Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of April
15, 2004, by and among Internet Commerce Corporation (the "Company"), and the
purchasers listed on Schedule 1 hereto (each a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company the (i) number of shares of Common Stock, and (ii) Warrants set
forth opposite each Purchaser's name on Schedule 1 (collectively, the
"Offering") in an aggregate offering amount no less than $3.0 million and no
greater than $5.0 million.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section 3.1(j).
"Agent Shares" shall have the meaning ascribed to such term in Section
2.6.
"Agent Warrant Agreement" shall mean the Placement Agent's Warrant
Agreement dated as of the Closing Date.
"Agent Warrants" shall have the meaning ascribed to such term in Section
2.6.
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 144.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Closing" means the closing of the purchase and sale of the Common Stock
and the Warrants pursuant to Section 2.1 on April 15, 2004, or such other date
as agreed to by the parties.
"Closing Date" means the date of the Closing.
"Closing Price" means on any particular date (a) the last reported closing
bid price per share of Common Stock on such date on the Trading Market (as
reported by Bloomberg L.P. at 4:15 p.m. (New York time) as the last reported
closing bid price for regular session trading on such day), or (b) if there is
no such price on such date, then the closing bid price on the Trading Market on
the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m.
(New York time) as the closing bid price for regular session trading on such
day), or (c) if the Common Stock is not then listed or quoted on the Trading
Market and if prices for the Common Stock are then reported in the "pink sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) if the
shares of Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Class A common stock, par value $.01
per share, and any securities into which such Common Stock may hereafter be
reclassified.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Company Counsel" means Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, New York, New
York.
"Disclosure Schedules" means the Disclosure Schedules attached hereto.
"Effective Date" means the date that the Registration Statement is first
declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Indemnified Party" shall have the meaning ascribed to such term in
Section 5.16(b)
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"Indemnifying Party" shall have the meaning ascribed to such term in
Section 5.16 (b)
"Investor Securities" means the Shares, the Warrants and the Warrant
Shares.
"Liens" means a lien, charge, security interest, encumbrance, right of
first refusal or other restriction.
"Material Adverse Effect" shall have the meaning ascribed to such term in
Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in Section
3.1(m).
"Per Share Purchase Price" means $1.75, subject to adjustment for reverse
or forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement and
before the Closing.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Placement Agent" means Xxxxxx Capital LLC.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares and the Warrant Shares and by the
Placement Agent of the Agent Shares.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of this Agreement, among the Company and each Purchaser, in
the form of EXHIBIT A.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock purchased by the Purchasers
pursuant to this Agreement.
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"Subscription Amount" means as to each Purchaser, the amount set forth
below such Purchaser's signature block on the Signature Page of this Agreement
in United States Dollars and in immediately available funds.
"Subsidiary" shall have the meaning ascribed to such term in Section
3.1(a).
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on a Trading Market, a
day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting price);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), and (ii) hereof, then Trading Day shall mean a Business Day.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the OTC
Bulletin Board, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Registration Rights
Agreement, the Warrants, the Placement Agent Warrant Agreement, the Agent
Warrant(s) and any and all other agreements executed by the Company in
connection with the transactions contemplated hereunder.
"Transaction Securities" means the Shares, the Warrants, the Warrant
Shares, the Agent Warrants and the Agent Shares.
"Warrants" means the common stock purchase warrants in the form of EXHIBIT
B issuable to each Purchaser at Closing; such Warrants are exercisable to
purchase up to the number of shares of Common Stock equal to 30% of the
aggregate number of Shares to be issued to such Purchaser at the Closing, which
shall be exercisable commencing six (6) months after the Closing Date and have
an exercise price equal to $2.22 and be exercisable for a period of five and
one-half years from the Closing Date.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Company shall sell and issue to each Purchaser
and each Purchaser shall purchase from the Company such number of Shares as
shall equal such Purchaser's Subscription Amount divided by the Per Share
Purchase Price. The Warrants shall be issued without additional consideration.
The aggregate number of Shares and the aggregate number of Warrants each
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Purchaser shall receive is set forth opposite each Purchaser's name on Schedule
1. Upon satisfaction of the conditions set forth in Section 2.2, the Closing
shall occur at such location as the parties shall mutually agree.
2.2 Closing Conditions.
(a) At the Closing, as a condition to the Purchasers' obligations
hereunder, each Purchaser shall receive from or on behalf of the Company:
(i) a restricted stock certificate for such number of Shares
set forth next to such Purchaser's name on Schedule 1 hereto
purchased by each Purchaser;
(ii) a Warrant, registered in the name of such Purchaser, as
duly executed by the Company, entitling such Purchaser to purchase
such number of Warrant Shares as are set forth next to such
Purchaser's name on Schedule 1 hereto;
(iii) the Registration Rights Agreement duly executed by the
Company;
(iv) this Agreement duly executed by the Company;
(v) a legal opinion from Company Counsel in form and substance
reasonably satisfactory to the Purchasers and Placement Agent;
(vi) a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company stating, among other things, that
(i) all the conditions set forth in this Section 2.2(a) have been
satisfied in all material respects, (ii) except as set forth in any
Schedule to this Agreement, since January 31, 2004, there has been no
event, condition or circumstance that has had or is reasonably
expected to have a Material Adverse Effect, and (iii) the Company has
complied in all material respects with all its covenants and
agreements set forth in the Transaction Documents;
(vii) a certificate of the Secretary of the Company containing,
among other items: (i) true and complete copies, as of the Closing
Date, of the Articles of Incorporation and any amendments thereto and
the By-Laws, and any amendments thereto, of the Company, and (ii)
true and complete copies of the resolutions of the Board of Directors
of the Company approving the Transaction Documents, Placement Agent
compensation, the Offering and all documents and matters relating
thereto; and
(viii) a Good Standing Certificate of the Company dated the
Closing Date.
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
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(ii) such Purchaser's payment for the Shares and Warrants being
purchased from the escrow account by wire transfer; and
(iii) the Registration Rights Agreement duly executed by such
Purchaser.
(c) At the Closing, as a condition to each party's obligations
hereunder, all representations and warranties of the other parties herein shall
remain true and correct in all material respects as of the Closing Date.
(d) As of the Closing Date, as a condition to the Purchasers'
obligations hereunder, there shall have been no Material Adverse Effect with
respect to the Company since the date hereof.
(e) As a condition to the Purchasers' obligations hereunder, from
the date hereof to the Closing Date, (i) trading in the Common Stock shall not
have been suspended; (ii) trading in securities shall not have been suspended or
limited generally or on any Trading Market; and (iii) no banking moratorium
shall have been declared either by the United States or New York State
authorities.
(f) At the Closing Date, as a condition to the Purchasers'
obligations hereunder, the Offering shall generate gross proceeds (before
expenses) to the Company of at least $3.0 million.
2.3 Escrow Provisions. Pending the sale of the Shares and the Warrants,
all funds paid hereunder shall be deposited by the Company in escrow with
Continental Stock Transfer & Trust Company (the "Escrow Agent") pursuant to an
escrow agreement by and among the Escrow Agent, the Company and the Placement
Agent (the "Escrow Agreement"). If a Closing has not occurred on or prior to
April 23, 2004, or such later date mutually agreed by Company and Placement
Agent (the "Termination Date"), then this Agreement shall be void and all funds
paid hereunder by each Purchaser shall be promptly returned to each Purchaser
without interest and/or deduction, subject to Section 2.5. If a Closing occurs
on or prior to the Termination Date, then all net purchase price proceeds shall
promptly be paid over to the Company.
2.4 Certificates. Each Purchaser hereby authorizes and directs the
Company, upon the Closing, to deliver certificates representing the Shares and
Warrants to be issued to such Purchaser pursuant to this Agreement to such
Purchaser's address indicated in this Agreement.
2.5 Return of Funds. Each Purchaser hereby authorizes and directs the
Company to return any funds for unaccepted purchases to the same account from
which the funds were drawn.
2.6 Expenses; Fees. Simultaneously with payment for and delivery of the
Shares and Warrants, at the Closing, the Company shall: (i) pay to the Placement
Agent a cash fee equal to eight (8%) percent of the aggregate purchase price of
the Shares and Warrants sold (the "Cash Fee"); (ii) reimburse the Placement
Agent for its actual out-of-pocket expenses incurred in connection with the
Offering, including, without limitation, the reasonable fees and expenses of its
legal counsel, not to exceed legal fees of $20,000; (iii) pay all expenses in
connection with the
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qualification of the Securities under the blue sky laws of the states which the
Placement Agent shall designate, including filing fees and disbursements in
connection with such blue sky matters; (iv) pay certain fees to the Escrow Agent
for acting as escrow agent; and (v) issue to the Placement Agent five (5) year
warrants (the "Agent Warrants") to purchase such number of shares of Common
Stock (the "Agent Shares") as shall equal ten (10%) percent of the aggregate
number of Shares sold in the Offering at a per share exercise price equal to the
Per Share Purchase Price and shall otherwise be substantially in the same form
as the Warrants.
2.7 Placement Agent. The Investor Securities are being offered on a
"best-effort" basis by the Placement Agent. The Placement Agreement reserves the
right, but is under no obligation, to sell to its affiliates Shares and Warrants
on the terms provided herein.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:
(a) Subsidiaries. Other than as disclosed on Schedule 3.1(a), the
Company has no direct or indirect operating subsidiaries (a "Subsidiary" and
collectively, the "Subsidiaries"). Except as set forth on Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not result in (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(iii) a material adverse effect on the Company's ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect").
(c) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The
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execution and delivery of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the Company and no
further corporate action is required by the Company in connection therewith.
Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and general
principles of equity.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, certificates of designation (or similar document
related to preferred stock), bylaws and/or other organizational or charter
documents, (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, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise), or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound, except in the case of clause (ii) or (iii), for any
conflict, default or violation that is not reasonably expected to have a
Material Adverse Effect .
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than the filing with the Commission of a Form D and the Registration
Statement, the application(s) and approvals to the Nasdaq SmallCap Market for
the listing of the Shares, Warrant Shares and the Agent Shares for trading
thereon in the time and manner required thereby, applicable Blue Sky filings,
and the filing of a current report on form 8-K under the Exchange Act.
(f) Issuance of the Securities. All of the Transaction Securities
have been duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens (other than Liens placed thereon by
Purchasers or Placement Agent). The Company has reserved from its duly
authorized capital stock such number of shares of Common Stock so as to permit
the issuance of the Shares, the Warrant Shares and the Agent Shares.
(g) Capitalization. Immediately prior to the Closing, the issued and
outstanding shares of the Company's capital stock (Common Stock and preferred
stock), all warrants, options and other securities convertible and/or
exchangeable into capital stock shall be as disclosed on Schedule 3.1(g) hereto.
All of the Company's outstanding securities have been and are, or upon
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issuance will be duly authorized, validly issued, fully paid and non-assessable.
Except as disclosed in Schedule 3.1(g), (i) no shares of the Company's capital
stock are subject to any preemptive rights, right of participation, right of
first refusal or any other similar rights; (ii) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions at the option of the holder thereof, 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 register
a security of the Company or any of its Subsidiaries; (iii) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Transaction Securities as described in
the Transaction Documents; and (iv) the Company does not have any stock
appreciation rights or "phantom stock" agreements or any similar agreement. All
prior sales of securities of the Company were either registered under the
Securities Act and applicable state securities laws or exempt from such
registration, and no security holder has any rescission and/or similar rights
with respect thereto.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or Section 15(d) of the Exchange Act,
for the two (2) years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the
"SEC Reports" and, together with the Disclosure Schedules to this Agreement, the
"Disclosure Materials"). As of their respective dates, the SEC Reports complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments.
(i) Material Changes. Since the date of the latest financial
statements included within the SEC Reports, (i) there has been no event,
occurrence or development that has had or is reasonably expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any material
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) except for the payment of a dividend on the outstanding Series
C Convertible Preferred Stock, the Company has not declared or made any dividend
or distribution of cash or other property to its holders of Common Stock or
purchased, redeemed or made any agreements
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to purchase or redeem any shares of its capital stock and (v) the Company has
not issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans, or in connection with the
payment of directors' fees to independent directors. The Company does not have
pending before the Commission any request for confidential treatment of
information.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency and/or regulatory authority (federal, state, county, local
or foreign), including, but not limited to, the Federal Trade Commission, the
Food and Drug Agency, the Consumer Product Safety Commission, the United States
Department of Agriculture and any State Attorney General (collectively, an
"Action") which is reasonably expected to (i) adversely affect or challenge the
legality, validity or enforceability of any of the Transaction Documents and/or
the Transaction Securities or (ii) result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor, to the knowledge of the Company, any
current director or officer thereof, is the subject of any Action involving a
claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. To the knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission, administrative
agency and/or regulatory authority involving the Company or any current
directors or officers of the Company. The Commission has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or the Securities
Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which is reasonably expected to result in a Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business, except in the case of clauses (i),
(ii) and (iii) as is not reasonably expected to result in a Material Adverse
Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such permits would
not have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
Material Permit.
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(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries, taken as a whole.
Any real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in material compliance.
(o) Intellectual Property Rights. The Company and its Subsidiaries
own, or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two years from the date of this
Agreement, except where such expiration or termination is not either
individually or in the aggregate reasonably expected to have a Material Adverse
Effect. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secrets or other similar rights
of others, or of any such development of similar or identical trade secrets or
technical information by others and no claim, action or proceeding has been made
or brought against, or to the Company's knowledge, has been threatened against,
the Company or its Subsidiaries regarding trademarks, trade name rights,
patents, patent rights, inventions, copyrights, licenses, service names, service
marks, service xxxx registrations, trade secrets or other infringement, except
where such infringement, claim, action or proceeding is not reasonably expected
to have either individually or in the aggregate a Material Adverse Effect. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their material intellectual
properties.
(p) Transactions With Affiliates and Employees. None of the
officers, directors and/or employees of the Company and the Subsidiaries is a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (a) for payment of salary
or consulting fees for services rendered, (b) reimbursement for expenses
incurred on behalf of the Company and (c) for other employee benefits, including
stock option agreements under any stock option plan of the Company.
(q) Internal Accounting Controls. 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
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accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(r) Certain Fees. Except for payments payable to the Placement Agent
or Xxxxxx Capital LLC by the Company, the Company has not entered into agreement
to pay any brokerage or finder's fees or commissions to any person including,
but not limited to, any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement,
except to the extent a Purchaser made an agreement to make any such payment.
(s) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Investor Securities
by the Company to the Purchasers as contemplated hereby. The issuance and sale
of the Transaction Securities hereunder does not contravene the rules and
regulations of the Nasdaq SmallCap Market.
(t) Investment Company. The Company is not, and is not an Affiliate
of, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(u) Listing and Maintenance Requirements. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all listing and maintenance requirements of the Nasdaq SmallCap
Market.
(v) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance of
the Transaction Securities and the Purchasers' ownership of the Investor
Securities.
(w) No General Solicitation. Neither the Company, its Subsidiaries,
any of their Affiliates nor any person acting on their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Transaction Securities.
(x) No Integrated Offering. Neither the Company, its Subsidiaries,
any of their Affiliates nor any person acting on 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 any of
the Transaction Securities under the Securities Act or cause the Offering to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable stockholder approval provisions, including without
limitation, under the rules
12
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated. None of the Company, its
Subsidiaries, their controlled Affiliates and any person acting on their behalf
will take any action or steps referred to in the preceding sentence that would
require registration of any of the Transaction Securities under the Securities
Act or cause the Offering to be integrated with other offerings.
(y) Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, except when
the failure to do so would not have a Material Adverse Effect, 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
or to the Company's knowledge otherwise due and payable, except those being
contested in good faith and has set aside on its books reserves in accordance
with GAAP 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.
(z) Registration Rights. Except with respect to Purchasers and the
Placement Agent and except as provided on Schedule 3.1(z) hereto, no person has
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company.
(aa) Right of First Refusal. Except with regard to Xxxxxx Capital
LLC, no person, firm or other business entity is a party to any agreement,
contract or understanding, written or oral entitling such party to a right of
first refusal with respect to offerings of securities by the Company; provided,
however, for the avoidance of doubt, it is agreed and understood that Xxxxxx
Capital LLC has no rights of first refusal to purchase securities in respect to
this Offering.
(bb) Disclosure. The Company confirms that, neither the Company nor
any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby in this Agreement and in the Disclosure Schedules to this
Agreement, furnished by or on behalf of the Company, are true and correct and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(cc) Insurance. Each of the Company and its Subsidiaries maintain
insurance of the types and in the amounts deemed adequate for its business,
including, but not limited to, product liability insurance, insurance covering
real and personal property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
(dd) Environmental. The Company and each of its Subsidiaries is, to
the best of its knowledge, in compliance with all applicable published rules and
regulations (and applicable standards and requirements) of the United States
Environmental Protection Agency
13
(the "EPA") and of any similar State agency. There is no suit, claim, action or
proceeding now pending before any court, governmental agency or board, or other
forum, nor, to the knowledge of the Company, is any of the same threatened by
any person or entity for (i) noncompliance by the Company with any environmental
law, rule, regulation or requirement, or (ii) relating to the release or
threatened release into the environment by the Company of any pollutant, toxic
or hazardous material, oil, or waste generated by the Company. The Company has
not released any Hazardous Materials (as hereinafter defined) at any site owned
or leased by the Company or shipped any Hazardous Materials for treatment,
storage or disposal at any other site of facility. For purposes of this Section
3.1(dd), "Hazardous Materials" shall mean and include any solid, hazardous or
toxic waste, substance or material as defined in the United States Resource
Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Toxic
Substances Control Act; the Comprehensive Environmental Response, Compensation
and Liability Act; applicable state laws for the protection of the environment,
and the regulations promulgated under any of the foregoing.
(ee) Conduct of Business. Since January 31, 2004, the Company has not
(a) made or suffered any changes in its contingent obligations by way of
guaranty, endorsement (other than the endorsement of checks for deposit in the
usual and ordinary course of business), indemnity, warranty or otherwise, (b)
discharged or satisfied any liens other than those securing, or paid any
obligation or liability other than, current liabilities shown on any balance
sheet forming part of the SEC Documents, and current liabilities incurred since
July 31, 2003, in each case in the ordinary course of business, (c) mortgaged,
pledged or subjected to lien any of its assets, tangible or intangible, (d)
sold, transferred or leased any of its assets except in the ordinary course of
business, (e) cancelled or compromised any debt or claim, or waived or released
any right, of material value, (f) suffered any physical damage, destruction or
loss (whether or not covered by insurance) adversely affecting the properties or
business of the Company, (g) entered into any transaction other than in the
ordinary course of business except for this Agreement and the related agreements
referred to herein, (h)encountered any labor difficulties or labor union
organizing activities, (i) made or granted any wage or salary increase or
entered into any employment agreement, except as set forth in the Disclosure
Materials, (j) made any change in the accounting principles, methods or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted, or (k) entered into any agreement or otherwise obligated
itself, to do any of the foregoing.
(ff) Foreign Corrupt Practices. 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 of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, (a) 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, (b)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or (c) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(gg) S-3 Eligibility. The Company is eligible to file a Registration
Statement with respect to the resale of the Transaction Securities on Form S-3
under the Securities Act.
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3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company, acknowledging that the
Company is relying upon the accuracy and completeness of the representations and
warranties set forth herein to, among other things, ensure that registration
under Section 5 of the Securities Act is not required in connection with the
sale of the Securities pursuant hereto, as follows:
(a) Organization; Authority. Such Purchaser, if not a natural
person, is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder, and the execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser understands that the Investor
Securities are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Investor Securities as principal for its own account and not with a view to or
for distributing or reselling such Investor Securities or any part thereof or
interest therein, has no present intention of distributing any of such Investor
Securities and has no arrangement or understanding with any other Person
regarding the distribution of such Investor Securities (this representation and
warranty not limiting such Purchaser's right to sell the Investor Securities
pursuant to the Registration Statement or otherwise in compliance with
applicable federal and state securities laws). Such Purchaser is acquiring the
Investor Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Investor Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and Warrants, it was, and at the date hereof it is and on the Closing
Date it will be an "accredited investor" as defined in Rule 501(a) under the
Securities Act. Such Purchaser is not, and is not required to be, registered as
a broker-dealer under Section 15 of the Exchange Act. In making an investment
decision as to whether to purchase the Shares and Warrants offered hereby, each
Purchaser has relied solely upon the SEC Reports and the representation and
warranties of the Company contained herein. Each Purchaser has had the
opportunity to ask questions of, and receive answers from, representatives of
the Company concerning the Company and the officers and all such questions have
been asked and answered by the Company to the satisfaction of the Purchaser.
(d) Experience of Such Purchaser. Each Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Investor Securities,
and has so evaluated the merits and risks of such investment. Such Purchaser is
able to bear the economic risk of an investment in the Investor Securities and,
at the present time, is, and at the Closing will be, able to afford a complete
loss of such investment.
15
(e) General Solicitation. Such Purchaser is not purchasing the Shares
and Warrants as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(f) Compliance with the Securities Laws. Such Purchaser hereby
confirms its understanding that it may not cover short sales made prior to the
Effective Date with shares of Common Stock registered for resale on the
Registration Statement.
(g) No Conflicts. Neither the execution and delivery of this
Agreement and/or any Transaction Document, nor the consummation of the
Transactions contemplated hereby, does or will violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Purchaser is subject or any provision of its organizational documents or other
similar governing instruments or conflict with, violate or constitute a default
under any agreement, credit facility, debt or other instrument or understanding
to which such Purchaser is a party.
(h) No Advice. Purchaser understands that nothing in this Agreement
or any other materials presented to Purchaser in connection with the purchase
and sale of the Investor Securities constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Investor Securities.
(i) No Litigation, Etc. There is no action, suit, proceeding,
judgment, claim or investigation pending or, to the knowledge of the Purchaser,
threatened against the Purchaser which could reasonably be expected in any
manner to challenge or seek to prevent, enjoin, alter or materially delay any of
the transactions contemplated by the Transaction Documents.
(j) Approvals. The execution, delivery and performance by the
Purchaser of this Agreement and the Transaction Documents to which it is a
party, and the consummation of the transactions set forth herein require no
material action by or in respect of, or material filing with, any governmental
body, agency, official or authority, by the Purchaser other than the filing by
the Purchaser with the Commission of such reports under the Exchange Act as may
be required in connection with this Agreement, the Transaction Documents and the
transactions contemplated hereby and thereby, and any filings required by the
securities or blue sky laws of the various states.
(k) Placement Agent. Each Purchaser agrees that neither the Placement
Agent nor any of its respective directors, officers, affiliates, employees or
agents shall be liable to the Purchaser for any action taken or omitted to be
taken by it in connection therewith, except for bad faith, willful misconduct or
gross negligence.
(l) Certain Fees. The Company shall have no obligation with respect
to any fees incurred by any Purchaser or with respect to any claims made by or
on behalf of other Persons for commissions, brokerage or finder's fees that may
be due to Persons from such Purchaser in connection with the transactions
contemplated by this Agreement.
16
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2
and Section 4.1.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Investor Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer of
Investor Securities other than pursuant to an effective registration statement,
pursuant to Rule 144(k), pursuant to Rule 144 (if customary documentation is
provided satisfactory to legal counsel to the Company), in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Investor Securities under the Securities Act.
As a condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Investor Securities in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF, THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE FORM AND SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Investor Securities to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of
17
such arrangement, such Purchaser may transfer pledged or secured Investor
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of legal counsel
of the pledgee, secured party or pledgor shall be required in connection with
the grant of the pledge. Further, no notice shall be required of grant of the
pledge. At the appropriate Purchaser's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Transaction Securities may reasonably request in connection with a pledge or
transfer of the Investor Securities, including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder. Notwithstanding anything to the contrary,
any such pledgee shall not be entitled to any rights under any of the
Transaction Documents unless and until such pledgee executes a written agreement
to be bound by Purchasers' obligations under the Transaction Documents.
(c) Subject to compliance with all laws, rules and regulations
including, but not limited to, the Securities Act and the Exchange Act,
certificates evidencing the Shares and Warrant Shares shall not contain any
legend (including the legend set forth in Section 4.1(b)), (i) following any
sale of the Shares or Warrant Shares pursuant to a registration statement
(including the Registration Statement) covering the resale of such security, or
(ii) following any sale of the Shares or Warrant Shares pursuant to Rule 144, or
(iii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k)
and appropriate documentation is provided satisfactory to legal counsel to the
Company, or (iv) if such legend is not required under applicable regulation of
the Securities Act (including judicial interpretations and pronouncements issued
by the Staff of the Commission). The Company agrees that at such time as such
legend is no longer required under and pursuant to this Section 4.1(c), it will,
no later than three (3) Trading Days following the delivery by a Purchaser to
the Company or the Company's transfer agent of a certificate representing Shares
and/or Warrant Shares, as the case may be, issued with a restrictive legend,
deliver or cause to be delivered to such Purchaser (i) a certificate
representing such securities that is free from all restrictive and other
legends, or (ii) in lieu of delivering physical certificates representing the
Shares and/or Warrant Shares, and provided that the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer (or FAST) program, upon request of the Purchaser, the Company shall use
its reasonable commercial efforts to cause its transfer agent to electronically
transmit the Shares and/or Warrant Shares by crediting the account of the
Purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission (or DWAC) system. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.
(d) Each Purchaser severally and not jointly agrees that the removal
of the restrictive legend from certificates representing the Shares and the
Warrant Shares as set forth in this Section 4.1 is predicated upon the Company's
reliance that the Purchaser will sell any Investor Securities pursuant to either
the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
4.2 Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of any of the Transaction Securities in a manner that
18
would require the registration under the Securities Act of the sale of the
Investor Securities to the Purchasers or that would be integrated with the offer
or sale of the Investor Securities for purposes of the rules and regulations of
any Trading Market.
4.3 Securities Laws Disclosure; Publicity. The Company shall by 8:30
a.m., Eastern Daylight Time on the first Business Day following the Closing,
issue a press release (which shall be followed by a Form 8-K filing within one
(1) Business Day thereafter) or file a Current Report on Form 8-K, in either
case disclosing all material terms of the transactions contemplated hereby, to
the extent permitted by applicable law. The Company and the Placement Agent
shall consult with each other (and any Purchaser if so requested by such
Purchaser) in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor the Placement Agent shall issue
any such press release or otherwise make any such public statement without the
prior consent of the Company, with respect to any press release of the Placement
Agent, or without the prior consent of the Placement Agent (or Purchaser(s), if
so requested), with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except (i) as required by federal securities law in
connection with the Registration Statement contemplated by the Registration
Rights Agreement and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under subclause (i) or
(ii).
4.4 Shareholders Rights Plan. No claim will be made or enforced by
the Company or any other Person that any Purchaser is an "Acquiring Person"
under any shareholders rights plan or similar plan or arrangement presently in
effect, or that any Purchaser could be deemed to trigger the provisions of any
such plan or arrangement, by virtue of receiving Investor Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.
4.5 Use of Proceeds. The Company covenants and agrees that all of the
net proceeds that it receives from the sale of the Shares and Warrants pursuant
to this Agreement, although distributed, allocated and expended by the Company
in its sole discretion, shall be used for general working capital and corporate
purposes.
4.6 Form D and Blue Sky. The Company shall file a Form D with respect
to the Transaction Securities as required under Regulation D under the
Securities Act and, upon written request, provide a copy thereof to each
Purchaser and the Placement Agent promptly after such filing. The Company shall,
on or before the Closing, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify any
Transaction Securities for sale to the Purchasers and/or the Placement Agent
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such action so
taken to the Purchasers on or prior to the Closing. The Company shall make all
filings and reports relating to the offer and sale of the Transaction
19
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing.
4.7 Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue the Shares, the Warrant Shares
and the Agent Shares.
4.8 Listing of Common Stock. The Company hereby agrees to use
reasonable commercial efforts to maintain the listing of the Common Stock on the
Nasdaq SmallCap Market, and immediately file with the Nasdaq SmallCap Market to
list the applicable Shares, Warrant Shares and Agent Shares on the Nasdaq
SmallCap Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will include in such
application the Shares, Warrant Shares and Agent Shares and will take such other
action as is necessary or desirable in the reasonable opinion of the Purchasers
to cause the Shares, Warrant Shares and Agent Shares to be listed on such other
Trading Market as promptly as reasonably possible. The Company will comply in
all material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Trading Market.
4.9 Indemnification by the Purchasers. Notwithstanding the
termination of this Agreement, each of the Purchasers severally and not jointly
agrees to indemnify and hold harmless the Company and its officers, directors,
agents, representatives, shareholders and employees and each of their respective
Affiliates, from and against any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation, as incurred, that any such Person may suffer or incur
which are caused by or arise out of (i) any material breach or default in the
performance by it of any covenant or agreement made by it in this Agreement or
in any of the Transaction Documents; (ii) any material misrepresentation or
material breach of warranty or representation made by it in this Agreement or in
any of the Transaction Documents; or (iii) the enforcement of this Agreement.
Notwithstanding anything to the contrary provided herein or elsewhere, the
liability of each Purchaser under this Section 4.9 shall be limited to the
amount paid by the Purchaser pursuant hereto to purchase the Investor
Securities, and the procedures and timing for indemnification by the Purchasers
under this Section 4.9 shall follow the procedures and provisions of Sections
5.16(b) and (c), mutatis mutandis, with respect to indemnification by the
Company of the Purchasers.
4.10 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, and, in any event, the Company
hereby agrees that no Purchaser shall have any duty of confidentiality or any
other obligation with respect to any such information if any such disclosure
occurs, subject to such Purchaser complying with all applicable securities laws.
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ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.
5.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on (a) the next Business Day, if sent by
U.S. nationally recognized overnight courier service, or (b) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications to the Company shall be as set forth below and for
each Purchaser shall be as set forth on the signature pages attached hereto.
If to the Company:
Internet Commerce Corporation
000 Xxxxx Xxx., 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of the Transaction Documents unless the same consideration is also
offered to all of the parties to the Transaction Documents or holders of the
Shares or Warrants, as the case may be. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the
21
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right.
5.5 Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. Any
reference herein to a Section or Schedule or Exhibit means a Section of or a
Schedule or Exhibit to this Agreement, unless otherwise stated.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser, however, may
assign any or all of its Investor Securities and/or rights under this Agreement
to any Person, provided such Purchaser complies with Section 4.1 and such
transferee agrees in writing to be bound, with respect to the transferred
Investor Securities and otherwise, by the provisions hereof that apply to the
"Purchasers."
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and, except as provided in Sections 4.10 and 5.16, is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York without regard to
the conflicts of laws principles thereof. The parties hereto hereby irrevocably
agree that any suit or proceeding arising directly and/or indirectly pursuant to
or under this Agreement, shall be brought solely in a federal or state court
located in the City, County and State of New York. By its execution hereof, the
parties hereby covenant and irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto waive any claim
that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in personam jurisdiction with respect
thereto.
5.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and delivery of the Shares
and Warrants and until no Purchaser owns any Shares, Warrants and/or Warrant
Shares.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
22
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Replacement of Investor Securities. If any certificate or
instrument evidencing any Investor Securities is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Investor
Securities.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.14 Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall, to the
extent permissible under applicable law, be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.15 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser represents that it has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents.
23
The Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
5.16 Indemnification by the Company.
(a) The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Purchaser, the officers, directors,
agents and employees of each of them, each Person who controls any such
Purchaser (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys' fees) and expenses (including the cost
(including without limitation, reasonable attorneys' fees) and expenses relating
to an Indemnified Party's (as defined below) actions to enforce the provisions
of this Section 5.16) (collectively, "Losses"), as incurred, that may be
suffered or incurred which are caused by or arise out of (i) any material
misrepresentation or material breach of any representation or warranty made by
the Company in the Transaction Documents, or, (ii) any material breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents, or (iii) any cause of action, suit or claim brought or made against
such Indemnified Party and arising out of or resulting from the execution,
delivery, performance or enforcement of the Transaction Documents executed
pursuant hereto by any of the Indemnified Parties. If the indemnification
provided for in this Section 5.16 is held by a court of competent jurisdiction
to be unavailable to an Indemnified Party with respect to any Losses, then the
Indemnifying Party (as defined below), in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of Losses in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the actions or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The Company shall notify the Purchasers promptly of the institution, threat or
assertion of any proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Conduct of Indemnification Proceedings. If any proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Company
(the "Indemnifying Party") in writing, and the Indemnifying Party shall have the
right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, however, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that such failure shall have materially and
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such proceeding and to participate in, but not control, the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such proceeding and to employ counsel
24
reasonably satisfactory to such Indemnified Party in any such proceeding; or (3)
the named parties to any such proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel in writing that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the reasonable
fees and expenses of one separate counsel for all Indemnified Parties in any
matters related on a factual basis shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of any
such proceeding affected without its written consent. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such proceeding.
(c) Timing of Payments. All reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such proceeding in a
manner not inconsistent with this Section 5.16 shall be paid to the Indemnified
Party, as incurred, within fifteen (15) Trading Days of written notice thereof
to the Indemnifying Party; provided, however, that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such fees and
expenses applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the relative faults
of the parties.
(Remainder of Page Intentionally Left Blank)
25
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
INTERNET COMMERCE CORPORATION
By:
---------------------------------
Name:
Title:
26
PURCHASERS SIGNATURE PAGE
By:
---------------------------------
Name:
Title:
____________________________________
Address
____________________________________
Facsimile Number
____________________________________
Tax Id #:
Subscription Amount:$_____________
____________________________________
By:
---------------------------------
Name:
Title:
____________________________________
Address
____________________________________
Facsimile Number
____________________________________
Tax Id #:
Subscription Amount:$_____________
____________________________________
By:
---------------------------------
Name:
Title:
____________________________________
Address
____________________________________
Facsimile Number
____________________________________
Tax Id #:
Subscription Amount:$______________
27
INDEX OF EXHIBITS AND SCHEDULES
-------------------------------
EXHIBITS
--------
Exhibit A - Form of Registration Rights Agreement
---------
Exhibit B - Form of Warrant
---------
SCHEDULES
---------
Schedule 1 - List of Purchasers and Securities Received
----------
Schedule 3.1(a) - Subsidiaries
Schedule 3.1(g) - Capitalization, Etc.
---------------
Schedule 3.1(z) Registration Rights Agreement
EXHIBIT A
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
EXHIBIT B
---------
FORM OF WARRANT
---------------
SCHEDULE 1
----------
LIST OF PURCHASERS AND AMOUNTS
------------------------------
INTENTIONALLY OMITTED
