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EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 3,
1999, by and among INTERNATIONAL MICROCOMPUTER SOFTWARE, INC., a corporation
organized under the laws of the State of California (the "COMPANY"), with
executive offices located at 00 Xxxxxxx Xxx, Xxxxxx, Xxxxxxxxxx 00000, and the
purchaser (the "PURCHASER") set forth on the execution page hereof (the
"EXECUTION PAGE").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. The Purchaser desires to purchase, subject to the terms and
conditions stated in this Agreement, (i) up to $8,000,000 of the Company's
common stock, no par value (the "COMMON STOCK"), constituting Tranche 1 Shares,
as defined in Section 1(c) below, and Optional Tranche 2 Shares, as defined in
Section 1(d) below, and (ii) warrants in the form attached hereto as Exhibit A
(the "WARRANTS"), to acquire shares of Common Stock. The Tranche 1 Shares,
Optional Tranche 2 Shares, if any, and the Adjustment Shares, as defined in
Section 1(e) below, if any, are collectively referred to herein as the "SHARES"
and the shares of Common Stock issuable upon exercise of or otherwise pursuant
to the Warrants are referred to herein as the "WARRANT SHARES." The Shares, the
Warrants and the Warrant Shares are collectively referred to herein as the
"SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF SHARES AND WARRANTS.
a. Certain Definitions. For purposes of Agreement, the following terms
shall have the meanings ascribed to them as provided below:
"ADJUSTMENT DATE" shall mean the date the registration statement filed
by the Company pursuant to Section 2(a)(i) of the Registration Rights Agreement
is declared effective by the SEC; or, in the event such registration statement
is not declared effective by the SEC within 180 days following the Tranche 1
Closing Date, the earlier of any date selected by the Purchaser
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following such 180 day period or the 365th day following the Tranche 1 Closing
Date (proposed mandatory adjustment on first year anniversary under
consideration).
"ADJUSTMENT DATE MARKET PRICE" shall mean the average Closing Price
during the five (5) Trading Days, as defined below, immediately preceding the
Adjustment Date, appropriately adjusted to reflect any pending stock dividend,
stock split or similar transaction.
"BUSINESS DAY" shall mean any day on which the principal United States
securities exchange or trading market where the Common Stock is listed or traded
as reported by Bloomberg, as defined below, is open for trading.
"CAPITAL TRANSACTION" shall mean any transaction or series of
transactions in which: (a) the Company or any of its material subsidiaries
sells, conveys or disposes of all or substantially all of its assets; (b) the
Company or any of its material subsidiaries merges, consolidates or engages in
any other business combination with any other entity other than a merger in
which the Company is the surviving or continuing entity and its capital stock is
unchanged; (c) the Company has fifty percent (50%) or more of the voting power
of its capital stock owned beneficially by one person, entity or "group" (as
such term is used under Section 13(d) of the Securities Exchange Act of 1934, as
amended); (d) the Company shall declare or make any distribution of its assets
(or rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Company's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off);
(e) there is a recapitalization, reclassification or change of the outstanding
shares of Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination) or (f) there is any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property.
"CLOSING DATE" shall mean the Tranche 1 Closing Date with respect to
the Tranche 1 Shares and Warrants and the Tranche 2 Closing Date with respect to
the Optional Tranche 2 Shares.
"CLOSING PRICE" shall mean for the Common Stock as of any date, the
closing bid price of such security on the principal United States securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg Financial Markets (or a comparable reporting service of national
reputation selected by the Purchaser and reasonably acceptable to the Company if
Bloomberg Financial Markets is not then reporting closing bid prices of such
security) (collectively, "BLOOMBERG"), or if the foregoing does not apply, the
last reported sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc., in each case for such date or, if such
date was not a Trading Day (as defined below) for such security, on the next
preceding day which was a Trading Day. If the Closing Price cannot be calculated
for a share of Common Stock as of either of such dates on any of the foregoing
bases, the Closing Price of such security
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on such date shall be the fair market value as reasonably determined by an
investment banking firm selected by the Purchaser and reasonably acceptable to
the Company, with the costs of such appraisal to be borne by the Company.
"FINANCING TRANSACTION" shall mean any financing transaction pursuant
to Regulation D and/or any other private placement exemption of equity
securities of the Company, or securities or rights convertible into or
exercisable or exchangeable for such securities, involving (i) an amount in
excess of $500,000 and (ii) securities which, based on the purchase price paid,
reflect a valuation of the Company which, when expressed on the basis of a share
of Common Stock is less than seventy percent (70%) of the Market Price on the
Tranche I Closing Date; provided that the definition of Financing Transaction
shall not include mergers and other strategic transactions the primary purpose
of which is not to raise capital or transactions presently under consideration
by the Company and disclosed in writing by the Company to the Purchaser on the
Tranche 1 Closing Date.
"MARKET PRICE" shall mean with respect to any date of determination (i)
the average Closing Price during the five (5) Trading Days, as defined below,
preceding such date of determination or (ii) the Closing Price on the Trading
Day immediately preceding such date of determination, whichever price is lower,
and in each case appropriately adjusted to reflect any pending stock dividend,
stock split or similar transaction.
"MATERIAL ADVERSE EFFECT" shall mean any material adverse effect on (i)
the ability of the Company to perform its obligations hereunder (including the
issuance of the Shares and the Warrants) and under the Warrants (including the
issuance of the Warrant Shares) or the Registration Rights Agreement or (ii) the
business, operations, properties or financial condition of the Company and its
subsidiaries, taken as a whole.
"ROFO FINANCING TRANSACTION" shall mean any financing transaction
involving the issuance of equity or equity-linked securities of the Company, or
securities or rights convertible into or exercisable or exchangeable for such
securities; provided that the definition of ROFO Financing Transaction shall not
include mergers and other strategic transactions the primary purpose of which is
not to raise capital or transactions presently under consideration by the
Company and disclosed in writing by the Company to the Purchaser on the Tranche
1 Closing Date.
"SEC" means the United States Securities and Exchange Commission.
"SHARE LIMIT" shall mean a number equal to the quotient of (x) Five
Million Dollars ($5,000,000) and (y) the product of (1) the Market Price on the
Tranche 1 Closing Date and (2) .70. From the Tranche 1 Closing Date through and
including the Adjustment Date, if the Company conducts a Financing Transaction,
then the Share Limit shall be adjusted ("SHARE LIMIT ADJUSTMENT") to the
quotient of (A) Five Million Dollars ($5,000,000) and (B) the valuation per
share of the securities to be sold by the Company in such Financing Transaction.
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"TRADING DAY" shall mean a Business Day on which the Common Stock
trades on the principal United States securities exchange or trading market
where such security is listed or traded as reported by Bloomberg.
b. Generally. Except as otherwise provided in this Section 1 and
subject to the satisfaction (or waiver) of the conditions set forth in Section 5
and Section 6 below, the Purchaser shall purchase the Warrants and the number of
Shares determined as provided in this Section 1, and the Company shall issue and
sell such Warrants and Shares to the Purchaser for the purchase price(s) as
provided below.
c. Tranche 1 Purchase Price; Number of Tranche 1 Shares and Warrants;
Form of Payment; Tranche 1 Closing Date.
i. On the Tranche 1 Closing Date, the Company shall sell and
the Purchaser shall buy (A) the number of whole shares of Common Stock
as is equal to the quotient of (I) Five Million Dollars ($5,000,000)
divided by (II) an amount (the "TRANCHE 1 PER SHARE PRICE") equal to
$11.425, and (B) Warrants to acquire the number of Warrant Shares equal
to thirty percent (30%) of the number of Tranche 1 Shares. The shares
of Common Stock acquired on the Tranche 1 Closing Date are referred to
herein as the "TRANCHE 1 SHARES." On the Tranche 1 Closing Date, the
Purchaser shall pay the Company an amount (the "TRANCHE 1 PURCHASE
PRICE") equal to the product of (i) the number of Tranche 1 Shares to
be acquired on the Tranche 1 Closing Date in accordance with the terms
of this Section 1 and (ii) the Tranche 1 Per Share Price which amount
shall constitute the total purchase price for the Tranche 1 Shares and
the Warrants.
ii. On the Tranche 1 Closing Date, the Purchaser shall pay the
Tranche 1 Purchase Price by wire transfer to the Company, in accordance
with the Company's written wiring instructions against delivery of
certificates representing the Tranche 1 Shares and duly executed
Warrants and the Company shall deliver the Tranche 1 Shares and the
Warrants against delivery of the Tranche 1 Purchase Price.
iii. Subject to the satisfaction (or waiver) of the conditions
thereto set forth in Section 5 and Section 6 below, the date and time
of the sale of the Tranche 1 Shares and the Warrants pursuant to this
Agreement (the "TRANCHE 1 CLOSING") shall be 5:00 p.m. San Francisco
Time on March 5, 1999 or such other date as the parties may mutually
agree ("TRANCHE 1 CLOSING DATE"). The Tranche 1 Closing shall occur at
the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, Xxx Xxxxxxxxxx Xxxxxx,
Xxxxxxx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, or at such other place
as the parties may otherwise agree.
d. Tranche 2 Purchase Price; Number of Optional Tranche 2 Shares; Form
of Payment; Tranche 2 Closing Date.
i. Upon both (A) the expiration of 18 months following the
Tranche 1 Closing Date (the "TRANCHE 2 TRIGGER DATE"), and, if earlier,
(B) the announcement of a transaction which, if consummated, would be a
Capital Transaction and during the period from such announcement
through and including the date on which the Capital
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Transaction is consummated but in all events no later than the Tranche
2 Trigger Date (the "CAPITAL TRANSACTION PERIOD"), the Purchaser shall
have the right, but not the obligation, to buy, and the Company shall
have the obligation to sell to the Purchaser, on the Tranche 2 Closing
Date (as hereafter defined), a maximum number of whole shares of Common
Stock as is equal to the quotient of (I) Three Million Dollars
($3,000,000) divided by (II) an amount (the "TRANCHE 2 PER SHARE
PRICE") equal to the lesser of (x) $14.28 , or (y) the Market Price on
September 6, 1999, but not less than $7.9975. For avoidance of doubt,
clause (y) of the preceding sentence shall be applicable only in
connection with Optional Tranche 2 Shares issued on or after September
6, 1999. The shares of Common Stock acquired on the Tranche 2 Closing
Date are referred to herein as the "OPTIONAL TRANCHE 2 SHARES." On the
Tranche 2 Closing Date, the Purchaser shall pay the Company an amount
(the "TRANCHE 2 PURCHASE PRICE") equal to the product of (i) the number
of Optional Tranche 2 Shares to be acquired on the Tranche 2 Closing
Date in accordance with the terms of this Section 1(d) and (ii) the
Tranche 2 Per Share Price which amount shall constitute the total
purchase price for the Optional Tranche 2 Shares. The Purchaser shall
notify the Company in writing (the "TRANCHE 2 PURCHASE NOTICE") no
later than 11:00 a.m. San Francisco Time on the third Business Day
preceding the Tranche 2 Trigger Date, or, during the Capital
Transaction Period, at any time beginning on the commencement of the
Capital Transaction Period and ending on the third Business Day
preceding the proposed consummation of the Capital Transaction, but in
all events no later than the third Business Day preceding the Tranche 2
Trigger Date, whether the Purchaser desires to purchase the Optional
Tranche 2 Shares, setting forth the number of shares the Purchaser
desires to purchase; provided, however, that the Tranche 2 Purchase
Notice may condition the Purchaser's election to close such purchase
upon the consummation of the Capital Transaction.
ii. The Tranche 2 Per Share Price or the Optional Tranche 2
Shares shall be subject to adjustment from time to time as follows:
(A) If the Company at any time after the Tranche 1
Closing Date, but before the Tranche 2 Closing Date,
subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or
otherwise) its shares of Common Stock into a greater number of
shares, then, after the date of record for effecting such
subdivision, the Tranche 2 Per Share Price in effect
immediately prior to such subdivision will be proportionately
reduced. If the Company at any time after the Tranche 1
Closing combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the
date of record for effecting such combination, the Tranche 2
Per Share Price in effect immediately prior to such
combination will be proportionately increased.
(B) In case, after the Tranche 1 Closing Date but
before the Tranche 2 Closing Date of any consolidation of the
Company with, or merger of the Company into any other entity
in which the Company is not the surviving entity, or in case
of any sale or conveyance of all or substantially all of the
assets of the
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Company other than in connection with a plan of complete
liquidation of the Company at any time after the Tranche 1
Closing, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby
the Purchaser will have the right, at its sole option, to
acquire and receive in lieu of the Optional Tranche 2 Shares
such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for the Optional
Tranche 2 Shares acquirable hereunder had such Optional
Tranche 2 Shares been issued immediately prior to the
consummation of such consolidation, merger or sale or
conveyance. In any such case, the Company will make
appropriate provision to insure that the provisions of this
Section 1.d.ii (B) hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or
securities thereafter deliverable in lieu of the Optional
Tranche 2 Shares. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to
the consummation thereof, the successor corporation (if other
than the Company) assumes by written instrument the
obligations under this Section 1.d.ii and the obligations to
deliver to the Purchaser such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the
Purchaser may be entitled to acquire.
(C) In case after the Tranche 1 Closing Date, but
before the Tranche 2 Closing Date, the Company shall declare
or make any distribution of its assets (or rights to acquire
its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise
(including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares)
of capital stock of a subsidiary) (a "DISTRIBUTION") at any
time after the Tranche 1 Closing, then, in each case, the
Tranche 2 Purchase Price shall be reduced as of the seventh
business day after the record date with respect to such
distribution so that the same shall be equal to the price
determined by multiplying the Tranche 2 Purchase Price in
effect immediately prior to the close of business on such
record date by a fraction the numerator of which is the
average Closing Price for the five trading days immediately
after such record date, and the denominator shall be the
average Closing Price for the five trading days immediately
prior to such record date, such reduction to become effective
immediately prior to the opening of business on the day
following the record date.
iii. On the Tranche 2 Closing Date, the Purchaser shall pay
the Tranche 2 Purchase Price by wire transfer to the Company, in
accordance with the Company's written wiring instructions against
delivery of certificates representing the Optional Tranche 2 Shares
against delivery of the Tranche 2 Purchase Price.
iv. Subject to the satisfaction (or waiver) of the conditions
thereto set forth in Section 5 and Section 6 below, the date and time
of the sale of the Optional Tranche 2 Shares pursuant to this Agreement
(the "TRANCHE 2 CLOSING") shall be 5:00 p.m. San Francisco Time on the
fifth Business Day following the date of the Tranche 2 Purchase Notice
or such later date if mutually agreed by the parties hereto (the
"TRANCHE 2 CLOSING
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DATE"). The Tranche 2 Closing shall occur at the offices of Xxxxxx,
Xxxx & Xxxxxxxx LLP, One Xxxxxxxxxx Street, Telesis Tower, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000 or at such other place as the parties may
otherwise agree.
v. If the Company fails for any reason to issue the Optional
Tranche 2 Shares on the Tranche 2 Closing Date, then in addition to all
other rights and remedies that the Purchaser may have under this
Agreement or at law or equity, the Company shall pay to the Purchaser
as liquidated damages ("TRANCHE 2 LIQUIDATED DAMAGES") an amount equal
to (I) Thirty Thousand Dollars ($30,000) for the first month following
the Tranche 2 Closing Date and (II) Sixty Thousand Dollars ($60,000)
for each month thereafter that the Company fails to issue the Optional
Tranche 2 Shares. In addition, the Purchaser shall have the option to
demand at any time beginning five Business Days after the Tranche 2
Closing Date, that the Company pay to it an amount (the "OPTIONAL
TRANCHE 2 DAMAGES") in cash equal to (x) the difference between the
Tranche 2 Per Share Price and the Closing Price on the Tranche 2
Closing Date, multiplied by (y) the number of Optional Tranche 2 Shares
the Company was to have delivered to the Purchaser on the Tranche 2
Closing Date. If the Company fails to pay the Purchaser the Optional
Tranche 2 Damages within one Business Day (the "OPTIONAL DAMAGES
PAYMENT DATE") of the date the Purchaser makes such demand, then the
Company shall pay to the Purchaser an amount equal to (A) one percent
(1%) of the amount of the Optional Tranche 2 Damages for the first
month following the Optional Damages Payment Date and (B) two percent
(2%) of the amount of the Optional Tranche 2 Damages for each month
thereafter that the Company fails to pay the Optional Tranche 2
Damages.
e. Adjustment Shares; Share Limit. If the Market Price on the
Adjustment Date is lower than the Tranche 1 Per Share Price paid by the
Purchaser on the Tranche 1 Closing Date, then, within three Business Days of the
Adjustment Date, the Company shall cause to be issued to the Purchaser a number
of additional whole shares of Common Stock (the "ADJUSTMENT SHARES") equal to
(I) the quotient of (x) Five Million Dollars ($5,000,000) divided by (y) an
amount equal to the Market Price on the Adjustment Date; minus (II) the number
of Tranche 1 Shares purchased by the Purchaser on the Tranche 1 Closing Date;
provided, however, that the Company shall not be required to issue to the
Purchaser a number of shares which, when aggregated with the Tranche 1 Shares,
would exceed the Share Limit. The Adjustment Shares shall deemed to be
outstanding as of the Adjustment Date.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The Purchaser represents and warrants to the Company as follows:
a. Purchase for Own Account. The Purchaser is purchasing the Securities
for the Purchaser's own account and not with a present view towards the
distribution thereof. Notwithstanding anything in this Section 2(a) to the
contrary, by making the foregoing representation, the Purchaser does not agree
to hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or
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pursuant to a registration statement or an exemption from registration under the
Securities Act and any applicable state securities laws.
b. Information. The Purchaser has been furnished all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by the
Purchaser. The Purchaser has been afforded the opportunity to ask questions of
the Company and have received what the Purchaser believes to be satisfactory
answers to any such inquiries. Neither such inquiries nor any other due
diligence investigation conducted by the Purchaser or its counsel or any of its
representatives shall modify, amend or affect the Purchaser's right to rely on
the Company's representations and warranties contained in Section 3 below.
c. Governmental Review. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
d. Authorization; Enforcement. The Purchaser has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to purchase the Shares and the Warrants in accordance with
the terms thereof. This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Purchaser and is a valid and binding agreement of
the Purchaser enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
e. Transfer or Resale. The Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless (a) subsequently registered thereunder, or (b)
the Purchaser shall have delivered to the Company an opinion of counsel
reasonably acceptable to the Company (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
under an exemption from such registration, or (c) sold under Rule 144
promulgated under the Securities Act (or a successor rule), or (d) sold or
transferred to an affiliate of the Purchaser pursuant to an exemption under the
Securities Act; and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder, in each case, other than pursuant to the Registration Rights
Agreement.
f. Legends. The Purchaser understands that the Tranche 1 Shares, the
Adjustment Shares and the Optional Tranche 2 Shares, if any, and the Warrants
and Warrant Shares and, until such time as the Tranche 1 Shares, the Adjustment
Shares, the Tranche 2 Shares and Warrant Shares, , respectively, have been
registered under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by the Purchaser under Rule 144 (k), the certificates for the
Tranche 1
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Shares, the Adjustment Shares, the Tranche 2 Shares, the Warrants and the
Warrant Shares, respectively, may bear a restrictive legend in substantially the
following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities represented hereby may
not be offered or sold in the absence of an effective registration
statement for the securities under applicable securities laws unless
offered, sold or transferred under an available exemption from the
registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder), or (b) such holder provides the Company with
an opinion of counsel reasonably acceptable to the Company, in form, substance
and scope customary for opinions of counsel in comparable transactions, to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act or (c) such holder provides the Company
with reasonable assurances that such Security can be sold under Rule 144(k). The
Purchaser agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, pursuant to an effective
registration statement or under an exemption from the registration requirements
of the Securities Act. Such legend shall be removed when such Security may be
sold pursuant to an effective registration statement or sold under Rule 144(k).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchaser that, except as
set forth in the Company's Disclosure Letter delivered to the Purchaser at the
Closing Date, as follows:
a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue and
sell the Shares and the Warrants in accordance with the terms hereof and to
issue the Warrant Shares upon exercise of the Warrants in accordance with the
terms thereof; (ii) the execution, delivery and performance of this Agreement,
the Warrants and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Shares and the issuance of the Warrants, and the reservation for issuance and
issuance of the Warrant Shares) have been duly
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authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors or its shareholders is
required; (iii) this Agreement has been duly executed and delivered by the
Company; and (iv) this Agreement constitutes, and, upon execution and delivery
by the Company of the Registration Rights Agreement and the Warrants, such
agreements will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).
c. Capitalization. The capitalization of the Company as of the date
hereof including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of capital stock, the number of Shares to be issued
pursuant to the terms hereof and the Warrant Shares to be issued upon the
exercise of the Warrants is set forth on Schedule 3(c). All of such outstanding
shares of capital stock have been, or upon issuance will be, validly issued,
fully paid and nonassessable. Except as set forth on Schedule 3(c), no shares of
capital stock of the Company (including the Shares and the Warrant Shares) are
subject to preemptive rights or any other similar rights of the shareholders of
the Company or any liens or encumbrances. Except for the Securities and as
disclosed in Schedule 3(c), as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement). Except as set forth
on Schedule 3(c), there are no securities or instruments containing antidilution
or similar provisions that may be triggered by the issuance of the Securities in
accordance with the terms of this Agreement or the Warrants and the holders of
the securities and instruments listed on such Schedule 3(c) have waived any
rights they may have under such antidilution or similar provisions in connection
with the issuance of the Securities in accordance with the terms of this
Agreement or the Warrants. The Company has made available to the Purchaser true
and correct copies of the Company's Articles of Incorporation as in effect on
the date hereof ("ARTICLES OF INCORPORATION"), the Company's By-laws as in
effect on the date hereof (the "BY-LAWS") and all other instruments and
agreements governing securities convertible into or exercisable or exchangeable
for capital stock of the Company, except for stock options granted under any
employee benefit plan or director stock option plan of the Company.
d. Issuance of Shares. The Shares are duly authorized and when issued
and paid for in accordance with the terms hereof will be validly issued, fully
paid and non-assessable, freely transferable and free from all taxes, liens,
claims and encumbrances and will not be subject to preemptive rights or other
similar rights of shareholders of the Company and will not impose
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personal liability upon the holder thereof. The Warrant Shares are duly
authorized and reserved for issuance, and, upon exercise of the Warrants in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, freely transferable and free from all taxes, liens, claims and
encumbrances and will not be subject to preemptive rights or other similar
rights of shareholders of the Company and will not impose personal liability
upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company,
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Shares and the Warrant Shares and the issuance of the Warrants)
will not (i) conflict with or result in a violation of the Articles of
Incorporation or By-laws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected (except, with respect to clause (ii), for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its subsidiaries is in violation
of its Articles of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its subsidiaries is in default (and no event has
occurred which, with notice or lapse of time or both, would put the Company or
any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for actual or possible violations, defaults or rights as would not, individually
or in the aggregate, have a Material Adverse Effect. The businesses of the
Company and its subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for actual or
possible violations, if any, the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement (including, without limitation the issuance and sale of the
Shares and Warrant as provided hereby), or the Warrants (including the issuance
of the Warrant Shares), in each case in accordance with the terms hereof or
thereof. The Company is not in violation of the listing requirements of the
Nasdaq National Market ("NASDAQ") and does not reasonably anticipate that the
Common Stock will be delisted by NASDAQ in the foreseeable future.
f. SEC Documents Financial Statements. Since January 1, 1996, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"),
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and, since January 1, 1998, has timely filed all such reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the Exchange Act, and has filed all registration statements and other
documents required to be filed by it with the SEC pursuant to the Securities Act
(all of the foregoing filed after January 1, 1996 and prior to the date hereof,
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has made available to the Purchaser
true and complete copies of the SEC Documents, except for the exhibits and
schedules thereto and the documents incorporated therein. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any statements made in any such SEC Documents that are or were
required to be updated or amended under applicable law has been or have been so
updated or amended. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC applicable with respect thereto. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal and recurring year-end audit
adjustments). Except as set forth in the SEC Documents filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such SEC Documents and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in such SEC Documents, which
liabilities and obligations referred to in clauses (i) and (ii), individually or
in the aggregate would not have a Material Adverse Effect.
g. Absence of Certain Changes. Except as disclosed in the SEC
Documents, since December 31, 1998, there has been no change or development
which individually or in the aggregate has had or would have a Material Adverse
Effect.
h. Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or threatened against or affecting the Company, any of its subsidiaries,
or any of their respective directors or officers in their capacities as such
which would have a Material Adverse Effect or which would adversely affect the
validity, enforceability of, or the authority or ability of the Company to
perform its obligations under this Agreement (including the issuance of the
Shares and the Warrants), the
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Registration Rights Agreement, the Warrants (including the issuance of the
Warrant Shares) or any other agreement or document delivered pursuant hereto or
thereto.
i. Intellectual Property. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted. Neither the
Company nor any subsidiary of the Company infringes or is in conflict with any
other person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
has received written notice that it is infringing upon third party Intangibles.
Neither the Company nor any of its subsidiaries has entered into any consent,
indemnification, forbearance to xxx or settlement agreements with respect to the
validity of the Company's or its subsidiaries' ownership or right to use its
Intangibles and there is no reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company and its subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the Company's knowledge, person is infringing on or violating the
Intangibles owned or used by the Company or its subsidiaries.
j. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the United States Foreign Corrupt Practices Act
of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
k. Environment. Except as disclosed in the SEC Documents (i) there is
no material environmental liability, nor factors likely to give rise to any
environmental liability, affecting any of the material properties of the Company
or any of its subsidiaries that, individually or in the aggregate, would have a
Material Adverse Effect and (ii) neither the Company nor any of its subsidiaries
has violated or infringed any environmental law now in effect nor has any such
entity violated or infringed any then current environmental law as applied at
that time, other than such violations or infringements that, individually or in
the aggregate, have not had and will not have a Material Adverse Effect.
l. Title. The Company and its subsidiaries have good title in fee
simple to all real property and good title to all personal property owned by
them which is material to the business
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of the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except for such defects in title that, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. Any real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions which have not had and will not have a Material Adverse
Effect.
m. Insurance. Each of the Company and each of its subsidiaries has its
assets insured against loss or damage as is appropriate to its business and
assets, in such amounts and against such risks as are customarily carried and
insured against by owners of comparable businesses and assets, and such
insurance coverages will be continued in full force and effect to and including
each Closing Date other than those insurance coverages in respect of which the
failure to continue in full force and effect could not reasonably be expected to
have a Material Adverse Effect.
n. Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchaser pursuant to Section
2(b) hereof and otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, operations, prospects or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation, would be
required to be disclosed by the Company in a registration statement filed on the
date hereof by the Company under the Securities Act with respect to a primary
issuance of the Company's securities. The Company has not provided, and without
the Purchaser's consent thereto, will not hereafter provide to the Purchaser,
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been disclosed.
o. Acknowledgment Regarding the Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that the Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, and the
relationship between the Company and the Purchaser is "arms length" and that any
statement made by the Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to the Purchaser's purchase
of Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
p. No Brokers to be Paid by Purchaser. The Company has not engaged any
person to which or to whom brokerage commissions, finder's fees, financial
advisory fees or similar payments are or will become due in connection with this
Agreement or the transactions contemplated hereby.
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q. Tax Status. The Company and each of its subsidiaries has made or
filed all federal, state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction. The Company has not
executed a waiver with respect to any statute of limitations relating to the
assessment or collection of any federal, state or local tax. Except as set forth
in Schedule 3(q), none of the Company's tax returns has been or is being audited
by any taxing authority.
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4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 5 and Section 6 of this
Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Purchaser promptly after such filing. The Company shall, on or
before each of the Tranche 1 Closing Date and Tranche 2 Closing Date, as
applicable, take such action as is the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Purchaser pursuant to this
Agreement under applicable securities or "blue sky" laws of the states of the
United States or obtain exemption therefrom, and shall provide evidence of any
such action so taken to the Purchaser on or prior to the Tranche 1 Closing Date
and Tranche 2 Closing Date, as applicable.
c. Reporting Status. So long as the Purchaser beneficially owns any
Securities or has the right to acquire any Securities pursuant to this Agreement
or the Warrants, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company shall use the net proceeds from the
sale of the Shares and the Warrants for working capital and general corporate
purposes, but in no event shall the Company use such net proceeds to repurchase
any outstanding securities of the Company without the Purchaser's prior written
consent.
e. Expenses. The Company shall reimburse the Purchaser at each Closing
for the out-of-pocket expenses reasonably incurred by the Purchaser and its
affiliates and advisors in connection with the negotiation, preparation,
execution and delivery of this Agreement, the Registration Rights Agreement, the
Warrants and the other agreements to be executed in connection herewith,
including, without limitation, in conducting such Purchaser's and its
affiliates' and advisors' reasonable due diligence and such Purchaser's and its
affiliates reasonable attorneys' fees and expenses up to a maximum of $15,000
(the "EXPENSES"). In addition, from time to time, after any Closing, upon the
Purchaser's written request, the Company shall reimburse the Purchaser for such
Expenses, if any, not covered by the payment made to the Purchaser at any prior
Closing (up to the $15,000 maximum). Notwithstanding the foregoing, the Company
shall not be obligated to reimburse the Purchaser for more than $15,000 pursuant
to this Section 4(e).
f. Financial Information. For a period of two (2) years following the
last Closing, the Company agrees to send the following reports to the Purchaser:
(i) within ten (10) days after the filing with the SEC, a copy of its Annual
Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy and
information statements and any Current Reports on Form 8-K; and (ii) within
three (3) days after release, copies of all earnings and similar financial press
releases issued by the Company or its subsidiaries, if any.
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g. Reservation of Shares. The Company has and shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the issuance of the maximum number of
Shares as provided in Section 1 hereof and the full exercise of the Warrants and
the issuance of the Warrant Shares in connection therewith and as otherwise
required hereby and by the Warrants. The Company shall not reduce the number of
shares reserved for issuance hereunder or upon the full exercise of the Warrants
(except as a result of any such conversion or exercise) without the consent of
the Purchaser.
h. Listing. On each Closing Date, the Company shall have secured the
listing of the Shares and Warrant Shares, in each case, upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or quoted (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Shares from time to time issuable hereunder and all
Warrant Shares from time to time issuable upon exercise of the Warrants. The
Company will use its best efforts to continue the listing and trading of its
Common Stock on NASDAQ, the New York Stock Exchange ("NYSE") or the American
Stock Exchange and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NYSE or any other
exchanges, as applicable, and the National Association of Securities Dealers
("NASD").
i. Corporate Existence. So long as the Purchaser beneficially owns any
Securities or the right to acquire any Securities pursuant to this Agreement or
the Warrants, the Company shall maintain its corporate existence, except in the
event of a merger, consolidation or sale of all or substantially all of the
Company's assets, as long as the surviving or successor entity in such
transaction assumes the Company's obligations hereunder and under the Warrants
and under the agreements and instruments entered into in connection herewith.
j. Right of First Offer. For a period of 360 days following the Tranche
1 Closing Date, prior to engaging in a ROFO Financing Transaction, the Company
shall first offer the Purchaser the right ("RIGHT OF FIRST OFFER") to fund fifty
percent (50%), up to a maximum amount of Two Million Five Hundred Thousand
Dollars ($2,500,000), of a ROFO Financing Transaction before offering to any
third party the opportunity to participate in such ROFO Financing Transaction.
If the Company desires to enter into a ROFO Financing Transaction, the
Company shall deliver to the Purchaser a written statement ("OFFER NOTICE")
notifying the Purchaser of the proposed terms of the ROFO Financing Transaction,
including the material terms of the proposed ROFO Financing Transaction, and
offering the Purchaser the opportunity to participate in such ROFO Financing
Transaction on terms consistent with this Section 4(j). The Purchaser shall have
no more than five (5) days (the "OFFER PERIOD") from the date of receipt of the
Offer Notice to exercise its Right of First Offer by delivering written notice
to the Company that it intends to exercise its Right of First Offer. If (a) the
Purchaser fails to exercise its Right of First Offer during the Offer Period,
(b) the Purchaser notifies the Company in writing that it does not intend to
exercise its Right of First Offer, (c) the Purchaser exercises its Right of
First Offer, but the parties are unable to consummate the ROFO Financing
Transaction within the time period
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specified for such consummation in the definitive documentation with respect to
such ROFO Financing Transaction, unless such inability to consummate is due to
no fault of the Purchaser, or (d) the Purchaser does not make its required funds
available on request or otherwise fulfill its obligations to the transaction
agreement with respect to the ROFO Financing Transaction at the time the ROFO
Financing Transaction is scheduled to be consummated, then the Company shall be
immediately free to deal with third parties with respect to such ROFO Financing
Transaction on the same terms as were set forth in the Offer Notice; provided,
however, that if the Company fails to consummate the ROFO Financing Transaction
within two (2) months of the delivery of the Offer Notice, such ROFO Financing
Transaction shall then become the subject of a new Right of First Offer, which
the Purchaser may choose to exercise in accordance with this Section 4(j).
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Shares
and the Warrants to the Purchaser hereunder is subject to the satisfaction, at
or before each Closing Date, of each of the following conditions thereto.
a. The Purchaser shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
b. The Purchaser shall have delivered (i) the Tranche 1 Purchase Price
in accordance with Section 1(c) above at the Tranche 1 Closing and (ii) the
Tranche 2 Purchase Price in accordance with Section 1(d) above at the Tranche 2
Closing.
c. The representations and warranties of the Purchaser shall be true
and correct as of the date when made and as of each Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and the Purchaser shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Purchaser at
or prior to each Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
6. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SHARES AND THE
WARRANTS.
The obligation of the Purchaser hereunder to purchase the Shares and
the Warrants hereunder is subject to the satisfaction, at or before each Closing
Date (except as otherwise specifically referred to in this Section 6), of each
of the following conditions, provided that these
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conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in the Purchaser's sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Purchaser.
b. The Company shall have delivered to the Purchaser (i) at the Tranche
1 Closing, certificates representing the number of Tranche 1 Shares determined
as provided in Section 1(c) above and duly executed Warrants in accordance with
Section 1(c) above; (ii) at the Tranche 2 Closing, certificates representing the
number of Optional Tranche 2 Shares determined as provided in Section 1(d)
above.
c. The Shares shall be authorized for quotation on NASDAQ and trading
in the Common Stock (or NASDAQ generally) shall not have been suspended or be
under threat of suspension by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct as of the date when made and as of each Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Closing Date. The Purchaser shall have received a certificate, executed
on behalf of the Company by its Chief Financial Officer, dated as of each
Closing Date, to the foregoing effect.
e. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, having authority over the matters contemplated hereby which
questions the validity of, or challenges or prohibits the consummation of, any
of the transactions contemplated by this Agreement.
f. The Purchaser shall have received an opinion of the Company's
counsel, dated as of each Closing Date, in substantially the form of Exhibit C
attached hereto.
g. Subsequent to the date of this Agreement, there shall not have
occurred any Material Adverse Effect.
With respect to the Tranche 2 Closing, the conditions in paragraphs d.,
f. and g. of this Section 6 shall not apply.
7. GOVERNING LAW MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and
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to be performed in the State of California. The Company irrevocably consents to
the jurisdiction of the United States federal courts and the state courts
located in San Francisco, California in any suit or proceeding based on or
arising under this Agreement and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process upon
the Company mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect the right of the Purchaser to serve process in any
other manner permitted by law. The Company agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement, Amendments; Waiver. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement and no
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Purchaser. Any waiver by any party of a
breach of any provision of this Agreement shall not operate as or be construed
to be a waiver of any other breach of such provision of or any breach of any
other provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered
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personally or by courier or by confirmed telecopy, and shall be effective five
days after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by courier or confirmed telecopy, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
International Microcomputer Software, Inc.
00 Xxxxxxx Xxx
Xxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxx Xxxxxxx
with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: C. Xxxxx Xxxxx, Esq.
If to the Purchaser, to the address set forth under the Purchaser's
name on the signature page hereto executed by the Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser; provided that, for purposes
of this Section 7.g., a merger or consolidation in which the Company is not the
surviving entity or sale of all or substantially all of the Company's assets
shall not be deemed an assignment, as long as the surviving or successor entity
in such transaction assumes the Company's obligations hereunder and under the
Warrants and the agreements and instruments entered into in connection herewith.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by any other person.
i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4 and 7 shall survive each of
the Closings hereunder notwithstanding any due diligence investigation conducted
by or on behalf of the Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies the Purchaser may have under applicable federal or state
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securities laws. The Company agrees to indemnify and hold harmless the Purchaser
and each of the Purchaser's officers, directors, employees, partners, members,
agents and affiliates for loss or damage relating to the Securities purchased
hereunder arising as a result of or related to any breach by the Company of any
of its representations or covenants set forth herein, including advancement of
expenses as they are incurred.
j. Publicity. The Company and the Purchaser shall have the right to
review and comment upon, before issuance any press releases, SEC, NASDAQ or NASD
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Purchaser, to make any press release or SEC,
NASDAQ or NASD filings with respect to such transactions as is required by
applicable law and/or exchange regulations (although the Purchaser shall be
entitled to review and comment upon any such press release prior to its
release).
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Tranche 1 Closing Date shall not
have occurred on or before March 10, 1999, unless the parties agree otherwise,
this Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to or relating to the
termination hereof.
m. Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Registration
Rights Agreement and the Warrants. As such, the language used herein and therein
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party to this Agreement, the Registration Rights Agreement or the Warrants.
n. Equitable Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPANY:
INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
By:__________________________________________
Name:
Title:
PURCHASER:
CAPITAL VENTURES INTERNATIONAL
By:__________________________________________
Name:
Title:
Residence: Cayman Islands
Address: c/o Heights Capital Management
000 Xxxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
with copies of all notices to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
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