SECURITIES PURCHASE AGREEMENT Dated as of June 5, 2008, By And Among COMMUNICATION INTELLIGENCE CORPORATION AND THE INVESTORS SIGNATORY HERETO
EXHIBIT
10-43
Dated
as of June 5, 2008,
By
And Among
AND
THE
INVESTORS SIGNATORY HERETO
EXHIBIT
10-43
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TABLE OF CONTENTS
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Page
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ARTICLE
1.
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DEFINITIONS
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1
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1.1 Definitions
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1
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ARTICLE
2.
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PURCHASE
AND SALE
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6
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2.1 Closing
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6
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2.2 Purchase
Price
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6
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2.3 Closing
Deliveries
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7
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ARTICLE
3.
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REPRESENTATIONS
AND WARRANTIES
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8
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3.1 Representations
and Warranties of the Company
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8
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3.2 Representations
and Warranties of the Investors
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18
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ARTICLE
4.
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OTHER
AGREEMENTS OF THE PARTIES
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20
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4.1 Transfer
Restrictions; Legends
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20
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4.2 Furnishing
of Information
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22
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4.3 Integration
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22
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4.4 Reservation
of Securities
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22
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4.5 Securities
Laws Disclosure; Publicity
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22
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4.6 Use
of Proceeds
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23
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4.7 Indemnification
of Investors
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23
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4.8 Listing
of Securities
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24
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4.9 Stockholder
Approval
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24
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4.10 Ranking
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25
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4.11 Cancellation
of Notes
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25
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ARTICLE
5.
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CONDITIONS
PRECEDENT TO CLOSING
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25
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5.1 Conditions
Precedent to the Obligations of the Investors
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25
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5.2 Conditions
Precedent to the Obligations of the Company
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25
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ARTICLE
6. MISCELLANEOUS
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26
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6.1 Rescission
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26
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6.2 Fees
and Expenses
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27
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6.3 Entire
Agreement
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27
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6.4 Notices
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27
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6.5 Amendments;
Waivers
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27
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6.6 Construction
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28
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6.7 Successors
and Assigns
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28
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6.8 No
Third-Party Beneficiaries
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28
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6.9 Governing
Law; Venue; Waiver of Jury Trial
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28
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6.10 Survival
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29
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6.11 Execution
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29
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6.12 Severability
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29
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6.13 Rescission
and Withdrawal Right
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29
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6.14 Replacement
of Securities
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29
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6.15 Remedies
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30
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6.16 Payment
Set Aside
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30
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6.17 Further
Assurances
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30
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6.18 Adjustments
in Share Numbers and Prices
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30
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6.19 Independent
Nature of Investors’ Obligations and Rights
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30
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EXHIBIT
10-43
Exhibit
A Schedule
of Investors
Exhibit
B Instruction
Sheet For Investor
Exhibit
B-1 Communication
Intelligence Corporation –Stock Certificate Questionnaire
Exhibit
B-2 Communication
Intelligence Corporation – Registration Statement Questionnaire
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Exhibit
B-3
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Communication
Intelligence Corporation – Certificate For Corporate, Partnership, Limited
Liability Company, Trust Foundation, Joint and Individual Investors -
Certificate
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Exhibit
C
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Form
of Registration Rights Agreement
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Exhibit
D
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Form
of Certificate of Designations
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EXHIBIT
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This
Securities Purchase Agreement (this “Agreement”) is dated as of
June 5, 2008, by and among Communication Intelligence Corporation, a Delaware
corporation, and all predecessors thereto (the “Company”) and the investors
identified on the signature pages hereto (each, an “Investor” and collectively,
the “Investors”).
WHEREAS,
the Investors have extended loans to the Company as evidenced by certain
promissory notes (each a “Promissory Note” and,
collectively, the “Promissory
Notes”), in such amounts and with such maturities as are set forth on
Exhibit A
hereto; 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 shall issue and sell to each Investor, and each
Investor, severally and not jointly, shall purchase from the Company the number
of shares of Series A Cumulative Convertible Preferred Stock of the Company (the
“Series A Preferred
Stock”) set forth on Exhibit A, as more
fully described in this Agreement; and
WHEREAS,
each Investor, in consideration and payment for the shares of Series A Preferred
Stock purchased by such Investor, shall return to the Company for cancellation
the Promissory Note issued by the Company to such Investor;
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 the Investors agree as
follows:
ARTICLE
1.
DEFINITIONS
1.1. Definitions
. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this
Section
1.1:
“8-K Filing” has the meaning
set forth in Section
4.5.
“Agreement” has the meaning
set forth in the preamble.
“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 under the Securities Act.
“Best Efforts” means the
reasonable efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved as
expeditiously as practical; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Company to dispose
of or make any change to its business.
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“Business Day” means any day
except Saturday, Sunday and any day which is 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.
“Certificate of Designations”
shall mean a certificate of designations to be filed prior to the Closing
by the Company with the Secretary of State of the State of Delaware, setting
forth the rights, preferences and privileges of the Shares, in substantially the
form attached as Exhibit D
hereto.
“CIC Acquisition Corp.” means
CIC Acquisition Corp., a Delaware corporation.
“Closing” means the closing of
the purchase and sale of the Shares pursuant to Article II.
“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.
“Collateral Agent” means SG
Phoenix LLC.
“Commission” means the
Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, par value $0.01 per share, and any securities into
which such common stock may hereafter be reclassified or for which it may be
exchanged as a class.
“Common Stock Equivalents”
means any securities of the Company or any Subsidiary which entitle the holder
thereof to acquire Common Stock at any time, 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 or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.
“Company” has the meaning set
forth in the preamble.
“Company Counsel” means Xxxxx
Xxxxxx Xxxxxxxx LLP.
“Company Deliverables” has the
meaning set forth in Section
2.3(a).
“Contingent Obligation” has
the meaning set forth in Section
3.1(bb).
“Convertible Securities” means
any stock or securities (other than Options) convertible into or exercisable or
exchangeable for Common Stock..
“Covering Shares” has the
meaning set forth in Section
4.1(b).
“Credit Agreement” means that
certain credit agreement, dated as of the date of this Agreement, by and among
the Company and the lenders signatory thereto.
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“Depositary Account Control
Agreement” means that certain depositary account control agreement, dated
as of the date of this Agreement, by and among the Collateral Agent, the Company
and the Depositary signatory thereto.
“Disclosure Materials” has the
meaning set forth in Section
3.1(h).
“Effective Date” means the
date that the Registration Statement required by Section 2(a) of the
Registration Rights Agreement is first declared effective by the
Commission.
“Environmental Laws” has the
meaning set forth in Section
3.1(ff).
“Evaluation Date” has the
meaning set forth in Section
3.1(s).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
“GAAP” means U.S. generally
accepted accounting principles.
“Governmental Authority” means
any nation, province, or state or any political subdivision of any of the
foregoing, and any government or any Person exercising executive, legislative,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity exercising such functions owned or controlled,
through stock or capital ownership or otherwise, by any of the
foregoing.
“Hazardous Materials” has the
meaning set forth in Section
3.1(ff).
“Indebtedness” has the meaning
set forth in Section
3.1(bb).
“Insolvent” has the meaning
set forth in Section
3.1(j).
“Intellectual Property Rights”
has the meaning set forth in Section
3.1(p).
“Investment Amount” means,
with respect to each Investor, the Investment Amount indicated on such
Investor’s signature page to this Agreement.
“Investor” has the meaning set
forth in the preamble.
“Investor Deliverables” has
the meaning set forth in Section
2.3(b).
“Investor Party” has the
meaning set forth in Section
4.7.
“Lien” means any lien, charge,
encumbrance, security interest, right of first refusal, right of participation
or other restrictions of any kind.
“Loan Documents” means this
Agreement, the Notes, the Security Documents, the Credit Agreement, the
Registration Rights Agreement, the Depositary Account Control Agreement and all
other instruments, documents and agreements executed by or on behalf of the
Company or any of its Subsidiaries, and delivered concurrently herewith or at
any time hereafter to or for the benefit of Phoenix, Xxxxxxx Xxxxxxx and/or
Xxxxxx Xxxxxxx in connection with
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10-43
the loans
and other transactions contemplated by the Credit Agreement, all as amended,
supplemented or modified from time to time.
“Losses” means any and all
losses, claims, damages, liabilities, settlement costs and expenses, including,
without limitation, reasonable attorney’s fees.
“Material Adverse Effect”
means a material and adverse effect on (i) the legality, validity or
enforceability of any Transaction Document, (ii) the results of operations,
assets, prospects, business or condition (financial or otherwise) of the Company
and its Subsidiaries, taken as a whole, or (iii) the rights and remedies of the
Investors under the Transaction Documents taken as a whole.
“New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.
“Note” or “Notes” means those certain
secured promissory notes, issued by the Company to Phoenix, Xxxxxxx Xxxxxxx and
Xxxxxx Xxxxxxx pursuant to the Credit Agreement, and any replacements,
restatements, renewals or extensions of such notes, in whole or in
part.
“Notice of Acceptance” has the
meaning set forth in Section
6.1.
“Options” means any
outstanding rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
“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.
“Phoenix” means Phoenix
Venture Fund LLC.
“Pledge and Security Agreement”
means that certain pledge and security agreement, dated as of the date
hereof, by and among the Company and its Subsidiaries, and the Collateral Agent,
Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx.
“Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened in writing.
“Promissory Note” has the
meaning set forth in the recitals.
“PCAOB” means the Public
Company Accounting Oversight Board.
“Purchase Price” has the
meaning set forth in Section
2.2.
“Registrable Securities” means
the Common Stock issued or issuable pursuant to the Transaction Documents,
together with any securities issued or issuable upon any stock
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10-43
split,
dividend or other distribution, recapitalization, or similar event with respect
to the foregoing.
“Registration Rights
Agreement” means that certain registration rights agreement, dated as of
the date of this Agreement, by and among the Company and the investors signatory
thereto, substantially in the form of Exhibit C
hereto.
“Registration Statement” means
a registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Investors of the Underlying
Shares.
“Regulation D” means Rule 506
of Regulation D as promulgated by the United States Securities and Exchange
Commission under the Securities Act.
“Rescission Notice” has the
meaning set forth in Section
6.1.
“Rescission Payment Date” has
the meaning set forth in Section
6.1.
“Rescission Price” has the
meaning set forth in Section
6.1.
“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” has the meaning
set forth in Section
3.1(h).
“Securities” means the Shares
and the Underlying Shares.
“Securities Act” means the
Securities Act of 1933, as amended.
“Security Documents” means,
collectively, all instruments, documents and agreements executed by or on behalf
of the Company to provide collateral security with respect to all obligations,
liabilities and Indebtedness of every nature of the Company from time to time
owed to Phoenix, Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx under the Loan Documents,
including the Pledge and Security Agreement and the Depositary Account Control
Agreement and all instruments, documents and agreements executed pursuant to the
terms of the foregoing, in such case, as amended, modified and supplemented from
time to time.
“Selling Holder Questionnaire”
has the meaning set forth in Section
2.3(b)(iii).
“Shares” or “Series A Preferred
Stock” means the shares of Series A Cumulative Convertible Preferred
Stock, par value $0.01 per share, issued or issuable to the Investors pursuant
to this Agreement.
“Stockholder Approval” has the
meaning set forth in Section
4.9.
“Subsidiary” means, with
respect to any Person, any corporation, partnership, association or other
business entity of which more than fifty percent (50%) of the total
voting
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power of
shares of stock (or equivalent ownership or controlling interest) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
“Trading Day” means (i) a day
on which the Common Stock is traded on a Trading Market (other than the OTC
Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market
(other than the OTC Bulletin Board), a day on which the Common Stock is quoted
in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii)
if the Common Stock is not quoted on any Trading Market, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the Pink
Sheets LLC (or any similar organization or agency succeeding to 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.
“Trading Market” means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
“Transaction Documents” means
this Agreement, the schedules and exhibits attached hereto, the Transfer Agent
Instructions, the Registration Rights Agreement, the Certificate of Designations
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
“Transfer Agent” means
American Stock Transfer and Trust Company, or any successor transfer agent for
the Company.
“Transfer Agent Instructions”
means, with respect to the Company, the Irrevocable Transfer Agent Instructions,
executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.
“Underlying Shares” means the
shares of Common Stock issuable upon conversion or exchange of the
Shares.
ARTICLE
2.
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 Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Shares representing
such Investor’s Investment Amount. The Closing shall take place at
the offices of Xxxxxx Xxxx Xxxxx Raysman & Xxxxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, XX 00000 on the Closing Date or at such other location or time as the
parties may agree.
2.2. Purchase
Price. At the Closing, each Investor shall, in full payment
for its Shares, tender to the Company for cancellation its
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Promissory
Note in the amount set forth opposite suchInvestor’s
name on Exhibit
A hereto (the “Purchase
Price”), such that each Investor shall receive one Share for each one
dollar represented by its Promissory Note.
2.3. Closing
Deliveries
. (a) At
the Closing, the Company shall deliver or cause to be delivered to each Investor
the following (the “Company
Deliverables”):
(i) a
certificate executed by the Company’s chief executive officer and chief
financial officer, dated as of the Closing Date, confirming the truth and
correctness of the Company’s representations and warranties made in Article III
hereof as of the date when made and as of the Closing Date as if made at such
time (except for representations and warranties that speak as of a specific date
which shall be true and correct as of such specified date);
(ii) a
certificate, executed by the Company’s chief executive officer and chief
financial officer, dated as of the Closing Date, confirming that the Company has
performed, satisfied and complied in all respects with the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date;
(iii) a
certificate of the secretary or an assistant secretary of the Company, attaching
a recent copy of the certificate of incorporation or formation, as amended, of
the Company and each Subsidiary of the Company, and a good standing certificate
of the Company dated as of a recent date, a certificate evidencing the Company’s
qualification as a foreign corporation and good standing issued by the Secretary
of State (or comparable office) of each jurisdiction in which the Company
conducts business and is required to so qualify, dated as of a recent date,
copies of the by-laws of the Company and resolutions of the Board of Directors
authorizing the transactions contemplated hereby, which the secretary or
assistant secretary of the Company has certified as true and correct copies in
full force and effect as of the Closing, the execution, delivery and performance
of this Agreement and the other Transaction Documents;
(iv) one
or more certificates evidencing the number of Shares set forth opposite such
Investor’s name on Exhibit A hereto
under the heading “Shares,” in such denominations and registered in such names
as such Investor requests;
(v) the
Transaction Documents, executed by the Company;
(vi) a
legal opinion of Company Counsel executed by such counsel and delivered to the
Investors in form and substance acceptable to the Investors;
(vii) duly
executed Transfer Agent Instructions acknowledged by the Company’s transfer
agent;
(viii) approval
by each applicable Trading Market of an additional shares listing application
covering all of the Registrable Securities, if required by such Trading Market
(and, if applicable, evidence of conditional listing approval);
(ix) a
certificate from the Secretary of State for the State of
Delaware, evidencing filing of the Certificate of
Designations;
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(x) any
consents or approvals of any Person listed on Schedule 3.1(bb) or
any other third-party required to effect the terms and conditions of this
Agreement; and
(xi) such
other documents relating to the transactions contemplated by this Agreement and
the other Transaction Documents as such Investor or its counsel may reasonably
request.
(b) At the
Closing, each Investor shall deliver or cause to be delivered to the Company the
following (the “Investor
Deliverables”):
(i) such
Investor’s Promissory Note in the amount set forth on Exhibit A hereto
constituting the Purchase Price;
(ii) each of
the Transaction Documents to which it is a party, executed by such Investor;
and
(iii) a
completed and executed Selling Stockholder Questionnaire in the form attached
hereto as Exhibit
B (the “Selling Holder
Questionnaire”).
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES
3.1. Representations and
Warranties of the Company
. The
Company hereby makes the following representations and warranties to each
Investor:
(a) Subsidiaries. The
Company has no Subsidiaries other than those listed in Schedule 3.1(a)
hereto. Except as disclosed in Schedule 3.1(a)
hereto, the Company owns, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any and all
Liens, and all the issued and outstanding shares of capital stock or comparable
equity interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and
Qualification. Each of the Company and its Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization (as applicable), with the
requisite legal 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 of its Subsidiaries is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each of its
Subsidiaries are duly qualified to conduct their respective businesses and are
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, could not, individually or in the aggregate, have
or reasonably be expected to result in 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
ofthe
Transaction Documents to which it is a party and otherwise to carry out its
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obligations
thereunder. The execution and delivery of each of the Transaction
Documents to which it is a party 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 consent or action is required
by the Company in connection therewith. Each Transaction Document has
been (or upon delivery will be) duly executed by the Company and, when delivered
in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies, and (ii) the effect of rules of law governing the availability of
specific performance and other equitable remedies.
(d) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) except as disclosed in Schedule 3.1(d)
hereto, 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 of its Subsidiaries is a party or by
which any property or asset of the Company or any of its Subsidiaries 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 any of its Subsidiaries is subject (including,
assuming the accuracy of the representations and warranties of the Investors set
forth in Section
3.2 hereof, federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject, including all applicable Trading Markets), or by
which any property or asset of the Company or a Subsidiary is bound or
affected.
(e) Filings, Consents and
Approvals. Except as set forth on Schedule 3.1(e), 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 third party
or 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 one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement, (ii) filings required by
state securities laws, (iii) the filing of a Notice of Sale of Securities on
Form D with the Commission under Regulation D of the Securities Act, (iv) the
filings required in accordance with Section 4.5 and (v)
those that have been made or obtained prior to the date of this
Agreement.
(f) Issuance of the
Securities. Upon the Stockholder Approval, the Securities will
be 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 and will not be subject to preemptive
or similar rights of stockholders. Upon StockholderApproval,
the Company will reserve from its
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duly
authorized capital stock the shares of Common Stock issuable pursuant to this
Agreement in order to issue the Underlying Shares upon conversion of the
Shares. Based, in part, on the representations and warranties of the
Investors set forth in Section 3.2 of this
Agreement, the offer, issuance and sale of the Shares and the Underlying Shares
to the Investors pursuant to this Agreement are exempt from the registration
requirements of the Securities Act.
(g) Capitalization. The
aggregate number of shares and type of all authorized, issued and outstanding
classes of capital stock, options and other securities of the Company (whether
or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company) is set forth in Schedule 3.1(g)
hereto. All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
in all materials respects with the applicable securities laws. Except
as disclosed in Schedule 3.1(g)
hereto, the Company does not have at the date hereof any other Options, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable into shares of Common Stock. Except as
set forth in Schedule
3.1(g) hereto, and except for customary adjustments as a result of stock
dividends, stock splits, combinations of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) and the
issuance and sale of the Shares will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Investors) and
will not result in a right of any holder of securities to adjust the exercise,
conversion, exchange or reset price under such securities. To the
knowledge of the Company, except as disclosed in the SEC Reports and any
Schedules 13D or 13G filed with the Commission pursuant to Rule 13d-1 of the
Exchange Act by reporting persons or in Schedule 3.1(g)
hereto, no Person or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial ownership
of 5% or more of the outstanding Common Stock.
(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 twelve months preceding the date hereof
(the foregoing materials being collectively referred to herein as the “SEC Reports” and, together
with the Schedules to this Agreement, the “Disclosure Materials”) on a
timely basis or has timely filed 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 filed by the
Company 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 and the PCAOB with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved, except as may be otherwise
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specified
in such financial statements or the notes thereto,and
except that unaudited financial statements may not contain all footnotes
required by GAAP or may be condensed or summary statements, and fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments. All material agreements to which the Company or any of
its Subsidiaries is a party or to which the property or assets of the Company or
any of its Subsidiaries are subject are included as part of or identified
pursuant to the rules and regulations of the Commission.
(i) Press
Releases. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.
(j) Material
Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or in Schedule 3.1(j)
hereto, (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 material liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses and other 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) the Company has not altered its method of accounting or the
identity of its auditors, except as disclosed in its SEC Reports, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders, in their capacities as such, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (except for repurchases by the Company of shares of capital stock held by
employees, officers, directors or consultants pursuant to an option of the
Company to repurchase such shares upon the termination of employment or
services), and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans. The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do
so. The Company is not as of the date hereof, and after giving effect
to the transactions contemplated hereby to occur at the applicable Closing, will
not be Insolvent (as defined immediately hereinafter). For purposes
of this Section
3.1(j), “Insolvent” means (i) the
present fair saleable value of the Company’s assets is less than the amount
required to pay the Company’s total Indebtedness (as defined in Section 3.1(bb)),
(ii) the Company is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured, (iii) the Company intends to incur or believes that it will incur debts
that would be beyond its ability to pay as such debts mature or (iv) the Company
has unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.
(k) Absence of
Litigation. Except as described in Schedule 3.1(k),
there is no action, suit claim or Proceeding, or, to the Company’s knowledge,
inquiry or investigation,before or
by any court, public board, government agency, self-regulatory organization or
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body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries that could, individually or in the aggregate,
have a Material Adverse Effect.
(l) Labor
Relations. The Company and its Subsidiaries are in compliance
in all material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours.
(m) Compliance. Except
as described in Schedule 3.1(m),
neither the Company nor any of its Subsidiaries, except in each case as would
not, individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect, (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 relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters. The Company is in compliance
with all effective requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where the failure to so comply would not have a Material Adverse
Effect.
(n) 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 could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any of its Subsidiaries has received any written notice of
proceedings relating to the revocation or modification of any such
permits.
(o) Title to
Assets. The Company and its Subsidiaries own no real property,
except as provided in Schedule
3.1(o)(i). Except as provided in Schedule 3.1(o)(ii),
the Company and its Subsidiaries have good and marketable title in all personal
property owned by them, in each case free and clear of all Liens. Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the Company
and its Subsidiaries are in material compliance.
(p) Patents and
Trademarks. The Company and its Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in
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the
aggregate, have or reasonably be expected to resultin a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Except as set forth in Schedule 3.1(p), none
of the Company’s Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. Neither the Company nor any of its Subsidiaries has any
knowledge that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of others. Except as
set forth in Schedule
3.1(p), the Company does not have knowledge of any infringement by others
of Intellectual Property Rights of the Company or its
Subsidiaries. Except as provided in Schedule 3.1(p),
there is no claim, action or proceeding being made or brought, or to the
knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding Intellectual Property Rights. Except as
provided in Schedule
3.1(p), the Company and its Subsidiaries have good and marketable title
in all Intellectual Property Rights owned by them, in each case free and clear
of all Liens.
(q) Insurance. The
Company and its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and its Subsidiaries are
engaged. The Company has no reason to believe that it will not be
able to renew its and its Subsidiaries’ existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its and its Subsidiaries’ business on terms consistent
with market for the Company’s and such Subsidiaries’ respective lines of
business.
(r) Transactions With Affiliates
and Employees. Except as set forth or incorporated by
reference in the Company’s SEC Reports, none of the officers, directors or
employees of the Company is presently a party to any transaction that would be
required to be reported on Form 10-K with the Company or any of its Subsidiaries
(other than for ordinary course 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 employee or, to the knowledge of the Company, any entity in which
any officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.
(s) Internal Accounting
Controls. The Company and its Subsidiaries maintain 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-15(e) and 15d-15(e)) 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. 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 effectivenessof the
disclosure
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10-43
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.
(t) No General Solicitation;
Fees. Neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Shares or the Underlying Shares. The Company shall be responsible for
the payment of any placement agent’s fees, financial advisory fees, or brokers’
commission (other than for Persons engaged by any Investor or its investment
advisor) relating to or arising out of the issuance of the Shares pursuant to
this Agreement. The Company shall pay, and hold each Investor
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of-pocket expenses) arising in connection
with any such claim for fees arising out of the issuance of the Shares pursuant
to this Agreement. The Company has not engaged any placement agent or
other agent in connection with the sale of the Shares.
(u) Registration
Rights. Except as specified in Schedule 3.1(u), the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other Governmental Authority except for
such rights that by their terms have expired or terminated and are no longer
effective as of the Closing Date or which are subject to currently effective
registration statements previously filed by the Company, as set forth on Schedule
3.1(u).
(v) Listing and Maintenance
Requirements. The Company has not, in the two years preceding
the date hereof, received notice (written or oral) 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
thereof. 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. The issuance and sale of the
Securities under the Transaction Documents does not contravene the rules and
regulations of the Trading Market on which the Common Stock is currently listed
or quoted.
(w) Investment
Company. The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended.
(x) Application of Takeover
Protections. Except as described in Schedule 3.1(x),
there is no 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
formation, as amended (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to any of the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation, as a result of the Company’s issuance of the Shares and the
Investors’ ownership of the Shares.
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(y) No Additional
Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction
Documents.
(z) Consultation with
Auditors. The Company has consulted its independent auditors
concerning the accounting treatment of the transactions contemplated by the
Transaction Documents, and in connection therewith has furnished such auditors
complete copies of the Transaction Documents.
(aa) Disclosure. The
Company confirms that, except with respect to information, including
projections, disclosed to the Investors, or any of them, as a result of their
positions as members or observers of the Company’s Board of Directors, neither
it nor any Person acting on its behalf has provided any of the Investors or
their respective agents or counsel with any information that constitutes or
might constitute material, non-public information (other than the existence and
terms of the issuance of the Shares, as contemplated by this Agreement)
concerning the Company, any of its Subsidiaries or their respective
businesses. The Company understands and confirms that each of the
Investors will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. Subject to the assumptions
and qualifications stated therein, all disclosure provided to the Investors
regarding the Company, its Subsidiaries or their respective businesses and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Schedules to this Agreement) are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not
misleading. To the Company’s knowledge, except for the transactions
contemplated by this Agreement, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that no Investor makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those set forth in the Transaction
Documents.
(bb) Indebtedness. Except
as disclosed in Schedule 3.1(bb) or
in the Company’s SEC Reports, neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness (as defined below), (ii) is in violation of
any term of or in default under any contract, agreement or instrument relating
to any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect (provided that, if the effect
of such violation or default is to cause or to permit the holder or holders then
to cause any such Indebtedness to become or be declared due prior to its stated
maturity it shall be deemed to be a Material Adverse Effect), or (iii) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. Schedule 3.1(bb)
provides a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or paymentobligations
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with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease,
(G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; and (y) “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto.
(cc) Foreign Corrupt
Practices. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any director, officer, agent, employee or
other Person acting on behalf of the Company or any of its Subsidiaries has, in
the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
(dd) Acknowledgment Regarding
Investors’ Purchase of Securities. Based upon the assumption
that the transactions contemplated by this Agreement are consummated in all
material respects in conformity with the Transaction Documents, the Company
acknowledges and agrees that each of the Investors is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby. The Company
further acknowledges that no Investor is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
Investor or any of their respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investors’ purchase of the
Securities. The Company further represents to each Investor that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
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(ee) Employee
Relations. Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement or employs any member of a
union. The Company believes that its relations with its employees are
as disclosed in the SEC Reports. Except as disclosed in the SEC
Reports, during the period covered by the SEC Reports, no executive officer of
the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
Securities Act) has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such
Subsidiary. To the knowledge of the Company or any such Subsidiary,
no executive officer of the Company or any of its Subsidiaries is in violation
of any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any such
Subsidiary to any liability with respect to any of the foregoing
matters.
(ff) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance
in all material respects with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses, and (iii) are in compliance in all material respects with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(gg) Subsidiary
Rights. Except as set forth in Schedule 3.1(gg), the
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(hh) Tax
Status. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and (iii) has set
aside on its books provision reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
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(ii) Right of First
Offer. Except as set forth on Schedule 3.1(ii), the
Company has not granted to any Person any rights of first offer or rights of
first refusal with respect to the provision or obtaining of any debt or equity
financing, including, but not limited to, any rights to provide additional
financing currently available under the credit facilities described on Schedule 3.1(bb)
hereto, except for such rights of first offer or rights of first refusal that by
their terms have expired or terminated and are no longer effective as of the
Closing Date.
3.2. Representations and
Warranties of the Investors
. Each
Investor hereby, for itself and for no other Investor, represents and warrants
to the Company as follows, as of the date hereof and as of the
Closing:
(a) Organization;
Authority. Such Investor (other than Xxxxxxx Xxxxxxx and
Xxxxxx Xxxxxxx) is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and
to consummate the transactions contemplated by the applicable Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by such Investor (other than Xxxxxxx
Xxxxxxx and Xxxxxx Xxxxxxx) of this Agreement and the other Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Investor. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with the terms hereof and thereof, will constitute the
valid and legally binding obligation of such Investor, enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies and (ii) other equitable principles of general
application.
(b) No Public Sale or
Distribution. Such Investor is acquiring the Shares in
the ordinary course of business, as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Shares or any part thereof, except pursuant to sales registered under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws, and such Investor does not
have a present arrangement to effect any distribution of the Shares to or
through any Person or entity; provided, however, that by making the
representations herein, such Investor does not agree to hold any of the Shares
for any minimum or other specific term and reserves the right to dispose of the
Shares at any time in accordance with or pursuant to a registration statement or
an exemption under the Securities Act.
(c) Investor
Status. At the time such Investor was offered the Shares, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act or a “qualified institutional buyer” as defined
under Rule 144A(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act, or a member of
the NASD, Inc., or an entity engaged in the business of being a broker
dealer. Except as otherwise disclosed in writing to the Company on
Exhibit B-2
(attached
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10-43
hereto)
on or prior to the date of this Agreement, such Investor is not affiliated with
any brokerdealer
registered under Section 15(a) of the Exchange Act, or a member of the NASD,
Inc., or an entity engaged in the business of being a broker
dealer.
(d) Experience of Such
Investor. Such Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Shares, and has so evaluated the merits and
risks of such investment. Such investor understands that it must bear
the risk of this investment in the Shares indefinitely, and is able to bear such
risk and is able too afford a complete loss of such investment.
(e) Access to
Information. Such Investor acknowledges that it has reviewed
the Disclosure Materials and has been afforded: (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (provided, if any such
information constitutes material non-public information, the Company shall (I)
inform such Investor thereof at the time such information is provided and (II)
make such information publicly available by furnishing or filing a Form 8-K with
the Commission no later than the Closing Date; provided, however, the Company shall
not be required to make public, disclose or file information, including
projections, disclosed to the Investors, or any of them, as a result of their
positions as members or observers of the Company’s Board of Directors) about the
Company and its Subsidiaries and their respective financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor
any other investigation conducted by or on behalf of such Investor or its
representatives or counsel shall modify, amend or affect such Investor’s right
to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction
Documents. Such Investor acknowledges receipt of copies of the SEC
Reports.
(f) No Governmental
Review. Such Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Shares or the
fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the
Shares.
(g) No
Conflicts. The execution, delivery and performance by such
Investor of this Agreement and the consummation by such Investor of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents, if any, of such Investor, or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Investor, except in the case of
clauses (ii) and (iii) above, for such that are not material and do not
otherwise affect the ability of such Investor to consummate the transactions
contemplated hereby.
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(h) Restricted
Securities. The Investors understand that the Shares are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such Shares may be resold without registration under the Securities Act only in
certain limited circumstances.
(i) Legends. It
is understood that, except as set forth in Section 4.1(b) of
this Agreement, certificates evidencing such Shares may bear the legend set
forth in Section
4.1(b).
(j) No Legal, Tax or Investment
Advice. Such Investor understands that nothing in this
Agreement or any other materials presented by or on behalf of the Company to the
Investor in connection with the purchase of the Securities constitutes legal,
tax or investment advice. Such Investor has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Securities.
The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
3.2.
ARTICLE
4.
OTHER
AGREEMENTS OF THE PARTIES
4.1. Transfer Restrictions;
Legends. (a)
Shares may only be disposed of pursuant
to an effective registration statement under, and in compliance with the
requirements of, the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of
the Securities other than pursuant to an effective registration statement, to
the Company, to an Affiliate of an Investor or in connection with a pledge as
contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable 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. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the books of
the Company and with its Transfer Agent, without any such legal opinion, except
to the extent that the Transfer Agent requests such legal opinion, any transfer
of Shares by an Investor to an Affiliate of such Investor, provided that the transferee
certifies to the Company that it is an “accredited investor” as defined in Rule
501(a) under the Securities Act and provided that such Affiliate
does not request any removal of any existing legends on any certificate
evidencing the Shares and the Company reasonably believes such transfer is in
compliance with all applicable securities laws.
(b) The
Investors agree to the imprinting, so long as is required by this Section 4.1(b), of
the following legend on any certificate evidencing any of the
Shares:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION
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FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS 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
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY
LAWS.
Certificates
evidencing Shares shall not be required to contain such legend or any other
legend (i) following any sale of such Shares pursuant to an effective
registration statement (including the Registration Statement) covering the
resale of the Shares, (ii) in connection with a sale, assignment or other
transfer, provided such
holder provides the Company with an opinion of counsel reasonably satisfactory
to the Company, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act and that such legend is no longer
required, or (iii) upon such holder’s providing the Company with assurance
reasonably acceptable to the Company, including customary seller and broker
representation letters, that the Shares can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A under the Securities Act. The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Transfer Agent on the Effective
Date. Following the Effective Date or at such earlier time as a
legend is no longer required for certain Shares, the Company will, no later than
three Trading Days following the delivery by an Investor to the Company or the
Transfer Agent of (i) a legended certificate representing such Shares and (ii)
an opinion of counsel or such other information to the extent required by Section 4.1(a) or
Section 4.1(b),
deliver or cause to be delivered to such Investor a certificate representing
such Shares that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth in this Section
4.1(b).
If within
three Trading Days after the Company’s receipt of a legended certificate and the
other documents as specified in Clauses (i) and (ii) of the paragraph
immediately above, the Company shall fail to issue and deliver to such Investor
a certificate representing such Shares that is free from all restrictive and
other legends, and if on or after such Trading Day the Investor purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Investor of shares of Common Stock that the
Investor anticipated receiving from the Company without any restrictive legend
(the “Covering Shares”),
then the Company shall, within three Trading Days after the Investor’s request,
pay cash to the Investor in an amount equal to the excess (if any) of the
Investor’s total purchase price (including brokerage commissions, if any) for
the Covering Shares, over the product of (A) the number of Covering Shares,
times (B) the closing bid price on the date of delivery of such certificate and
the other documents as specified in Clauses (i) and (ii) of the paragraph
immediately above.
(c) The
Company will not object to and shall permit (except as prohibited by law) an
Investor to pledge or grant a security interest in some or all of the Shares in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Shares, and if required under the terms of such
agreement, loan or arrangement, the Company will notobject to
and shall permit (except as prohibited by law) such Investor to transfer pledged
or secured Shares to the pledgees or secured parties. Except as
required by law, such a
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10-43
pledge or
transfer shall not be subject to approval of the Company, no legal opinion of
the pledgee, secured party or pledgor shall be required in connection therewith,
and no notice shall be required of such pledge. Each Investor
acknowledges that the Company shall not be responsible for any pledges relating
to, or the grant of any security interest in, any of the Shares or for any
agreement, understanding or arrangement between any Investor and its pledgee or
secured party. At the appropriate Investor’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Shares may reasonably request in connection with a pledge or transfer
of the Shares, 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. Provided that the Company is
in compliance with the terms of this Section 4.1(c), the
Company’s indemnification obligations pursuant to Section 4.7 shall not
extend to any Proceeding or Losses arising out of or related to this Section
4.1(c).
4.2. Furnishing of
Information
. Until
the date that any Investor owning Shares may sell all of them under Rule 144 of
the Securities Act (or any successor provision), the Company covenants to use
its Best Efforts 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. The
Company further covenants that it will take such further action as any holder of
Shares may reasonably request to satisfy the provisions of this Section
4.2.
4.3. Integration
. The
Company shall not, and shall use its Best Efforts to ensure that no Affiliate of
the Company shall, 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 Shares in a manner
that would require the registration under the Securities Act of the sale of the
Shares to the Investors, or that would be integrated with the offer or sale of
the Shares for purposes of the rules and regulations of any Trading
Market.
4.4. Reservation of
Securities. The Company shall, at all times, maintain a
reserve from its duly authorized Shares of Shares for issuance pursuant to the
Transaction Documents. In addition, the Company shall, as soon as
possible, but in no event later than June 30, 2008, maintain a reserve from its
duly authorized shares of Common Stock a sufficient number of shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may
be required to fulfill its obligations to issue such shares of Common Stock upon
conversion of the Shares or otherwise under the Transaction
Documents. In the event that at any time the then authorized Shares
of shares of Common Stock are insufficient for the Company to satisfy its
obligations to issue such Shares or shares of Common Stock under the Transaction
Documents, the Company shall promptly take such actions as may be required to
increase the number of authorized and reserved Shares and shares of Common
Stock, as applicable.
4.5. Securities Laws Disclosure;
Publicity. The
Company shall, promptly after the Closing, but in no event later than 5:30 p.m.,
New York time, on the Business Day following the Closing, issue a press release
reasonably acceptable to the Investors disclosing all material
terms
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of the
transactions contemplated hereby and by the Credit Agreement. The
Company shall, promptly after the Closing, but in no event later than the second
Business Day following the Closing Date, file a Current Report on Form 8-K with
the Commission (the “8-K
Filing”) describing the terms of the transactions contemplated by the
Transaction Documents and the Credit Agreement, in the form required by the
Exchange Act. Thereafter, the Company shall timely file any filings
and notices required by the Commission or applicable law with respect to the
transactions contemplated hereby and by the other Transaction Documents and
shall provide copies thereof to the Investors promptly after
filing. Except as herein provided, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
press release without the prior written consent of such Investor, unless
otherwise required by law. The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide any Investor with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the issuance of the above referenced press release without the express
written consent of such Investor.
4.6. Use of
Proceeds. The Company does not anticipate receiving any
proceeds under the Transaction Documents. To the extent that the
Company does receive any proceeds under the Transaction Documents or in
connection with the transactions contemplated thereby, the Company intends to
use such proceeds for the payment of fees and expenses related to the
transactions contemplated hereby and by the other Transaction Documents and then
to use any remaining proceeds for product development, working capital and
general corporate purposes.
4.7. Indemnification of
Investors
. In
consideration of each Investor’s execution and delivery of the Transaction
Documents and acquisition of the Shares thereunder, and in addition to all of
the Company’s other obligations under the Transaction Documents, including the
indemnity provided in the Registration Rights Agreement, the Company will
defend, protect, indemnify and hold harmless each of the Investors, each other
holder of Shares, and their respective stockholders, directors, officers,
shareholders, partners, members, employees and agents or other representatives
(each, an “Investor
Party”) from any and all Losses that any such Investor Party may suffer
or incur as a result of, arising out of or relating to (a) any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document or any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement or obligation of the Company contained in
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Investor Party by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out
of or resulting from (i) the execution, delivery, performance or enforcement of
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Shares, or (iii) the status of such Investor or holder of the Shares or
the Underlying Shares as an investor in the Company, except, in each case,
solely to the extent arising out of the gross negligence, fraud or other
intentional misconduct by such Investor Party, any material misrepresentation or
material breach of any representation or warranty made by the Investor Party in
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or material breach of any covenant, agreement or
obligation of
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10-43
the
Investor Party contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the indemnified Losses which is permissible under
applicable law. In addition to the indemnity contained herein, the
Company will reimburse each Investor Party 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. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 4.7 shall be
the same as those set forth in Section 5 of the Registration Rights
Agreement.
4.8. Listing of
Securities
. The
Company agrees, (i) if the Company applies to have the Common Stock traded on
any other Trading Market, it will include in such application the Underlying
Shares, and will take such other action as is necessary or desirable to cause
the Underlying Shares to be listed on such other Trading Market as promptly as
possible, and (ii) it 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.
4.9. Stockholder
Approval.
(a) The
Company covenants and agrees to obtain the approval of its stockholders, and to
take all requisite actions in order to increase the number of authorized shares
of Common Stock by a number of shares as shall be sufficient to fully reserve
shares for issuance upon conversion of the Shares (collectively “Stockholder Approval”) which
Stockholder Approval shall occur as soon as possible, but in no event later than
June 30, 2008.
(b) In
furtherance of obtaining the Stockholder Approval, (i) the Company shall adopt
proper resolutions authorizing the actions set forth in subsection (a) above,
(ii) the Board of Directors of the Company shall recommend and the Company shall
otherwise use its Best Efforts to promptly and duly obtain Stockholder Approval,
including, without limitation, soliciting proxies from its stockholders in
connection therewith in the same manner as all other management proposals in
such proxy statement and having all management-appointed proxy-holders vote
their proxies in favor of such proposals to carry out such resolutions, and
(iii) within three Business Days of obtaining such Stockholder Approval, take
all actions necessary to effectuate the actions set forth in subsections (b)(i)
and (b)(ii) above.
4.10. Ranking. The
Shares shall rank senior to any class of equity security of the
Company.
4.11. Cancellation of
Notes. With respect to each Investor that holds a Promissory
Note issued by the Company as set forth on Exhibit A hereto, all
obligations, liabilities, covenants and agreements of the Company under or in
connection with the Note and Warrant Purchase Agreement, dated as of February 5,
2007 and June 15, 2007, respectively, and each related Promissory Note issued
thereunder, are, as to each Investor, hereby terminated and cancelled and are of
no further force or effect upon Closing and receipt by each Investor of (i) a
certificate evidencing its respective Shares pursuant to Section 2.3(a)(iv),
(ii) in the case of AFSInvestments,
Inc., Rubicon Global Value Fund,
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10-43
L.P. and
Xxxxxxxxx Xxxxxx, payment at Closing of accrued and unpaid interest in the
amounts set forth on Exhibit A and (iii)
payment to each Investor of interest accrued and unpaid for the period from (and
including) June 1, 2008 to (but excluding) the Closing Date, which certificates
and payments have been tendered by the Company and accepted by each Investor as
full payment and satisfaction for the Promissory Note(s) issued to such Investor
and the Company’s obligations thereunder and under the Note and Warrant Purchase
Agreement under which such Promissory Note was issued, except as may otherwise
be provided in connection with a rescission pursuant to Section 6.1.
ARTICLE
5.
CONDITIONS
PRECEDENT TO CLOSING
5.1. Conditions Precedent to the
Obligations of the Investors
. The
obligation of each Investor to acquire Shares at the Closing is subject to the
satisfaction or waiver by such Investor, 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 for representations
and warranties that speak as of a specific date which shall be true and correct
as of such specified date);
(b) Performance. The
Company and each Investor shall have performed, satisfied and complied 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) Company
Deliverables. The Company shall have delivered each of the
Company Deliverables; and
(d) Executed Loan
Documents. The Loan Documents including but not limited to (a)
the Credit Agreement, (b) the Notes, (c) the Pledge and Security Agreement, and
(d) the Depositary Account Control Agreement, and all other documents and
instruments contemplated by such agreements, shall have been duly authorized and
executed by each of the parties thereto in form and substance reasonably
satisfactory to Phoenix, Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx, and the Company
shall have delivered sufficient original counterparts thereof to Phoenix,
Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx.
5.2. Conditions Precedent to the
Obligations of the Company
. The
obligation of the Company to sell Shares at the Closing to each Investor 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 of such
Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made
on and as of such date (except for representations and warranties that speak as
of a specific date which shall be true and correct as of such specified
date);
(b) Performance. Such
Investor shall have performed, satisfied and complied in all material respects
(except as to those
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covenants,
agreements and conditions qualified bymateriality)
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;
(c) Promissory
Notes. Not less than $945,000 in principal of the Promissory
Notes shall be tendered as payment for the Shares; and
(d) Investor
Deliverables. Such Investor shall have delivered each of the
Investor Deliverables to be delivered by such Investor at the
Closing.
ARTICLE
6.
MISCELLANEOUS
6.1. Rescission. In
the event that the Company fails to meet the requirements of Section 4.9 herein,
the Company shall make a rescission offer to the holders of the Shares by
sending to each holder, on or before July 7, 2008, a notice (the “Rescission Notice”) of such
rescission offer, which shall specify the rescission rights including the date
by which the rescission offer must be accepted, the method of acceptance, the
documents (including certificates for Shares) that are required for acceptance,
and the consideration to be received. Each holder may accept such
rescission offer, in whole or in part, in its sole discretion, by sending a
notice of acceptance (“Notice of Acceptance”) of such
rescission offer on or prior to August 4, 2008 (or such later date as the
Company shall specify in the Rescission Notice), stating the number of Shares
such holder will rescind. The Company shall make a payment to each
holder of Shares who accepts the rescission offer, promptly (and in no event
more than three (3) Business Days) (the “Rescission Payment Date”)
following such holder’s tendering certificate(s) for all or such portion of its
Shares as are specified in the Notice of Acceptance, consideration identical to
the consideration paid by such holder for such Shares by reissuing to such
holder its Promissory Note or issuing to such holder a new promissory note
identical in all respects to such holder’s Promissory Note, in a principal
amount equal to one dollar ($1.00) for each Share being rescinded, plus, at the
holder’s option: (i) an amount in cash equal to all accrued but unpaid dividends
on the Shares being rescinded to the Rescission Payment Date, or (ii) an amount
in cash equal to the accrued but unpaid interest on such holder’s Promissory
Note (or new promissory note, as the case may be) being reissued (or issued, as
the case may be) to such holder pursuant hereto, as would have accrued had it
been outstanding from the Closing Date to the Rescission Payment Date (in each
case, as adjusted to reflect forward or reverse stock splits, stock dividends,
recapitalizations or other similar capital reorganization or reclassification of
capital stock) (the “Rescission
Price”). The Shares not rescinded shall remain outstanding and
entitled to all the rights and preferences provided herein other than those
rights set forth in this Section
6.1. To the extent applicable, the Company shall issue
replacement certificates representing any Shares not rescinded to be delivered
to such holder with such holder’s Rescission Price. Upon rescission,
all rights of the holders of Shares so rescinded shall cease with respect to
such Shares, and such Shares shall not thereafter be transferred on the books of
the Company or be deemed to be outstanding for any purpose and shall be
automatically and immediately canceled and shall not be reissued or sold, and
neither the Company nor any of its Subsidiaries shall be a
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holder
of, nor may any of them exercise any rights granted to holders of, such Shares
following rescission. Upon return of all or any portion of such
holder’s PromissoryNote,
along with the Rescission Price and any other deliverables pursuant to this
Section 6.1,
interest shall accrue on such Promissory Note pursuant to the original terms set
forth therein.
6.2. Fees and
Expenses. The Company shall pay all fees, costs and expenses
(including legal fees, due diligence costs, expenses of attorneys and costs of
advisers, counsel, accountants and other experts, if any) incurred by any party
to this Agreement in connection with (a) any matters contemplated by or
arising out of this Agreement and the Transaction Documents, (b) the
examination, review, due diligence investigation, documentation, negotiation and
closing of the transactions contemplated herein; (c) the continued
administration of the Transaction Documents, including any such fees, costs and
expenses incurred in perfecting, maintaining, determining the priority of and
releasing any security, any tax payable in connection with any Transaction
Documents and any amendments, modifications and waivers thereof; (d) any
amendment, supplement, waiver or modification of any of the Transaction
Documents; and (e) any default and any enforcement of collection proceeding
resulting therefrom or any workout or restructuring of any of the transactions
hereunder or contemplated thereby or any action to enforce any Transaction
Document or to collect any payments due from the Company; provided, however, that the aggregate
amount of subsections (a) and (b) and the legal fees and expenses, due diligence
costs, costs of advisers, counsel, accountants and other experts, if any, and
all other expenses that occur pre-Closing shall be paid by the Company to
Phoenix or its designee at Closing.
6.3. 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, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further
consideration, the Company will execute and deliver to the Investors such
further documents as may be reasonably requested in order to give practical
effect to the intention of the parties under the Transaction
Documents.
6.4. 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 or e-mail at the facsimile number or
e-mail address specified in this Section 6.4 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 or e-mail at the facsimile number or e-mail address 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 deposit
with a nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The
addresses, facsimile numbers and e-mail addresses for such notices and
communications are those set forth on the signature pages hereof, or such other
address, facsimile number or e-mail address as may be designated hereafter, in
the same manner, by any such Person.
6.5. 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
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and each
of the Investors 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 any party to exercise any right hereunder in any
manner impair the exercise of any such right.
6.6. 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.
6.7. 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 the Investors holding a majority of the Shares. Any
Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers (including by way of distribution to its members,
partners or stockholders) any Securities, provided (i) such
transferor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of the name and
address of such transferee or assignee, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, (iv) such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions hereof that apply to the “Investors”,
and (v) such transfer shall have been made in accordance with the applicable
requirements of this Agreement and with all laws applicable
thereto.
6.8. 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.
6.9. Governing Law; Venue; Waiver
of Jury Trial
. THE
CORPORATE LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE
RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING
IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY
DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, 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 WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT,
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10-43
ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING 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. THE
COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
6.10. Survival
. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing.
6.11. 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 or e-mail attachment, 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.
6.12. 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.
6.13. Rescission and Withdrawal
Right
. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Investor exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Investor may rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights.
6.14. 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 the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company for any losses in connection therewith. 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.
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EXHIBIT
10-43
6.15. Remedies
. In
addition to being entitled to exercise all rights provided herein or in the
other Transaction Documents or granted by law or any other agreement or
contract, including recovery of damages, each Investor, each other holder of
Shares and the Company will be entitled to seek 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 (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate. Furthermore, the Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under the Transaction Documents, any remedy at law may prove to be inadequate
relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.
6.16. Payment Set
Aside
. To the
extent that the Company makes a payment or payments to any Investor pursuant to
any Transaction Document or an Investor 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.
6.17. 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 any 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.
6.18. Adjustments in Share Numbers
and Prices
. In
the event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof, each reference in any Transaction Document to a number of
shares or a price per share shall be amended to appropriately account for such
event.
6.19. Independent Nature of
Investors’ Obligations and Rights
. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Documents. The decision of each
Investor to purchase Securities pursuant to this Agreement has been made by such
Investor independently of any other Investor and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of
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EXHIBIT
10-43
operations,
condition (financial or otherwise) or prospects of the Company which may have
been made or given by any other Investor or by any agent or employee of any
other Investor, and no Investor or any of its agents or employees shall have any
liability to any other Investor (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Investor pursuant thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors 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 Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its
investment hereunder and that no other Investor will be acting as agent of such
Investor in connection with monitoring its investment hereunder. Each
Investor 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
Investor to be joined as an additional party in any Proceeding for such
purpose.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOLLOW]
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EXHIBIT
10-43
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.
By: /s/ Xxxxx
XxXxxxxxxx
Name: Xxxxx
X. XxXxxxxxxx
Title:
Chief Executive Officer and President
Address
for Notice:
000
Xxxxxxxxx Xxxxx, #000
Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
Attn: Xxxxx
Xxxx
With a
copy to:
Xxxxx
Xxxxxx Xxxxxxxx LLP
0000 XX
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx,
Xxxxxx 00000
Facsimile: (000)
000-0000
Telephone:
(000) 000-0000
Attn:
Xxxxxxx X. Xxxxxxx, Esq.
COMPANY
SIGNATURE PAGE
-
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EXHIBIT
10-43
Investor Signature
Page
By its execution and delivery of this
signature page, the undersigned Investor hereby joins in and agrees to be bound
by the terms and conditions of the Securities Purchase Agreement dated as
of June 5, 2008 (the “Purchase Agreement”) by and
among Communication Intelligence Corporation and the Investors (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of
Investor:
By:
Rubicon Global Value Fund, L.P.
By:
/s/ Xxxxxx
Xxxx
Name: Xxxxxx Xxxx
Title: Managing Director
Address:
Xxx XX Xxxxxxxx Xx. Xxxxx 000
Xxxxxxxx, XX 00000
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
Email
Address: xxxxx@xxxxxxxxxxxx.xxx
Number of
Shares: 75,000
Aggregate
Purchase Price: $75,000
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EXHIBIT
10-43
Investor Signature
Page
By its execution and delivery of this
signature page, the undersigned Investor hereby joins in and agrees to be bound
by the terms and conditions of the Securities Purchase Agreement dated as
of June 5, 2008 (the “Purchase Agreement”) by and
among Communication Intelligence Corporation and the Investors (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of
Investor:
By: Kendu
Partners
By:
/s/ Xxxxxxx X.
Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: General Partner
Address: c/x Xxxxxxx Options
000
Xxxx Xx. Xxxxx
000
Xxx Xxxxxxxxx, XX 00000
Xxx Xxxxxxxxx, XX 00000
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
Email
Address: Xxxx.Xxxxxxx@xxxxxxxxxxxxxx.xxx
Number of
Shares: 320,000
Aggregate
Purchase Price: $320,000
-
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EXHIBIT
10-43
Investor Signature
Page
By its execution and delivery of this
signature page, the undersigned Investor hereby joins in and agrees to be bound
by the terms and conditions of the Securities Purchase Agreement dated as
of June 5, 2008 (the “Purchase Agreement”) by and
among Communication Intelligence Corporation and the Investors (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of
Investor: Xxxxxxx Xxxxxxx
By:
By:
/s/ Xxxxxxx X.
Xxxxxxx
Name: Xxxxxxx
Xxxxxxx
Title:
Address: 00
Xxx Xxxxxxxx Xxx
Xxx
Xxxxxxxxx, XX 00000
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
Email
Address: XXXX.XXXXXXX@XXXXXXXXXXXXXX.XXX
(small letters)
Number of
Shares: 250,000
Aggregate
Purchase Price: $250,000
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EXHIBIT
10-43
Investor
Signature Page
By
its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of June 5, 2008 (the
“Purchase Agreement”)
by and among Communication Intelligence Corporation and the Investors (as
defined therein), as to the number of shares of Common Stock set forth below,
and authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name
of Investor: MDNH Partners, L.P.
By:
MDNH Partners, L.P.
By:
/s/ Xxxxxxx X.
Xxxxxxx
Name: Xxxxxxx X.
Xxxxxxx
Title: General
Partner
Address: MDNH Partners
000 Xxxx Xx., Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
Email
Address: XXXX.XXXXXXX@XXXXXXXXXXXXXX.XXX
Number
of Shares: 150,000
Aggregate
Purchase Price: $150,000
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EXHIBIT
10-43
Investor
Signature Page
By
its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of June 5, 2008 (the
“Purchase Agreement”)
by and among Communication Intelligence Corporation and the Investors (as
defined therein), as to the number of shares of Common Stock set forth below,
and authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name
of Investor:
By:
By:
/s/ Xxxxxxxxx X.
Xxxxxx
Name: Xxxxxxxxx X.
Xxxxxx
Title:
Address:
0000 Xxxxxxxx Xxxxx, Xxxxx #000
Xxxxxxxxxxxx, XX 00000
Telephone
No.: 000 000 0000
Facsimile
No.: 000 000 0000
Email
Address: xxxx.xxxxxx@xxxxxxxx.xxx
Number
of Shares: 50,000
Aggregate
Purchase Price: $50,000.00
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EXHIBIT
10-43
Investor
Signature Page
By
its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of June 5, 2008 (the
“Purchase Agreement”)
by and among Communication Intelligence Corporation and the Investors (as
defined therein), as to the number of shares of Common Stock set forth below,
and authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name
of Investor:
By:
AFS Investments, Inc.
By:
/s/ Xxxx X.
Xxxxxxx
Name: Xxxx X.
Xxxxxxx
Title: President
Address:
00000 Xxxx
Xx
Xx. Xxxxx, XX 00000
Xx. Xxxxx, XX 00000
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
Email
Address: XXXXXXXXXXXXXX@XXX.XXX
Number
of Shares:
Aggregate
Purchase Price:
-
33 -
