EXHIBIT 10.1
EXECUTION COPY
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of December 6,
2000, by and among CELLPOINT INC., a Nevada corporation (the "COMPANY"), and
each of the purchasers set forth on the execution page hereof (individually, a
"PURCHASER" and collectively, the "PURCHASERS").
WHEREAS:
A. The Company and the Purchasers 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. The Company desires to sell, and the Purchasers desire to purchase,
upon the terms and conditions stated in this Agreement, (i) convertible notes of
the Company in the aggregate principal amount of Ten Million Dollars
($10,000,000), in the form attached hereto as EXHIBIT A (the "NOTES"),
convertible into shares of the Company's common stock, par value $.001 per share
(the "COMMON STOCK"), and (ii) warrants (the "INITIAL WARRANTS"), in the form
attached hereto as EXHIBIT B, to acquire Two Hundred Ten Thousand Five Hundred
Twenty -Six (210,526) shares of Common Stock in the aggregate. The Initial
Warrants and the Prepayment Warrants, if any, as defined in and issued in
accordance with the Notes shall be referred to herein as the "WARRANTS." The
shares of Common Stock issuable upon conversion of or otherwise pursuant to the
Notes are referred to herein as the "CONVERSION SHARES" and the shares of Common
Stock issuable upon exercise of or otherwise pursuant to the Warrants are
referred to herein as the "WARRANT SHARES." The Notes, the Warrants, the
Conversion Shares and the Warrant Shares are collectively referred to herein as
the "SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT C (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.
D. All references herein to monetary denominations shall refer to
lawful money of the United States of America.
NOW, THEREFORE, the Company and the Purchasers, intending to be legally
bound, hereby agree as follows:
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1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS
a. PURCHASE OF NOTES AND WARRANTS. On the Closing Date (as defined below),
subject to the satisfaction (or waiver) of the conditions set forth in Section 6
and Section 7 below, the Company shall issue and sell to each Purchaser, and
each Purchaser severally agrees to purchase from the Company, such Notes and the
Warrants for the purchase price as is set forth on such Purchaser's execution
page hereof (the "PURCHASE PRICE"). Each Purchaser's obligation to purchase its
Notes and Warrants hereunder is distinct and separate from each other
Purchaser's obligation to purchase its Notes and Warrants, and no Purchaser
shall be required to purchase hereunder more than the number of its Notes and
Warrants set forth on such Purchaser's execution page hereto notwithstanding any
failure by any other Purchaser to purchase its Notes and Warrants hereunder nor
shall any Purchaser have any liability by reason of any such failure by any
other Purchaser.
b. FORM OF PAYMENT. On the Closing Date, each Purchaser shall pay such
Purchaser's Purchase Price for the Notes and Warrants being purchased by such
Purchaser at the Closing by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of the duly executed
Notes and Warrants being purchased by such Purchaser, and the Company shall
deliver such Notes and Warrants against delivery of such Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or waiver) of the relevant
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes and the Warrants pursuant to this
Agreement (the "CLOSING") shall be 9:30 A.M. Eastern Time on December 6, 2000,
or such other time as may be mutually agreed upon by the Company and the
Purchasers (the "CLOSING DATE"). The Closing shall occur at the offices of Wolf,
Block, Xxxxxx and Xxxxx-Xxxxx LLP, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally, but not jointly, represents and warrants to the
Company as follows:
a. PURCHASE FOR OWN ACCOUNT, ETC. Such Purchaser is acquiring the
Securities for such Purchaser's own account and not with a present view toward
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 any such
Securities other than as contemplated by the Registration Rights Agreement. Such
Purchaser understands that: (a) the Notes and Warrants (i) may not be sold or
transferred by the Purchaser without the prior consent of the Company, which may
not be unreasonably withheld, (ii) are "restricted securities" (as such term is
defined in Rule 144 promulgated under the Securities Act), (iii) the Company has
no present intention of registering
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the Notes and the Warrants under the Securities Act and (iv) the Notes and
Warrants may only be sold or transferred pursuant to an exemption from
registration under the Securities Act and any applicable state securities laws;
and (b) prior to the effective date of a registration statement filed by the
Company in accordance with the Registration Rights Agreement, the Conversion
Shares and the Warrant Shares, when issued, shall be restricted securities and
may only be sold or transferred pursuant to an exemption from registration under
the Securities Act and any applicable state securities laws. 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
under the Securities Act, and in the case of the Notes in accordance with the
second sentence of Section 9.4 thereof and in the case of the Warrants, in
accordance with the first sentence of Section 7(a) thereof.
b. ACCREDITED INVESTOR AND INTERESTED STOCKHOLDER STATUS. (i) Such
Purchaser is an "ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of
Regulation D. As of the date hereof, such Purchaser is not an "interested
stockholder" of the Company as such term is defined in Section 203(c)(5) of the
Delaware General Corporation Law.
(ii) Such Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of the Notes, the Warrants, the Conversion Shares and the Warrant
Shares pursuant to this Agreement.
(iii) Such Purchaser has the power and authority to execute and deliver
this Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly and validly
executed and delivered by such Purchaser and constitutes the legal, valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as enforceability, to general principals of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(iv) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state, or
local governmental authority on the part of such Purchaser is required in
connection with the valid execution and delivery by such Purchaser of this
Agreement and the Registration Rights Agreement, or the consummation by such
Purchaser of the transactions contemplated hereby, except for such filings as
have been made prior to the Closing.
(v) Such Purchaser: (A) is a limited liability company duly organized,
validly existing under the laws of the State of Delaware, (B) has all requisite
power and authority to carry on its business as currently conducted, (C) is duly
qualified to transact business and is in good standing in all jurisdictions
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except where such failure to do so would
not have a material adverse effect on such Purchaser.
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(vi) Such Purchaser has the power and authority and is in possession of
all material franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and orders to own, lease and operate its
properties and to carry on its business as now being conducted.
(vii) As of the Closing Date, the Purchaser does not, directly or
indirectly, beneficially own any securities of the Company.
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 has had access to the Company's SEC
Documents (as defined), including the Company's Annual Report on Form 10-KSB for
the year ended June 30, 2000, the Company's Quarterly Report on Form 10QSB for
the three months ended September 30, 3000 and such Purchaser has been furnished
with the Company's private placement memorandum dated December 4, 2000, as well
as all other 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. Such Purchaser has been
afforded the opportunity to ask questions of the Company and has received what
such Purchaser believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
such Purchaser 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. TRANSFER OR RESALE. Such Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless (a) subsequently registered thereunder, 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 under an exemption from such
registration, or (c) sold under Rule 144 promulgated under the Securities Act
(or a successor rule) ("RULE 144"), or (d) sold or transferred to an affiliate
of such Purchaser who is an Accredited Investor; 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 or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to the
Registration Rights Agreement).
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g. LEGENDS. Such Purchaser understands that the Notes and the 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 under Rule 144, 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. The securities represented hereby may not
be offered or sold in the absence of an effective registration statement
for the securities under applicable securities laws unless offered, sold
or transferred under an available exemption from the registration
requirements of those laws.
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, (a) the sale of
such Security is registered under the Securities Act, or (b) 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 (c) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144. Such Purchaser agrees
to sell all Securities, including those represented by a certificate(s) from
which the legend has been removed, pursuant to an effective registration
statement or under an exemption from the registration requirements of the
Securities Act. 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 notice to
such Purchaser the Company may require that the above legend be placed on any
such Security and such Purchaser shall cooperate in the prompt replacement of
such legend.
h. 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 in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to the
enforcement of creditors' rights and remedies or by other equitable principles
of general application.
i. 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.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" shall mean any
material adverse effect on (i) the Securities, (ii) the ability of the Company
to perform its obligations hereunder and under the Notes, the Warrants or the
Registration Rights Agreement or (iii) the
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business, operations, properties, prospects or financial condition of the
Company and its subsidiaries, taken as a whole.
The Company represents and warrants to each Purchaser as follows:
a. ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, 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 would have a Material Adverse
Effect.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Warrants and the Registration Rights Agreement,
to issue and sell the Notes and Initial Warrants in accordance with the terms
hereof, to issue the Prepayment Warrants in accordance with the terms of the
Notes, to issue the Conversion Shares upon conversion of the Notes 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, the Notes, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Notes and the Warrants, and the issuance and reservation for issuance of 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 its stockholders is required; and (iii) this
Agreement constitutes, and, upon execution and delivery by the Company of the
Registration Rights Agreement, the Notes and the Warrants, such agreements will
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to the enforcement of creditor's rights and
remedies or by other equitable principles of general application.
c. STOCKHOLDER AUTHORIZATION. Neither the execution, delivery or
performance by the Company of its obligations under this Agreement, the Notes,
the Warrants or the Registration Rights Agreement nor the consummation by it of
the transactions contemplated hereby or thereby (including, without limitation,
the issuance of the Notes or Warrants or the issuance or reservation for
issuance of the Conversion Shares or Warrant Shares) require any consent or
authorization of the Company's stockholders, other than stockholder consent, if
any, required under Rule 4460(i) promulgated by the National Association of
Securities Dealers, Inc. (the "NASD") or any similar rule in connection with the
issuance of Conversion Shares and Warrant Shares in excess of the Cap Amount (as
defined in the Note and Warrant).
d. 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
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shares 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 Notes and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock and the number
of shares to be reserved for issuance upon conversion of the Notes and exercise
of the Warrants is set forth on SCHEDULE 3(d). All of such outstanding shares of
capital stock have been, or upon issuance will be, validly issued, fully paid
and nonassessable. Except as disclosed on SCHEDULE 3(d), no shares of capital
stock of the Company (including the Conversion Shares and the Warrant Shares)
are subject to preemptive rights or any other similar rights of the stockholders
of the Company or any liens or encumbrances which are imposed by the Company.
Except for the Securities and as disclosed in SCHEDULE 3(d), as of the date of
this Agreement, (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
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 or arrangements contemplated and (ii)
there are no agreements 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 as set forth on SCHEDULE 3(d), there are no
securities or instruments containing antidilution or similar provisions that
will be triggered by the issuance of the Securities in accordance with the terms
of this Agreement, the Notes or the Warrants. The Company has furnished to such
Purchaser true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof ("CERTIFICATE OF INCORPORATION") and the
Company's By-laws as in effect on the date hereof (the "BY-LAWS"). All
instruments and agreements governing securities of the Company or instruments
convertible into or exercisable or exchangeable for capital stock of the Company
have been filed as exhibits to the SEC Documents (as defined) and are available
under the SEC's XXXXX filing system.
e. ISSUANCE OF SHARES. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance, and, upon conversion of the Notes and
exercise of the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and, except as disclosed on SCHEDULE 3(d), will not be subject
to preemptive rights, rights of first refusal or other similar rights of
stockholders of the Company.
f. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Notes and the Warrants by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance, as applicable, of the Notes, the Warrants, the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation or By-laws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations) 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 clause (ii), for such
conflicts, defaults, terminations, amendments, accelerations,
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cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its subsidiaries
is in violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its subsidiaries is
in default (and no event has occurred which, 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, except for actual or possible violations, defaults or
rights as would not, individually or in the aggregate, have a Material Adverse
Effect. The respective 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 actual or possible violations, if any, the
sanctions for which, either singly or in the aggregate, would not have a
Material Adverse Effect. Except as disclosed on SCHEDULE 3(f) or as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, 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, any regulatory or self regulatory agency
or other third party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Registration Rights Agreement, the Notes
or the Warrants, in each case in accordance with the terms hereof or thereof.
The Company is not in violation of the listing requirements of the Nasdaq
National Market ("NASDAQ") and does not reasonably anticipate that the Common
Stock will be delisted by NASDAQ for the foreseeable future.
g. SEC DOCUMENTS, FINANCIAL STATEMENTS. Since June 30, 1999, the
Company has timely filed 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, being hereinafter referred to herein as the
"SEC DOCUMENTS"). The Company has delivered to each Purchaser true and complete
copies of the SEC Documents, except for the exhibits and schedules thereto and
the documents incorporated therein. To the extent that any SEC Document is
available under the SEC's XXXXX filing system, such SEC Document shall be deemed
to have been delivered to each of the Purchasers. As of their respective dates,
the SEC Documents 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 none of the SEC Documents, at the time they were filed with the SEC,
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. None of the statements made in any such SEC Documents is, or has
been, required to be amended under applicable law nor are any such amendments
presently contemplated. As of their respective dates, the financial statements
of the Company included in the SEC Documents complied 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,
consistently applied, during the periods involved and fairly present in all
material respects the
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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 immaterial year-end audit adjustments). Except as set forth in
the financial statements of the Company included in the SEC Documents filed
prior to the date hereof, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which liabilities and obligations
referred to in clauses (i) and (ii), individually or in the aggregate, if
reflected in such financial statements, would not have a Material Adverse
Effect.
h. ABSENCE OF CERTAIN CHANGES. Since June 30, 2000, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in the SEC Documents filed prior to the date
hereof.
i. ABSENCE OF LITIGATION. Except as disclosed in the SEC Documents
filed prior to the date hereof or on SCHEDULE 3(i), 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 or NASDAQ, 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 which could have a Material Adverse Effect. There are no
facts which, if known by a potential claimant or governmental authority, could
give rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, would be reasonably
likely to have a Material Adverse Effect.
j. INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns
or is licensed 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. To the best knowledge of the Company,
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 Intangibles
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect. Except as
disclosed on Schedule 3(j), 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, indemnification, forbearance to xxx or settlement
agreements with respect to the validity of the Company's or its subsidiaries'
ownership or right to use its Intangibles and, to the best knowledge of the
Company, 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
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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. To the best knowledge
of the Company, no person is infringing on or violating the Intangibles owned or
used by the Company of its subsidiaries.
k. 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 subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses; 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.
l. DISCLOSURE. All information relating to or concerning the Company
set forth in this Agreement or provided to any Purchaser pursuant to Section
2(d) hereof and 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. No event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation, would be
required to be disclosed by the Company in a registration statement filed on the
date hereof by the Company under the Securities Act with respect to a primary
issuance of the Company's securities.
m. ACKNOWLEDGMENT REGARDING THE PURCHASERS' PURCHASE OF THE SECURITIES.
The Company acknowledges and agrees that none of the Purchasers is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, and the
relationship between the Company and each Purchaser is "ARMS LENGTH" and that
any statement made by any Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to such Purchaser's purchase
of Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
n. FORM S-3 ELIGIBILITY. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances known to the Company that
would prohibit or delay the preparation and filing of a registration statement
on Form S-3 with respect to the Registrable Securities (as defined in the
Registration Rights Agreement).
o. NO GENERAL SOLICITATION. Neither the Company nor any person
participating on the Company's behalf in the transactions contemplated
hereby has conducted any "general
10
solicitation," as such term is defined in Regulation D, with respect to any of
the Securities being offered hereby.
p. NO INTEGRATED OFFERING. 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 or any applicable stockholder
approval provisions, including, without limitation, Rule 4460(i) of the NASD or
any similar rule.
q. NO BROKERS. Except as set forth in the following sentence, the
Company has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby. The Company is responsible
for all brokerage commissions, finder's fees or similar payments relating to
this Agreement and the transactions contemplated hereby which are required to be
paid to Ladenburg Xxxxxxxx & Co., Inc.
r. ACKNOWLEDGMENT REGARDING SECURITIES. The Company's executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The number of Conversion Shares issuable upon conversion of the
Notes and/or Warrant Shares issuable upon the exercise of the Warrants may
increase substantially in certain circumstances, including the circumstances
wherein the trading price of the Common Stock declines. The Company's executive
officers and directors have studied and fully understand the terms of this
Agreement and the transactions contemplated hereby and the nature of the
securities being sold hereunder and recognize that they have a potential
dilutive effect. The Company acknowledges that its obligation to issue
Conversion Shares upon conversion of the Notes in accordance with the terms of
the Notes and to issue Warrant Shares upon the exercise of the Warrant's in
accordance with the terms of the Warrants is absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders. Taking the foregoing into account, the
Company's Board of Directors has determined in its good faith business judgment
that the issuance of the Notes and the Warrants hereunder and the consummation
of the other transactions contemplated hereby are in the best interests of the
Company and its stockholders.
s. TAX STATUS. Except as set forth in the SEC Documents filed prior to
the date hereof, the Company and each of its subsidiaries has made or filed all
U.S. federal, state 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
11
limitations relating to the assessment or collection of any federal, state or
local tax. None of the Company's tax returns has been or is being audited by any
taxing authority.
t. TITLE. Neither the Company nor any of its subsidiaries owns any real
property. 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.
u. INSURANCE. The Company has in force fire, casualty, directors' and
officers' liability, product liability and other insurance policies, with
extended coverage, sufficient in amount to allow it to replace any of its
presently existing 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 as presently existing 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. To the best knowledge of the Company, no
default or event has occurred that could give rise to a default under any such
policy.
v. ENVIRONMENTAL MATTERS. There is no environmental litigation or other
environmental proceeding pending or, to the Company's knowledge, threatened by
any governmental regulatory or others with respect to the current or any former
business of the Company or of any partnership or joint venture currently or at
any time affiliated with the Company. To the Company's knowledge, 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 that may otherwise have a Material Adverse Effect. No
Hazardous Substances have been treated, stored or disposed of, or otherwise
deposited by the Company or, to the Company's knowledge, any other Person, in or
on the properties leased by the Company or by any partnership or joint venture
currently or at any time affiliated with the Company in violation of any
applicable environmental laws. The environmental compliance programs of the
Company comply in all respects with all environmental laws, whether federal,
state or local, currently in effect. As used herein, "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.
w. SOLVENCY. Immediately before and after giving effect to the
transactions contemplated by this Agreement, the Company (i) has not incurred
and does not intend to incur, or believe that it will incur, debts beyond its
ability to pay such debts as they become due, (ii) owns and will have assets,
the fair saleable value of which is (a) greater than the total amount of its
liabilities (including contingent liabilities) and (b) greater than the amount
that will be required to pay the probable liabilities of its then existing debts
as they become absolute and matured, and (iii) has and will have capital that is
not unreasonably small in relation to its business as presently conducted and as
proposed to be conducted.
4. COVENANTS.
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a. BEST EFFORTS. The parties shall use their best efforts timely
to satisfy each of the conditions described in Section 6 and Section 7 of
this Agreement.
b. FORM D; BLUE SKY LAWS; CURRENT REPORT. The Company shall file 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
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. Within five business days after the Closing
Date, the Company agrees to file a Form 8-K concerning this Agreement and the
transactions contemplated hereby, which Form 8-K shall attach this Agreement and
its Exhibits as exhibits to such Form 8-K.
c. REPORTING STATUS. From the date hereof until the expiration of the
Registration Period (as defined in Section 3(a) of the Registration Rights
Agreement), the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, 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. The Company shall use its best efforts to continue to meet the
"registrant eligibility" requirements set forth in the general instructions to
Form S-3 or any successor form.
d. USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Notes and the Warrants for working capital and general corporate purposes.
e. EXPENSES. The Company shall pay to Castle Creek Technology Partners,
LLC ("CASTLE CREEK") or its designee at the Closing (or a later date if so
requested by Castle Creek), reimbursement for the expenses reasonably incurred
by Castle Creek and its affiliates and advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
Castle Creek and its affiliates' and advisors' reasonable due diligence and
attorneys' fees and expenses (the "EXPENSES"). In addition, from time to time
thereafter, upon Castle Creek's written request, the Company shall pay to Castle
Creek such additional Expenses, if any, not covered by such payment, in each
case to the extent reasonably incurred by Castle Creek or its affiliates or
agents in connection with the negotiation, preparation, execution and delivery
of this Agreement and the other agreements to be executed in connection
herewith. Notwithstanding the foregoing, the Company shall not be obligated to
reimburse Castle Creek for more than $35,000 pursuant to this Section 4(e).
f. FINANCIAL INFORMATION. The Company shall send the following reports
to each Purchaser until such Purchaser transfers, assigns or sells all of its
Notes and Warrants: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K or Form 10-KSB, as applicable, its
Quarterly Reports on Form 10-Q or Form 10-QSB, its proxy statements and any
Current Reports on Form 8-K; and (ii) within one (1) day after release, copies
of all press releases (other than trade releases) issued by the Company or any
of its subsidiaries. The Company shall be deemed to have been delivered the
documents referred to in a subclause
13
(i) of the preceding sentence to the extent that they become available to the
public under the SEC's XXXXX filing system within the ten (10) day period
referred to in such subclause.
g. LISTING. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Notes and
all Warrant Shares from time to time issuable upon exercise of the Warrants. The
Company will take all action necessary to continue the listing and trading of
its Common Stock on the NASDAQ, the New York Stock Exchange ("NYSE") or the
American Stock Exchange ("AMEX"), as the case may be, and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASD and such exchanges, as applicable. In the event the
Common Stock is not eligible to be traded on any of the NASDAQ, NYSE or AMEX and
the Common Stock is not eligible for listing on any such exchange or system, the
Company shall use its best efforts to cause the Common Stock to be eligible for
trading on the Nasdaq Smallcap Market ("SMALLCAP") or on the over-the-counter
bulletin board at the earliest practicable date and remain eligible for trading
while any Conversion Shares and Warrant Shares are outstanding. The Company
shall not reduce the number of shares reserved for issuance upon conversion of
the Notes and the full exercise of the Warrants (except as a result of any such
conversion or exercise) without the written consent of the Purchaser. The
Company shall promptly provide to the holders of the Notes copies of any notices
it receives regarding the continued eligibility of the Common Stock for trading
on any securities exchange, including the NASDAQ and the Smallcap (or, if
applicable, in the over-the-counter market) on which securities of the same
class or series issued by the Company are then listed or quoted, if any.
h. CORPORATE EXISTENCE. Except as provided in the immediately
succeeding sentence, from the date hereof until the expiration of the
Registration Period, the Company shall maintain its corporate existence. The
Company may merge, consolidate or sell all or substantially all of its assets,
provided that any surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the Notes and the Warrants and the
agreements and instruments entered into in connection herewith 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 of all
Notes and the exercise in full of all Warrants outstanding as of the date of
such transaction and (ii) is a publicly traded corporation whose common stock is
listed for trading on the NASDAQ, NYSE or AMEX. In furtherance of the foregoing,
the Company may reincorporate in another state in the United States for the sole
purpose of changing its domicile, provided that the successor entity satisfies
the requirements of subclauses (i) and (ii) in the preceding sentence.
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 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.
14
j. REDEMPTIONS AND DIVIDENDS. So long as the Purchasers beneficially
own Notes in the aggregate principal amount of $500,000 and except as otherwise
required by the Notes, the Company shall not, without first obtaining the
written approval of the Purchasers, repurchase, redeem, or declare or pay any
cash dividend or distribution on, any shares of capital stock of the Company;
PROVIDED, HOWEVER, if there is more than one Purchaser, then only the written
approval of Purchasers holding a majority-in-interest of the then outstanding
principal amount of the Notes (the "MAJORITY HOLDERS") shall be required.
k. STOCKHOLDER APPROVAL (i) Unless the Annual Meeting Trigger Event (as
defined) has occurred or a special meeting of the Company's stockholders has
been called or held as required by subclause (ii) below prior to the mailing of
proxies for the Company's next annual meeting of stockholders, at the Company's
next annual meeting of stockholders which shall be held no later than December
15, 2001 (the "NEXT ANNUAL MEETING"), the Company's stockholders shall be asked
to vote upon and approve this Agreement, the Notes and the Warrants, the
authorization and issuance of the Warrants and the Notes, the issuance of the
Warrant Shares upon exercise of or otherwise pursuant to the Warrants (without
giving effect to the limitations on exercise contained in Section 7(g) of the
Warrants) and the issuance of the Conversion Shares issuable upon conversion of
the Notes (without giving effect to the limitations on conversion contained in
Section 3.3 of the Note) (collectively the "STOCKHOLDER MATTERS"). For purposes
of this Section 4(k), the term "ANNUAL MEETING TRIGGER EVENT" shall mean the
Closing Bid Price (as defined in the Note) of a share of Common Stock on each of
the trading days during the ten (10) consecutive trading day period ending on
the earlier of the date the Company first mails the Next Annual Meeting proxy
materials to its stockholders or October 31, 2001 exceeds $11.00.
(ii) Unless the Stockholder Matters have already been considered at the
Next Annual Meeting as required by subclause (i) above, the Company shall hold a
special meeting of its stockholders, no later than 90 days (120 days if the SEC
comments upon the proxy material filed pursuant to the Exchange Act in
connection with such special meeting of stockholders) after a Trigger Event (as
defined) at which the Company's stockholders will be asked to approve the
Stockholder Matters. For the purposes of this Section 4(k), the term "TRIGGER
EVENT" means the average Closing Bid Price of a share of Common Stock is $7.00
or less during any ten consecutive trading days during the period commencing on
the 120th day after the Closing and ending on the date when all outstanding
Notes have been converted and all outstanding Warrants have been exercised or
expired. Within thirty (30) days after the Trigger Event, the Company shall file
with the SEC pursuant to the Exchange Act a proxy statement covering the
Stockholder Matters to be considered at the special meeting of stockholders
required pursuant to this Section 4(k)(ii). Notwithstanding the foregoing the
Company shall not be obligated to hold a special meeting of stockholders if
within 30 days after the Trigger Event it shall have mailed proxy materials to
its stockholders in connection with the Next Annual Meeting at which the
Stockholder Matters shall be presented to stockholders for approval.
(iii) At any meeting of stockholders held as required by this Section
4(k), the Company shall, through its Board of Directors, recommend to its
stockholders approval of the Stockholder Matters. The Company shall use its best
efforts to solicit from its stockholders proxies in favor of such matters
sufficient to comply with all relevant legal requirements, including, without
15
limitation, Rule 4460(i) promulgated by the NASD, and shall vote such proxies in
favor of such matters
l. ADDITIONAL EQUITY CAPITAL. The Company agrees that during the period
beginning on the date hereof and ending on the date which is 180 days following
the effective date of the Registration Statement required to be filed under
Section 2(a) of the Registration Rights Agreement (the "LOCK-UP PERIOD"), the
Company will not, without the prior written consent of Castle Creek, contract
with any party to obtain additional financing in which any equity or equity-like
securities are issued (including any debt financing with an equity feature)
("FUTURE OFFERINGS"). The limitations referred to in the immediately preceding
sentence and in the following paragraph are collectively referred to as the
"CAPITAL RAISING LIMITATIONS". The Capital Raising Limitations shall not apply
to (i) the issuance of securities pursuant to a firm commitment, fully
distributed, public offering, (ii) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof; (iii) the grant of additional options or
warrants, or the issuance of additional securities, under any duly authorized
Company stock option, restricted stock or warrant plan for the benefit of the
Company's employees or directors; or (iv) the issuance of securities to a
strategic investor (a "STRATEGIC INVESTOR"), provided that in the case of
subclause (iv), such sale satisfies each of the following conditions: (A) the
sale of securities is approved by the non-employee members of the Board of
Directors who, in good faith and exercising reasonable business judgment have
concluded that such transaction will further the operational business interests
of the Company; and (B) the primary purpose of such sale is other than a
financing arrangement.
m. RIGHT OF EXCHANGE. Until the first anniversary of the Closing Date,
the Company shall not, and shall cause each of its direct and indirect
subsidiaries not to, conduct any Future Offering which involves the sale of any
equity securities in a transaction not involving a public offering unless the
Company has satisfied or has caused its subsidiary to satisfy all of the
following requirements with respect to such issuance:
(i) The Company or the subsidiary shall have delivered a notice to
Castle Creek (the "TRANSFER NOTICE"), which notice shall include (A) the terms
and conditions of the securities and the consideration per unit which the
Company or the subsidiary desires to receive for the securities (which, in the
case where the Company or the subsidiary shall have received an offer to
purchase such securities other than from Castle Creek (a "THIRD PARTY OFFER")
shall be the consideration set forth in such offer) and (B) all of the material
terms and conditions, including the terms and conditions of payment, upon which
the Company, or the subsidiary proposes to transfer said securities (which, in
the case of a Third Party Offer, shall be the terms and conditions set forth in
the Third Party Offer).
(ii) Upon the delivery of the Transfer Notice, Castle Creek shall
have an option to exchange any or all of the Notes (which shall be deemed to
have a cash value equal to the sum of the principal amount thereof plus all
accrued and unpaid interest thereon) for any or all of the securities described
in the Transfer Notice on the terms set forth therein, except that in lieu of
paying the purchase price for such securities in cash, Castle Creek may deliver
to the Company Notes having a value (determined as provided above) equal to the
aggregate purchase
16
price of the securities described in the Transfer Notice which Castle Creek has
elected to acquire. Such option shall be exercisable by Castle Creek (or its
designee) by service of written notice upon the Company or the subsidiary within
ten business days of receipt of the Transfer Notice. If Castle Creek exercises
the option in this clause (ii), Castle Creek shall not be entitled to receive
any Prepayment Warrants with respect to and to the extent that Notes are
exchanged hereunder.
(iii) If the option created in clause (ii) hereof is not exercised
by Castle Creek within ten business days of service of the Transfer Notice, or
if such option is exercised only in part, then, within a period of 30 days
beginning on the day following the date of expiration of the option period, the
Company or the subsidiary may issue some or all of the securities sought to be
issued as to which such option was not exercised, at a price which is not less
than the price specified in the Transfer Notice and on terms and conditions not
less favorable to the Company or the subsidiary than those specified in the
Transfer Notice.
(n) INDEBTEDNESS. So long as Notes in the aggregate principal amount of
at least $500,000 are outstanding, without the advance written approval of the
Majority Holders, except for Permitted Indebtedness (as defined below), the
Company and each of its subsidiaries will not incur any additional indebtedness
for borrowed money, including for purposes of this Section 4(o) any capitalized
leases. In addition, so long as Notes in the aggregate principal amount of at
least $500,000 are outstanding without the advance written approval of the then
Majority Holders, except with respect to Permitted Indebtedness, the Company and
each of its subsidiaries will not (i) prepay any indebtedness for money borrowed
or any indebtedness secured by any of the assets of the Company or any of its
subsidiaries assets; or (ii) enter into or modify any agreement as a result of
which the terms of payment of any indebtedness are amended or modified in a
manner which would accelerate its payment. "PERMITTED INDEBTEDNESS" shall mean
(I) the obligations of the Company for borrowed money set forth on Schedule 4(o)
("EXISTING INDEBTEDNESS") and any extensions, amendments and replacements of
such Existing Indebtedness (x) which do not increase the amount outstanding,
other than increases resulting from an increase in the Company's inventory or
receivables borrowing base (provided that the advance rates with respect to such
inventory and receivables are no more favorable to the Company than contained in
the agreements governing such Existing Indebtedness as of the date of this
Agreement) and (y) which do not otherwise materially increase amounts required
to be paid under the agreements governing such Existing Indebtedness as of the
date of this Agreement, and which, in any event, (other than by virtue of
indebtedness permitted by the foregoing clause (x)) do not affect the Purchasers
or the Purchasers' interests in the Securities in any manner materially more
adverse to the Purchasers than the agreements governing such Existing
Indebtedness in their forms as of the date of the Closing; (II) capitalized
lease obligations of the Company set forth on Schedule 4(o) which obligations
are outstanding on the date of this Agreement; (III) purchase money financing
set forth on Schedule 4(o) which purchase money financing is outstanding on the
date of this Agreement; and (IV) indebtedness of the Company or any of its
subsidiaries incurred to finance the acquisition, construction or improvements
of any fixed or capital assets, including capital lease obligations and
indebtedness assumed in connection with the acquisition of any such assets or
secured by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such indebtedness that do not
increase the outstanding principal amount
17
thereof, provided that, in the case of indebtedness described in subclause (IV):
(x) such indebtedness is incurred prior to or within ninety (90) days after such
acquisition of the completion of such construction or improvement; (y) the
aggregate principal amount of such indebtedness does not exceed the cost of the
fixed or capital asset acquired or the cost of the construction of or
improvement to such fixed or capital asset; and (z) such indebtedness, if
subject to a Lien, is secured only by the asset acquired, constructed or
improved.
(o) LIENS. So long as Notes in the aggregate principal amount of at
least $500,000 are outstanding, without the prior written approval of the
Majority Holders, the Company shall not create or suffer to exist any Lien upon
any of its property now owned or hereafter acquired, or acquire any property
upon any conditional sale or other title retention device or arrangement or any
purchase money security agreement, other than Permitted Liens and Liens to
secure Permitted Indebtedness. As used in this Agreement: (a) "LIEN" means any
mortgage, lien, title claim, assignment, encumbrance, security interest, adverse
claim, contract of sale, restriction on use or transfer or other defect of title
of any kind; and (b) "PERMITTED LIENS" means (i) statutory liens for taxes not
yet due; (ii) Liens of carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for sums not yet due; (iii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; and (iv) Liens securing Permitted Indebtedness.
(p) RESERVED AMOUNT. On the date of the Closing the Company shall have
reserved Two Million (2,000,000) shares of the authorized but unissued shares of
Common Stock for issuance upon conversion of the Notes and upon the exercise of
the Warrants and thereafter the number of authorized but unissued shares of
Common Stock so reserved shall not be decreased but shall be increased if
necessary so that at all times the number of authorized but unissued shares of
Common Stock reserved for issuance upon conversion of the Notes and upon the
exercise of the Warrants (without regard to the limitations on issuance set
forth in Section 3.3 of the Note and Section 7(g) of the Warrants) shall equal
the sum of 200% of the Conversion Shares then issuable upon conversion of the
Notes outstanding (using the applicable Conversion Price, as defined in the
Note) PLUS 100% of the Warrant Shares issuable upon the exercise of Warrants
outstanding (subject to equitable adjustment for any stock splits, stock
dividends, reclassification or similar events and subject to reduction for the
number of any shares of Common Stock issued upon conversion of the Notes and
upon the exercise of the Warrants) (THE "RESERVED AMOUNT") solely for the
purpose of effecting the conversion of the Notes and the exercise of the
Warrants. The Reserved Amount shall be allocated ratably among the Purchasers in
accordance with the principal amount of Notes and Warrants held by them from
time to time. If for any ten (10) consecutive trading days (the last of such ten
(10) trading days being the "AUTHORIZATION TRIGGER DATE") the number of shares
of the Company's authorized Common Stock (as reduced by any Common Stock
reserved for issuance other than upon conversion of the Notes or exercise of the
Warrants) is equal to or less than the Reserved Amount (the "SHORTFALL"), the
Company immediately notify each Purchaser of such occurrence and shall take
action as soon as possible, but in any event within 90 days (120 days if the SEC
reviews the relevant proxy materials) after the Authorization Trigger Date to
increase the number of authorized shares of Common Stock by an amount at least
equal to the greater of the Shortfall or 10,000,000. The Company shall, through
its Board of Directors, recommend to its stockholders
18
approval of such matters. The Company shall use its best efforts to solicit from
its stockholders proxies in favor of such matters and shall vote such proxies in
favor of such matters.
(q) TRADING RESTRICTIONS. No Purchaser shall be permitted to sell,
transfer or otherwise dispose of Conversion Shares and Warrant Shares, during
any 45 trading day period, in an amount exceeding in the aggregate 9.99% of the
least number of shares of Common Stock issued and outstanding during such 45
trading day period (other than dispositions to the Company.)
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
such Purchaser to the Company upon conversion of the Notes or exercise of the
Warrants, as applicable. To the extent and during the periods provided in
Section 2(g) of this Agreement, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement.
b. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the transfer of the Conversion
Shares and the Warrant Shares prior to registration of the Conversion Shares and
the Warrant Shares under the Securities Act or without an exemption therefrom,
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way any Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement or under an exemption from the registration
requirements of applicable securities law.
c. If any Purchaser provides the Company with an opinion of counsel,
which opinion of counsel 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 registration, or that the Conversion Shares and the Warrant
Shares may be sold pursuant to an effective Registration Statement, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and
the Warrants to each Purchaser hereunder is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.
a. Each Purchaser shall have executed such Purchaser's signature page
to this Agreement and the Registration Rights Agreement and delivered the same
to the Company.
19
b. Each Purchaser shall have delivered such Purchaser's Purchase Price
in accordance with Section 1(b) above.
c. The representations and warranties of each Purchaser shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and each Purchaser shall have performed, satisfied and complied
in all material respects 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 statute, rule, regulation, executive order, decree, ruling or
injunction 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
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase such Purchaser's
Notes and Warrants hereunder is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in such Purchaser's sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to such Purchaser.
b. The Company shall have delivered to such Purchaser duly executed
Notes and Initial Warrants (in such denominations as such Purchaser shall
request) in accordance with Section 1(a) above.
c. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. Each Purchaser shall have received a certificate, executed
by the Chief Executive Officer or Executive Vice President of the Company, dated
as of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by any Purchaser.
d. 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
20
authority over the matters contemplated hereby which questions the validity of,
or challenges or prohibits the consummation of, any of the transactions
contemplated by this Agreement.
e. Each Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date in substantially the form of EXHIBIT D
attached hereto.
f. No material adverse change or development in the business,
operations, properties, prospects, financial condition, or results of operations
of the Company shall have occurred since the date hereof.
g. The Purchasers 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, the Notes, the Warrants and the
Registration Rights Agreement 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.
h. On the Closing Date, the Common Stock shall be listed on NASDAQ,
including 2,000,000 shares of Common Stock reserved for issuance as Conversion
Shares and Warrant Shares, subject to issuance, an application for such listing
shall have been filed with the NASDAQ and trading in the Common Stock shall not
have been suspended by NASDAQ or the SEC and no de-listing or suspension shall
be reasonably likely in the judgment of the Purchasers for the foreseeable
future.
i. No event exists which constitutes an Event of Default (as defined in
the Notes) or which would constitute an Event of Default with notice or the
passage of time or both which have not been cured or waived to the satisfaction
of the Purchasers.
8. MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflict of laws provisions thereof. The parties hereto irrevocably consent
to the jurisdiction of the United States federal courts and the state courts
located in the State of New York 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 parties hereto
irrevocably waive the defense of an inconvenient forum to the maintenance of
such suit or proceeding. Each of the parties hereto further agrees that service
of process upon it mailed by first class mail shall be deemed in every respect
effective service of process upon it in any such suit or proceeding. Nothing
herein shall affect the right of any Purchaser or the Company to serve process
in any other manner permitted by law. The parties hereto agree 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.
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,
21
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 (5) days of the execution hereof, provided that the
failure to so deliver any manually executed signature page shall not affect the
validity or enforceability of this Agreement.
c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
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 instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Purchaser 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 delivered personally or by responsible
overnight carrier or by confirmed telecopy, and shall be effective upon receipt
or refusal of receipt, if delivered personally or by responsible overnight
carrier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
22
If to the Company:
CELLPOINT INC.
0000 Xxxxxxxxx Xxxxx
Hillswood Business Park
Chertsey,
Surrey KT16 ORS
Attention: Xxxx Xxxxxxxxx
Telecopy: 441 344 623 090
with a copy to:
Salans Xxxxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: 000-000-0000
If to any Purchaser, to the address set forth under such Purchaser's name
on the execution page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
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 below with respect to the right to assign rights to affiliates and to
transferees and pledgees of Securities, neither the Company nor any Purchaser
shall assign this Agreement or any rights or obligations hereunder, except, upon
the prior written consent of the other, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, any Purchaser may assign its rights
hereunder to any of its "affiliates," as that term is defined under the Exchange
Act, without the consent of the Company or to any other person or entity with
the consent of the Company. This provision shall not limit any Purchaser's right
to transfer the Securities pursuant to the terms of this Agreement, the Notes,
the Warrants or the Registration Rights Agreement or to assign such Purchaser's
rights hereunder and/or thereunder to any such transferee. In addition, and
notwithstanding anything to the contrary contained in this Agreement, the Notes,
the Warrants or the Registration Rights Agreement, the Securities may be pledged
and all rights of any Purchaser under this Agreement or any other agreement or
document related to the transactions contemplated hereby may be assigned,
without further consent of the Company, to a bona fide pledgee in connection
with such Purchaser's margin or brokerage accounts.
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.
23
i. SURVIVAL. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 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. The
Company agrees to indemnify and hold harmless each Purchaser and each other
holder of the Securities and all of their stockholders, officers, directors,
employees, partners, members, agents and direct or indirect investors and
affiliates and any of the foregoing person's agents 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 (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Notes, the Warrants, the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement, the Notes, the Warrants, the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby, (c) any cause of action, suit or claim brought or made by any
person or entity (other than the Company) against such Indemnitee and arising
out of or resulting from the execution, delivery, performance or enforcement of
this Agreement, the Notes, the Warrants, the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or thereby or
(d) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities. 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. Any claim for indemnification pursuant to this Section 8(i)
shall be subject to the terms, conditions and procedures set forth in the
Registration Rights Agreement, which terms, conditions and procedures are
incorporated herein by reference.
j. PUBLICITY. The Company and each Purchaser shall have the right to
review and approve, such approval not to be unreasonably withheld or delayed,
before issuance the press release and current Report on Form 8-K with respect to
the transactions contemplated hereby; PROVIDED, HOWEVER, that the Company shall
be entitled, without the prior review of any Purchaser, to make any other press
release or any other SEC filing or any NASDAQ or NASD filings with respect to
such transactions as is required by applicable law and regulations, so long as
the substance of such releases and/or filings are consistent with the press
release and current report on Form 8-K reviewed by the Purchasers as provided in
the first clause of this sentence.
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.
24
l. TERMINATION. In the event that the Closing shall not have occurred
on or before December 6, 2000, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
m. JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Notes, the
Warrants and the Registration Rights Agreement. 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.
n. EQUITABLE RELIEF. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Purchaser 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,
without the necessity of showing economic loss and without any bond or other
security being required.
o. ADDITIONAL ACKNOWLEDGMENT. Each Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement, the Notes, the Warrants and the Registration Rights Agreement, 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. The Purchasers have
not taken any actions that would deem such Purchasers to be members of a "group"
for purposes of Section 13(d) of the Exchange Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
IN WITNESS WHEREOF, the Purchasers and the Company have caused this
Agreement to be duly executed as of the date first above written.
CELLPOINT INC.
By: /s/ Xxxx Xxxxxxxxx
----------------------------------
Name: Xxxx Xxxxxxxxx
Title: Executive Vice President
CASTLE CREEK TECHNOLOGY PARTNERS LLC
BY: CASTLE CREEK PARTNERS LLC, AS AGENT
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
RESIDENCE: Illinois
ADDRESS FOR NOTICES: 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
--------------
with copies of all notices to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx, LLP
0000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esquire
Original Principal Amount of Notes: $10,000,000
Number of Warrants: 210,526
26
EXHIBIT A
TO
SECURITIES PURCHASE AGREEMENT
[SEE EXHIBIT 4.2]
27
EXHIBIT B
TO
SECURITIES PURCHASE AGREEMENT
[SEE EXHIBIT 4.3]
28
EXHIBIT C
TO
SECURITIES PURCHASE AGREEMENT
[SEE EXHIBIT 4.1]
29