic information to the public in accordance with Regulation
FD promulgated under the Exchange Act. Notwithstanding the foregoing, and in
addition to any other remedy provided herein or in the other Transaction
Documents, in the event of a breach of such covenant, the Purchaser shall also
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material nonpublic information
without the prior approval by the Company, its Subsidiaries or any of its or
their respective officers, directors, employees or agents; provided, however, a
-14-
copy of such press release, public advertisement or other communication shall be
provided to the Company no less than 24 hours prior to its issuance to the
public. No Purchaser shall have any liability to the Company, its Subsidiaries
or any of its or their respective directors, officers, employees, affiliates,
stockholders, agents or representatives for any such disclosure. Subject to the
foregoing, neither the Company nor any Purchaser shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Purchaser, to make any press release or other public disclosure
with respect to such transactions as is required by applicable law and
regulations (provided that (a) each Purchaser shall be consulted by the Company
in connection with any such press release or other public disclosure prior to
its release and (b) in no event will any Purchaser be identified by name in any
press release, including, without limitation, the Press Release, or other public
disclosure without the express prior approval of the Purchaser to be named).
(c) Reporting Status. So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the
Exchange Act (subject to permitted extensions to do so), and the Company shall
not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
(d) Use of Proceeds. The Company shall use the proceeds from the sale and
issuance of the Units as set forth on Schedule 4(d). Except as set forth on
Schedule 4(d), such proceeds shall not be used to (i) pay dividends; (ii) pay
for any increase in executive compensation or make any loan or other advance to
any officer, employee, shareholder, director or other affiliate of the Company,
without the express approval of the Board of Directors acting in accordance with
past practice; (iii) purchase debt or equity securities of any entity (including
redeeming the Company's own securities), except for (A) evidences of
indebtedness issued or fully guaranteed by the United States of America and
having a maturity of not more than one year from the date of acquisition, (B)
certificates of deposit, notes, acceptances and repurchase agreements having a
maturity of not more than one year from the date of acquisition issued by a bank
organized in the United States having capital, surplus and undivided profits of
at least Five Hundred Million Dollars ($500,000,000), (C) the highest-rated
commercial paper having a maturity of not more than one (1) year from the date
of acquisition, and (D) "Money Market" fund shares, or money market accounts
fully insured by the Federal Deposit Insurance Corporation and sponsored by
banks and other financial institutions, provided that the investments consist
principally of the types of investments described in clauses (A), (B), or (C)
above; or (iv) make any investment not directly related to the current business
of the Company.
(e) [Intentionally omitted]
(f) Reservation of Shares. The Company currently has authorized and
reserved for the purpose of issuance (i) nine million, thirty-three thousand,
seven hundred and fifty (9,033,750) shares of Common Stock to provide for the
conversion of the Preferred Stock and issuance of the Conversion Shares in
connection therewith, the exercise of the Warrants and the issuance of the
Warrant Shares in connection therewith and as otherwise required by the
Preferred Stock, the Warrants and the Registration Rights Agreement and (ii) six
thousand eight
-15-
hundred and seventy-five (6,875) shares of Preferred Stock to provide for the
issuance of the Initial Preferred Stock and the issuance of the Additional
Preferred Stock upon full conversion of the Preferred Warrants (collectively,
the "ISSUANCE OBLIGATIONS"). The Company shall, no later than September 30,
2005, (x) obtain stockholder approval to amend its Certificate of Incorporation
to increase the number of authorized shares of Common Stock from thirty million
(30,000,000) shares to at least sixty million (60,000,000) shares and (y) take
any and all other actions necessary to effect such amendment of its Certificate
of Incorporation. The Company shall, from and after the earlier of (I) such time
as the Company's stockholders have approved such amendment to its Certificate of
Incorporation and (II) September 30, 2005, reserve such number of shares of its
authorized but unissued shares of Common Stock to provide for the satisfaction
of the Issuance Obligations that is equal to (A) the aggregate number of shares
of Common Stock issuable in satisfaction of the Issuance Obligations immediately
following the consummation of the transactions contemplated by this Agreement,
multiplied by (B) one hundred and twenty-five percent (125%). In the event the
number of shares of Common Stock or Preferred Stock so reserved becomes
insufficient to cover (X) one hundred and twenty-five percent (125%) of the
maximum number of shares of Common Stock issuable pursuant to the Issuance
Obligations, or (Y) one hundred percent (100%) of the Preferred Stock issuable
upon exercise of the Preferred Warrants, the Company shall take all necessary
action to authorize and reserve such additional shares of Common Stock or
Preferred Stock as may be necessary to cover (a) one hundred and twenty-five
percent (125%) of the maximum number of shares of Common Stock issuable pursuant
to the Issuance Obligations, and (b) one hundred percent (100%) of the Preferred
Stock issuable upon exercise of the Preferred Warrants, as applicable.
(g) Quotation or Listing. So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company shall
maintain the quotation or listing of all Conversion Shares and Warrant Shares
from time to time issuable upon conversion of the Preferred Stock and exercise
of the Warrants on each national securities exchange, automated quotation system
or electronic bulletin board on which shares of Common Stock are currently
quoted or listed. The Company shall use its best efforts to continue the
quotation (or listing, as applicable) and trading of its Common Stock on the
Bulletin Board or on the Nasdaq National Market (the "NATIONAL MARKET"), the
Nasdaq SmallCap Market (the "SMALLCAP MARKET"), the New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX") and shall comply in all
respects with the reporting, filing and other obligations under the bylaws or
rules of the National Association of Securities Dealers, Inc. (the "NASD"), such
exchanges, or such electronic system, as applicable. The Company shall promptly
provide to each Purchaser copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading on any securities exchange
or automated quotation system on which securities of the same class or series
issued by the Company are then quoted or listed, if any.
(h) Corporate Existence. So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company shall
maintain its corporate existence, and in the event of a merger, consolidation or
sale of all or substantially all of the Company's assets, the Company shall
ensure that the surviving or successor entity in such transaction (i) assumes
the Company's obligations under this Agreement and the other Transaction
Documents and the agreements and instruments entered into in connection herewith
and therewith regardless of whether or not the Company would have had a
sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the conversion
-16-
of all the Preferred Stock and exercise in full of all Warrants outstanding as
of the date of such transaction, as well as all Additional Preferred Stock and
Additional Warrants issuable upon exercise of the Preferred Warrants outstanding
as of the date of such transaction, and (ii) except in the event of a merger,
consolidation of the Company into any other corporation, or the sale or
conveyance of all or substantially all of the assets of the Company where the
consideration consists solely of cash, is a publicly-traded corporation whose
common stock is quoted or listed, as applicable, for trading on the Bulletin
Board, the SmallCap Market, the National Market, the NYSE or the AMEX.
(i) No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of the Securities to be integrated with
any other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
(j) Legal Compliance. The Company shall conduct its business and the
business of its Subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(k) Redemptions, Dividends and Repayments of Indebtedness. So long as any
Purchasers (or any of their respective affiliates) beneficially own any of the
Preferred Stock or the Preferred Warrants, the Company shall not, without first
obtaining the written approval of the holders of a majority of the shares of
Preferred Stock then outstanding (which number of shares shall be deemed to
include any shares of Preferred Stock issuable upon exercise of outstanding
Preferred Warrants and which approval may be given or withheld by such holders
in their sole and absolute discretion), repurchase, redeem or declare or pay any
cash dividend or distribution on any shares of capital stock of the Company or
repay or prepay any indebtedness of the Company other than as expressly required
pursuant to the terms of such indebtedness as in effect on the date hereof.
(l) Information. So long as any Purchasers (or any of their respective
affiliates) beneficially own any of the Securities, the Company shall furnish to
each such Purchaser:
(i) concurrently with the filing with the SEC of its annual reports
on Form 10-K, a certificate of the President, a Vice President or a senior
financial officer of the Company stating that, based upon such examination or
investigation and review of this Agreement as in the opinion of the signer is
necessary to enable the signer to express an informed opinion with respect
thereto, neither the Company nor any of its Subsidiaries is or has during such
period been in default in the performance or observance of any of the terms,
covenants or conditions hereof, or, if the Company or any of its Subsidiaries
shall be or shall have been in default, specifying all such defaults, and the
nature and period of existence thereof, and what action the Company or such
Subsidiary has taken, is taking or proposes to take with respect thereto; and
(ii) the information the Company must deliver to any holder or to
any prospective transferee of Securities in order to permit the sale or other
transfer of such Securities pursuant to Rule 144 or any similar rule then in
effect.
-17-
The Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
(m) Inspection of Properties and Books. So long as any Purchasers (or any
of their respective affiliates) beneficially own any of the Securities, each
such Purchaser and its representatives and agents (collectively, the
"INSPECTORS") shall have the right, at such Purchaser's expense, to visit and
inspect any of the properties of the Company and of its Subsidiaries, to examine
the books of account and records of the Company and of its Subsidiaries, to make
or be provided with copies and extracts therefrom, to discuss the affairs,
finances and accounts of the Company and of its Subsidiaries with, and to be
advised as to the same by, its and their officers, employees and independent
public accountants (and by this provision the Company authorizes such
accountants to discuss such affairs, finances and accounts, whether or not a
representative of the Company is present) all at such reasonable times and
intervals and to such reasonable extent as the Purchasers may desire; provided,
however, that each Inspector shall hold in confidence and shall not make any
disclosure (except to such Purchaser) of any such information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement filed pursuant to the Registration Rights Agreement, (ii) the release
of such information is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, or (iii) such information
has been made generally available to the public other than by disclosure in
violation of this or any other agreement. Each Purchaser agrees that it shall,
upon learning that disclosure of such information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the information deemed confidential.
(n) Shareholders Rights Plan. No claim shall be made or enforced by the
Company or any other person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under this Agreement or any other Transaction Documents or under any
other agreement between the Company and the Purchasers.
(o) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by any Purchaser in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company shall execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Purchaser.
-18-
(p) Variable Securities. So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company shall
not, without first obtaining the written approval of the holders of a majority
of the shares of Preferred Stock then outstanding (which number of shares shall
be deemed to include any shares of Additional Preferred Stock issuable upon
exercise of outstanding Preferred Warrants and which approval may be given or
withheld by such holders in their sole and absolute discretion), issue or sell
any rights, warrants or options to subscribe for or purchase Common Stock, or
any other securities directly or indirectly convertible into or exchangeable or
exercisable for Common Stock, at an effective conversion, exchange or exercise
price that varies or may vary with the market price of the Common Stock,
including by way of one or more reset(s) to any fixed price.
(q) Expenses. At the Closing, the Company shall pay to Xxxx Xxxx Capital
Group, Inc. ("XXXX XXXX") reimbursement for the out-of-pocket expenses
reasonably incurred by it and its affiliates in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, Rose Glen's and its affiliates'
reasonable due diligence and attorneys' fees and expenses (the "EXPENSES");
provided, however, that the aggregate amount of the Expenses payable to Xxxx
Xxxx shall not exceed Forty-Five Thousand Dollars ($45,000) (the "EXPENSE CAP").
In addition, from time to time thereafter, upon Rose Glen's written request, the
Company shall pay (on an as incurred basis) to Xxxx Xxxx such additional
Expenses (not to exceed, in the aggregate, the Expense Cap), if any, not covered
by such payment, in each case to the extent reasonably incurred by Xxxx Xxxx or
its affiliates in connection with the negotiation, preparation, execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby.
(r) [Intentionally omitted]
(s) Issuance Limitations. Other than Permitted Issuances, as defined
herein, from the date of this Agreement to the date that is six (6) months
following the initial effective date of the Registration Statement covering the
Securities, as contemplated by the Registration Rights Agreement, the Company
shall not issue, sell or exchange, or agree or obligate itself to issue, sell or
exchange or reserve, agree to or set aside for issuance, sale or exchange any
equity or other securities (including, without limitation, in connection with
any debt financing with an equity component) without the prior written approval
of the Purchasers. As used herein, "Permitted Issuances" shall mean: (i) the
issuance of securities in connection with the concurrent offering as
contemplated by Section 7(g) of this Agreement or upon exercise of the Common
Warrants (as defined in Section 7(g) of this Agreement); (ii) a firm commitment
underwritten public offering registered under the Securities Act (other than a
continuous offering pursuant to Rule 415 under the Securities Act) covering the
offer and sale by the Company of its Common Stock in which the aggregate
proceeds to the Company equal or exceed Twenty Million Dollars ($20,000,000),
net of underwriting discounts and commissions; (iii) the issuance of Common
Stock upon the exercise or conversion of any convertible securities outstanding
on the date hereof and disclosed in Section 3(c) of the Disclosure Schedule in
accordance with the terms of such convertible securities as of the date hereof;
(iv) (x) the grant of options to purchase Common Stock, with exercise prices not
less than the market price of the Common Stock on the date of grant, which are
issued to employees, officers, directors or consultants of the Company for the
primary
-19-
purpose of soliciting or retaining their employment or service pursuant to an
equity compensation plan, so long as such plan and the issuance of Common Stock
upon exercise thereof has been approved by (A) the Company's Board of Directors,
and (B) if and to the extent required under the Securities Act, the Exchange
Act, the rules and regulations of the SEC thereunder and/or the listing
standards of any national exchange or quotation service, the requisite vote of
the holders of the Common Stock in compliance with applicable law and the
Company's organizational documents and (y) the issuance of Common Stock upon
exercise of such options; (v) the conversion of the Series C Preferred Stock or
exercise of the Warrants; (vi) the issuance of securities in connection with
mergers, acquisitions, strategic business partnerships or joint ventures, in
each case, with non-affiliated third parties and otherwise on an arms-length
basis, the primary purpose of which, in the reasonable judgment of the Board of
Directors, is not to raise additional capital; or (vii) the issuance of
securities, approved by the Board of Directors, pursuant to any equipment
financing from a reputable commercial bank, savings and loan association,
savings bank, finance company or other financial institution that is regularly
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business.
5. SECURITIES TRANSFER MATTERS.
(a) Conversion and Exercise. Upon conversion of the Preferred Stock or
exercise of the Warrants by any person, (i) if the DTC Transfer Conditions (as
defined below) are satisfied, the Company shall cause its transfer agent to
electronically transmit all Conversion Shares and Warrant Shares by crediting
the account of such person or its nominee with the Depository Trust Company
("DTC") through its Deposit Withdrawal Agent Commission system; or (ii) if the
DTC Transfer Conditions are not satisfied, the Company shall issue and deliver,
or instruct its transfer agent to issue and deliver, physical certificates
(subject to the legend and other applicable provisions hereof and the
Certificate of Designation and Warrants), registered in the name of such person
or its nominee, representing the Conversion Shares and Warrant Shares, as
applicable. Even if the DTC Transfer Conditions are satisfied, any person
effecting a conversion of Preferred Stock or exercising Warrants may instruct
the Company to deliver to such person or its nominee physical certificates
representing the Conversion Shares and Warrant Shares, as applicable, in lieu of
delivering such shares by way of DTC Transfer. For purposes of this Agreement,
"DTC TRANSFER CONDITIONS" means that (A) the Company's transfer agent is
participating in the DTC Fast Automated Securities Transfer program and (B) the
certificates for the Conversion Shares or Warrant Shares required to be
delivered do not bear a legend and the person effecting such conversion or
exercise is not then required to return such certificate for the placement of a
legend thereon.
(b) Transfer or Resale. Each Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(A) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (B)
such Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (C) sold under and in compliance with Rule 144; or (D) sold or
-20-
transferred to an affiliate of such Purchaser that agrees to sell or otherwise
transfer the Securities only in accordance with the provisions of this Section
5(b); and (ii) neither the Company nor any other person is under any obligation
to register such Securities under the Securities Act or any state securities
laws (other than pursuant to the terms of the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement, provided such pledge is consistent
with applicable laws, rules and regulations.
(c) Legends. Each Purchaser understands that the Preferred Stock and
Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the Securities Act (including registration pursuant to
Rule 416 thereunder) as contemplated by the Registration Rights Agreement or
otherwise may be sold by such Purchaser without limitation as to volume under
Rule 144(k) (or any successor thereto), the certificates for the Conversion
Shares and Warrant Shares may bear a restrictive legend in substantially the
following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state of the United States or in any other
jurisdiction. The securities represented hereby may not be offered,
sold or transferred in the absence of an effective registration
statement for the securities under applicable securities laws unless
offered, sold or transferred pursuant to an available exemption from
the registration requirements of those laws.
The Company shall, immediately prior to a registration statement covering
the Securities (including, without limitation, the Registration Statement
contemplated by the Registration Rights Agreement) being declared effective,
deliver to its transfer agent an opinion letter of counsel, opining that at any
time such registration statement is effective, the transfer agent shall issue,
in connection with the issuance of the Conversion Shares and Warrant Shares,
certificates representing such Conversion Shares and Warrant Shares without the
restrictive legend above, provided such Conversion Shares and Warrant Shares are
to be sold pursuant to the prospectus contained in such registration statement.
Upon receipt of such opinion, the Company shall cause the transfer agent to
confirm, for the benefit of the holders, that no further opinion of counsel is
required at the time of transfer in order to issue such shares without such
restrictive legend.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder); (ii) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act; or
(iii) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144. In the event the above legend is removed
from any Security and thereafter the effectiveness of a registration statement
covering such Security is suspended or the Company determines that a supplement
or amendment thereto is required by applicable securities laws, then upon
reasonable advance written notice to such Purchaser the Company may require that
the above legend be
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placed on any such Security that cannot then be sold pursuant to an effective
registration statement or under Rule 144 and such Purchaser shall cooperate in
the replacement of such legend. Such legend shall thereafter be removed when
such Security may again be sold pursuant to an effective registration statement
or under Rule 144.
(d) Transfer Agent Instruction. Upon compliance by any Purchaser with the
provisions of this Section 5 with respect to the transfer of any Securities, the
Company shall permit the transfer of such Securities and, in the case of the
transfer of Conversion Shares or Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates (or effect a DTC Transfer) in such name
and in such denominations as specified by such Purchaser. The Company shall not
give any instructions to its transfer agent with respect to the Securities,
other than any permissible or required instructions provided in this Section 5,
and the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to
each Purchaser hereunder is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions as to such Purchaser, provided
that such conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Execution of Transaction Documents. Each Purchaser shall have executed
such Purchaser's Execution Page to this Agreement and each other Transaction
Document to which such Purchaser is a party and delivered the same to the
Company.
(b) Payment of Purchase Price. Each Purchaser shall have delivered the
full amount of such Purchaser's Purchase Price to the Company by wire transfer
in accordance with the Company's written wiring instructions.
(c) Representations and Warranties True; Covenants Performed. The
representations and warranties of each Purchaser set forth in this Agreement
that are not qualified by materiality or "Material Adverse Effect" shall be true
and correct in all material respects, and the representations and warranties of
each Purchaser set forth in this Agreement that are qualified by materiality
shall be true in all respects, in each case, as of such date as if made on such
date (except that to the extent that any such representation or warranty relates
to a particular date, in which case such representation or warranty shall be
true and correct in all material respects as of that particular date), and such
Purchaser shall have performed, satisfied and complied with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing Date.
(d) No Legal Prohibition. No statute, rule, regulation, executive order,
decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the consummation of
any of the transactions contemplated by this Agreement.
-22-
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Units for which
it is subscribing from the Company hereunder is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
such conditions are for each Purchaser's individual and sole benefit and may be
waived by any Purchaser as to such Purchaser at any time in such Purchaser's
sole discretion:
(a) Execution of Transaction Documents. The Company shall have executed
each Transaction Document to which the Company is a party and delivered executed
originals of the same to such Purchaser.
(b) Subscriptions. The Purchasers shall have agreed to purchase an
aggregate of Five Million Five Hundred Thousand Dollars ($5,500,000) in Units
pursuant to the terms of this Agreement, and the Company shall not have sold any
Securities to any individual or entity other than the Purchasers.
(c) Filing of Certificate of Designation. The Certificate of Designation
shall have been filed and accepted for filing with the Secretary of State of the
State of Delaware and a copy thereof certified by the Secretary of State of the
State of Delaware shall have been delivered to such Purchaser.
(d) Delivery of Securities. The Company shall have delivered to such
Purchaser duly executed certificates representing the Preferred Stock, the
Preferred Warrants and the Initial Warrants for the number of Units being
purchased by such Purchaser (each in such denominations as such Purchaser shall
request), registered in such Purchaser's name.
(e) Bulletin Board. The Common Stock shall be authorized for quotation and
quoted on the Bulletin Board and trading in the Common Stock (or on the Bulletin
Board generally) shall not have been suspended by the SEC or the Bulletin Board.
(f) Representations and Warranties True; Covenants Performed. The
representations and warranties of the Company set forth in this Agreement that
are not qualified by materiality or "Material Adverse Effect" shall be true and
correct in all material respects, and the representations and warranties of the
Company set forth in this Agreement that are qualified by materiality shall be
true in all respects, in each case, as of such date as if made on such date
(except that to the extent that any such representation or warranty relates to a
particular date, in which case such representation or warranty shall be true and
correct in all material respects as of that particular date), and the Company
shall have performed, satisfied and complied with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by it at or prior to the Closing Date. Such Purchaser shall have received a
certificate, executed by the Chief Executive Officer of the Company after
reasonable investigation, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may reasonably be requested by such Purchaser.
(g) Concurrent Offering. The Company shall have closed an offering of (i)
one million six hundred and sixty-six thousand, six hundred and sixty seven
(1,666,667)
-23-
newly-issued shares of its Common Stock at an issuance price of Ninety Cents
($0.90) per share and (ii) warrants (the "Common Warrants") to purchase (A) four
hundred and sixteen thousand, six hundred and sixty-seven (416,667) shares of
its Common Stock at an exercise price of One Dollar and Eleven Cents ($1.11) per
share and (B) four hundred and sixteen thousand, six hundred and sixty-seven
(416,667) shares of its Common Stock at an exercise price of One Dollar and
Thirty-Three Cents ($1.33) per share.
(h) No Legal Prohibition. No statute, rule, regulation, executive order,
decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(i) Legal Opinion. Such Purchaser shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in the form attached hereto as
Exhibit E
(j) No Material Adverse Change. There shall have been no material adverse
changes and no material adverse developments in the business, properties,
operations, prospects, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole, since the date
hereof, and no information that is materially adverse to the Company and of
which such Purchaser is not currently aware shall come to the attention of such
Purchaser.
(k) Corporate Approvals. Such Purchaser shall have received a copy of
resolutions, duly adopted by the Board of Directors of the Company, which shall
be in full force and effect at the time of the Closing, authorizing the
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents and the consummation by the Company of the
transactions contemplated hereby and thereby, certified as such by the Secretary
or Assistant Secretary of the Company, and such other documents they reasonably
request in connection with the Closing.
8. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and
each Purchaser irrevocably consent to the exclusive jurisdiction of the United
States federal courts and the state courts located in the County of New Castle,
State of Delaware, in any suit or proceeding based on or arising under this
Agreement and irrevocably agree that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
in such forum. The Company further agrees that service of process upon the
Company mailed by first class mail shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any Purchaser to serve process in any other
manner permitted by law. The Company agrees that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
-24-
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which 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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed execution page(s)
hereof to be physically delivered to the other party within five days of the
execution hereof, provided that the failure to so deliver any manually executed
execution page shall not affect the validity or enforceability of this
Agreement.
(c) Construction. Whenever the context requires, the gender of any word
used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles and sections
of this Agreement, and all references to schedules are to schedules attached
hereto, each of which is made a part hereof for all purposes. The descriptive
headings of the several articles and sections of this Agreement are inserted for
purposes of reference only, and shall not affect the meaning or construction of
any of the provisions hereof.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the other Transaction
Documents (including any schedules and exhibits hereto and thereto) contain the
entire understanding of the Purchasers, the Company, their affiliates and
persons acting on their behalf with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Purchasers make any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived other than by an instrument in writing signed by the party to be charged
with enforcement, and no provision of this Agreement may be amended other than
by an instrument in writing signed by the Company and each Purchaser.
(f) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be in writing and sent by certified or registered mail
(return receipt requested) or delivered personally, by nationally recognized
overnight carrier or by confirmed facsimile transmission, and shall be effective
five days after being placed in the mail, if mailed, or upon receipt or refusal
of receipt, if delivered personally or by nationally recognized overnight
carrier or confirmed facsimile transmission, in each case addressed to a party
as provided herein. The initial addresses for such communications shall be as
follows, and each party shall provide notice to the other parties of any change
in such party's address:
-25-
(i) If to the Company:
PDG Environmental, Inc.
Xxxxxx Xxxxxxxxxxxx Technology Center
Building 801
0000 Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000, Ext. 16
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, CEO
with a copy simultaneously transmitted by like means (which
transmittal shall not constitute notice hereunder) to:
Xxxxx & Xxxxxxx, P.C.
00 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
(ii) If to any Purchaser, to the address set forth under such
Purchaser's name on the Execution Page hereto executed by such Purchaser.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Except as
provided herein, the Company shall not assign this Agreement or any rights or
obligations hereunder. Any Purchaser may assign or transfer the Securities
pursuant to the terms of this Agreement and of such Securities, or assign such
Purchaser's rights hereunder to any other person or entity.
(h) Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person; provided, however, that Section 4(q) may be enforced by Xxxx Xxxx
and its affiliates to the extent the same is entitled to reimbursement of
Expenses pursuant thereto.
(i) Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof shall
survive the Closing notwithstanding any due diligence investigation conducted by
or on behalf of any Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies any Purchaser may have under applicable U.S. federal or state
securities laws.
(j) Publicity. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC or, to the extent applicable,
NASD filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Purchasers, to make any press release or SEC
or, to the extent applicable, NASD filings with respect to such transactions as
is
-26-
required by applicable law and regulations (although the Purchasers shall be
consulted by the Company in connection with any such press release or filing
prior to its release and shall be provided with a copy thereof and in no event
shall any Purchaser be identified by name in any press release or filing without
the express prior approval of the Purchaser to be named).
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Indemnification. In consideration of each Purchaser's execution and
delivery of this Agreement and the other Transaction Documents and purchase of
the Securities hereunder, and in addition to all of the Company's other
obligations under this Agreement and the other Transaction Documents, from and
after the Closing, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents (including, without
limitation, legal counsel) or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement, collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, any other
Transaction Document or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, any other Transaction
Document or any other certificate, instrument or document contemplated hereby or
thereby or (iii) any cause of action, suit, claim, order, proceeding or process
brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out
of or resulting from (A) the execution, delivery, performance or enforcement of
this Agreement, any other Transaction Document or any other certificate,
instrument or document contemplated hereby or thereby, (B) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance and sale of the Securities, (C) any disclosure made by
such Purchaser pursuant to Section 4(b) or 4(m) hereof, or (D) the status of
such Purchaser or holder of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8(l)
shall be the same as those set forth in Section 6(c) of the Registration Rights
Agreement.
(m) Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to any of the other Transaction
Documents or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or
-27-
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.
(n) Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement and the other
Transaction Documents. As such, the language used herein and therein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
(o) Remedies. No provision of this Agreement or any other Transaction
Document providing for any remedy to a Purchaser shall limit any other remedy
which would otherwise be available to such Purchaser at law, in equity or
otherwise. Nothing in this Agreement or any other Transaction Document shall
limit any rights any Purchaser may have under any applicable federal or state
securities laws with respect to the investment contemplated hereby. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchasers by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations hereunder (including, but not
limited to, its obligations pursuant to Section 5 hereof) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement (including, but not limited to, its obligations
pursuant to Section 5 hereof), that each Purchaser shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer of the Securities, without
the necessity of showing economic loss and without any bond or other security
being required.
(p) Knowledge. As used in this Agreement, the term "knowledge" of any
person or entity shall mean and include (i) actual knowledge and (ii) that
knowledge which a reasonably prudent business person could have obtained in the
management of his or her business affairs after making due inquiry and
exercising due diligence which a prudent business person should have made or
exercised, as applicable, with respect thereto.
(q) Exculpation Among Purchasers; No "Group". The Company acknowledges
that the obligations of each Purchaser under this Agreement and each of the
other Transaction Documents 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 the Transaction
Documents. Each Purchaser acknowledges that it has independently evaluated the
merits of the transactions contemplated by this Agreement and the other
Transaction Documents, that it has independently determined to enter into the
transactions contemplated hereby and thereby, that it is not relying on any
advice from or evaluation by any other Purchaser, and that it is not acting in
concert with any other Purchaser in making its purchase of securities hereunder
or in monitoring its investment in the Company. The
-28-
Purchasers and, to its knowledge, the Company agree that no action taken by any
Purchaser pursuant hereto or to the other Transaction Documents, 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 would deem such Purchasers to be members of a
"group" for purposes of Section 13(d) of the Exchange Act, and the Purchasers
have not agreed to act together for the purpose of acquiring, holding, voting or
disposing of equity securities of the Company. 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 any of the Purchasers. The Company acknowledges that such procedure with
respect to the Transaction Documents in no way creates a presumption that the
Purchasers are in any way acting in concert or as a "group" for purposes of
Section 13(d) of the Exchange Act with respect to the Transaction Documents or
the transactions contemplated hereby or thereby. Each Purchaser acknowledges
that it has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents. Each Purchaser further
acknowledges that Xxxx Xxxx has retained Drinker Xxxxxx & Xxxxx LLP ("DB&R") to
act as its counsel in connection with the transactions contemplated by this
Agreement and the other Transaction Documents and that DB&R has not acted as
counsel for any of the other Purchasers in connection therewith and none of the
other Purchasers have the status of a client of DB&R for conflict of interest or
other purposes as a result thereof.
[Signature Page Follows]
-29-
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
PDG ENVIRONMENTAL, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: President & CEO
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
PURCHASER:
__________________________________________________
(Print or Type Name of Purchaser)
By: ______________________________________________
Name:
Title:
RESIDENCE: _______________________________________
ADDRESS: _________________________________________
_________________________________________
_________________________________________
Telephone: ______________________________
Facsimile: ______________________________
Attention: ______________________________
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Units: _________________________________
Purchase Price ($______ per Unit): _______________
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
