EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
May [ ], 2004, among The Ultimate Software Group, Inc., a Delaware corporation
(the "COMPANY"), and the purchasers identified on the signature pages hereto
(each a "PURCHASER" and collectively the "PURCHASERS"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to 1,500,000 shares of Common
Stock on the Closing Date.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"ACTION" shall have the meaning ascribed to such term in
Section 3.1(j).
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person as such terms are used in and construed under Rule
144. With respect to a Purchaser, any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as such
Purchaser will be deemed to be an Affiliate of such Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
"CLOSING" means the closing of the purchase and sale of the
Common Stock pursuant to Section 2.1.
"CLOSING DATE" means the Business Day on which all of the
conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other
date as the parties may agree.
"CLOSING PRICE" means on any particular date (a) the last
reported closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if
there is no such price on such date, then the closing bid price on the Trading
Market on the date nearest preceding such date (as reported by Bloomberg L.P. at
4:15 PM (New York time) for the closing bid price for regular session trading on
such day), or (c) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the "pink
sheets" published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
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most recent bid price per share of the Common Stock so reported, or (d) if the
shares of Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an appraiser mutually agreeable to the
Purchasers of a majority in interest of the Shares then outstanding and the
Company.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, $0.01
par value per share, and any securities into which such common stock may
hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time convertible
into or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.
"COMPANY COUNSEL" means Xxxxx Xxxxxxxxxx LLP.
"DISCLOSURE SCHEDULES" means the Disclosure Schedules attached
as ANNEX I hereto.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"EVALUATION DATE" shall have the meaning ascribed to such term
in Section 3.1(r)
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
to such term in Section 3.1(o).
"KNOWLEDGE" means the actual knowledge of the Chairman, Vice
Chairman, Chief Operating Officer or Chief Financial Officer of the Company.
"LEGEND REMOVAL DATE" shall have the meaning set forth in
Section 4.1(c).
"LIENS" means a lien, charge, security interest, encumbrance,
right of first refusal or other similar restriction.
"LOSSES" shall have the meaning set forth in Section 4.8.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to
such term in Section 3.1(b).
"MATERIAL PERMITS" shall have the meaning ascribed to such
term in Section 3.1(m).
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"MEMORANDUM" shall have the meaning provided in Section 3.1.
"NON-DISCLOSURE AGREEMENT" means, as to each Purchaser, that
certain Confidentiality Agreement entered into between the Company and such
Purchaser dated May 7, 2004.
"PER SHARE PURCHASE PRICE" equals $11.00, subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement and prior to the Closing Date.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PURCHASER PARTY" shall have the meaning ascribed to such term
in Section 4.8.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Purchasers of the Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and each
Purchaser, in the form of EXHIBIT A hereto.
"RULE 144," means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" shall have the meaning ascribed to such term in
Section 3.1(h).
"SECURITIES" means the Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issued or issuable
to each Purchaser pursuant to this Agreement.
"SUBSCRIPTION AMOUNT" means, as to each Purchaser and the
Closing, the amounts set forth below such Purchaser's signature block on the
signature page hereto, in United States dollars and in immediately available
funds.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not listed on a
Trading Market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
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"TRADING MARKET" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market or the Nasdaq SmallCap Market.
"TRANSACTION DOCUMENTS" means this Agreement, the
Non-Disclosure Agreements and the Registration Rights Agreement.
ARTICLE II.
PURCHASE AND SALE
2.1 CLOSING. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
the number of Shares equal to such Purchaser's Subscription Amount divided by
the Per Share Purchase Price. The Closing shall take place at the offices of
Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000 on the Closing
Date or at such other location or time as the parties may agree.
2.2 CLOSING DELIVERIES.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following (the "COMPANY DELIVERABLES"):
(i) a certificate evidencing a number of Shares equal
to such Purchaser's Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser or in the name of the Purchaser's
nominee;
(ii) the legal opinion of Company Counsel, in agreed
form, addressed to the Purchasers; and
(iii) the Non Disclosure Agreement, Registration
Rights Agreement, duly executed by the Company.
(b) At the Closing, each Purchaser shall deliver or cause to
be delivered to the Company the following (the "PURCHASER DELIVERABLES"):
(i) its Subscription Amount , in United States
dollars and in immediately available funds, by wire transfer to an account
designated in writing by the Company for such purpose; and
(ii) the Non Disclosure Agreement, Registration
Rights Agreement, duly executed by such Purchaser.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
in the SEC Reports or in the Private Placement Memorandum of the Company dated
May 7, 2004 with respect to the Shares (the "Memorandum") or under the
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corresponding section of the Disclosure Schedules delivered concurrently
herewith, the Company hereby makes the following representations and warranties
as of the date hereof and as of the Closing Date to each Purchaser:
(a) SUBSIDIARIES. The Company has no direct or indirect
subsidiaries. The Company owns, directly or indirectly, all of the capital stock
of each Subsidiary free and clear of any Lien and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights. If the Company
has no subsidiaries, then references in the Transaction Documents to the
"SUBSIDIARIES" will be disregarded.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not reasonably be expected to result in (i)
a material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company's ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
"MATERIAL ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof and assuming each Transaction Document is a valid and binding
obligation of each Purchaser, enforceable against each Purchaser in accordance
with its terms, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws of general application affecting
enforcement of creditors' rights generally and (ii) insofar as the remedies of
specific performance, injunctive relief or other equitable remedies may be
unavailable and (iii) as the enforcement thereof may be limited by public
policy. No representation or warranty is made hereby concerning the
enforceability or valid and binding nature of Section 5 of the Registration
Rights Agreement and Section 4.8 of this Agreement insofar as such
indemnification relates to federal security law matters.
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
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violate any provision of the Company's or any Subsidiary's certificate of
incorporation or bylaws, or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject (assuming
the accuracy of the Purchasers' representations and warranties in Section 3.2,
including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as would not reasonably be
expected to result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing with the Commission of the Registration
Statement, one or more Forms D with respect to the Shares as required under
Regulation D of the Securities Act, the application(s) to each Trading Market
for the listing of the Shares for trading thereon in the time and manner
required thereby, and applicable Blue Sky filings, (ii) such as have already
been obtained or waived or such exemptive filings as are required to be made
under applicable securities laws and (iii) those which if not obtained, made or
given would not be reasonably expected to have a Material Adverse Effect.
(f) ISSUANCE OF THE SECURITIES. The Securities are duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement.
(g) CAPITALIZATION. The capitalization of the Company is as
described in the Company's most recent periodic report filed with the
Commission. The Company has not issued any capital stock since such filing other
than pursuant to the exercise of employee stock options under the Company's
stock option plans. No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
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securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the "SEC REPORTS" and,
together with the Disclosure Schedules to this Agreement, the "DISCLOSURE
MATERIALS") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) MATERIAL CHANGES. Since the date of the latest audited
financial statements included within the SEC Reports, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) liabilities
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) except as required by applicable law or GAAP, the Company has
not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
(j) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the Knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "ACTION") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) would, if there were an unfavorable decision, reasonably
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be expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor, to the Company's Knowledge, any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been and, to the Knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or, to the Company's Knowledge, any current or former director or
officer of the Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) LABOR RELATIONS. No material labor dispute exists or, to
the Knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
(l) COMPLIANCE. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business, except in the case of clauses (i),
(ii) and (iii) as would not reasonably be expected to result in a Material
Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits would not have or reasonably be expected to
result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by them that
is material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance
in all material respects.
(o) PATENTS AND TRADEMARKS. The Company or its Subsidiaries
have exclusive ownership or a valid license to use all patent, copyright, trade
secret, trademark or other proprietary rights that are used in the business of
the Company and are material to the Company and its Subsidiaries taken as a
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whole (collectively, "INTELLECTUAL PROPERTY"). All of such material patents,
registered trademarks and registered copyrights have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights or the corresponding offices of other
jurisdictions and have been maintained and renewed in accordance in all material
respects with all applicable provisions of law and administrative regulations in
the United States and all such jurisdictions.
All material licenses or other material agreements under which
(i) the Company or any Subsidiary is granted rights in Intellectual Property and
(ii) the Company or any Subsidiary has granted rights to others in Intellectual
Property owned or licensed by the Company or any Subsidiary, are in full force
and effect except where the failure to be in full forCE would not be reasonably
likely to have a Material Adverse Effect and there is no material default by the
Company or any Subsidiary thereto.
No proceedings have been instituted or are pending which
challenge in a material manner the rights of the Company or any Subsidiary in
respect to the Company or any Subsidiary's right to the use of the Intellectual
Property. The Company and each Subsidiary has the right to use, free and clear
of material claims or rights of other persons, all of its customer lists,
designs, computer software, systems, data compilations, and other information
that are required for its products or its business as presently conducted.
The Company believes it and each Subsidiary has taken such
reasonable steps as are required in accordance with sound business practice and
business judgment to establish and preserve its ownership of all material
copyright, trade secret and other proprietary rights with respect to its
products and technology.
To the Knowledge of the Company, the present business,
activities and products of the Company and each Subsidiary do not infringe any
intellectual property of any other person, except where such infringement would
not be reasonably likely to have a Material Adverse Effect. No material
proceeding charging the Company or any Subsidiary with infringement of any
adversely held Intellectual Property has been filed. The Company has not
received or is otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any facts or
circumstances which would be reasonably likely to render any Intellectual
Property invalid or inadequate to protect the interests of the Company or any
Subsidiary, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or
in the aggregate, would be reasonably likely to result in a Material Adverse
Effect. To the Knowledge of the Company, the Company is not making unauthorized
use of any material confidential information or trade secrets of any third
party. To the Company's Knowledge, the activities of the Company or any
Subsidiary or any employee on behalf of the Company or any Subsidiary do not
violate any material agreements or arrangements known to the Company which any
such employees have with other persons, if any.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company reasonably believes are prudent and customary
in the businesses in which the Company and the Subsidiaries are engaged. Neither
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the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in the SEC Reports, none of the officers or directors of the Company and,
to the Knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company (iii) for other employee benefits, including
stock option agreements under any stock option plan of the Company and (iv)
those not required to be disclosed in the SEC Reports.
(r) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company
and designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Form 10-K or 10-Q, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures in accordance with Item
307 of Regulation S-K under the Exchange Act for the Company's most recently
ended fiscal quarter or fiscal year-end (such date, the "EVALUATION DATE"). The
Company presented in its most recently filed Form 10-K or Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 308(c) of
Regulation S-K under the Exchange Act) or, to the Company's Knowledge, in other
factors that could significantly affect the Company's internal controls.
(s) CERTAIN FEES. Other than the fees and expenses of Xxxx
Capital Partners LLC which shall be paid by the Company and the fees of
America's Growth Capital (which fees shall be paid by Xxxx Capital Partners
LLC), no brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation arising
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out of any act or omission of the Company with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by this Agreement.
(t) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.
(u) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(v) REGISTRATION RIGHTS. Except as set forth in SCHEDULE
3.1(V), no Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company.
(w) FORM S-3 ELIGIBILITY. The Company is eligible to register
the resale of its Common Stock by the Purchasers under Form S-3 promulgated
under the Securities Act.
(x) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not,
in the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(y) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance of
the Securities and the Purchasers' ownership of the Securities.
(z) DISCLOSURE. The Company confirms that, neither the Company
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, non-public information other than the Memorandum. The
Company understands and confirms that the Purchasers will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company.
(aa) 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 cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable stockholder approval provisions, including,
11
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.
(bb) SOLVENCY. Based on the financial condition of the Company
as of the Closing Date but taking into account the proceeds of the offering
contemplated hereby to be received by the Company, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
Each Purchaser acknowledges and agrees that the Company does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.1.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by such Purchaser of the Transaction
Documents and performance of the transactions contemplated by the Transaction
Documents has been duly authorized by all necessary corporate action on the part
of such Purchaser. Each Transaction Document to which it is party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with terms hereof, will constitute the valid and legally binding obligation of
such Purchaser, enforceable against it in accordance with its terms.
(b) INVESTMENT INTENT. Such Purchaser understands that the
Securities are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such Securities and has
no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
such Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
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securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(c) UNDERSTANDING OF RISK. Such Purchaser recognizes that an
investment in the Company involves substantial risks. Such Purchaser has taken
full cognizance of and understands all of the risks related to the purchase of
the Securities. Such Purchaser acknowledges that it has carefully considered and
has, to the extent such Purchaser believes such discussion necessary, discussed
with such Purchaser's professional, legal, financial and tax advisers, the
suitability of an investment in the Company for such Purchaser's particular
financial and tax situation and has determined that the Securities are a
suitable investment for him.
(d) AVAILABILITY OF INFORMATION. Such Purchaser acknowledges
that it has had the opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the terms and conditions of the
Transaction Documents and its investment in the Company. Any questions raised by
such Purchaser have been answered to the satisfaction of such Purchaser. The
Company has made available to such Purchaser all documents and information that
such Purchaser has requested relating to an investment in the Company.
(e) MEMORANDUM. Such Purchaser acknowledges receipt of the
Memorandum and the documents incorporated by reference therein.
(f) EXPERIENCE OF PURCHASER. Such Purchaser acknowledges that
by reason of business or financial experience, or that of such Purchaser's
professional advisors, such Purchaser is capable of evaluating information and
data relating the Company's industry and the merits and risks of an investment
in the Company and of protecting its own interest in connection with an
investment in the Company and that it is able to bear the economic risk of such
investment in the Company.
(g) RESALE OF SECURITIES. Such Purchaser acknowledges that no
representations or promises have been made concerning the marketability or value
of the Securities. The Company has not agreed with or represented to such
Purchaser that the Securities will be purchased or redeemed from such Purchaser
at any time in the future or otherwise qualified for sale under applicable
securities laws, except that the Company and such Purchaser have agreed to enter
into the Registration Rights Agreement. Such Purchaser understands that the
Commission has taken the position that persons who offer to sell restricted
securities such as the Securities without reliance on Rule 144 under the
Securities Act are to be on notice that, in view of the broad remedial purposes
of the Securities Act and of public policy which supports registration, they
will have a substantial burden of proof establishing that an exemption from
registration is available for such offers or sales. In view of the above
restrictions and those set forth in Section 4.1, such Purchaser may be required
to bear the economic risk of its investment in the Company for an indefinite
period of time.
(h) CERTAIN TRADING ACTIVITIES. Such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, engaged in any transactions in the
securities of the Company (including, without limitations, any Short Sales
involving the Company's securities) since the time that such Purchaser was first
contacted by the Company, Xxxx Capital Partners, LLC or America's Growth Capital
regarding an investment in the Company. For purposes of this Section, "SHORT
SALES" include, without limitation, all "short sales" as defined in Rule 3b-3 of
the Exchange Act and include all types of direct and indirect stock pledges,
forward sale contracts, options, puts, calls, short sales, swaps and similar
13
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers having
the effect of hedging the securities or investment made under this Agreement.
Such Purchaser covenants that neither it nor any Person acting on its behalf or
pursuant to any understanding with it will engage in any transactions in the
securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed.
(i) LIMITED OWNERSHIP. The purchase by such Purchaser of the
Securities issuable to it at the Closing will not result in such Purchaser
(individually or together with other Person with whom such Purchaser has
identified, or will have identified, itself as part of a "group" in a public
filing made with the Commission involving the Company's securities) acquiring,
or obtaining the right to acquire, in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred. Such Purchaser does not
presently intend to, alone or together with others, make a public filing with
the Commission to disclose that it has (or that it together with such other
Persons have) acquired, or obtained the right to acquire, as a result of the
Closing (when added to any other securities of the Company that it or they then
own or have the right to acquire), in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred.
(j) INDEPENDENT INVESTMENT DECISION. Such Purchaser has
independently evaluated the merits of its decision to purchase Securities
pursuant to the Transaction Documents, and such Purchaser confirms that it has
not relied on the advice of any other Purchaser's business and/or legal counsel
in making such decision. Such Purchaser has not relied on the business or legal
advice of Xxxx Capital Partners, LLC or any of its agents, counsel or Affiliates
in making its investment decision hereunder, and confirms that none of such
Persons has made any representations or warranties to such Purchaser in
connection with the transactions contemplated by the Transaction Documents.
(k) PURCHASER STATUS. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Purchaser is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act.
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of a Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
14
Company an opinion of counsel reasonably satisfactory to the Company, the form
and substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY
SATISFACTORY TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of such arrangement,
such Purchaser may transfer pledged or secured Securities to the pledgees or
secured parties. Such a pledge or transfer would not be subject to approval of
the Company and no legal opinion of legal counsel of the pledgee, secured party
or pledgor shall be required in connection therewith. Notwithstanding the
foregoing, such pledged Securities shall remain subject to all of the
restrictions on transfer set forth in this Agreement, and the pledgee shall
agree in writing to be bound by the terms hereof. At the appropriate Purchaser's
expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with
a pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
(c) Certificates evidencing the Shares shall not contain any
legend (including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii) following
any sale of such Shares pursuant to Rule 144, or (iii) the Company receives an
opinion of counsel reasonably satisfactory to the Company to the effect that
15
such Shares are eligible for sale under Rule 144(k), or (iv) the Company
receives an opinion of counsel reasonably satisfactory to it to the effect that
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission). The Company shall use its reasonable best efforts to cause the
Company's transfer agent promptly after the Effective Date to effect the removal
of the legend hereunder. The Company agrees that following the Effective Date or
at such time as such legend is no longer required under this Section 4.1(c), it
will, no later than five Trading Days following the delivery by a Purchaser to
the Company or the Company's transfer agent of a certificate representing Shares
issued with a restrictive legend (a "LEGEND REMOVAL DATE"), deliver or cause to
be delivered to such Purchaser a certificate representing such Securities that
is free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section.
(d) In addition to a Purchaser's other available remedies, the
Company shall pay to such Purchaser, in cash, as liquidated damages and not as a
penalty, for each $1,000 of Shares (based on the Closing Price of the Common
Stock on the date such Securities are submitted to the Company's transfer agent)
submitted for legend removal by a Purchaser pursuant to and in accordance with
Section 4.1(c), $5 per Trading Day (increasing to $10 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each Trading Day after
the applicable Legend Removal Date until such certificate is delivered without a
legend. Nothing herein shall limit such Purchaser's right to pursue actual
damages for the Company's failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Purchaser shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
(e) Each Purchaser, severally and not jointly, agrees that the
removal of the restrictive legend from certificates representing Securities as
set forth in this Section 4.1 is predicated upon the Company's reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the reasonable request of any such holder of Securities, the
Company shall deliver to such holder a written certification of a duly
authorized officer as to whether it has complied with the preceding sentence. As
long as any Purchaser owns Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
16
4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, on the
Business Day following the date of this Agreement, issue a press release
reasonably acceptable to Xxxx Capital Partners, LLC disclosing the transactions
contemplated hereby and make such other filings and notices in the manner and
time required by the Commission. The Company and Xxxx Capital Partners, LLC
shall consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and no Purchaser or Xxxx Capital Partners LLC,
as the case may be, shall issue any such press release or otherwise make any
such public statement without the prior consent of the Company, which consent
shall not unreasonably be withheld, except if such disclosure is required by law
or the rules of any Trading Market, in which case the Purchaser or Xxxx Capital
Partners LLC, as the case may be, shall promptly provide the Company with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except (i) as required by federal securities law in connection with the
registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).
4.5 SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by the
Company or any other Person acting on the Company's behalf that any Purchaser is
an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement,
solely by virtue of receiving Securities under the Transaction Documents or
under any other agreement between the Company and the Purchasers.
4.6 NON-PUBLIC INFORMATION. The Company covenants and agrees that
following the date hereof, neither it nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
4.7 USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for general corporate purposes, including
working capital and not for the satisfaction of any portion of the Company's
debt (other than payment of liabilities in the ordinary course of the Company's
business), to redeem any Company equity or equity-equivalent securities or to
settle any outstanding litigation.
17
4.8 INDEMNIFICATION OF PURCHASERS. The Company will indemnify and hold
the Purchasers and their directors, trustees, officers, shareholders, partners,
employees and agents (each, a "PURCHASER PARTY") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any such Purchaser
Party may suffer or incur ("LOSSES") as a result of or relating to: (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser. The Company shall not be liable for any indemnity
pursuant to this Section 4.8 until the aggregate of all Losses incurred by the
Purchaser Parties as a result of such misrepresentation, breach, inaccuracy,
cause of action, suit or claim exceeds $50,000, at which time the Company shall
be liable to indemnify the Purchaser Parties for the full amount of such Losses
relating back to dollar one. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred upon presentation of reasonably
evidence thereof. The Purchaser Parties shall notify the Company in writing
promptly upon becoming aware of any fact or circumstance which might give rise
to indemnification pursuant to this Section 4.8. The Company shall be entitled
to control the defense of any action for which any Purchaser Party claims or may
claim indemnification pursuant to this Section 4.8, with counsel of the
Company's own choosing. No Purchaser Party shall settle or compromise any action
for which it has claimed indemnification pursuant to this Section 4.8 without
the prior written consent of the Company.
4.9 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement.
4.10 LISTING OF COMMON STOCK.The Company hereby agrees to use
commercially reasonable efforts to maintain the listing of the Common Stock on
the Trading Market, and as soon as reasonably practicable following the Closing
(but not later than the earlier of the Effective Date and the first anniversary
of the Closing Date) to list the applicable Shares on the Trading Market. The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Trading Market, it will include in such application the Shares, and
will take such other action as is necessary or desirable in the reasonable
opinion of the Purchasers to cause the Shares to be listed on such other Trading
Market as promptly as possible. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all material respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.
18
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS TO
PURCHASE SECURITIES. The obligation of each Purchaser to acquire Securities at
the Closing is subject to the satisfaction or waiver by such Purchaser, at or
before the Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained herein shall be true and correct as of the
date when made and as of the Closing as though made on and as of such date
except where such failure would not reasonably be expected to result in a
Material Adverse Effect;
(b) PERFORMANCE. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing;
(c) NO INJUNCTION. 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 that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) ADVERSE CHANGES. Since the date of execution of this
Agreement, no event or series of events shall have occurred that reasonably
could have or result in a Material Adverse Effect;
(e) NO SUSPENSIONS OF TRADING IN COMMON STOCK; LISTING.
Trading in the Common Stock shall not have been suspended by the Commission or
any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a Trading Market;
(f) COMPANY DELIVERABLES. The Company shall have delivered the
Company Deliverables in accordance with Section 2.2(a); and
(g) TIMING. The Closing shall have occurred no later than May
21, 2004.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY TO SELL
SECURITIES. The obligation of the Company to sell Securities at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties each Purchaser contained herein shall be true and correct as of the
date when made and as of the Closing as though made on and as of such date
except where such failure would not reasonably be expected to result in a
Material Adverse Effect;
(b) PERFORMANCE. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
19
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing;
(c) NO INJUNCTION. 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 that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) PURCHASERS DELIVERABLES. Each Purchaser shall have
delivered its Purchasers Deliverables in accordance with Section 2.2(b); and
(e) Timing. The Closing shall have occurred no later than May
21, 2004.
ARTICLE VI.
MISCELLANEOUS
6.1 FEES AND EXPENSES. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Securities.
6.2 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
6.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set forth on the
signature pages attached hereto.
6.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
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6.5 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
6.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
6.8 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
New York for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court or that such suit, action or proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by delivering a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
6.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and delivery of the Shares.
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6.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.11 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.12 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
6.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
6.14 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.15 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
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joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through Xxxxx Xxxx LLP. Xxxxx Xxxx LLP
does not represent the Purchasers in this transaction but only Xxxx Capital
Partners, the placement agent that introduced the Company to the Purchasers. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
6.16 LIMITATION OF LIABILITY. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that all liabilities of Janus
Investment Fund ("Janus") and Xxxxxxx Xxxxx Funds ("Xxxxx"), each a registered
investment company, arising directly or indirectly, under this Agreement, of any
and every nature whatsoever, shall be satisfied solely out of the assets of
Janus or Xxxxx, as the case may be, and that no trustee, officer or holder of
shares of beneficial interest of Janus or Xxxxx, as the case may be, shall be
personally liable for any liabilities of Janus or Xxxxx, as the case may be. The
Declaration of Trust of Janus and Xxxxx, each of which is on file with the
Commonwealth of Massachusetts, describe the responsibilities and liabilities of
such parties.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
THE ULTIMATE SOFTWARE GROUP, INC.
By: /s/
---------------------------------
Name:
Title:
ADDRESS FOR NOTICE:
0000 Xxxxxxxx Xxx
Xxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx X. XxxxXxxxxxx, Xx.
[SIGNATURE PAGE CONTINUES]
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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
NAME OF INVESTOR
By: /s/
--------------------------------------------
Name:
Title:
Subscription Amount: $
--------------------------
Number of Shares:
-------------------------------
Tax ID No.:
------------------------------------
ADDRESS FOR NOTICE
c/o:
-------------------------------------------
Street:
----------------------------------------
City/State/Zip:
--------------------------------
Attention:
-------------------------------------
Tel:
---------------------------------------
Fax:
---------------------------------------
DELIVERY INSTRUCTIONS
(IF DIFFERENT FROM ABOVE)
c/o:
-------------------------------------------
Street:
-----------------------------------------
City/State/Zip:
--------------------------------
Attention:
-------------------------------------
Tel:
---------------------------------------
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