Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 11,
1999, by and among Xxxxxx Electronics Corporation, a New York corporation,
with headquarters located at 00 Xxxxxxxx Xxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000
(the "COMPANY"), and the investor listed on the Schedule of Buyers attached
hereto (the "BUYER").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule
506 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 "1933 ACT");
B. The Company has authorized the following new series of its Preferred
Stock, par value $0.01 per share which shall be called the Company's Series B
Convertible Preferred Stock (the "PREFERRED STOCK"), which shall be
convertible into shares of the Company's common stock, par value $0.50 per
share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Amendment of the
Certificate of Incorporation of the Company, substantially in the form
attached hereto as Exhibit A (the "CERTIFICATE OF AMENDMENT");
C. The Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, initially (i) an aggregate of 750 shares of the Preferred
Stock (the "INITIAL PREFERRED SHARES"), and (ii) warrants to purchase up to
100 shares of Common Stock (as exercised collectively, the "INITIAL WARRANT
SHARES") for each Initial Preferred Share purchased by Buyer on the Initial
Closing Date (as defined below), such warrants to be substantially in the form
attached as Exhibit E (the "INITIAL WARRANTS");
D. Subject to the terms and conditions set forth in this Agreement, the
Company may have the right to cause the Buyer to purchase (i) up to an
aggregate of 750 shares of Preferred Stock (the "ADDITIONAL PREFERRED SHARES")
(the Initial Preferred Shares and the Additional Preferred Shares collectively
are referred to in this Agreement as the "PREFERRED SHARES") and (ii) warrants
to purchase up to 100 shares of Common Stock (as exercised, collectively, the
"ADDITIONAL WARRANT SHARES") for each Additional Preferred Share purchased by
Buyer on the Additional Closing Date (the Initial Warrant Shares and the
Additional Warrant Shares collectively are referred to in this Agreement as
the "WARRANT SHARES");
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights
Agreement substantially 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 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. Subject to satisfaction (or waiver)
of the conditions set forth in Sections 6(a) and 7(a), the Company shall issue
and sell to the Buyer and the Buyer shall purchase from the Company 750
Initial Preferred Shares, along with the related Warrants (the "INITIAL
CLOSING"). Subject to the satisfaction (or waiver) of the conditions set forth
in Sections 1(c), 1(d), 6(b) and 7(b), the Company may require that Buyer
purchase up to 750 Additional Preferred Shares along with the related Warrants
(the "ADDITIONAL CLOSING" and together with the Initial Closing, the
"CLOSINGS"). The purchase price (the "PURCHASE PRICE") of each Preferred Share
and the related Warrant at each of the Closings shall be an aggregate of
$10,000. "BUSINESS DAY" means any day other than Saturday, Sunday or other day
on which commercial banks in the city of New York are authorized or required
by law to remain closed.
b. The Initial Closing Date. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Central Time, within
three (3) Business Days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a)
and 7(a) (or such later date as is mutually agreed to by the Company and the
Buyer). The Initial Closing shall occur on the Initial Closing Date at the
offices of Xxxxxx Xxxxxx & Zavis, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000-0000.
c. The Additional Closing Date. The date and time of each of the
Additional Closings (the "ADDITIONAL CLOSING DATES") shall be 10:00 a.m.
Central Time, on the date specified in the Company's Additional Share Notice
(as defined below), subject to satisfaction (or waiver) of the conditions to
the Additional Closing set forth in Sections 6(b) and 7(b) and the conditions
set forth in this Section 1(c) and Section 1(d), (or such later date as is
mutually agreed to by the Company and the Buyer). During the period beginning
on and including the date which is 271 days after the Initial Closing Date and
ending on the date which is 451 days after the Initial Closing Date (the
"ADDITIONAL NOTICE PERIOD"), but subject to the requirements of Sections 6(b)
and 7(b) and satisfaction of the Additional Notice Conditions (as defined in
Section 1(d) below), the Company on not more than two occasions may require
Buyer to purchase Additional Preferred Shares and the related Additional
Warrants by delivering written notice to the Buyer (an "ADDITIONAL SHARE
NOTICE") during the Additional Notice Period at least ten (10) Business Days
but not more than 15 Business Days (the "ADDITIONAL SHARE NOTICE DATE") prior
to the Additional Closing Date set forth in the Company's Additional Share
Notice, which Additional Closing Date shall not be later than the last
business day of the Additional Notice Period. The Company's Additional Share
Notice shall set forth (i) the number of Additional Preferred Shares which the
Company is requiring the Buyer to purchase at the Additional Closing, which
number shall not exceed, in the aggregate, 750 shares of Preferred Stock at
all Additional Closings and which number shall be at least 250 shares of
Preferred Stock, (ii) the aggregate Purchase Price for Buyer's Additional
Preferred Shares and (iii) the date selected by the Company for the Additional
Closing Date. Notwithstanding the foregoing, if at the first Additional
Closing to occur after the Initial Closing Date the Company sells and issues
less than 375 shares of Preferred Stock or more than 500 shares of Preferred
Stock, then the Company shall not be entitled to deliver another Additional
Share Notice or to require the Buyer to acquire any additional shares of
Preferred Stock at any subsequent Additional Closing. The Additional Closing
shall occur on the Additional Closing Date at the offices of Xxxxxx Xxxxxx &
Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000. The
Initial Closing Date and the Additional Closing Date collectively are referred
to in this Agreement as the "CLOSING Dates."
d. The Additional Notice Conditions. Notwithstanding anything in
this Agreement to the contrary, the Company shall not be entitled to deliver
an Additional Share Notice and require the Buyer to purchase the Additional
Preferred Shares unless, in addition to the satisfaction of the requirements
of Sections 6(b) and 7(b), all of the following conditions (the "ADDITIONAL
NOTICE CONDITIONS") are satisfied: (i) either (A) the Company's stockholders
shall have approved the issuance of the Securities (as defined below) on or
prior to the Additional Share Notice Date or (B) on each day during the period
beginning on and including the date which is 60 days prior to the Additional
Closing Date and ending on and including the Additional Closing Date 19.99% of
the number of shares of Common Stock outstanding on the Initial Closing Date
is greater than (x) the sum of (I) the number of Conversion Shares and Warrant
Shares issued by the Company, (II) the number of Conversion Shares and Warrant
Shares then issuable upon conversion of all outstanding Preferred Shares and
Warrants, respectively, without regard to any limitations on conversion or
exercise thereof, plus (III) the number of Conversion Shares and Warrant
Shares that would be issuable upon conversion of the Additional Preferred
Shares and exercise of the Additional Warrants (without regard to any
limitations on conversion or exercise) covered by the applicable Additional
Notice, as if all such Additional Preferred Shares and Additional Warrants
were issued and outstanding on each such date, multiplied by (y) 1.5; (ii) the
Initial Registration Statement shall have been declared effective by the
Securities and Exchange Commission (the "SEC") and available for sale of 125%
of the sum of (A) the number of Conversion Shares and Warrant Shares then
issuable upon conversion of all outstanding Preferred Shares and Warrants,
respectively, (B) the Additional Conversion Shares and Additional Warrant
Shares covered by such Additional Notice and (C) the number of Conversion
Shares and Warrant Shares that are then held by the Buyer, in accordance with
the terms of the Registration Rights Agreement at all times during the 60 days
immediately preceding the Additional Closing Date; (iii) at all times during
the period beginning on the Initial Closing Date and ending on and including
the Additional Closing Date, the Common Stock shall have been designated for
quotation on The American Stock Exchange, Inc. ("AMEX") and shall not have
been suspended from trading on such exchange nor shall delisting or suspension
by such exchange have been threatened in writing by such exchange; (iv) during
the period beginning on the Initial Closing Date and ending on and including
the Additional Closing Date, there shall not have occurred either (A) the
consummation of a Major Transaction (as defined in the Certificate of
Amendment) or a public announcement of a pending Major Transaction which
has not been abandoned or terminated or (B) a Triggering Event (as defined in
the Certificate of Amendment), an Excluded Redemption Event (as defined in the
Certificate of Amendment) or an event which, with the passage of time, would
constitute a Triggering Event or an Excluded Redemption Event; (v) either (A)
both (I) the average Variable Conversion Price during the ten trading days
immediately preceding the Additional Closing Date is not less than the
Variable Conversion Price on the Initial Closing Date and (II) the average
Variable Conversion Price has been no less than 120% of the Fixed Conversion
Price for 20 consecutive trading days while the Registration Statement has
been effective and available for resale of all shares of Common Stock issuable
upon conversion of the Preferred Shares and upon exercise of the Warrants or
(B) the average Variable Conversion Price during the 10 trading days
immediately preceding the Additional Closing Date is not less than the Fixed
Conversion Price on the Initial Closing; (vi) the Variable Conversion Price on
the Additional Closing Date is either (A) no less than 80% of the Variable
Conversion Price on the Additional Notice Date or (B) no less than the
Variable Conversion Price on the Initial Closing Date; (vii) during the period
beginning on the Initial Closing Date and ending on and including the
Additional Closing Date, the Company shall have delivered Conversion Shares
upon conversion of the Preferred Shares on a timely basis as set forth in
Section IV(G)(2) of the Certificate of Amendment (unless any non-compliance
therewith shall have been waived in writing by the holders of the Preferred
Stock) and otherwise shall have been in compliance with and shall not have
breached any provision of the Transaction Documents (as defined below) and the
Certificate of Amendment; and (viii) there previously shall not have occurred
more than one Additional Closing.
e. Form of Payment. On each of the Closing Dates (i) Buyer shall pay
the Purchase Price to the Company for the Preferred Shares and the related
Warrants to be issued and sold to Buyer by wire transfer of immediately
available funds in accordance with the Company's written wire instructions,
and (ii) the Company shall deliver to Buyer stock certificates (in the
denominations as Buyer shall request) (the "STOCK Certificates") representing
such number of the Preferred Shares which Buyer is then purchasing along with
the related Warrants, duly executed on behalf of the Company and registered in
the name of Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants that:
a. Investment Purpose. Buyer (i) is acquiring the Preferred Shares
and the Warrants, (ii) upon conversion of the Preferred Shares, will acquire
the Conversion Shares then issuable and (iii) upon exercise of the Warrants,
will acquire the Warrant Shares issuable upon exercise thereof (the Preferred
Shares, the Warrants, the Conversion Shares and the Warrant Shares,
collectively are referred to herein as the "SECURITIES"), for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making
the representations herein, Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of
the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Buyer is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of Buyer to
acquire such Securities.
d. Information. Buyer and its advisors, if any, have been furnished
with 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 Buyer. Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by Buyer or its
advisors, if any, or its representatives shall modify, amend or affect Buyer's
right to rely on the Company's representations and warranties contained in
Sections 3 and 9(m) below. Buyer understands that its investment in the
Securities involves a high degree of risk. Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Buyer 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 Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Buyer understands that except as provided in
the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) Buyer shall have delivered to the Company an
opinion of counsel, in a form reasonably satisfactory to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or
(C) Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 promulgated under
the 1933 Act (or a successor rule thereto)("RULE 144"); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale
of the Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that
term is defined in the 0000 Xxx) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
g. Legends. Buyer understands that the certificates or other
instruments representing the Preferred Shares and the Warrants and, until such
time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM
REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it
is stamped, if (i) such Securities are registered for sale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a form reasonably satisfactory to the Company,
to the effect that a public sale, assignment or transfer of such Securities
may be made without registration under the 1933 Act, or (iii) such holder
provides the Company with assurances reasonably acceptable to the Company that
such Securities can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold. Buyer acknowledges, covenants and agrees to sell the
Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the
1933 Act, or (ii) advice of counsel that such sale is exempt from registration
required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Buyer and are valid and binding agreements of Buyer enforceable
against Buyer in accordance with their terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
i. Residency. Buyer is a resident of that jurisdiction specified on
the Schedule of Buyers.
j. Short Sale Limitation. During (i) the 30 days immediately
preceding the Initial Closing Date neither Buyer nor its affiliates has
engaged and (ii) the period beginning on the Additional Share Notice Date and
ending on the Additional Closing Date (or such earlier date as the Additional
Closing may be abandoned due to the failure to meet the Additional Notice
Conditions), neither Buyer nor its affiliates will engage, directly or
indirectly, in any transaction constituting a "short sale" (as defined in Rule
3b-3 of the Securities Exchange Act of 1934, as amended (the "1934 ACT")),
provided, however, that a sale which would otherwise be deemed a short sale
shall not be prohibited by this Agreement so long as the Buyer submits on the
same day of such sale a Conversion Notice of Preferred Shares entitling such
Buyer to receive a number of shares of Common Stock equal to at least the
number of shares so sold.
k. Section 9 of the Securities Exchange Act. So long as the Buyer
holds any Preferred Shares, Buyer will comply with the provisions of Section 9
of the 1934 Act and the rules promulgated thereunder with respect to
transactions involving the securities of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the
requisite corporate power and authorization to own properties and to carry on
their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good
standing would not have a Material Adverse Effect. As used in this Agreement,
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the business,
properties, assets, operations, results of operations or financial condition
of the Company and its Subsidiaries taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below) or the
Certificate of Amendment.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section
5), the Warrants and each of the other agreements entered into by the parties
hereto in connection with the transactions contemplated by this Agreement
(collectively, the "TRANSACTION DOCUMENTS"), and to issue the Securities in
accordance with the terms hereof and thereof, (ii) the execution and delivery
of the Transaction Documents by the Company and the execution and filing of
the Certificate of Amendment by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Preferred Shares and the Warrants and the reservation for
issuance and the issuance of the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders (except
such stockholder approval as may be required by AMEX for the issuance of a
number of shares of Common Stock which is greater than 19.99% of the number of
shares outstanding on the Initial Closing Date), (iii) the Transaction
Documents have been duly executed and delivered by the Company, (iv) this
Agreement and, when executed and delivered, the other Transaction Documents,
constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of creditors' rights
and remedies, and (v) prior to each of the Closing Dates, the Certificate of
Amendment will have been filed with the Secretary of State of the State of New
York and will be in full force and effect, enforceable against the Company in
accordance with its terms.
c. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, of which as of the date
hereof 13,251,288 shares were issued and outstanding, 3,725,500 shares were
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and 3,000 shares are issuable and reserved for issuance
pursuant to securities (other than the Preferred Shares and the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common Stock
and (ii) 5,000,000 shares of Preferred Stock, of which as of the date hereof,
no shares were issued and outstanding and 25,000 shares are issuable and
reserved for issuance pursuant to the Company's Rights Plan (as defined in
Section 3(u)). All of such outstanding shares have been, or upon issuance will
be, validly issued and are fully paid and nonassessable. Except as disclosed
in Schedule 3(c), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) there are no outstanding debt
securities issued by the Company; (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries; (iv) there are no agreements
or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. The Company has furnished to the Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and
as in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and non-assessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Amendment. At least 2,450,000
shares of Common Stock (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(f) below) have been duly authorized and
reserved for issuance upon conversion of the Preferred Shares and exercise of
the Warrants. Upon conversion or exercise in accordance with the Certificate
of Amendment or the Warrants, as the case may be, the Conversion Shares and
the Warrant Shares will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
The issuance by the Company of the Securities is exempt from registration
under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the
Certificate of Amendment and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares and the
Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Amendment, Preferences and Rights of any
outstanding series of Preferred Stock of the Company or the By-laws; (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 (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange
on which the Common Stock is traded or listed) 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 as disclosed in Schedule
3(e), neither the Company nor its Subsidiaries is in violation of any term of
(i) its Certificate of Incorporation, any Certificate of Amendment,
Preferences and Rights of any outstanding series of Preferred Stock or By-laws
or their organizational charter or by-laws, respectively, or (ii) any statute,
rule or regulation applicable to the Company or its Subsidiaries and neither
the Company nor its Subsidiaries is in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order, except for defaults as would not, individually or in the aggregate,
have a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation
of any law, ordinance or regulation of any governmental entity, except where
such violation would not result in a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and the securities laws of the State of New York and except such as have been
obtained as of the date hereof, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory agency
in order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or the Certificate of Amendment in
accordance with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries have no actual knowledge of any facts or circumstances which
might reasonably be expected to give rise to any of the foregoing. The Company
is not in violation of the listing requirements of AMEX as in effect on the
date hereof and on each of the Closing Dates and has no actual knowledge of
any facts which would reasonably lead to delisting or suspension of the Common
Stock by AMEX in the foreseeable future.
f. SEC Documents; Financial Statements. Since December 31, 1997, the
Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act, (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC DOCUMENTS"). A complete list of the
Company's SEC Documents is set forth on Schedule 3(f). As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements of the SEC with respect thereto. Such financial
statements have been prepared in accordance with 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,
and (ii) in the case of unaudited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of
the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Neither the Company nor any of its Subsidiaries
or any of their officers, directors, employees or agents have provided the
Buyer with any material, nonpublic information. The Company meets the
requirements for the use of Form S-3 for registration of the resale of the
Registrable Securities (as defined in the Registration Rights Agreement) by
the Buyer.
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since December 31, 1998 there has been no material adverse change and no
material adverse development in the business, properties, operations,
financial condition, liabilities results of operations of the Company or its
Subsidiaries, taken as a whole. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any actual
knowledge 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.
h. Absence of Litigation. Except as disclosed in Schedule 3(h),
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, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as expressly set
forth in Schedule 3(h). Except as set forth in Schedule 3(h), to the knowledge
of the Company none of the directors or officers of the Company have been
involved in securities related litigation during the past five years.
i. Acknowledgment Regarding Buyer's Purchase of Preferred Shares.
The Company acknowledges and agrees that the Buyer is acting solely in the
capacity of an arm's length purchaser with respect to the Transaction
Documents and the Certificate of Designation and the transactions contemplated
thereby. The Company further acknowledges that Buyer is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the Certificate of Amendment and
the transactions contemplated thereby and any advice given by the Buyer or any
of its respective representatives or agents in connection with the Transaction
Documents and the Certificate of Amendment and the transactions contemplated
thereby is merely incidental to Buyer's purchase of the Securities. The
Company further represents to Buyer that the Company's decision to enter into
the Transaction Documents has been based solely on the independent evaluation
by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the issuance of the Preferred Stock and Warrants
contemplated by this Agreement, no event, liability, development or
circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement (including by way of
incorporation by reference) filed with the SEC relating to an issuance and
sale by the Company of its Common Stock and which has not been publicly
disclosed.
k. No General Solicitation. 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 under the 0000 Xxx) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of
any of the Securities under the 1933 Act or cause this offering of Securities
to be integrated with prior offerings by the Company for purposes of the 1933
Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of AMEX, nor will the Company or
any of its Subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. Employee Relations. No executive officer (as defined in Rule
501(f) of the 0000 Xxx) has notified the Company's Board of Directors that
such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company.
n. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted, except where the failure to own or possess such
rights would not, individual or in the aggregate, have a Material Adverse
Effect. Except as set forth on Schedule 3(n), none of the Company's
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate within two
years from the date of this Agreement, except where such expiration or
termination would not result, individually or in the aggregate, in a Material
Adverse Effect. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service xxxx registrations, trade secrets or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 3(n), no claim, action or proceeding has been made or brought
against, or to the Company's knowledge, has been threatened against, the
Company or its Subsidiaries regarding trademarks, trade name rights, patents,
patent rights, inventions, copyrights, licenses, service names, service marks,
service xxxx registrations, trade secrets or other infringement; and the
Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing, except where any of the foregoing
would not have a Material Adverse Effect.
o. Regulatory Permits. Except the absence of which would not have a
Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
p. Internal Accounting Controls. The Company and each of 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 generally accepted accounting principles 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.
q. Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state 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 for which the Company 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.
r. Transactions With Affiliates. Except as set forth on Schedule
3(r) or in the SEC Documents filed at least ten days prior to the date hereof
and other than the grant of stock options disclosed on Schedule 3(c), none of
the officers, directors, or employees of the Company is presently a party to
any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
s. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred
Shares and Warrant Shares issued upon exercise of the Warrants will increase
in certain circumstances. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with this Agreement and the Certificate of Amendment and its
obligation to issue the Warrant Shares in accordance with this Agreement and
the Warrants is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company.
t. Application of Takeover Protections. Assuming that Buyer has no
present intention to takeover or to participate in a takeover of the Company,
the Company and its board of directors have taken all necessary action, if
any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the Buyer and the Company
fulfilling their obligations under the Transaction Documents and the
Certificate of Designation, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities.
u. Rights Agreement. Assuming that Buyer has no present intention to
takeover or to participate in a takeover of the Company and so long as the
proviso to the first sentence of Section IV(A) of the Certificate of Amendment
remains in full force and effect, the Company specifically represents,
warrants and agrees that, (i) in accordance with that certain Rights Agreement
dated as of April 23, 1999 (the "Rights Plan") between the Company and
Continental Stock Transfer & Trust Company, as the Rights Agent thereunder,
regardless of the number of Conversion Shares and Warrant Shares of which
Buyer is deemed the Beneficial Owner (as defined in the Rights Plan), Buyer is
not intended to be nor will be deemed to be an Acquiring Person within the
meaning of the Rights Plan because of the acquisition of the Securities
(including the Conversion Shares and the Warrant Shares) pursuant to this
Agreement, and (ii) the acquisition of the Securities (including the
Conversion Shares and the Warrant Shares) pursuant to this Agreement, shall
not, under any circumstances, trigger a Distribution Date within the meaning
of the Rights Plan; provided, however, that only Securities (including the
Conversion Shares and the Warrant Shares) acquired pursuant to this Agreement
shall be deemed excluded from the number of shares of Common Stock deemed
beneficially owned by Buyer in determining whether Buyer is an Acquiring
Person within the meaning of the Rights Plan.
v. Year 2000 Compliance. The Company has initiated a review and
assessment of all areas within its and each Subsidiary's business and
operations that could be materially adversely affected by the "YEAR 2000
PROBLEM" (that is, the risk that computer applications used by the Company or
any of the Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999). Based on the foregoing, the Company believes that the
computer applications that are currently material to its or any Subsidiary's
business and operations are reasonably expected to be able to perform properly
data-sensitive functions for all dates before and after January 1, 2000,
except to the extent that the failure to do so would not reasonably be
expected to have a Material Adverse Effect.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D. 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
Buyer promptly after such filing. The Company shall, on or before each of the
Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the
Securities for, sale to the Buyer at each of the Closings pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyer on or prior to the Closing Date. The Company shall make all filings and
reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following each of the Closing Dates.
c. Reporting Status. Until the earlier of (i) the date on which the
Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Conversion Shares and the Warrant Shares without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto)
and (ii) the date on which (A) the Investors have sold all the Conversion
Shares and Warrant Shares and (B) none of the Preferred Shares or Warrants is
outstanding (the "REPORTING PERIOD"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale
of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the following
to each Investor (as defined in the Registration Rights Agreement) during the
Reporting Period: (i) within two (2) Business Days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its Subsidiaries and (iii) copies of any
notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares (without regard to any
limitations on conversions) and 100% of the number of shares of Common Stock
needed to provide for the issuance of the Warrant Shares.
g. Right of First Refusal. Subject to the exceptions described
below, for so long as at least 150 Initial Preferred Shares or 20% of the
number of Additional Preferred Shares issued remain outstanding, the Company
and its Subsidiaries shall not, without the prior written consent of the
holders of at least two-thirds (2/3) of the Preferred Shares then outstanding,
negotiate or contract with any party for any equity financing (including any
debt financing with an equity component) or issue any equity securities of the
Company or any Subsidiary or securities convertible or exchangeable into or
for equity securities of the Company or any Subsidiary (including debt
securities with an equity component) in any form ("FUTURE OFFERINGS") during
the periods (i) beginning on the Initial Closing Date and ending on and
including the date which is 365 days after the Initial Closing Date and (ii)
beginning on each Additional Closing Date and ending on the date which is 365
days after such Additional Closing Date, unless it shall have first delivered
to Buyer or a designee appointed by Buyer written notice (the "FUTURE OFFERING
NOTICE") describing the proposed Future Offering, including the buyer and
terms and conditions thereof, and providing the Buyer an option to purchase up
to the entire Future Offering on the same terms and conditions set forth in
the Future Offering Notice (the limitations referred to in this sentence are
collectively referred to as the "CAPITAL RAISING LIMITATION"). The Buyer can
exercise its option to participate in a Future Offering by delivering written
notice thereof to participate to the Company within ten (10) business days of
receipt of a Future Offering Notice, which notice shall state the quantity of
securities being offered in the Future Offering that Buyer will purchase. In
the event the Buyer fails to elect to fully participate in the Future Offering
within the periods described in this Section 4(g), the Company shall have 60
days thereafter to sell the securities of the Future Offering for which
Buyer's rights were not exercised, upon the same terms and conditions
(including the amount thereof) specified in the Future Offering Notice. In the
event the Company has not sold such securities of the Future Offering within
such 60 day period, the Company shall not thereafter issue or sell such
securities without first offering such securities to the Buyer in the manner
provided in this Section 4(g). The Capital Raising Limitation shall not apply
to any of the following transactions (each an "EXCLUDED ISSUANCE" and,
collectively, the "EXCLUDED ISSUANCES") (i) a loan or lease from a commercial
bank which does not have any equity feature (other than warrants exercisable
at exercise prices greater than 150% of the average of the Closing Bid Price
(as defined in the Certificate of Amendment) of the Common Stock for the five
trading days immediately preceding the date of issuance of such warrant and
exercisable for a number of Shares of Common Stock that does not exceed the
quotient of (A) 10% of the proceeds to the Company from, such loan or value of
the property covered by such lease, as the case may be, divided by (B) the
average of the Closing Bid Price of the Common Stock for the five trading days
immediately preceding the date of issuance of such warrant), (ii) any
transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation, (B) in connection with any
strategic partnership or joint venture with any entity, the primary purpose of
which is not to raise equity capital, or (C) in connection with any strategic
partnership or joint venture with a "high-tech" company, the sole purpose of
which is not to raise equity capital, (D) as consideration for the acquisition
of a business, product, license or other assets by the Company, (iii) the
issuance of Common Stock in a firm commitment underwritten public offering,
(iv) the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the date
hereof, (v) the grant of additional options or warrants (including the
issuance of shares of Common Stock upon exercise of such options or warrants),
or the issuance of additional securities, under any Company stock option or
restricted stock plan for the benefit of the Company's employees, directors or
consultants or (vi) the issuance of securities pursuant to an offering by the
Company in reliance upon Rule 144A under the 1933 Act with proceeds to the
Company of at least $75,000,000. The Buyer shall not be required to
participate or exercise its right of first refusal with respect to a
particular Future Offering in order to exercise its right of first refusal
with respect to later Future Offerings.
h. Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system
(including AMEX), if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents and the Certificate of Amendment. The Company shall
maintain the Common Stock's authorization for listing on AMEX, the Nasdaq
National Market ("NASDAQ") or The New York Stock Exchange ("NYSE"). Neither
the Company nor any of its Subsidiaries shall take any action which may result
in the delisting or suspension of the Common Stock on AMEX, Nasdaq or NYSE
(other than to switch listings from AMEX, Nasdaq or NYSE ). The Company shall
promptly provide to Buyer copies of any notices it receives from AMEX, Nasdaq
or NYSE regarding the continued eligibility of the Common Stock for listing on
such automated quotation system or securities exchange. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(h).
i. Expenses. Subject to Section 9(l) below, following the Initial
Closing, the Company shall reimburse the Buyer for the Buyer's legal expenses
in connection with negotiating and preparing the Transaction Documents and
consummating the transactions contemplated thereby up to an aggregate of
$50,000.
j. Transactions With Affiliates. So long as (i) at least 50
Preferred Shares are outstanding or (ii) any Buyer owns Conversion Shares or
Warrant Shares with a market value of $500,000 the Company shall not, and
shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any of
its or any Subsidiary's officers, directors, person who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the Common Stock, or affiliates or with any
individual related by blood, marriage or adoption to any such individual or
with any entity in which any such entity or individual owns a 5% or more
beneficial interest (each a "RELATED PARTY"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company or (c) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no
less favorable than terms which would have been obtainable from a person other
than such Related Party. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or entity,
(ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "CONTROL" or "CONTROLS" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
k. Filing of Form 8-K. On or before the second business day
following each of the Closing Dates, each Additional Share Notice Date and the
Additional Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required
by the 1934 Act.
l. Corporate Existence. Until the later of (i) the date which is 30
months of the last Closing Date to occur or (ii) so long as a Buyer
beneficially owns at least 75 Preferred Shares, the Company shall maintain its
corporate existence and shall not sell all or substantially all of the
Company's assets, except in the event of a merger or consolidation or sale of
all or substantially all of the Company's assets, where the surviving or
successor entity in such transaction (x) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (y) is a publicly traded corporation whose common stock is listed
for trading on AMEX, Nasdaq or NYSE. So long as a Buyer beneficially owns any
Preferred Shares, if the Company fails to maintain its corporate existence or
sells all or substantially all of the Company's assets, except in the event of
a merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i)
assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is listed for trading on AMEX, Nasdaq or NYSE
(each a "CORPORATE TERMINATION EVENT"), then the Company shall deliver written
notice ("CORPORATE TERMINATION NOTICE") to the Buyer at least 10 Business Days
prior to the consummation of such Corporate Termination Event and at the
election of the Buyer the Company shall redeem any Preferred Shares held by
such Buyer at a price per Preferred Share equal to 250% of the Liquidation
Value (as defined in the Certificate of Amendment) concurrently with the
consummation of the Corporate Termination Event. The Buyer shall exercise its
right to require the Company to redeem outstanding Preferred Shares pursuant
to this Section 4(l) by delivering written notice to the Company within five
Business Days after the Buyer's receipt of the Company's Corporate Termination
Notice.
m. Proxy Statement. The Company shall provide each stockholder
entitled to vote at a meeting of stockholders of the Company, which meeting
shall be not later than the earlier of (i) the date which is 180 days after
the first date (a "180-DAY PROXY STATEMENT TRIGGER DATE") on which for each of
the 20 consecutive trading days ending on such Proxy Statement Trigger Date
the sum of (A) the Conversion Shares issued or issuable upon conversion of the
Preferred Shares (without regard to any limitations on conversions) and (B)
the Warrant Shares issued or issuable upon exercise of the Warrants (without
regard to any limitations on conversions) is greater than or equal to the
Exchange Cap (as defined in the Articles of Amendment) and (ii) the date which
is 60 days after the first date (a "60-DAY PROXY STATEMENT TRIGGER DATE") on
which the sum of (A) the Conversion Shares issued upon conversion of the
Preferred Shares and (B) the Warrant Shares issued upon exercise of the
Warrants is greater than or equal to the Exchange Cap (the "STOCKHOLDER
MEETING DEADLINE"), a proxy statement, which has been previously reviewed by
the Buyers and a counsel of their choice, soliciting each such stockholder's
affirmative vote at such stockholder meeting for approval of the Company's
issuance of all of the Securities as described in this Agreement, and the
Company shall use its best efforts to solicit its stockholders' approval of
such issuance of the Securities and cause the Board of Directors of the
Company to recommend to the stockholders that they approve such proposal.
Notwithstanding the foregoing, if a 60-Day Proxy Statement Trigger Date
occurs, the Company shall not be required to hold a meeting of stockholders
solely because of the occurrence of such 60-Day Proxy Statement Trigger Date
unless the holders of the Preferred Shares temporarily waive, in writing, any
redemption rights to which such holders are entitled under the Certificate of
Amendment due to the Company's inability to issue Conversion Shares as a
result of the Exchange Cap (the "REDEMPTION WAIVER") during the period
beginning on the date of the mailing of the proxy statement to the Company's
stockholders (the "MAILING DATE") and ending on the earlier of (i) the date
which is thirty (30) days after the Mailing Date and (ii) the date of the
meeting of stockholders; provided, however, that the holders of Preferred
Shares shall not be required to execute the Redemption Waiver and the Company
will remain obligated to hold a meeting of stockholders unless the Company
gives such holders written notice of the requirement for the Redemption Waiver
at least the two (2) Business Days prior to the Mailing Date. If the Company
fails to hold a meeting of its stockholders by the Stockholder Meeting
Deadline, then, as partial relief (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
holder of Preferred Shares an amount in cash per Preferred Share equal to the
product of (i) $10,000 multiplied by (ii) .025 multiplied by (iii) the
quotient of (x) the number of days after the Stockholder Meeting Deadline that
a meeting of the Company's stockholders is not held, divided by (y) 30. The
Company shall make the payments referred to in the immediately preceding
sentence within five days of the earlier of (I) the holding of the meeting of
the Company's stockholders, the failure of which resulted in the requirement
to make such payments and (II) the last day of each 30-day period beginning on
the Stockholder Meeting Deadline. In the event the Company fails to make such
payments in a timely manner, such payments shall bear interest at the rate of
2.0% per month (pro rated for partial months) until paid in full.
Notwithstanding the foregoing, the Company shall not be required to hold a
meeting of its stockholders within 180 days of a 180-Day Proxy Statement
Trigger Date as a result of such 180-Day Proxy Statement Trigger Date having
occurred if for 20 consecutive trading days during the period beginning on the
first day following such 180-Day Proxy Statement Trigger Date and ending on
and including the date which is 90 days after such 180-Day Proxy Statement
Trigger Date 19.99% of the number of shares of Common Stock outstanding on the
Initial Closing Date is greater than (x) the sum of (I) the number of
Conversion Shares and Warrant Shares issued by the Company and (II) the number
of Conversion Shares and Warrant Shares then issuable upon conversion of all
outstanding Preferred Shares and Warrants, respectively, without regard to any
limitations on conversion or exercise thereof, multiplied by (y) 1.5 (a "PROXY
STATEMENT CURE"); provided, however, that if a Proxy Statement Cure shall have
occurred then the Company shall be obligated to hold a meeting of its
stockholders pursuant to clause (i) of the first sentence of this Section 4(m)
following the next 180-Day Proxy Statement Trigger Date to occur following
such Proxy Statement Cure.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of Buyer or its respective nominee(s), for the Conversion Shares and
the Warrant Shares in such amounts as specified from time to time by Buyer to
the Company upon conversion of the Preferred Shares or exercise of the
Warrants (the "IRREVOCABLE TRANSFER AGENT Instructions"). Prior to
registration of the Conversion Shares and the Warrant Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5, and stop transfer instructions to give effect to Section 2(f) hereof (in
the case of the Conversion Shares and the Warrant Shares, prior to
registration of the Conversion Shares and the Warrant Shares under the 0000
Xxx) will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any
way Buyer's obligations and agreements set forth in Section 2(g) to comply
with all applicable prospectus delivery requirements, if any, upon resale of
the Securities. If a Buyer provides the Company with an opinion of counsel, in
a form reasonable satisfactory to the Company, that registration of a resale
by Buyer of any of such Securities is not required under the 1933 Act or the
Buyer provides the Company with reasonable assurances that the Securities can
be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and the Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates in such name and in such
denominations as specified by Buyer and without any restrictive legends. The
Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyer 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.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company hereunder to
issue and sell the Initial Preferred Shares and the Initial Warrants to Buyer
at the Initial Closing is subject to the satisfaction, at or before the
Initial Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
(i) Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company.
(ii) The Certificate of Amendment shall have been filed with the
Secretary of State of the State of New York.
(iii) Buyer shall have delivered to the Company the Purchase Price
for the Initial Preferred Shares and the related Warrants being purchased
by Buyer at the Initial Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iv) The representations and warranties of Buyer contained herein
shall be true and correct as of the date when made and as of the Initial
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Buyer shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by Buyer at or prior to the Initial Closing
Date.
b. Additional Closing Date. The obligation of the Company hereunder
to issue and sell the Additional Preferred Shares and the Additional Warrants
to Buyer at the Additional Closings is subject to the satisfaction, at or
before each of the Additional Closing Dates, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(i) The Buyer shall have delivered to the Company the Purchase Price
for the Additional Preferred Shares and the related Warrants being
purchased by Buyer at the Additional Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by
the Company.
(ii) The representations and warranties of Buyer contained herein
shall be true and correct as of the date when made and as of the
applicable Additional Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and
Buyer shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by Buyer at or prior to the
applicable Additional Closing Date.
7. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of Buyer hereunder to
purchase the Initial Preferred Shares and Initial Warrants at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions, provided that these conditions are for
Buyer's sole benefit and may be waived by Buyer at any time in its sole
discretion:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to Buyer.
(ii) The Certificate of Amendment, shall have been filed with the
Secretary of State of the State of New York, and a copy thereof certified
by such Secretary of State shall have been delivered to Buyer.
(iii) The Common Stock shall be designated for quotation on AMEX or
listed on the NYSE, and shall not have been suspended from trading on or
delisted from such exchanges nor shall delisting or suspension by such
exchanges have been threatened either (A) in writing by such exchanges or
(B) by falling below the minimum listing maintenance requirements of such
exchanges and the Company has complied with the listing requirements of
AMEX for the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise of the Initial Preferred Shares and the related
Warrants, as the case may be.
(iv) The representations and warranties of the Company contained
herein shall be true and correct as of the date when made and as of the
Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents or
Certificate of Amendment to be performed, satisfied or complied with by
the Company at or prior to the Initial Closing Date. Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Initial Closing Date, to the foregoing effect
which also shall include an update as of the Initial Closing Date
regarding the representation contained in Section 3(c) above.
(v) Buyer shall have received the opinion of Xxxxx & Xxxx LLP, dated
as of the Initial Closing Date, in substantially the form of Exhibit C
attached hereto.
(vi) The Company shall have executed and delivered to Buyer the
Stock Certificates for the Initial Preferred Shares and Initial Warrants
being purchased by Buyer at the Initial Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to Buyer (the "RESOLUTIONS").
(viii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares and exercise
of the Warrants, at least 2,450,000 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(x) The Company shall have delivered to Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within ten
days of the Initial Closing Date.
(xi) The Company shall have delivered to Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) the Certificate of
Incorporation, (C) By-laws and (D) the number of shares of Common Stock
outstanding as of a date within five (5) days of the Initial Closing,
each as in effect at the Initial Closing Date.
(xii) The Company shall have delivered to Buyer a certified copy of
its Certificate of Incorporation as certified by the Secretary of State
of the State of New York within days of the Initial Closing Date.
(xiii) The Company shall have delivered to Buyer such other
documents relating to the transactions contemplated by the Transaction
Documents as Buyer or its counsel may reasonably request.
b. Additional Closing Date. The obligation of Buyer hereunder to
purchase the Additional Preferred Shares and the Additional Warrants at the
Additional Closings is subject to the satisfaction, at or before each of the
Additional Closing Dates, of each of the following conditions, provided that
these conditions are for Buyer's sole benefit and may be waived by Buyer at
any time in its sole discretion:
(i) The Company shall have complied with the requirements of Section
1(c) and all of the Additional Notice Conditions set forth in Section
1(d) shall have been satisfied as of the Additional Closing Date.
(ii) The Certificate of Amendment, shall be in full force and effect
and shall not have been amended, without the knowledge or consent of the
Buyer, since the Initial Closing Date, and a copy thereof certified by
the Secretary of State of the State of New York shall have been delivered
to Buyer.
(iii) The Common Stock shall be authorized for quotation on AMEX,
trading in the Common Stock issuable upon conversion of the Additional
Preferred Shares to be traded on AMEX shall not have been suspended by
the SEC, AMEX and all of the Conversion Shares issuable upon conversion
of the Additional Preferred Shares to be sold at the Additional Closing
shall be listed upon AMEX.
(iv) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Additional Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents or the Certificate of
Amendment to be performed, satisfied or complied with by the Company at
or prior to the Additional Closing Date. Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company,
dated as of the Additional Closing Date, to the foregoing effect which
also shall include an update as of the Additional Closing Date regarding
the representation contained in Section 3(c) above.
(v) Buyer shall have received the opinion of Xxxxx & Wood LLP, dated
as of the Additional Closing Date in substantially the form of Exhibit C
attached hereto.
(vi) The Company shall have executed and delivered to Buyer the
Stock Certificates for the Additional Preferred Shares and the Additional
Warrants being purchased by Buyer at the Additional Closing.
(vii) The Board of Directors of the Company shall have adopted, and
shall not have amended, the Resolutions.
(viii) As of the Additional Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, a number of
shares of Common Stock equal to at least 200% of the number of shares of
Common Stock which would be issuable upon conversion in full of the then
outstanding Preferred Shares (without regard to any limitations on
conversions) and 100% of the number of shares of Common Stock which would
be issuable upon conversion in full of the then outstanding Warrants,
including for such purposes the Additional Preferred Shares and related
Warrants to be issued at such Additional Closing.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent and shall be in effect as of
the Additional Closing.
(x) The Company shall have delivered to Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in the state of such corporation's state of incorporation
issued by the Secretary of State of such state of incorporation as of a
date within ten days of the Additional Closing Date.
(xi) The Company shall have delivered to Buyer a certified copy of
its Certificate of Incorporation as certified by the Secretary of State
of the State of New York within ten days of the Additional Closing Date.
(xii) The Company shall have delivered to Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) the Certificate of
Incorporation and (C) By-laws and (D) the number of shares of Common
Stock outstanding as of a date within five (5) days of the Additional
Closing Date, each as in effect at the Additional Closing.
(xiii) The Company shall have delivered to Buyer such other
documents relating to the transactions contemplated by this Agreement as
Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of Buyer's execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Amendment, the Company shall defend, protect,
indemnify and hold harmless Buyer and all of its stockholders, officers,
directors, employees and direct or indirect equity investors and any of the
foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a
result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the
Transaction Documents or Certificate of Amendment 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 the Certificate of Amendment 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 Indemnitee (other than a cause of action,
suit or claim which is (x) brought or made by the Company and (y) is not a
shareholder derivative suit) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the Transaction Documents
or the Certificate of Amendment, (ii) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities (excluding losses resulting solely from a decline
in the market value of the Company's securities) or (iii) solely the status of
Buyer or holder of the Securities as an investor in the Company.
Notwithstanding the foregoing, Indemnified Liabilities shall not include any
liability of any Indemnitee arising solely out of such Indemnitee's willful
misconduct or fraudulent action(s). To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except
as otherwise set forth herein, the mechanics and procedures with respect to
the rights and obligations under this Section 8 shall be the same as those set
forth in Sections 6(a) and (d) of the Registration Rights Agreement,
including, without limitation, those procedures with respect to the settlement
of claims and the Company's rights to assume the defense of claims.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of New York shall govern all issues concerning the relative rights
of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
Each party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting the City of New York, borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, 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 to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical 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; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
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 in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyer, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less
than all of the holders of the Preferred Shares then outstanding. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents or
the Certificate of Amendment unless the same consideration also is offered to
all of the parties to the Transaction Documents or holders of the Preferred
Shares, as the case may be.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) upon delivery by a nationally
recognized delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Xxxxxx Electronics Corporation
00 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President, Chief Operating Officer
With a copy to:
Xxxxxx Electronics Corporation
00 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Executive Vice President, Chief Financial Officer
If to the Transfer Agent:
Continental Stock Transfer & Trust Company
Two Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Compliance Officer
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to Buyer's representatives as set forth on the
Schedule of Buyers, or at such other address and/or facsimile number and/or to
the attention of such other person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communications, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Buyer, including by merger or consolidation,
except pursuant to a Major Transaction (as defined in Section V(C) of the
Certificate of Amendment or an Excluded Redemption Event described in Section
V(H)(4) of the Certificate of Amendment with respect to which the Company is
in compliance with its obligations under Sections V and IV(E)(3) of the
Certificate of Amendment). The rights under this Agreement shall be assignable
by the Buyer without consent of the Company. Notwithstanding the foregoing,
any assignment by the Buyer shall not release the Buyer from its obligations
hereunder unless such obligations are assumed by such assignee and the Company
has consented to such assignment and assumption, which consent shall not be
unreasonably withheld. Notwithstanding anything to the contrary contained in
the Transaction Documents or the Certificate of Amendment, Buyer shall be
entitled to pledge the Securities in connection with a bona fide margin
account.
h. No 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. Unless this Agreement is terminated under Section 9(l),
the representations and warranties of the Company and the Buyer contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive
each of the Closings.
j. Publicity. The Company and Buyer shall have the right to approve
before issuance any press releases 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 any Buyer, to make any press
release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although Buyer shall be consulted
by the Company in connection with any such press release or other public
disclosure prior to its release and shall be provided with a copy thereof).
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 Initial Closing shall not have
occurred with respect to a Buyer on or before three (3) Business Days from the
date hereof due to the Company's or Buyer's failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the non-breaching party's failure to
waive such unsatisfied condition(s)), the non-breaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyer for expenses up to the amount described in Section 4(i)
above.
m. Placement Agent. The Company and the Buyer each acknowledges that
it has not engaged any placement agent in connection with the sale of the
Preferred Shares and the related Warrants.
n. No Strict Construction. 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.
o. Remedies. Buyer and each holder of the Securities shall have all
rights and remedies set forth in the Transaction Documents and the Certificate
of Amendment and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a payment
or payments to the Buyer hereunder or pursuant to the Registration Rights
Agreement, the Certificate of Amendment or the Warrants or the Buyer enforce
or exercise its rights hereunder or 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.
* * * * * *
IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYER:
XXXXXX ELECTRONICS HFTP INVESTMENT L.L.C.
CORPORATION By: Promethean Investment Group L.L.C.
Its: Investment Manager
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxx X. X'Xxxxx, Xx.
------------------------------ -------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxx X. X'Xxxxx, Xx.
Title: Co-Chief Executive Officer Its: Managing Member
SCHEDULE OF BUYERS
NUMBER OF
INITIAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES AND FACSIMILE NUMBER
--------------- ----------------------------- ----------- ------------------------------------
HFTP Investment L.L.C. Promethean Investment Group, L.L.C. 750 Promethean Investment Group, L.L.C.
000 Xxxxxxxxx Xxxxxx 000 Xxxxxxxxx Xxxxxx
00xx Xxxxx 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. X'Xxxxx, Xx. Attn: Xxxxx X. X'Xxxxx, Xx.
Xxxxxx Xxxxxxx Xxxxxx Xxxxxxx
Telephone: 000-000-0000 Telephone: 000-000-0000
Facsimile: 000-000-0000 Facsimile: 000-000-0000
Residence: New York
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 312-902-1061
SCHEDULES
---------
Schedule of Buyer
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(f) - SEC Documents
Schedule 3(e) - Conflicts
Schedule 3(g) - Material Changes
Schedule 3(h) - Litigation
Schedule 3(n) - Intellectual Property
Schedule 3(r) - Transactions with Affiliates
Schedule 4(d) - Use of Proceeds
EXHIBITS
--------
Exhibit A - Form of Certificate of Amendment
Exhibit B - Form of Registration Rights Agreement
Exhibit C - Form of Company Counsel Opinion
Exhibit D - Form of Irrevocable Transfer Agent Instructions
Exhibit E - Form of Warrant
