EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
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This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
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April 19, 2001, by and between VOXWARE, INC., a Delaware corporation (the
"Company"), with principal executive office located at 000 Xxxxxxxx Xxxxxx Xxxx,
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Xxxxx 0, Xxxxxxxxxxxxx, Xxx Xxxxxx 00000, and Castle Creek Technology Partners,
LLC, a Delaware limited liability company (the "Purchaser") with principal
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offices located at 000 X. Xxxxxxx Xxxx., Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000.
RECITALS
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A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
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States Securities and Exchange Commission (the "SEC") under the Securities Act
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of 1933, as amended (the "Securities Act").
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B. The Purchaser desires to purchase and the Company desires to issue and
sell upon the terms and conditions stated in this Agreement for an aggregate
purchase price of Two Hundred Forty-Two Thousand Seven Hundred Sixty
($242,760):(i) 714,000 shares (the "Purchased Shares") of the Company's common
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stock, par value $0.001 per share (the "Common Stock") and (ii) a warrant in the
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form attached hereto as Exhibit A (the "Warrant") to purchase up to 2,142,000
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shares of Common Stock. The Purchased Shares and the Warrant are sometimes
referred to herein as the "Purchased Securities". The shares of Common Stock
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issuable upon the exercise of or otherwise pursuant to the Warrant are referred
to as "Warrant Shares". The Purchased Shares, the Warrant, the Warrant Shares,
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the Additional Share Warrants and the Additional Shares (as those terms are
defined in Section 4.15 below), the Remedy Warrant and the Remedy Shares (as
those terms are defined in the Registration Rights Agreement) are referred to
herein as the "Securities".
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C. Contemporaneously 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 B (the "Registration Rights Agreement"),
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pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.
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AGREEMENTS
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NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Purchaser hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES; SECURITY
1.1. Purchase of Shares of Common Stock and Warrant. The purchase price
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to be paid by the Purchaser for the Purchased Shares and the Warrant being
purchased by the Purchaser hereunder shall be the lesser of Five Hundred
Thousand Dollars ($500,000) or the aggregate purchase price set forth in the
second recital (the "Purchase Price"). The "Price Per Share" shall mean an
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amount equal to the aggregate Purchase Price divided by the number of Purchased
Shares. On the Closing Date (as defined herein), subject to the terms and the
satisfaction (or waiver) of the conditions set forth in Articles VI and VII of
this Agreement, the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company (i) the Purchased Shares and (ii) the
Warrant.
1.2. Form of Payment. At the Closing, the Purchaser shall pay the
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Purchase Price for (i) the Purchased Shares and (ii) the Warrant, by wire
transfer of immediately available funds to the Company, in accordance with the
Company's written wiring instructions, and the Company shall deliver to the
Purchaser one or more executed certificates representing the Purchased Shares
and the Warrant and a duly executed Registration Rights Agreement.
1.3. Closing Date. Subject to the satisfaction (or waiver) of the
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conditions set forth in Articles VI and VII below, the date and time of the
issuance, sale and purchase of the Purchased Securities pursuant to this
Agreement (the "Closing") shall be April 19, 2001 (such date being hereinafter
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referred to as the "Closing Date"). The Closing shall occur on the Closing Date
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at 11:00 a.m. New York City time, at the offices of Wolf, Block, Xxxxxx and
Xxxxx Xxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
ARTICLE II
PURCHASERS' REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Company as follows:
2.1. Purchase for Own Account. The Purchaser is purchasing the Securities
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for its own account and not with a view toward, or in connection with, the
public distribution thereof, and will not resell the Securities except pursuant
to sales that are exempt from the registration requirements of the Securities
Act and/or sales that are registered under the Securities Act. The Purchaser
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to any
third party with respect to any of the Securities. The Purchaser
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understands that it must bear the economic risk of this investment indefinitely,
unless any disposition of the Securities is registered pursuant to the
Securities Act and any applicable state securities laws or an exemption from
such registration is available, and that the Company has no present intention of
disposing of any such Securities other than as contemplated by the Registration
Rights Agreement. By making the representations in this Section 2.1, the
Purchaser does not agree to hold any Securities for any minimum or other
specific term and reserves the right to dispose of any or all of the Securities
at any time in accordance with or pursuant to a registration statement or an
exemption from registration under the Securities Act and other applicable state
securities laws and, without limiting the foregoing, the Purchaser may transfer
a portion of the Purchased Shares to one or more charitable entities and the
Company shall cooperate in effecting the transfer and reissuance of any such
transferred stock certificates.
2.2. Accredited Investor Status. The Purchaser is an "accredited investor"
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as that term is defined in SEC Rule 501(a) of Regulation D, as presently in
effect, under the Securities Act.
2.3. Reliance on Exemptions. The Purchaser understands that the Purchased
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Securities are being offered and sold to the Purchaser in reliance upon specific
exemptions from the registration requirements of the United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of the representations and warranties of the Purchaser set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the Securities.
2.4. Information. The Purchaser has been furnished all materials relating
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to the business, finances and operations of the Company and materials relating
to the offer and sale of the Purchased Securities which have been requested by
the Purchaser. The Purchaser has been afforded the opportunity to ask questions
of the Company and has received what the Purchaser believes to be satisfactory
answers to any such inquiries. The Purchaser understands and acknowledges that
such discussions, as well as any written information issued by the Company, (i)
were intended to describe the aspects of the Company's business and prospects
which the Company believes to be material, but were not necessarily an
exhaustive description, and (ii) may have contained forward-looking statements
involving known and unknown risks and uncertainties which may cause the
Company's actual results in future periods or plans for future periods to differ
materially from what was anticipated and that, except as specifically set forth
elsewhere herein, no representations or warranties were or are being made with
respect to any such forward-looking statements or the probability of achieving
any of the results projected in any of such forward-looking statements. Neither
such materials or inquiries nor any other due diligence investigation conducted
by the Purchaser nor any of its representations, warranties, covenants or
agreements shall modify, amend or affect the Purchaser's right to rely on the
Company's representations and warranties contained in Article III. The
Purchaser understands that the Purchaser's investment in the Purchased
Securities involves a high degree of risk.
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2.5. Governmental Review. The Purchaser understands that no United States
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federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.
2.6. Transfer or Resale. The Purchaser understands that (i) except as
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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 subsequently registered thereunder or an
exemption from such registration is available (which exemption the Company
expressly agrees may be established as contemplated in clauses (b) and (c) of
Section 5.1 hereof or as otherwise may be permissible under the Securities Act);
(ii) any sale of such Securities made in reliance on Rule 144 under the
Securities Act (or a successor rule) ("Rule 144") may be made only in accordance
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with the terms of said Rule and further, if said Rule is not applicable, any
resale of such Securities without registration under the Securities Act may
require compliance with some other exemption under the Securities Act or the
rules and regulations of the SEC thereunder; and (iii) 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
this Agreement or the Registration Rights Agreement).
2.7. Legends. The Purchaser understands that, subject to Article V hereof,
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the certificates for the Purchased Shares and the Warrant and, until such time
as the Warrant Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement or otherwise, may be sold by
the Purchaser pursuant to Rule 144 or otherwise without registration, the
certificates for the Warrant Shares will bear a restrictive legend (the
"Legend") in the following form:
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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 OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED,
SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Except for the Legend in accordance with this Section 2.7 and Section 5.1
hereof, the Securities shall bear no other legend.
2.8. Authorization; Enforcement. This Agreement and the Registration
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Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Purchaser and are valid and binding agreements of the Purchaser
enforceable against
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the Purchaser in accordance with their respective terms, except as enforcement
thereof may be limited by (i) laws of general application relating to
bankruptcy, insolvency moratorium, reorganization or other similar laws, both
state and federal, affecting the enforcement of creditors' rights in general,
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
3.1. Organization and Qualification. The Company and each of its
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subsidiaries is a corporation duly organized, validity existing and in good
standing under the laws of the jurisdiction in which it is incorporated, and has
the requisite corporate power and authority 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 where the failure to so qualify would have a
Material Adverse Effect.
For the purpose of this agreement "Material Adverse Effect" means any
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material adverse effect on (a) the business, operations, properties, financial
condition or operating results of the Company and its subsidiaries, taken as a
whole on a consolidated basis or (b) the ability of the Company to perform its
obligations under this Agreement, the Warrant and the Registration Rights
Agreement (collectively, the "Investment Agreements").
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3.2. Authorization; Enforcement. (a) The Company has the requisite
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corporate power and authority to (i) enter into, and perform its obligations
under each of the Investment Agreements, (ii) issue, sell and perform its
obligations with respect to the Purchased Securities in accordance with the
terms hereof and thereof, (iii) issue the Warrant Shares, the Additional Share
Warrants, Additional Shares, the Remedy Warrant and Remedy Shares in accordance
with the terms and conditions of the applicable Investment Agreement; (iv)
repurchase forty-six (46) shares (the "Initial Repurchased Shares") of the
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Company's Series A Convertible Preferred Stock, par value $.001 per share (the
"Series A Preferred Stock") for an aggregate purchase price of $48,200, and (v)
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repurchase shares of Series A Preferred Stock pursuant to Section 4.16 below and
pursuant to Section 3(c)(i) of the Warrant (collectively, the "Subsequent
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Repurchased Shares" and, together with the Initial Repurchased Shares, the
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"Repurchased Shares"), (b) the execution, delivery and performance of this
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Agreement and the other Investment Agreements by the Company and the
consummation by the Company of each of the transactions contemplated hereby and
thereby (including without limitation the issuance of the Purchased Securities,
the reservation for issuance and issuance of the number of the Warrant Shares
initially issuable pursuant to the exercise of the Warrant and the repurchase of
the Repurchased Shares) have been duly authorized by all necessary corporate
action and no further consent or authorization of the Company, its board of
directors or stockholders or any other person, body or agency is required with
respect to
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any of the transactions contemplated hereby or thereby (other than actions of
the SEC and the Company's Board of Directors in connection with the registration
of the Purchased Shares and the Warrant Shares in accordance with the
Registration Rights Agreement); (c) the Investment Agreements have been duly
executed and delivered by the Company; and (d) each of the Investment Agreements
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforcement thereof
may be limited by (i) laws of general application relating to bankruptcy,
insolvency moratorium, reorganization or other similar laws, both state and
federal, affecting the enforcement of creditors' rights in general, (ii) rules
of law governing specific performance, injunctive relief and other equitable
remedies, and (iii) Section 160 of the Delaware General Corporation Law (the
"GCL").
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3.3. Capitalization. The capitalization of the Company as of the date of
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this Agreement, including the authorized capital stock, the number of shares
issued and outstanding (including the Purchased Securities), the number of
shares reserved for issuance pursuant to the Company's stock option plans, the
number of shares reserved for issuance pursuant to securities (other than the
Securities), directly or indirectly, exercisable for, or convertible into or
exchangeable for any shares of Common Stock, the number of shares of Common
Stock currently reserved for issuance upon conversion of the Series A Preferred
Stock and the exercise of the Warrant is set forth on Schedule 3.3. All
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outstanding shares of the Company's capital stock have been validly issued,
fully paid and non-assessable. Except as disclosed in Schedule 3.3, (i) no
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shares of capital stock of the Company (including the Purchased Securities 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 granted or
created by the Company preemptive or similar, and (ii) there are no outstanding
debt securities issued by the Company; (iii) 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, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries; (iv) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of their securities under the Securities Act (except the
Registration Rights Agreement); (v) there are no outstanding securities or
instruments of the Company or any of its subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to redeem a security of the Company or any of its
subsidiaries; and (vi) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement. The
Company has furnished or made available to the Purchaser true and correct copies
of the its Certificate of Incorporation as currently in effect ("Certificate of
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Incorporation"), and its By-laws as currently in effect (the "By-laws"). The
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Company has set forth on Schedule 3.3 all instruments and agreements (other than
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the Certificate of Incorporation and By-
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laws) governing securities convertible into or exercisable or exchangeable for
Common Stock or the Company's preferred stock, par value $0.001 per share
("Preferred Stock"), including the Series A Preferred Stock, and the Company
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shall provide to the Purchaser copies thereof upon the request of the Purchaser.
Except as set forth on Schedule 3.3, the Company has no indebtedness for
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borrowed money and no agreement providing for indebtedness for borrowed money.
The Company has no subsidiaries, except as provided on Schedule 3.3. All such
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subsidiaries included on Schedule 3.3. are one hundred percent (100%) owned by
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the Company. Except as provided on Schedule 3.3, the Company has no investments,
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either debt or equity, in any other entity.
3.4. Issuance of Shares. The Purchased Shares are duly authorized and
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reserved for issuance, and when issued and delivered in accordance with the
terms hereof will be validly issued, fully paid and non-assessable, free from
all taxes, liens, claims and encumbrances and are not and will not be subject to
preemptive rights or other similar rights and will not trigger any anti-dilution
or similar provisions in any securities of the Company or any other agreements
to which the Company is party which rights or provisions have not been waived,
except for the rights of the Purchasers as provided in Sections 4.5 and 4.7 of
that certain Securities Purchase Agreement dated as of August 10, 2000, between
the Purchaser and the Company (the "2000 SPA") which rights are being satisfied
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by the Company by the offer of the Purchased Securities pursuant to the terms of
this Agreement and except as provided in the Certificate of Designations,
Preferences and Rights of Series A Preferred Stock filed in the Office of the of
the Delaware Secretary of State on August 14, 2000 and in effect on the date
hereof (the "Certificate of Designations"). Pursuant to the Certificate of
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Designations, upon the sale of the Purchased Securities pursuant to the terms
hereof, the Conversion Price (as defined in the Certificate of Designations) of
the Series A Preferred Stock shall be reduced to $0.34. The number of the
Warrant Shares initially issuable upon the exercise of the Warrant are duly
authorized and reserved for issuance, and, upon the exercise of the Warrant, in
accordance with its terms, the Warrant Shares will be validly issued, fully paid
and non-assessable, and free from all taxes, liens, claims and encumbrances and
will not be subject to preemptive rights or other similar rights will not
trigger any anti-dilution provisions in any securities of the Company or any
other agreements to which the Company is a party which rights or provisions have
not been waived.
3.5. Listing. The Company's Common Stock is eligible for quotation and is
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quoted on the OTC Bulletin Board (the "OTCBB") and the Company is not aware of
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any threat to suspend such quotation. No corporate authorization is required
under the rules of the SEC, the National Association of Securities Dealers (the
"NASD") or any other regulatory authority applicable to the eligibility
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requirements for securities quoted on OTCBB for the issuance of the Purchased
Shares and the Warrant Shares upon the exercise of the Warrant in accordance
with its terms.
3.6. No Conflicts. The execution, delivery and performance of each of the
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Investment Agreements, by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including the issuance of the
Purchased Securities, the reservation for issuance of the Warrant Shares and the
repurchase of the
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Repurchased Shares, do not and will not (a) result in a violation of the
Certificate of Incorporation or By-laws of the Company or any of its
subsidiaries, (b) 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 (except for such conflicts, defaults, terminations,
amendments, accelerations, and cancellations as would not, individually or in
the aggregate, have a Material Adverse Effect), or (c) assuming the accuracy of
the Purchaser's representations and warranties set forth in Article II hereof,
result in a violation of any law, rule, regulation, order, judgment or decree
(including, without limitation, 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. 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 to the Company's knowledge, 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. The business of the Company and its subsidiaries is not
being conducted in violation of any law, ordinance, rule, regulation, order,
judgment or decree of any governmental entity, court or arbitration tribunal in
any material respect. The Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency or entity or
authority in order for it to execute, deliver or perform any of its obligations
under any of the Investment Agreements or to perform its obligations in
accordance with the terms hereof or thereof.
3.7. SEC Documents; Financial Statements. The Common Stock is registered
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under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and has been so registered since October 30, 1996. The Company
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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 Exchange Act or pursuant to the registration and reporting requirements
of the Securities Act (all of the foregoing filed after June 30, 1998, and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, and all correspondence to and from
the SEC related thereto, being referred to herein as the "SEC Documents").
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Schedule 3.7 sets forth a complete list of the SEC Documents. The Company has
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delivered or made available to the Purchaser true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act 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
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Document is, or has been, required to be updated or amended under applicable
law, except as listed on Schedule 3.7. The financial statements of the Company
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included in the SEC Documents were prepared in accordance with U.S. generally
accepted accounting principles, consistently applied, and the rules and
regulations of the SEC during the periods involved and present accurately and
completely the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, immaterial year-end audit adjustments).
Except as set forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred subsequent to the date of such financial
statements in the ordinary course of business consistent with past practice 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, in each case of clause (i) and (ii)
next above which, individually and in the aggregate, are not material to the
financial condition, business, operations, properties or operating results of
the Company and its subsidiaries taken on a whole. The Company meets the
requirements for use of Form S-2 for registration of the resale of Registrable
Securities, as defined in the Registration Statement.
3.8. Absence of Certain Changes. Except as set forth in Schedule 3.8,
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since December 31, 2000, there has been no change and no development in the
business, properties, operations, financial condition or results of operations
of the Company which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
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3.9. Absence of Litigation. Except as disclosed in Schedule 3.9 or the
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SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, governmental agency or authority, or self-
regulatory organization or body 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, wherein an unfavorable decision, ruling or finding could
have a Material Adverse Effect or would adversely affect the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, this Agreement or
any of such other documents. To the Company's knowledge, there are no facts
which, if known by a potential claimant or governmental agency or authority,
could give rise to a claim or proceeding against the Company or any of its
subsidiaries which, if asserted or conducted with results unfavorable to the
Company or any of its subsidiaries, could have a Material Adverse Effect.
3.10. Disclosure. No information relating to or concerning the Company set
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forth in this Agreement or provided to the Purchaser in connection with the
transactions contemplated hereby contains an untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in light of
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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 other than the
transactions contemplated hereby. There is no fact (other than matters of a
general economic or political nature which do not uniquely affect the business,
properties, operations or financial condition of the company) known to the
Company that has not been disclosed by the Company to the Purchaser and to the
public that might reasonably be expected to have or result in a material effect
on the business, properties, operations or financial condition of the Company
and its subsidiaries taken as a whole or have a material effect on the ability
of the Company to conduct its business after the Closing in all material
respects as currently conducted.
3.11. Acknowledgment Regarding Purchaser's Purchase of the Securities. The
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Company acknowledges and agrees that the Purchaser is acting independently and
is not 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, that this Agreement and the transactions contemplated
hereby, and the relationship between the Purchaser and the Company is "arms-
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length", and that any statement made by the Purchaser, or any of its
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representatives or agents, in connection with this Agreement or the transactions
contemplated hereby, other than the representations and warranties of the
Purchaser contained herein, is not advice or a recommendation, is merely
incidental to the Purchaser's purchase of the Securities and has not been relied
upon in any way by the Company, its officers, directors or other
representatives. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement and the transactions
contemplated hereby has been based solely on an independent evaluation by the
Company and its representatives.
3.12. No General Solicitation. Neither the Company nor any person acting
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on behalf of the Company has conducted any "general solicitation," as described
--------------------
in Rule 502(c) under Regulation D, with respect to any of the Securities being
offered hereby.
3.13. 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 prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the Securities Act pursuant to the provisions of Regulation
D. The transactions contemplated hereby are exempt from the registration
requirements of the Securities Act, assuming the accuracy of the representations
and warranties herein contained of the Purchaser to the extent relevant for such
determination.
3.14. No Brokers. The Company has taken no action which would give rise to
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any claim by any person for brokerage commissions, finder's fees or similar
payments (collectively, "Transaction Fees") by the Purchaser relating to this
----------------
Agreement or the transactions contemplated hereby, provided that, although the
Company does not believe it has any obligation to Nutmeg Securities, Ltd. d/b/a
I.F.G., Inc. ("IFG") in connection
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with this Agreement or the transactions contemplated hereby, no representation
or warranty is made with respect thereto; provided further that the Company
hereby indemnifies the Purchaser and its affiliates against all liability and
costs (including without limitation reasonable attorney's fees and expenses)
arising from any claim by IFG or any other person for Transaction Fees arising
from this Agreement or the transactions contemplated hereby.
3.15. Acknowledgment of Dilution. The potential number of Warrant Shares,
--------------------------
Remedy Shares and Additional Shares issuable to the Purchaser may increase
substantially in certain circumstances, including the circumstance 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 board of
directors of the Company has concluded in its good faith business judgment that
the issuance of the Securities as contemplated hereby is in the best interests
of the Company. The Company acknowledges that its obligation to issue the Remedy
Warrant, Warrant Shares, Additional Share Warrants, Additional Shares and Remedy
Shares in accordance with the terms of the applicable Investment Agreement is
binding upon it and enforceable regardless of the dilution that such issuance
may have on the ownership interests of other stockholders.
3.16. Intellectual Property. Except as set forth in the SEC Documents, to
---------------------
the Company's knowledge each of the Company and its subsidiaries, owns or
possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, 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") used or necessary for the conduct of its
-----------
business as now being conducted and as described in the Company's SEC Documents.
Except as set forth in the SEC Documents, neither the Company nor any subsidiary
of the Company infringes on or is in conflict with any right of any other person
with respect to any Intangibles nor is there any claim of infringement made by a
third party against or involving the Company or any of its subsidiaries, which
infringement, conflict or claim, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect. Except as set forth in the SEC Documents, none of the
Intangibles used in the Company's business is expected to expire or terminate
within two years from the date of this Agreement, except where such expiration
or termination would not result, either individually or in the aggregate, in 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 Intangibles.
3.17. 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
11
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee. Without limiting the
generality of the foregoing, the Company and its subsidiaries have not directly
or indirectly made or agreed to make (whether or not said payment is lawful) any
payment to obtain, or with respect to, sales other than usual and regular
compensation to its or their employees and sales representatives with respect to
such sales.
3.18. Officers and Directors. No executive officer (as defined in Rule
----------------------
501(f) promulgated under the Securities Act) or director of the Company or any
of its subsidiaries, is, or is now expected to be, in violation of any material
term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant between such officer or director and the
Company and its subsidiaries or between the such officer or director and any
other third party. No officer or director has, to the knowledge of the Company
and its subsidiaries, any intention to terminate or limit his or her employment
with, or services to, the Company or any of its subsidiaries, nor is any such
officer subject to any constraints which would cause such person to be unable to
devote his full time and attention to such employment or services.
3.19. Solvency. As of the Closing, 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 assets, the fair
saleable value of which is greater than the total amount of its liabilities
(including contingent liabilities), and (iii) has and intends to have capital
that is not unreasonably small in relation to its business as presently
conducted and as proposed to be conducted.
3.20. Title to Properties; Liens and Encumbrances. The Company has good
-------------------------------------------
and marketable title to all of its material properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject only to mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges created in the ordinary course of business.
3.21. Employment Matters. The Company is in compliance in all material
------------------
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
----- ----------------
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
------------
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension
---- -------
12
plan" for which the Company would have any liability that is intended to be
----
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification. Neither the Company nor any of its
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. To the
knowledge of the Company, none of the Company's or its subsidiaries' employees
is a member of a union which relates to such employee's relationship with the
Company. Neither the Company nor any of its subsidiaries is a party to a
collective bargaining agreement, and the Company and its subsidiaries believe
that their relations with their employees are good.
3.22. Insurance. The Company maintains property and casualty, general
---------
liability, personal injury, director and officer liability and other similar
types of insurance with financially sound and reputable insurers that is
adequate, consistent with industry standards and the historical claims
experience of the Company and its subsidiaries. The Company has not received
notice from, and has no knowledge of any threat by, any insurer (that has issued
any insurance policy to the Company or any of its subsidiaries) that such
insurer intends to deny coverage under or cancel, discontinue or not renew any
insurance policy covering the Company or any of its subsidiaries presently in
force.
3.23. Taxes. Except as set forth in Schedule 3.23, all applicable tax
----- -------------
returns required to be filed by the Company and each of its subsidiaries have
been prepared and filed in compliance with all applicable laws, or if not yet
filed have been granted extensions of the filing dates which extensions have not
expired, and all taxes, assessments, fees and other governmental charges upon
the Company, its subsidiaries, or upon any of their respective properties,
income or franchises, shown in such returns and on assessments received by the
Company or its subsidiaries to be due and payable have been paid, or adequate
reserves therefor have been set up if any of such taxes are being contested in
good faith; or if any of such tax returns have not been filed or if any such
taxes have not been paid or so reserved for, the failure to so file or to pay
would not in the aggregate have a Material Adverse Effect.
3.24. Internal Controls. The Company maintains a system of internal
-----------------
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.25. Contracts. The SEC Documents, as supplemented by Schedule 3.25
--------- -------------
hereto, contain a complete and accurate list of all material undischarged
written or oral contracts, agreements, leases or other instruments to which the
Company or any subsidiary is a party or by which the Company or any subsidiary
is bound or to which any
13
of the properties or assets of the Company or any subsidiary is subject (each a
"Contract"). None of the Company, its subsidiaries or, to the knowledge of the
--------
Company, any of the other parties thereto, is in breach or violation of any
Contract, which breach or violation relates to indebtedness for borrowed money,
is with respect to an obligation in excess of Seventy-Five Thousand Dollars
($75,000) or would have a Material Adverse Effect. No event, occurrence or
condition exists which, with the lapse of time, the giving of notice, or both,
or the happening of any further event or condition, would become a breach or
default by the Company or its subsidiaries under any Contract which breach or
default would have a Material Adverse Effect.
3.26. Year 2000 Processing. The computer systems used by the Company and
--------------------
its subsidiaries (the "Systems"), both hardware and software, are in good
-------
working order. The occurrence of the year 2000 has not materially and adversely
affected the Systems of the Company, its subsidiaries, or their business, and no
material expenditures in excess of currently budgeted items are or will be
required in order to cause such Systems to operate properly as a result of the
change of the year 1999 to 2000. The Company and its subsidiaries have resolved
any issues discovered as a result of year 2000 inquires and compliance testing
or otherwise known to the Company.
3.27. Environmental Matters. Neither the Company and its subsidiaries,
---------------------
nor to the Company's knowledge, any predecessor in interest, has ever caused or
permitted any Hazardous Material (as defined below) to be released, treated or
disposed of on, at, under or within any real property owned, leased or operated
by the Company and its subsidiaries or any predecessor in interest, and no such
real property has ever been used (either by the Company and its subsidiaries or
any predecessor in interest ) as a treatment, storage or disposal site for any
Hazardous Material. The Company has no liabilities with respect to Hazardous
Materials, and to the Company's knowledge, no facts or circumstances exist which
could give rise to liabilities with respect to Hazardous Materials, which could
have any reasonable likelihood of having a Material Adverse Effect on the
Company. For purposes of this Agreement "Hazardous Materials" shall mean (a) any
-------------------
pollutants or contaminations, (b) any asbestos or insulation or other material
composed of or containing asbestos and (c) any petroleum product and any
hazardous, toxic or dangerous waste, substance or material defined as such in,
or for purposes of, the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Superlien" law, or (d) any other
--------- ---------
applicable federal, state, local or other statute, law, ordinance, code, rule,
regulation, order or decree concerning the protection of human health or the
environment or otherwise regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
3.28. Regulatory Permits. Except for Permits (as defined below) the
------------------
absence of which would not result, either individually or in the aggregate, in a
Material Adverse Effect, the Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses (the "Permits"), and neither the Company nor any
-------
14
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such Permit.
3.29. Transactions With Affiliates. Except as set forth in the SEC
----------------------------
Documents and other than the grant of stock options disclosed on Schedule 3.29,
-------------
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company or any of its subsidiaries (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 such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
3.30. 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 Certificate of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Purchaser
as a result of the transactions contemplated by the Investment Agreements,
including, without limitation, the Company's issuance of the Securities and the
Purchaser's ownership of the Securities.
ARTICLE IV
COVENANTS
4.1. Efforts. The Company and the Purchaser shall use commercially
-------
reasonable efforts timely to satisfy each of the conditions described in Article
VI and VII of this Agreement.
4.2. Securities Laws. The Company agrees to file a Form D with respect to
---------------
the Securities with the SEC as required under Regulation D and to provide a copy
thereof to the Purchaser within fifteen (15) days of the Closing. The Company
agrees to file a Current Report on Form 8-K disclosing this Agreement and the
transactions contemplated hereby with the SEC within one (1) business day
following the Closing Date. Such Form 8-K shall contain as exhibits this
Agreement, the form of Warrant and the form of Registration Rights Agreement.
The Company shall, on or prior to the Closing, take such action as is necessary
to sell the Purchased Shares and Warrant to the Purchaser in accordance with
applicable securities laws of the states of the United States, and shall provide
evidence of any such action so taken to the Purchaser on or prior to the date of
the applicable Closing. Without limiting any of the Company's obligations under
any Investment Agreement from and after the Closing Date, neither the Company
nor any person acting on its behalf shall take any action which would adversely
affect any exemptions from registration under the Securities Act with respect to
the transactions contemplated hereby.
15
4.3. Reporting Status. So long as the Purchaser beneficially owns any
----------------
Securities, 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.
4.4. Use of Proceeds. The Company shall use a portion of the proceeds
---------------
from the sale of the Securities to repurchase the Repurchased Shares and the
balance for general corporate purposes only, in the ordinary course of its
business and consistent with past practice and, without limiting the generality
of the foregoing, shall not use such proceeds to make a loan to any employee,
officer, director or stockholder of the Company, to repay any loan or other
obligation of the Company to any such person or to repurchase or pay a dividend
on shares of Common Stock or other securities of the Company, other than any
such payment explicitly required or permitted by the terms of this Agreement,
the Certificate of Designations or the other Investment Agreements; provided,
however, that the foregoing shall not prohibit the Company from paying bonuses
to its executive officers as described on Schedule 4.4.
------------
4.5. Restriction on Other Registrations. During the period beginning on
----------------------------------
the Closing Date and ending on the date which is the effective date of the
registration statement contemplated by Section 2.1 of the Registration Rights
Agreement (the "Effective Date"), the Company shall not permit any registration
--------------
statement filed by it or entities that it controls to be declared effective by
the SEC.
4.6. Intentionally Omitted.
---------------------
4.7. Right of First Refusal. During the period beginning on the date
----------------------
hereof and ending on the later of the 365th day thereafter or the last day of
the Additional Share Period (as defined in Section 4.15(a) below) the Company
shall not, and shall cause each of its direct and indirect subsidiaries not to,
issue or agree to issue or offer to issue or solicit any offer or inquiry with
regard to any Restricted Securities unless the Company has satisfied or has
caused its subsidiary to satisfy all of the following requirements with respect
to such issuance:
(a) The Company or the subsidiary shall have delivered a notice
to the Purchaser (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 the Purchaser (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).
16
(b) Upon the delivery of the Transfer Notice, the Purchaser
shall have an option to purchase all or any part of the securities described
therein. Such option shall be exercisable by the Purchaser by service of written
notice upon the Company or the subsidiary within ten (10) business days of
receipt of the Transfer Notice.
(c) If the option created in clause (b) hereof is not exercised
by Purchaser within ten (10) business days of service of the Transfer Notice, or
if such option is exercised only in part, (to the extent permitted by clause (b)
hereof), then, within a period of thirty (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 one
hundred percent (100%) of 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.
(d) The term "Restricted Securities" means any equity, equity-
---------------------
like or equity-linked securities of the Company or any security convertible into
or exercisable or exchangeable, directly or indirectly, for equity, equity-like
or equity-linked securities of the Company, other than Excluded Securities (any
such securities, "Restricted Securities"). The term "Excluded Securities" means
---------------------- -------------------
capital stock issued and sold by the Company: (i) to the Purchaser pursuant to
this Agreement and the Warrant, including the Warrant Shares, (ii) to the
Purchaser pursuant to the exercise of the Common Stock Warrant as defined in
the 2000 SPA, (iii) to the holders of Series A Preferred Stock upon the
conversion thereof in accordance with its terms of the Certificate of
Designations, (iv) pursuant to any employee stock option, stock purchase or
restricted stock plan of the Company, so long as the issuance of such stock or
option is approved by a committee of independent directors of the Company or (v)
to the holders of any outstanding warrants or other convertible securities of
the Company outstanding on the date hereof and identified on Schedule 4.7, which
------------
schedule shall also identify those Excluded Securities which the holders have
the right to require the Company to register under the Securities Act.
4.8. Expenses. The Company shall pay to Castle Creek Technology Partners
--------
LLC ("CC") or its designee, up to Thirty Thousand Dollars ($30,000.00) (less
--
the Fifteen Thousand Dollar ($15,000.00) retainer paid to date), as
reimbursement for the expenses incurred by CC and its affiliates and advisors in
connection with the negotiation, preparation, execution, and delivery of this
Agreement and the other agreements and documents to be executed in connection
herewith, including, without limitation, CC's and its affiliates' and advisors'
due diligence and reasonable attorneys' fees and expenses (the "Expenses") upon
--------
presentation of documentary evidence of such Expenses. The Company shall
reimburse CC at the Closing for such Expenses (which, at Purchaser's election,
may be effected by reducing the amount paid by Purchaser pursuant to Section
6.1(b) below), and thereafter upon CC's written request therefor, subject to
such $30,000.00 limit.
4.9. Quotation Requirements. The Company shall continue to cause its
----------------------
Common Stock to be quoted on the OTCBB, the Nasdaq Stock Market or a national
17
securities exchange (any of the foregoing "Principal Market"), and shall comply
----------------
in all respects with the filing and other obligations under the rules applicable
to the then Principal Market and shall not permit the suspension of quotation of
Common Stock on a Principal Market and if such quotation is suspended, the
Company will use its reasonable best efforts to requalify its Common Stock or
otherwise cause such quotation to resume. The Company shall promptly provide to
the Purchaser copies of any notices it receives from the Principal Market or the
SEC regarding the continued eligibility of the Common Stock for quotation on the
Principal Market. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 4.9.
4.10. Corporate Existence. So long as the Purchaser beneficially owns any
-------------------
Securities, the Company shall maintain its corporate existence, except in the
event of a Change in Control Transaction (as defined in the Warrant), as long as
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith regardless of whether or not the Company would have had a
sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the exercise of the Warrant then outstanding in
whole and not in part as of the date of such transaction and (ii) is a publicly
traded corporation whose Common Stock is quoted and listed for trading on the
Nasdaq National Market or the New York Stock Exchange.
4.11. Reserved Amount
---------------
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock a sufficient number of shares of
Common Stock to provide for: (i) the exercise in full of the Warrant and
issuance of the Warrant Shares in connection therewith; (ii) upon issuance of
the Remedy Warrant, the exercise in full of the Remedy Warrant and issuance of
the Remedy Shares in connection therewith; and (iii) upon issuance of an
Additional Share Warrant, the exercise in full of such Additional Share Warrant
and issuance of the applicable Additional Shares in connection therewith. In the
event that any approvals, including stockholder approval are required to
increase the number of shares of Common Stock reserved for issuance as provided
in the preceding sentence, the Company shall take all actions necessary to
obtain such approval(s) as soon as possible.
4.12. Transactions with Affiliates. The Company and each of its
----------------------------
subsidiaries will not enter into any agreement or arrangement, written or oral,
directly or indirectly, with any officer, director, employee or other person
holding in excess of 5% of the Company's capital stock or any other person
controlling, controlled by or under common control with the Company, or provide
services or sell goods to, or for the benefit of, or pay or otherwise distribute
monies, goods or other valuable consideration to, an affiliate, except upon fair
and reasonable terms no less favorable to the Company and each of its
subsidiaries than terms in a comparable arm's length transaction with an
unaffiliated person or entity and except for existing intercompany debt and upon
the approval of the disinterested members of the Company's Board of Directors,
after full disclosure.
18
4.13. Limitation of Agreements. The Company will not, and will not permit
------------------------
any subsidiary to, enter into any contract, or any amendment, modification,
extension or supplement to any existing contract, which contractually prohibits
the Company from performing its obligations under any Investment Agreement.
4.14. Bankruptcy Waiver. In the event the Company becomes a debtor under
-----------------
the Bankruptcy Code, the Company hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. 362 in respect of the exercise
of the Warrant to the extent the Company has required the Purchaser to exercise
the Warrant under Section 3 thereof. At the direction of Purchaser, the Company
agrees, without cost or expense to the Purchaser, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. 362.
4.15 Right to Additional Shares.
--------------------------
(a) During the period (the "Additional Share Period") beginning on the date
-----------------------
hereof and ending six months after the earlier of (i) the Expiration Date, as
defined in the Warrant or (ii) the last date on which the Warrant is exercised
(which may include a Mandatory Exercise Date, as defined in the Warrant), on
each occasion, prior to the issuance of any Warrant Shares, that the Company
issues or sells, or in accordance with Section VIII.E of the Certificate of
Designations is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share less than the Per Share Price (as
adjusted to reflect any stock splits, dividends, recapitalizations or similar
events following the Closing Date), simultaneously with such issuance (a
"4.15(a) Subsequent Issuance"), the Company shall issue to the Purchaser for no
---------------------------
separate consideration a warrant (the "Section 4.15(a) Additional Share
--------------------------------
Warrant") to purchase a number of additional shares of Common Stock (the
"Section 4.15(a) Additional Shares") in accordance with the following formula:
---------------------------------
A=(PP divided by NC) - (PS +PAS)
Where:
A= Number of Section 4.15(a) Additional Shares
PP= Purchase Price (as defined herein)
NC= Consideration per share of Common Stock in the applicable 4.15(a)
Subsequent Issuance calculated as provided in Section VIII.E. of the
Certificate of Designations
PS= Purchased Shares (as adjusted to reflect any stock splits,
dividends, recapitalizations or similar events following the Closing
Date)
PAS= Section 4.15(a) Additional Shares, if any, issued (or issuable upon
exercise of a previously issued Section 4.15(a) Additional Share
Warrant) to the Purchaser prior to the applicable 4.15(a) Subsequent
Issuance (as adjusted to reflect any stock splits, dividends,
recapitalizations or similar events following the issuance of such
Section 4.15(a) Additional Shares, if any)
19
(b) During the Additional Share Period, on each occasion, after the
issuance of any Warrant Shares, that the Company issues or sells, or in
accordance with Section VIII.E of the Certificate of Designations is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Exercise Price (as defined in the Warrant)
at which the Warrant was then most recently exercised (as adjusted to reflect
any stock splits, dividends, recapitalizations or similar events following the
then most recent date on which the Warrant was exercised), simultaneously with
such issuance (a "4.15(b) Subsequent Issuance"), the Company shall issue to the
----------------------------
Purchaser for no separate consideration a warrant (the "Section 4.15(b)
---------------
Additional Share Warrant") to purchase a number of additional shares of Common
------------------------
Stock (the "Section 4.15(b) Additional Shares") in accordance with the following
---------------------------------
formula:
B=(AEP divided by NC) - (WS+AS)
Where:
B= Section 4.15(b) Additional Shares
AEP= Aggregate Exercise Price paid on the then most recent exercise of
the Warrant
NC= Consideration per share of Common Stock in the applicable 4.15(b)
Subsequent Issuance calculated as provided in Section VIII.E. of the
Certificate of Designations
WS= Total number of Warrant Shares issued on the then most recent
exercise of the Warrant (as adjusted to reflect any stock splits,
dividends, recapitalizations or similar events following the then
most recent date on which the Warrant was exercised)
AS= Section 4.15 (b) Additional Shares, if any, issued (or issuable upon
exercise of a previously issued Section 4.15(b) Additional Share
Warrant) to the Purchaser prior to the applicable 4.15(b) Subsequent
Issuance (as adjusted to reflect any stock splits, dividends,
recapitalizations or similar events following the issuance of such
Section 4.15(b) Additional Shares, if any)
(c) If, during the period beginning on August 15, 2001 and ending one year
from the date hereof, the Company issues or sells, or in accordance with Section
VIII.E of the Certificate of Designations is deemed to have issued or sold, any
shares of Common Stock for no consideration per share less than the then current
Conversion Price (as defined in the Certificate of Designations) (a "4.15(c)
-------
Subsequent Issuance") and the Purchaser subsequently converts (a "Subsequent
------------------- ----------
Conversion") any shares of Series A Preferred Stock into Common Stock, the
----------
Company shall issue to the Purchaser immediately upon each Subsequent Conversion
for no separate consideration a warrant (the "Section 4.15(c) Additional Share
--------------------------------
Warrant") to purchase a number of additional shares of Common Stock (the
-------
"Section 4.15(c) Additional Shares") equal to the excess, if any, of the number
---------------------------------
of shares of Common Stock that would have been issuable upon the Subsequent
Conversion if the 4.15(c) Subsequent Issuance had occurred prior to August
20
15, 2000 (as a result of Section VIII.E.1 of the Certificate of Designations)
over the number of shares of Common Stock that are issuable upon such Subsequent
Conversion. Purchaser agrees not to convert any shares of Series A Preferred
Stock to the extent that the sum of the number of shares of Common Stock
actually issued upon conversion of Series A Preferred Stock and the number of
shares issued pursuant to this Section 4.15(c) exceeds the Exchange Cap (or,
upon the occurrence of the Conversion Event and either the Capital Increase
Event or the Reverse Split Event, exceeds the 5,000,000 Share Limit (as those
terms are defined in Section 4.15(d)).
(d) If (i) the shares of Series A Preferred Stock have been converted to
the full extent permitted by the Certificate of Designations without exceeding
the Exchange Cap and without violating the last sentence of Section 4.15(c) (the
"Conversion Event"), and (ii) (A) the Company's Certificate of Incorporation has
----------------
been amended to increase the number of shares of authorized Common Stock (the
"Capital Increase Event") or (B) there has been a reverse split of the Common
----------------------
Stock (the "Reverse Split Event"), the Purchaser shall have the right, from time
-------------------
to time while any shares of Series A Preferred Stock remain outstanding, to
exchange (each such exchange, an "Exchange"), upon written notice to the Company
--------
(an "Exchange Notice"), any or all remaining shares of Series A Preferred Stock
---------------
held by it for a warrant (the "Section 4.15(d) Additional Share Warrant" and,
----------------------------------------
together with the Section 4.15(a) Additional Share Warrant, the Section 4.15(b)
Additional Share Warrant and the Section 4.15(c) Additional Share Warrant, the
"Additional Share Warrants") to purchase a number of additional shares of Common
-------------------------
Stock (the "Section 4.15(d) Additional Shares" and, together with the Section
---------------------------------
4.15(a) Additional Shares, the Section 4.15(b) Additional Shares and the Section
4.15(c) Additional Shares, the "Additional Shares") equal to the number of
-----------------
shares of Common Stock into which the shares of Series A Preferred Stock subject
to such Exchange are convertible without reference to the Exchange Cap and
without reference to the limitation set forth in Section IV.G.2 of the
Certificate of Designations; provided that the aggregate number of shares of
Common Stock issued pursuant to the conversion of Series A Preferred Stock and
issuable pursuant to Section 4.15(c) Additional Share Warrants and Section
4.15(d) Additional Share Warrants shall not exceed Five Million (5,000,000) (the
"5,000,000 Share Limit"). Each Additional Share Warrant issued pursuant to any
---------------------
subsection of this Section 4.15 shall be in the form attached hereto as Exhibit
-------
E. Each Exchange Notice shall specify the number of shares of Series A
-
Preferred Stock to be exchanged and shall include certificates for such number
of shares with such notice. Each Exchange shall be effected within three
business days after the Company's receipt of the applicable Exchange Notice.
Upon each Exchange, to the extent that a Section 4.15(c) Additional Share
Warrant would have been issuable upon the conversion of the shares of Series A
Preferred Stock subject to such Exchange (without giving effect to the Exchange
Cap), the Company shall issue for no separate consideration, at the same time as
the Section 4.15(d) Additional Share Warrant, a Section 4.15(c) Additional Share
Warrant to purchase the same number of shares of Common Stock as would have been
issued pursuant to Section 4.15(c) upon such conversion (without giving effect
to the Exchange Cap), subject to the 5,000,000 Share Limit.
21
4.16. Repurchase of Series A Preferred Stock. During the period commencing
--------------------------------------
on the date hereof and ending on the last day of the Additional Share Period and
so long as any shares of Series A Preferred Stock are outstanding, on each
occasion that the Company issues or sells, or in accordance with Section VIII.E
of the Certificate of Designations is deemed to have issued or sold, any shares
of Common Stock, to the extent permitted under applicable law (the Company's
being obligated to (i) utilize capital to repurchase shares of Series A
Preferred Stock to the full extent permitted under Section 160 of the GCL; and
(ii) reduce the Company's capital in accordance with Sections 243 and 244 of the
GCL to the full extent permitted therein and necessary to permit the repurchase
specified herein of shares of Series A Preferred Stock), the Company shall use
not less than twenty percent (20%) of the consideration received by the Company
upon such actual or deemed issuance to repurchase from the Purchaser shares of
Series A Preferred Stock at a purchase price per share of Series A Preferred
Stock equal to the sum of $1,000 plus accrued and unpaid dividends on such
share, which repurchase shall be simultaneously with the applicable issuance or
deemed issuance, provided that the Purchaser may, upon one business days'
advance notice to the Company, decline the Company's offer to repurchase shares
of Series A Preferred Stock as provided in this Section 4.16.
ARTICLE V
LEGEND REMOVAL, TRANSFER, AND CERTAIN SALES
5.1. Removal of Legend. The Legend shall be removed and the Company shall
-----------------
issue a certificate without any legend to the holder of any Security upon which
such Legend is stamped, and a certificate for a Security shall be originally
issued without the Legend if (a) the sale of such Security is registered under
the Securities Act, (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
Security can be sold pursuant to Rule 144. The Purchaser agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Securities Act. In the event the Legend is
removed from any Security or any Security is issued without the Legend and
thereafter the effectiveness of a registration statement covering the resale of
such Security is suspended or a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to each
Purchaser holding such Security, the Company may require that the Legend be
placed on any such Security that cannot then be sold pursuant to an effective
registration statement or Rule 144 or with respect to which the opinion referred
to in clause (b) next above has not been rendered, which Legend shall be removed
when such Security may be sold pursuant to an effective registration statement
or Rule 144 or such holder provides the opinion with respect thereto described
in clause (b) next above.
22
5.2. Transfer Agent Instructions.
---------------------------
(a) The Company shall instruct its transfer agent to issue
certificates, registered in the name of the Purchaser or its nominee, for the
Shares of Common Stock in accordance with the terms of this Agreement, the
Warrant Shares in such amounts as specified from time to time by the Purchaser
to the Company upon, and in accordance with the terms of the Warrant. Such
certificates shall bear a legend only in the form of the Legend and only to the
extent permitted by Section 5.1 above. The Company warrants that no instruction
other than such instructions referred to in this Article V, and no stop transfer
instructions other than stop transfer instructions to give effect to Section 2.6
hereof in the case of the Warrant Shares prior to registration under the
Securities Act, will be given by the Company to its transfer agent and, subject
to applicable law, the Securities shall otherwise be freely transferable on the
books and records of the Company. Nothing in this Section shall affect in any
way the Purchaser's obligations and agreement set forth in Section 5.1 hereof to
resell the Securities pursuant to an effective registration statement and to
deliver a prospectus in connection with such sale or in compliance with an
exemption from the registration requirements of applicable securities laws.
Without limiting any other rights of the Purchaser or obligations of the
Company, if (i) the Purchaser provides the Company with an opinion of counsel,
to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from registration or (ii) the Purchaser
transfers Securities pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of Warrant Shares promptly instruct its transfer
agent to issue one or more certificates in such name and in such denomination as
specified by the Purchaser in order to effect such a transfer or sale.
(b) Purchaser shall exercise its right to exercise the Warrant by
faxing an executed and completed Form of Exercise Agreement to Purchase to the
Company, and delivering within two (2) business days thereafter, the original
Form of Exercise Agreement to Purchase (and the related original Warrant and
exercise price in the case of a non-cashless exercise of the Warrant) to the
Company by hand delivery or by express courier, duly endorsed. Each date on
which a completed Form of Exercise Agreement to Purchase is faxed in accordance
with the provisions of the Warrant shall be deemed an "Exercise Date." The
-------------
Company will transmit the certificates representing the Common Stock issuable
upon exercise of any Warrant (together with Warrants not so exercised) to the
Purchaser via express courier as soon as practicable, but no later than three
(3) business days after the Exercise Date (each such delivery date, is referred
to herein as a "Delivery Date"). For purposes of this Agreement, exercise of
-------------
the Warrant shall be deemed to have been made immediately prior to the close of
business on the Exercise Date.
(c) In lieu of delivering physical certificates representing the
Common Stock issuable upon the conversion of, or in lieu of dividends on, the
Shares of Common Stock or upon the exercise of the Warrant(s), provided the
Company's transfer agent is participating in the Depositary Trust Company
("DTC") Fast Automated Securities Transfer program, on the written request of
---
the Purchaser, who shall have previously instructed the Purchaser's prime broker
to confirm such request to the Company's transfer
23
agent, the Company shall cause its transfer agent to electronically transmit
such Common Stock to the Purchaser by crediting the account of the Purchaser's
prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
----
system no later than the applicable Delivery Date.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1. Conditions to the Company's Obligation to Sell. The obligation of the
----------------------------------------------
Company hereunder to issue and sell the Purchased Securities to the Purchaser at
the Closing is subject to the satisfaction, as of the date of such Closing, 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) The Purchaser shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(b) The Purchaser shall deliver the Purchase Price in immediately
available funds for the Shares of Common Stock and the Warrant, subject to
adjustment pursuant to Sections 4.8 and 7.1(j).
(c) The representations and warranties of the Purchaser shall be
true and correct as of the date when made and as of the Closing as though made
at that time, and each Purchaser shall have performed, satisfied and complied in
all material respects with the covenants and agreements required by this
Agreement to be performed or complied with by the Purchaser at or prior to the
Closing.
(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
restricts or prohibits the consummation of any of the transactions contemplated
by this Agreement.
(e) The Purchaser shall deliver duly executed stock powers
sufficient to transfer the Initial Repurchased Shares to the Company pending
delivery by the Company of the aggregate redemption price therefor as required
by Section 7.1(j).
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE
7.1. Conditions to the Closing. The obligation of the Purchaser hereunder
-------------------------
to purchase the Shares of Common Stock and the Warrant to be purchased by it on
the Closing Date is subject to the satisfaction of each of the following
conditions, provided that these conditions are for the Purchaser's sole benefit
and may be waived by the Purchaser at any time in the Purchaser's sole
discretion:
24
(a) The Company shall have executed this Agreement, the Warrant and
the Registration Rights Agreement and delivered the same to the Purchaser.
(b) The Company shall have delivered at the Closing one or more
duly executed certificates representing the Shares of Common Stock, in such
denominations as the Purchaser shall request.
(c) The Common Stock shall be eligible for quotation on the OTCBB,
suspension of such quotation by the SEC shall not be threatened or reasonably
likely in the judgment of the Purchaser for the foreseeable future.
(d) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing (except for those
that address matters as of a particular date, which need only be true as of such
date) as though made at that time and the Company shall have performed,
satisfied and complied with the covenants and agreements required by this
Agreement to be performed or complied with by the Company at or prior to the
Closing, except where the breach of such representation, warranty or covenant
would not have a Material Adverse Effect. The Purchaser shall have received a
certificate, executed by the Chief Executive Officer or Chief Financial Officer
of the Company, dated as of the Closing to the foregoing effect and as to such
other matters as may be reasonably requested by the Purchaser.
(e) 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.
(f) The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing, in the form attached hereto as Exhibit C.
---------
(g) On or prior to the Closing Date, there shall not have occurred
any of the following: (i) a suspension or material limitation in the trading of
securities generally on the Nasdaq National Market or the New York Stock
Exchange; (ii) a general moratorium on commercial banking activities in New York
declared by the applicable banking authorities; (iii) the outbreak or escalation
of hostilities involving the United States, or the declaration by the United
States of a national emergency or war; or (iv) a material change in
international, political, financial or economic conditions, if the effect of any
such event, in the judgment of the Purchaser, makes it impracticable or
inadvisable to proceed with the purchase of the Purchased Shares and the Warrant
on the terms and in the manner contemplated in this Agreement and in the other
Investment Agreements.
(h) On the Closing Date, the Company shall have reimbursed the
Purchaser for the Purchaser's Expenses incurred in connection with the
transactions contemplated by this Agreement (including reasonable fees and
disbursements of the Purchaser's legal counsel) as provided in Section 4.9
hereof.
25
(i) On the Closing Date, the Purchaser shall have received a six
month lock-up agreement, dated the Closing Date, from Xxxxxxxxx X. Xxxxxxxx,
Xxxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxx X. Xxxx and Xxxxx Xxxxx in substantially the
form as attached in Exhibit D.
---------
(j) On the Closing Date, the Company shall have (i) repurchased the
Initial Repurchased Shares and shall have paid to the holder thereof in cash or
by wire transfer of immediately available funds, the aggregate redemption price
therefor (which, at Purchaser's election, may be effected by reducing the amount
paid by Purchaser pursuant to Section 6.1(b) above), which price shall be an
amount equal to the number of Redeemed Shares multiplied by an amount equal to
the sum of $1,000 plus all accrued and unpaid dividends on a share of Series A
Preferred Stock from August 14, 2000 to the Closing Date; and (ii) issued to
Purchaser a new certificate evidencing the shares of Series A Preferred Stock
that have not been repurchased.
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1. Governing Law; Jurisdiction. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware without regard to
choice of laws or conflict of laws principles thereof. The parties hereto
irrevocably consent to the jurisdiction of the United States federal courts
located in the State of Delaware and the state courts in the State of Delaware
in any suit or proceeding based on or arising under this Agreement or the
transactions contemplated hereby and irrrevocably agree that all claims in
respect f such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process upon
the Company mailed by the first class mail shall be deemed in every respect
effective service of process upon the Company in any suit or proceeding arising
hereunder. Nothing herein shall affect the Purchaser's right 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.
8.2. Counterparts. This Agreement may be executed in two or more
------------
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts 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. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause additional
original executed signature pages to be promptly delivered to the other parties.
8.3. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
26
8.4. 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.
8.5. Scope of Agreement; Amendments. This Agreement and the documents and
------------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein. 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 the
Purchaser.
8.6. Notice. Any notice herein required or permitted to be given under the
------
terms of this Agreement shall be in writing and may be personally served or
delivered by courier or by facsimile-machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission). The addresses for such communications shall be:
If to the Company:
VOXWARE, INC.
Xxxxxxxxxxxxx Xxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxx Xxxxxx 00000
or
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxx 0
Xxxxxxxxxxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copies to:
Xxxx and Xxxx LLP
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
27
If to the Purchaser:
CASTLE CREEK TECHNOLOGY PARTNERS LLC
c/o Castle Creek Partners, LLC, Investment Manager
000 X. Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxx
Managing Director
Telephone No. (000) 000-0000
Facsimile No. (000) 000-0000
with copies to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx - 00/xx/ Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Each party shall provide notice to the other party of any change in
address.
8.7. Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties and their successors and assigns. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Purchaser.
8.8. 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.
8.9. Survival. The representations and warranties, covenants and
--------
agreements in this Agreement shall survive the execution and delivery of this
Agreement and the Securities under the Investment Agreements, notwithstanding
any due diligence investigation conducted by or on behalf of the Purchaser. All
covenants and agreements of the Company in respect of which performance is
contemplated to occur following the Closing shall survive the Closing. The
Company agrees to indemnify and hold harmless the Purchaser and each of the
Purchaser's officers, directors, members, managers, employees, partners, agents
and affiliates and any direct or indirect officers, directors, shareholders,
members, managers, employees, partners, agents and affiliates of any of the
foregoing for loss or damage arising as a result of or related to (x) any breach
by the Company of any of its representations, warranties, covenants and
agreements set forth
28
herein, or (y) any cause of action, suit or claim brought or made against such
indemnitee, other than directly by the Company solely for breach of this
Agreement, the Warrant, or the Registration Rights Agreement by the indemnitee
or by governmental or regulatory authorities, and arising out of or resulting
from (whether in whole or in part) the execution, delivery, performance by the
Company or enforcement of this Agreement or any other Investment Agreements or
any other instrument, document or agreement executed pursuant hereto or thereto
or contemplated hereby or thereby (including without limitation the acquisition
of the Purchased Shares, the Warrant, and/or the Warrant Shares), any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or the status of
the Purchaser as an investor in the Company, except to the extent that such
actual loss or damage directly results from a breach by such indemnitee of this
Agreement, the Warrant, or the Registration Rights Agreement or from a violation
of law or gross negligence or willful misconduct; provided, that,
indemnification under the Registration Rights Agreement shall be governed by and
construed in accordance with such agreement. The right to indemnification shall
include the right to advancement of expenses as they are incurred; provided,
however, that any expenses so advanced shall be returned in the event a final
nonappealable judgment is rendered by a court of competent jurisdiction to the
effect that such indemnification is not required under the terms of this
Agreement or permitted under applicable law.
8.10. Public Filings; Publicity. On the same day as the Company files the
-------------------------
Form 8-K required pursuant to Section 4.2, the Company shall issue a press
release with respect to the transactions contemplated hereby. The Company and
the Purchaser shall have the right to review reasonably in advance of the
issuance any press releases (including the foregoing press release), SEC or
other filings, or any other public statements, with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Purchaser, to make any press release or SEC,
Nasdaq, NASD or exchange filings with respect to such transactions as is
required by applicable law and regulations (although the Purchaser shall (to the
extent time permits) be consulted by the Company in connection with any such
press release prior to its release and shall be provided with a copy thereof).
8.11. 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.
8.12. Remedies, Characterizations, Other Obligations, Breaches and
------------------------------------------------------------
Injunctive Relief. The remedies provided in this Agreement shall be cumulative
-----------------
and in addition to all other remedies available under this Agreement, at law or
in equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit a
Purchaser's right to actual damages for any failure by the Company to comply
with the terms of this Agreement. Amounts set forth or provided for
29
herein with respect to payments and the like (and the computation thereof) shall
be the amounts to be received by the Purchaser and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance thereof).
8.13. Failure or Indulgence Not Waiver. No failure or delay on the part
--------------------------------
of a Purchaser in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
8.14. Termination. In the event that the Closing shall not have occurred
-----------
on April 19, 2001, time being of the essence, 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 the
other party hereto for a breach of this Agreement prior to or relating to the
termination.
8.15. Joint Participation in Drafting. Each party to this Agreement and
-------------------------------
to the Investment Agreements has participated in the drafting of such
Agreements. 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 shall be applied against any party to this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
30
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
VOXWARE, INC.
By: /s/ Xxxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Senior Vice President & Chief Financial Officer
PURCHASER:
CASTLE CREEK TECHNOLOGY PARTNERS LLC
By: Castle Creek Partners, L.L.C.
Its: Investment Manager
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxx X. Xxxx
Title: Managing Director
Address: 000 X. Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx - 00/xx/ Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn.: Xxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
31
FORM OF
WARRANT
EXHIBIT E
to Securities
Purchase
Agreement
VOID AFTER 5:00 P.M., NEW YORK CITY
TIME, ON __________, 20__ [ten years from the Issue Date]
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE
OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase ______ Shares of
Common Stock
Date: __________, 200_
VOXWARE, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CASTLE CREEK TECHNOLOGY PARTNERS
LLC or its registered assigns (the "Holder"), is entitled to purchase from
VOXWARE, INC., a corporation organized under the laws of the State of Delaware
(the "Company"), at any time or from time to time during the period specified in
Section 2 hereof, ______________ (_____) [number of Additional Shares calculated
in accordance with Section 4.15 of Securities Purchase Agreement] fully paid and
nonassessable shares of the Company's common stock, par value $.001 per share
(the "Common Stock") for an exercise price (the "Exercise Price") per share of
Common Stock equal to One Cent ($0.01), subject to appropriate adjustment in the
event of a stock split, stock dividend, merger, reclassification or similar
event. The term "Warrant" means this warrant. The term "Warrants" means this
Warrant and any warrants issued upon full or partial transfer of this Warrant in
accordance with its terms. The shares of Common Stock issuable upon the
exercise of this Warrant are referred to
1
as the "Exercise Shares." This Warrant is subject to the following terms,
provisions and conditions:
1. Manner of Exercise; Issuance of Exercise Shares. Subject to the
-----------------------------------------------
provisions hereof, including, without limitation, the limitations contained in
Sections 2 and 8 hereof, this Warrant may be exercised by the Holder hereof, in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder hereof), and upon payment of the
Exercise Price to the Company in cash, by certified or official bank check or by
wire transfer to the account of the Company. The Exercise Shares so purchased
shall be deemed to be issued to the Holder hereof or such Holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such Exercise
Shares as set forth above or, if such date is not a business date, on the next
succeeding business day. The Exercise Shares so purchased shall be delivered to
the Holder hereof within a reasonable time, not exceeding two (2) Trading Days,
after this Warrant shall have been so exercised (the "Delivery Period").
2. Period of Exercise. This Warrant shall be exercisable at any time and
------------------
from time to time during the period from the date of initial issuance of this
Warrant (the "Issue Date") until 5:00 p.m. New York City time ________, 200_
[ten years from the Issue Date] (the "Expiration Date"). The period beginning
on the Issue Date and ending on the Expiration Date is referred to herein as the
"Exercise Period."
3. Intentionally Omitted.
----------------------
4. Certain Agreements of the Company. The Company hereby covenants and
---------------------------------
agrees as follows:
(a) Certain Actions Prohibited. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the Holder of this
Warrant in order to protect the economic benefit inuring to the Holder hereof
and the exercise privilege of the Holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant.
(b) Consolidation; Merger. In case of any consolidation of the Company
---------------------
with, or merger of the Company into, any other corporation, or in case of any
sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company at
any time during the Exercise Period, then as a condition of such consolidation,
merger or sale or conveyance, adequate provision will be made whereby the
2
Holder hereof will have the right to acquire and receive upon exercise of this
Warrant in lieu of the Exercise Shares immediately theretofore acquirable upon
the exercise of this Warrant, such securities, cash or assets as may be issued
or payable with respect to or in exchange for the Exercise Shares immediately
theretofore acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such case,
the Company will make appropriate provision to insure that the provisions of
this Section 4 will thereafter be applicable as nearly as may be in relation to
any instrument or securities thereafter deliverable upon the exercise of this
Warrant.
(c) Notices. In case at any time:
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(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary dissolution, liquidation or
winding-up of the Company;
then, in each such case, the Company shall give to the Holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least thirty (30) days prior to the record date or the date on which the
Company's books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing,
the Company shall publicly disclose the substance of any notice delivered
hereunder prior to delivery of such notice to the Holder hereof.
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(d) Definition. "Trading Day" means a day on which the
----------
principal United States securities exchange or trading market where the Common
Stock is then listed or traded as reported by Bloomberg is open for trading.
5. Transfer, Exchange, Redemption and Replacement of Warrant.
---------------------------------------------------------
(a) Restriction on Transfer. This Warrant and the rights granted to
-----------------------
the Holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 5(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 5(f) hereof and to the provisions of Section
2.6 of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered Holder hereof as the owner and Holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary.
Notwithstanding anything to the contrary contained herein, the registration
rights described in Section 6 hereof are assignable only in accordance with the
provisions of the Registration Rights Agreement.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof by the Holder hereof at the office or
agency of the Company referred to in Section 5(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase Exercise Shares, which may be purchased hereunder, each of such new
Warrants to represent the right to purchase Exercise Shares at the Exercise
Price therefor as shall be designated by the Holder hereof at the time of such
surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 5, this Warrant shall be promptly canceled by the Company. The
Company shall pay all issuance taxes (other than securities transfer taxes) and
charges payable in connection with the preparation, execution, and delivery of
Warrants pursuant to this Section 5. The Company shall indemnify and reimburse
the Holder of this Warrant for all losses and damages arising as a result of or
related to any breach of the terms of this Warrant, including costs and expenses
(including legal fees) incurred by such Holder in connection with the
enforcement of its rights hereunder.
(e) Warrant Register. The Company shall maintain, at its principal
----------------
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder hereof), a register for this Warrant, in which
the Company shall record the name and
4
address of the person in whose name this Warrant has been issued, as well as the
name and address of each transferee and each prior owner of this Warrant.
(f) Transfer or Exchange Without Registration. If, at the time of the
-----------------------------------------
surrender of this Warrant in connection with any transfer, or exchange of this
Warrant, this Warrant (or, in the case of any exercise, the Exercise Shares
issuable hereunder), shall not be registered under the Securities Act and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such transfer or exchange, (i) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company a written
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
acceptable to the Company) to the effect that such transfer or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws (the cost of which shall be borne by the Company if
the Company's counsel renders such an opinion), (ii) that the Holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter, or status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
6. Registration Rights. The initial Holder of this Warrant (and certain
-------------------
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Exercise Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
7. Notices. Any notices required or permitted to be given under the
-------
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Voxware Inc.
Xxxxxxxxxxxxx Xxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000 0000
Attn: Xxxxxxxx Xxxxxx
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with a copy simultaneously transmitted by like means to:
Xxxx and Xxxx LLP
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Holder, at such address as such Holder shall have provided in writing
to the Company, or at such other address as such Holder furnishes by notice
given in accordance with this Section 7.
8. Additional Restriction on Exercise. Notwithstanding anything to the
----------------------------------
contrary contained herein, this Warrant shall not be exercisable by the Holder
or subject to a Mandatory Exercise by the Company to the extent (but only to the
extent) that such exercise by the Holder or Mandatory Exercise would result in
the Holder being the beneficial owner of more than 4.99% of the shares of Common
Stock. For the purposes of this paragraph, beneficial ownership and all
determinations and calculations, shall be determined in accordance with Section
13(d) of the Exchange Act and all applicable rules and regulations thereunder.
For clarification, it is expressly a term of this security that the limitations
contained in this Section 8 shall apply to each successive Holder.
9. Miscellaneous.
-------------
(a) Amendments. This Warrant and any provision hereof may only be
----------
amended by an instrument in writing signed by the Company and the Holders of a
majority in interest of the Warrants.
(b) Descriptive Headings. The descriptive headings of the several
--------------------
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
10. Governing Law; Jurisdiction. This Warrant shall be governed by and
---------------------------
construed in accordance with the laws of the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect
the Holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
VOXWARE, INC.
By: _________________________________
Name:_____________________________
Title:____________________________
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FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: Voxware, Inc.
Xxxxxxxxxxxxx Xxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000 0000
Attn: Xxxxxxxx Xxxxxx
The undersigned hereby irrevocably exercises the right to purchase ________
shares of Common Stock of Voxware, Inc., a corporation organized under the laws
of the State of Delaware, evidenced by the attached Warrant, and herewith makes
payment of the Exercise Price with respect to such shares, all in accordance
with the conditions and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise dispose of
the shares obtained on exercise of the Warrant, except under circumstances that
will not result in a violation of the Securities Act of 1933, as amended, or any
state securities laws.
The undersigned requests the delivery of the shares to the undersigned at
its listed below:
Dated:_________________ _____________________________________
Signature of Holder
_____________________________________
Name of Holder (Print)
Address:
_____________________________________
_____________________________________
_____________________________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock set forth hereinbelow, to:
Name of Assignee Address Number of Shares
---------------- ------- ----------------
, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: _____________________, 2001
In the presence of
__________________
Name: ____________________________
Signature:________________________
Title of Signing Officer or Agent (if any):
__________________________________
Address: __________________________________
__________________________________
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
