Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
June 19, 2001, by and among Alloy Online, Inc., a Delaware corporation, with
headquarters located at 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
(the "Company"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers 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 $.01 per share: the Company's Series B Convertible
Preferred Stock ("Preferred Stock") which shall be convertible into shares of
the Company's Common Stock, $.01 par value per share (the "Common Stock") (as
converted, the "Conversion Shares"), in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Preferred
Stock in the form attached hereto as Exhibit A (the "Certificate of
Designations").
C. The Buyers severally wish to purchase, upon the terms and
conditions stated in this Agreement, (i) an aggregate of 1,815 shares of
Preferred Stock (the "Preferred Shares"), in the respective amounts set forth
opposite each Buyer's name on the Schedule of Buyers; and (ii) warrants (the
"Warrants") to purchase up to 502,492 shares of Common Stock (as exercised
collectively, the "Warrant Shares") for each Preferred Share purchased by such
Buyer on the Closing Date (as defined below), such Warrants to be substantially
in the form attached hereto as Exhibit B.
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit C (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.
E. The location of defined terms in this Agreement is set
forth on the Index of Terms attached hereto.
NOW, THEREFORE, the Company and the Buyers hereby agree as
follows:
1. PURCHASE AND SALE OF PREFERRED SHARES and warrants.
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a. Purchase of Preferred Shares and Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company the respective number of Preferred Shares, together with the
related Warrants, set forth opposite each Buyer's name on the Schedule of Buyers
(the "Closing"). The per share price (the "Purchase Price") of Preferred Shares
shall be $10,000. On the Closing Date (as defined below), the Company shall
deliver to each Buyer a stock certificate(s) representing such number of
Preferred Shares which such Buyer is then purchasing (as indicated opposite such
Buyer's name on the Schedule of Buyers), duly executed on behalf of the Company
and registered in the name of such Buyer or its designee (the "Stock
Certificates").
b. Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m. New York City Time on June 19, 2001, subject
to the satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and the Buyers). The Closing shall occur on the Closing Date at the
offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
c. Form of Payment. On the Closing Date, each Buyer shall pay
the Company the Purchase Price for the Preferred Shares to be issued and sold to
such Buyer at the Closing, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions provided in writing to
the Buyers at least two days prior to the Closing Date.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred Shares
it will acquire the Conversion Shares then issuable and (iii) upon exercise of
the Warrants held by it, will acquire the Warrant Shares issuable upon exercise
thereof (the Preferred Shares, the Conversion Shares, the Warrants and the
Warrant Shares collectively are referred to herein as the "Securities") for its
own account for investment only and not with a present 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, such Buyer does not agree to hold any
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. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D under the
1933 Act.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
d. Information. Such 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 such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of and receive answers from
the Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in this Agreement.
e. No Governmental Review. Such 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. Such 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) they
are offered, sold, assigned or transferred pursuant to an effective registration
statement under the 1933 Act, (B) such Buyer shall have delivered to the Company
an opinion of counsel, in a form and from counsel reasonably acceptable 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) such 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 the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan secured by the Securities
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and Warrants and, until such
time as the sale of the Conversion Shares and the Warrant Shares have been sold
in an offering 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:
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 MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION
OF COUNSEL, IN A FORM AND FROM COUNSEL GENERALLY AND REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) 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 OR OTHER
LOAN SECURED BY THE SECURITIES.
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 transferred or sold pursuant to an effective
registration statement under the 1933 Act covering the Securities to be
transferred or sold, (ii) in connection with a sale transaction, such holder
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act, or (iii) such holder provides
the Company with reasonable assurances that the 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.
h. Authorization; Enforcement; Validity. Such Buyer has full
power and authority to enter into and perform in accordance with its and their
terms, this Agreement, the Registration Rights Agreement and each other
Transaction Document (as defined below). This Agreement and each of the other
Transaction Documents have been duly and validly authorized, executed and
delivered on behalf of such Buyer and is a valid and binding agreement of such
Buyer enforceable against such Buyer in accordance with its 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. Such Buyer is a resident of that country or
state specified in its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers
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 which ownership entitles the Company to elect a majority of the
board of directors or similar governing body of such entity) 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 authority to own their 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 (i) the business, properties, assets, operations,
condition (financial or otherwise), results of operations or prospects of the
Company, individually, or of the Company and its Subsidiaries, taken as a whole,
or (ii) on the ability of the Company to perform its obligations hereunder,
under the Certificate of Designations, the Registration Rights Agreement, the
Warrants or under the agreements or instruments to be entered into or filed in
connection therewith or herewith, or (iii) the Securities. A complete list of
entities in which the Company, directly or indirectly, owns capital stock or
holds an equity or similar interest is set forth on Schedule 3(a).
b. Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Warrants, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5)
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. The execution and delivery of the Transaction
Documents by the Company and the execution and filing of the Certificate of
Designations by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Preferred Shares, the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion thereof, the issuance of the Warrants
and the reservation for issuance and the issuance of the Warrant Shares issuable
upon exercise of the Warrants, 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 to the extent that
stockholder approval may be required pursuant to the rules of the NASDAQ
National Market ("NASDAQ") for the issuance of a number of Conversion Shares and
Warrant Shares greater than 19.99% of the number of shares of Common Stock
outstanding immediately prior to the Initial Closing Date (the "19.99% Rule")).
The Transaction Documents have been duly executed and delivered by the Company.
The 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. The Certificate of Designations has been filed on or prior
to the Closing Date with the Secretary of State of the State of Delaware and
will be in full force and effect, enforceable against the Company in accordance
with its terms and shall not have been amended unless in compliance with its
terms.
c. Capitalization. As of the date hereof and immediately prior
to the issuance of the Preferred Shares and Warrants hereunder, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common Stock,
of which as of the date hereof 23,023,384 shares are issued and outstanding, no
shares are held in treasury, 8,078,129 shares are reserved for issuance pursuant
to the Company's stock option and purchase plans, and 1,220,797 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, (ii) 5,000,000 shares of preferred
stock of the Company, 1,850,000 shares of which have been designated as the
Company's Series A Convertible Preferred Stock, and of which as of the date
hereof 1,052,632 have been issued and are outstanding, and 3,150,000 shares of
which are undesignated and none of which are issued and outstanding. In
addition, the Company has, in connection with the filing of its proxy statement
on Schedule 14A, proposed amending its Certificate of Incorporation to increase
the number of authorized preferred stock to 10,000,000 shares, and will effect
such amendment if the required shareholder approval is received. 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), (A) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights (arising under Delaware law, the Company's Certificate of
Incorporation or By-laws or any agreement or instrument to which the Company is
a party) or any liens or encumbrances granted or created by the Company; (B)
there are no outstanding debt securities issued by the Company; (C) 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 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; (D) 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); (E) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is bound to redeem a security of the Company or any of its Subsidiaries; (F)
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 (G) 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 each 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 amended and
as in effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable or exchangeable for Common Stock and the
material rights of the holders thereof in respect thereto except for stock
options granted under any benefit plan or stock option plan of the Company
approved by the Board of Directors of the Company.
d. Issuance of Securities. The Preferred Shares and the
Warrants are duly authorized and, upon issuance and payment therefor 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
issuance thereof and shall not be subject to preemptive rights or other similar
rights of stockholders of the Company and (iii) as to the Preferred Shares,
entitled to the rights and preferences set forth in the Certificate of
Designations. As of the Initial Closing, at least 2,955,038 shares of Common
Stock (subject to adjustment pursuant to the Company's covenant set forth in
Section 4(f) below) will have been duly authorized and reserved for issuance
upon conversion of the Preferred Shares and exercise of the Warrants. Upon
conversion or issuance in accordance with the Certificate of Designations or the
Warrants, as applicable, the Conversion Shares and the Warrant Shares, as the
case may be, 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. Based, in
part, on reliance on the representations and warranties of each of the Buyers in
the Transaction Documents, the issuance by the Company of the Securities is
exempt from registration under the 1933 Act.
e. No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designations 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 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; (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 (as defined below)) 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, in any such event set forth in clauses (ii) and (iii) above
that would have a Material Adverse Effect. Neither the Company nor its
Subsidiaries is in violation of any term of its Certificate of Incorporation or
its By-laws or their organizational charter or by-laws, respectively, other than
with respect to the holding of annual shareholder and/or Board of Directors
meetings of Subsidiaries (which violations would not result, either individually
or in the aggregate, in a Material Adverse Effect). Except as disclosed in
Schedule 3(e), neither the Company nor any of its Subsidiaries is in violation
of any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except where
such violations and defaults would not result, either individually or in the
aggregate, in 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
violations would not result, either individually or in the aggregate, in a
Material Adverse Effect. Except as specifically contemplated by this Agreement,
as required under the 1933 Act, as required by Blue Sky filings or as required
by the 19.99% Rule, 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 to perform its obligations under the Certificate of
Designations 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 are unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company is not in violation of the
listing requirements of the Principal Market, and has no actual knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock
by the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since May 14, 1999,
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 Securities Exchange Act of 1934, as amended (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"). Except as disclosed on Schedule 3(f), as of the date of filing of
such SEC Documents, such SEC Documents, as it may have been subsequently amended
by filings made by the Company with the SEC prior to the date hereof, 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.
None of the SEC Documents, as of the date filed and as they may have been
subsequently amended by filings made by the Company with the SEC prior to the
date hereof, 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 the 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 and the published
rules and regulations of the SEC with respect thereto. Except as disclosed on
Schedule 3(f), 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, or (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). No other
information provided by or on behalf of the Company to any Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d), contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein as of the date of and delivery of such information and, in the light of
the circumstances under which they are or were made, not misleading; provided,
that information given in writing as of a later date, including, without
limitation, on the Schedules hereto, shall be deemed to modify information given
as of an earlier date. Neither the Company nor any of its Subsidiaries nor any
of their officers, directors, employees or agents have provided the Buyers with
any material, nonpublic information. As of the date hereof, the Company meets
the requirements for use of Form S-3 for registration of the resale of
Registrable Securities (as defined in the Registration Rights Agreement). The
Company is not required to file and will not be required to file any agreement,
note, lease, mortgage, deed or other instrument entered into prior to the date
hereof and to which the Company is a party or by which the Company is bound
which has not been previously filed as an exhibit to its reports filed with the
SEC under the 1934 Act.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g) or as disclosed in the Company's Annual Report on Form 10-K for the year
ended January 31, 2001, there has been no change or development in the business,
properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company and its Subsidiaries individually or
taken as a whole that has had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. 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 knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings or any actual knowledge of any
fact which would reasonably lead a creditor to do so. Since January 31, 2001,
the Company has not declared or paid any dividends, sold any assets,
individually or in the aggregate, in excess of $500,000 outside of the ordinary
course of business or had capital expenditures, individually or in the
aggregate, in excess of $2,000,000.
h. Absence of Litigation. 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) or,
with respect to the Company and its Subsidiaries, to the extent that any such
action or threatened action does not set forth potential liability, claims or
charges individually in excess of $250,000, or in the aggregate in excess of
$1,000,000. 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 a party to
any securities related litigation during the past five years. To the best
knowledge of the Company, Schedule 3(h) contains a complete list and summary
description of any pending, or to the knowledge of the Company, threatened
proceeding against or affecting the Company or any of its Subsidiaries, without
regard to whether it could have a Material Adverse Effect.
i. Acknowledgment Regarding Buyer's Purchase of Securities.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of an arm's length purchaser with respect to the Transaction
Documents and the Certificate of Designations and the transactions contemplated
hereby and thereby. The Company further acknowledges that each 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
Designations and the transactions contemplated hereby and thereby and any advice
given by any of the Buyers or any of their respective representatives or agents
in connection with the Transaction Documents and the Certificate of Designations
and the transactions contemplated hereby and thereby is merely incidental to
such Buyer's purchase of the Securities. The Company further represents to each
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 Shares and the Warrants
contemplated by this Agreement and as set forth on Schedule 3(j), 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 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 any of
the Securities offered hereby.
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 the
issuance by the Company of any of the Securities under the 1933 Act or cause the
offering of any of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or, except as set forth on Schedule 3(l),
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of NASDAQ, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or, except
as set forth on Schedule 3(l), cause the offering of the Securities to be
integrated with other offerings.
m. Employment Matters; ERISA Matters. (i) Neither the Company
nor any of its Subsidiaries is involved in any union labor dispute nor, to the
Company's knowledge, is any such dispute threatened. None of the Company's or
its Subsidiaries' employees is a member of a union which relates to such
employee's relationship with the Company, neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
believes that its and its Subsidiaries relations with their employees are good.
No executive officer (as defined in Rule 501(f) of the 0000 Xxx) has notified
the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company. No executive officer, to
the Company's knowledge, is, or is now expected to be, in violation of any term
of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, which violation could have a Material
Adverse Effect, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters, which liability could have a Material Adverse
Effect.
(ii) The Company and its Subsidiaries are in compliance with
all federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually
or in the aggregate, have a Material Adverse Effect. To the best of the
Company's knowledge, there are no pending investigations involving the Company
or any of its Subsidiaries by the U.S. Department of Labor or any other
governmental agency responsible for the enforcement of such federal, state,
local or foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company or any of its Subsidiaries pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company or
any of its Subsidiaries. No representation question exists respecting the
employees of the Company or any of its Subsidiaries, and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company or any of its Subsidiaries. No grievance or arbitration proceeding
is pending under any expired or existing collective bargaining agreements of the
Company or any of its Subsidiaries. No material labor dispute with the employees
of the Company or any of its Subsidiaries exists or, to the knowledge of the
Company, is imminent. Schedule 3(m)(ii) sets forth a list of every employee
benefit plan (whether or not subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) maintained or contributed to by the Company
(determined in accordance with Section 4001(a)(14) of ERISA) (collectively the
"Plans"). Except for such failures that would not, either individually or in the
aggregate, result in a Material Adverse Effect, each of the Plans have been
maintained and administered in accordance with their terms, ERISA, the Internal
Revenue Code of 1986, as amended (the "Code"), and other applicable laws. None
of the Plans is subject to Title IV of ERISA and no Plan is a multiemployer plan
(within the meaning of Section 3(37) of ERISA). Each Plan intended to qualify
under Section 401(a) or 501(c)(9) of the Code has received a favorable
determination or approval letter from the Internal Revenue Service regarding its
qualification under such section and no event has occurred which cause any such
Plan to lose its qualification.
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 other intellectual property rights necessary
to conduct their respective businesses as now conducted, except where the
failure to own or possess such rights would not result, either individually or
in the aggregate, in 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, governmental 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, either individually or in
the aggregate, in a Material Adverse Effect. Except as would not have 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 names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, trade secrets or other intellectual
property rights of others, or of any development of similar or identical trade
secrets or technical information by others and, except as set forth on Schedule
3(n), and except as would not have a Material Adverse Effect, there is no claim,
action or proceeding being made or brought against, or to the knowledge of the
Company, being threatened against, the Company or its Subsidiaries regarding its
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, trade secrets,
or infringement of other intellectual property rights. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their material intellectual properties.
o. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere in any material respect with the use made and
proposed to be made of such property by the Company and any of its Subsidiaries.
Any real property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere in any material
respect with the use made and proposed to be made of such property and
facilities by the Company and its Subsidiaries.
p. Environmental Laws. (i) The Company and its Subsidiaries
(A) are in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except in each case where the failure of the Company and its
subsidiaries would not, either individually or in the aggregate, have a Material
Adverse Effect. Except as would not have a Material Adverse Effect, with respect
to the Company and/or its Subsidiaries (1) there are no past or present releases
of any material into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under any Environmental
Law in any material respect and (2) neither the Company nor any of its
Subsidiaries has received any notice with respect to the foregoing, nor is any
action pending or, to the knowledge of the Company, threatened in connection
with the foregoing. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, to the knowledge of the Company,
no Hazardous Materials are contained on or about any real property currently
owned, leased or used by the Company or any of its Subsidiaries, and to the best
knowledge of the Company no Hazardous Materials were released on or about any
real property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries.
(iii) To the knowledge of the Company, there are no
underground storage tanks on or under any real property owned, leased or used by
the Company or any of its Subsidiaries that are not in compliance with
applicable law.
q. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. To the Company's knowledge, neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for, and the Company has no reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
r. Regulatory Permits. Except for Permits (as defined below)
the absence of which would not result, either individually or in the aggregate,
in a Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses (the "Permits"), and neither the Company nor, to the Company's
knowledge, any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such Permit.
s. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls that the Company
reasonably believes is 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.
t. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares 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 Designations is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the company.
u. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
v. Tax Status. The Company and each of its Subsidiaries (i)
has made or filed all federal, state and foreign 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), (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and for which the Company has made appropriate
reserves for on its books, and (iii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations (referred to in clause
(i) above) 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.
w. Transactions With Affiliates. Except as set forth on
Schedule 3(w) and in the SEC Documents, and other than the grant of stock
options described in Section 3(c) or 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 such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.
x. S-3 Registration. The Company is currently eligible to
register securities, including the resale of the Conversion Shares and the
Warrant Shares on a registration statement on Form S-3 under the 0000 Xxx.
y. Disclosure. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects as
of the date of and delivery of such information and the Company has not omitted
to state any material fact necessary in order to make the statements made herein
or therein, in light of the circumstances under which they were made, not
misleading; provided, that information given as of a later date, including,
without limitation, on the Schedules hereto, shall be deemed to modify
information given as of an earlier date. No event or circumstance has occurred
or information exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports filed under the
1934 Act are being incorporated into an effective registration statement filed
by the Company under the 1933 Act).
z. Investment Company Status. The Company is not, and upon
consummation of the sale of the Securities will not be, an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
aa. Foreign Corrupt Practices. To the Company's knowledge,
neither the Company nor any of its Subsidiaries, nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of his actions for, or on behalf of, the Company
or any Subsidiary used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
bb. Solvency. The Company individually and together with its
Subsidiaries on a consolidated basis (both before and after giving effect to the
transactions contemplated by the Transaction Documents) is solvent (i.e., its
assets have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured)
and currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature.
4. COVENANTS AND AGREEMENTS.
------------------------
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 and Blue Sky. 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 each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Buyers at the Closing 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 Buyers 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 the
Closing Date.
c. Reporting Status. Until the later of (i) the date which is
one year after the date as of 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
shall have sold all the Conversion Shares and the Warrant Shares and (B) none of
the Preferred Shares or Warrants is outstanding (the "Reporting Period"), the
Company (x) shall timely 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 and (y)
will use its best efforts to take all necessary action to maintain its ability
and eligibility to register securities on Form S-3.
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 file 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. The
financial statements of the Company will be prepared in accordance with
generally accepted accounting principles, consistently applied, and will fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries and results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). The Company agrees to send
the following to each Investor (as that term is defined in the Registration
Rights Agreement) during the Reporting Period: (i) within two (2) 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, provided that if any such report is not filed with the SEC through
XXXXX then the Company shall deliver a copy of such report to each Investor by
facsimile on the same day it is filed with the SEC; (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 the sum of (i) 150% of the number of shares of Common
Stock needed to provide for the issuance of the shares of Common Stock upon
conversion of all outstanding Initial Preferred Shares (without regard to any
limitations on conversions) and (ii) 125% of the number of shares of Common
Stock needed to provide for the issuance of the shares of Common Stock upon
exercise of all outstanding Warrants (without regard to any limitations on
exercises).
g. 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, 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 Designations. The Company shall maintain the Common Stock's
authorization for listing on the NYSE or quotation on NASDAQ (as applicable, the
"Principal Market"). Neither the Company nor any of its Subsidiaries shall take
any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock from the Principal Market. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(g).
h. Filing of Form 8-K. On or before 8:30 a.m., New York City
time, on the Business Day following the Closing Date, the Company shall file a
Current Report on Form 8-K with the SEC describing the terms of the transactions
contemplated by the Transaction Documents and including as exhibits to such
Current Report on Form 8-K this Agreement, the Certificate of Designations, the
form of Warrants and the Registration Rights Agreement, and the schedules hereto
and thereto in the form required by the 1934 Act.
i. Proxy Statement. Unless the Company shall have provided the
Buyers with evidence reasonably satisfactory to the Buyers that the Stockholder
Approval is not required by the Principal Market in connection with the 19.99%
Rule, the Company shall provide each stockholder entitled to vote at the next
meeting of stockholders of the Company, which meeting shall occur on or before
the earlier of (A) the date which is 90 days after the Proxy Statement
Triggering Date (as defined below) and (B) the date of the Company's next annual
meeting of its stockholders, which meeting shall occur on or before July 31,
2002 (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
in accordance with applicable law and the rules and regulations of the Principal
Market (such affirmative approval being referred to herein as the "Stockholder
Approval"), and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and to cause the Board
of Directors of the Company to recommend to the stockholders that they approve
such proposal. 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 convertible into Conversion Shares that would violate the provisions of
the 19.99% Rule equal to the product of (i) $10,000; multiplied by (ii) .01;
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 1.5% per month (pro rated for partial months) until paid
in full. "Proxy Statement Triggering Date" shall mean the first date after the
date of this Agreement on which the sum of (A) the number of shares of Common
Stock previously issued upon conversion of any Preferred Shares and exercise of
any Warrants, (B) the number of shares of Common Stock issuable upon conversion
of all the outstanding Preferred Shares based on the Conversion Price in effect
on the date of such determination (without regard to any limitation upon the
conversion of any Preferred Shares), and (C) the number of shares of Common
Stock issuable upon exercise of all of the outstanding Warrants based on the
Exercise Price (as defined in the Warrants) in effect on the date of such
determination (without regard to any limitation upon the exercise of any
Warrants) exceeds 19.99% of the aggregate number of shares of Common Stock
deemed outstanding as of the relevant date for purposes of the 19.99% Rule.
j. Corporate Existence. So long as a Buyer beneficially owns
any Preferred Stock, 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, (x) where the consideration tendered by the surviving or
successor entity in such transaction consists entirely of cash or (y) 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) such surviving or successor entity or its parent
into whose stock the Preferred Shares and Warrants will be convertible or
exercisable is a publicly traded corporation whose common stock is listed for
trading on or quoted on NYSE or NASDAQ.
k. Pledge of Securities. The Company acknowledges and agrees
that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan secured by the Securities. The pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder unless
the Pledgor also transfers or assigns the right to vote the Securities so
pledged (other than a transfer that only becomes effective upon a default on the
underlying obligation), and no Investor effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement, any other Transaction
Document or the Certificate of Designations, including, without limitation,
Section 2(f) of this Agreement unless the Pledgor also transfers or assigns the
right to vote the Securities so pledged (other than a transfer that only becomes
effective upon a default on the underlying obligation); provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
l. Expenses. Each of the Company and the Buyers shall each pay
its respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, delivery and performance of
this Agreement, the Certificate of Designations, the Warrants and the
Registration Rights Agreement; provided, that at the Closing as the Buyers may
request, the Company shall reimburse the Buyers for the Buyers' and its
attorneys' fees and expenses incurred in connection with the preparation of this
Agreement, the Certificate of Designations, the Warrants and the Registration
Rights Agreement up to an aggregate of $50,000. In addition to the foregoing,
the Company agrees to pay on demand all reasonable costs and expenses
(including, without limitation, reasonable fees and expenses of counsel to the
Buyers) incurred by the Buyers in connection with the enforcement of the Buyers'
rights and/or the collection of all amounts due under this Agreement, the
Certificate of Designations, the Warrants or the Registration Rights Agreement.
m. Good Standing. At the Closing, the Company shall deliver a
good standing certificate to each of the Buyers, certifying the Company's
qualification to do business and its good standing in the State of New York as
certified by the Secretary of State of the State of New York.
n. Additional Issuances of Securities. The Company shall not
without the Buyer's prior written approval, at any time on or before the 180th
day following the date the Initial Registration Statement filed pursuant to
Section 2(a) of the Registration Rights Agreement is declared effective by the
SEC, agree to issue or issue any Common Stock or other equity security or any
other security convertible into or exchangeable or exercisable for Common Stock
(including any debt financing with an equity component) or any other right to
acquire any Common Stock (the "Convertible Securities") pursuant to Section 4(2)
of the 1933 Act or an offering of equity securities (including any debt security
with an equity component) under Regulation D or Regulation S of the 1933 Act or
in any other private placement or enter into any equity issuing arrangement
including an "equity line" or similar product if (A) the per share purchase
price for the securities to be so issued or sold is less than the greater of (x)
the Conversion Price (as defined in the Certificate of Designations) then in
effect and (y) the Closing Bid Price (as defined in the Certificate of
Designations) on the trading day immediately preceding the issuance date or date
of applicable contract, as appropriate or (B) the conversion ratio for any such
Convertible Securities may fluctuate, in whole or in part, based on or derived
from or by reference to any trading price or other measure of value of Common
Stock. The foregoing provisions shall not apply to issuances of Common Stock or
Convertible Securities (1) pursuant to Company authorized stock option plans,
(2) in traditional registered underwriting offerings, (3) pursuant to a
Strategic Financing (as defined below) or (4) in connection with the acquisition
by the Company of any other business or assets or rights to use any assets. A
"Strategic Financing" shall mean the issuance of Common Stock or warrants to
purchase Common Stock at a purchase price or an exercise price, as the case may
be, that is not less than the market price of the Common Stock on the date of
issuance of such Common Stock or warrant, in connection with any strategic
investor, vendor, lease or similar arrangement (the primary purpose of which is
not to raise equity capital), provided that the aggregate number of shares of
Common Stock which the Company may issue pursuant to this definition shall not
exceed 100,000 shares (subject to adjustment for stock splits, stock dividends,
stock combination and similar transactions)
o. Additional Preferred Stock. For so long as any Buyer
beneficially owns any Securities, the Company will not issue any Preferred Stock
other than to the Buyers as contemplated hereby.
p. Transactions With Affiliates. So long as (i) Preferred
Shares with an aggregate Stated Value (as defined in the Certificate of
Designations) of no less than $1 million are outstanding or (ii) any Buyer owns
Conversion Shares with a market value of $1 million, 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 their 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
arm's-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.
q. Disclosure. From and after the date hereof, the Company
will not provide to any Buyer any material non-public information which,
according to applicable law, rule or regulation should be disclosed publicly by
the Company but which has not been so disclosed.
r. Compliance with Law. The Company will conduct its business
in compliance with all applicable laws, rules, ordinances and regulations of the
jurisdictions in which it is conducting business, including, without limitation,
all applicable local, state and federal environmental laws and regulations the
failure to comply with which would have a Material Adverse Effect.
s. Insurance. The Company shall maintain liability, casualty
and other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size and operations to
the Company.
t. No Integration. The Company will not conduct any future
offering that will be integrated with the issuance of the Securities for
purposes of the rules promulgated by the SEC or NASDAQ.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its
transfer agents, and any subsequent transfer agent, to issue certificates, or
credit shares to the applicable balance accounts at DTC registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares and
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Preferred Shares, or exercise of the
Warrants, as applicable (the "Irrevocable Transfer Agent Instructions"), a form
of which is attached as Exhibit D hereto. Prior to sale of the Conversion Shares
and the Warrant Shares pursuant to an effective registration statement 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 the sale of the
Conversion Shares and the Warrant Shares pursuant to an effective registration
statement under the 1933 Act) 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, the
Warrants and the Registration Rights Agreement. If a Buyer provides the Company
with an opinion of counsel, in form reasonably acceptable to the Company, to the
effect that a public sale, assignment or transfer of Securities may be made
without registration under the 1933 Act or the Buyer provides the Company with
reasonable assurances that the 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, 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, or
credit shares to one or more balance accounts at DTC in such name and in such
denominations as specified by such Buyer and without any restrictive legend. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers 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 Buyers shall be entitled,
in addition to all other available remedies, to an order and/or 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.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Preferred Shares and the Warrants to each Buyer at the Closing is subject to the
satisfaction, with respect to each Buyer at or before the 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) Such 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 Designations
shall have been filed with the Secretary of State of the State
of Delaware.
(iii) Such Buyer shall have delivered
to the Company the Purchase Price (less, in the case of
BayStar Capital, L.P., the amounts withheld pursuant to
Section 4(l)) for the Preferred Shares and the Warrants being
purchased by such Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions
provided by the Company.
(iv) The representations and warranties
of such Buyer shall be true and correct in all material
respects as of the date when made and as of the Closing Date
as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer
shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions
required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the
Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the
Preferred Shares and the Warrants from the Company at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have executed
each of the Transaction Documents and delivered the same to
such Buyer.
(ii) The Certificate of Designations
shall have been filed with the Secretary of State of the State
of Delaware, and a copy thereof certified by the Secretary of
State of the State of Delaware shall have been delivered to
such Buyer.
(iii) The Common Stock (x) shall be
designated for quotation or listed on the Principal Market and
(y) shall not have been suspended by the SEC or the Principal
Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been
threatened either (A) in writing by the SEC or the Principal
Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market; and the Conversion
Shares issuable upon conversion of the Preferred Shares
(without regard to any limitations on conversions) and the
Warrant Shares issuable upon exercise of the Warrants (without
regard to any limitations on exercises) shall be listed upon
the Principal Market.
(iv) The representations and warranties
of the Company shall be true and correct as of the date when
made and as of the 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 to be performed,
satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated
as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer,
including, without limitation, an update as of the Closing
Date regarding the representation contained in Section 3(c)
above.
(v) Such Buyer shall have received
the opinion of Mintz, Levin, dated as of the Closing Date, in
the form of Exhibit E, attached hereto.
(vi) The Company shall have executed
and delivered to such Buyer the Preferred Stock Certificates
and Warrants (in such denominations as such Buyer shall
request) for the Initial Preferred Shares and the Warrants
being purchased by such Buyer at the Closing.
(vii) The Board of Directors of the
Company shall have adopted resolutions consistent with Section
3(b) above and in a form reasonably acceptable to such Buyer
(the "Resolutions").
(viii) As of the 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 the exercise of the Warrants, at
least 2,955,038 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
such Buyer a certificate evidencing the incorporation and good
standing of the Company in the State of Delaware issued by the
Secretary of State of Delaware as of a date within ten days of
the Closing Date.
(xi) The Company shall have delivered
to such Buyer a certified copy of the Certificate of
Incorporation as certified by the Secretary of State of the
State of Delaware as of a date within ten days of the Closing
Date.
(xii) The Company shall have delivered
to such Buyer a secretary's certificate, dated as of the
Closing Date, certifying as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the By-laws, each as in
effect at the Closing.
(xiii) The Company shall have made all
filings under all applicable federal and state securities laws
necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws.
(xiv) The Company shall have delivered
to such Buyer a letter from the Company's transfer agent
certifying the number of shares of Common Stock outstanding as
of a date within five days of the Closing Date.
(xv) The Company shall have delivered
to the Buyers such other documents relating to the
transactions contemplated by the Transaction Documents as the
Buyers or their counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each 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 Designations, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their stockholders, officers, directors, employees and
direct or indirect 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, the Certificate of Designations 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, the Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby, (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 stockholder derivative suit) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents, the Certificate of Designations or any other certificate,
instrument or document contemplated hereby or thereby, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities or (iii) the status of such Buyer or
holder of the Securities as an investor in the Company. 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. MISCELLANEOUS.
-------------
a. Governing Law; Jurisdiction; Jury
Trial. All 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 jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute 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 each
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 or waived other than by an instrument in writing
signed by the Company and the holders of at least 66 2/3% of the Preferred
Shares then outstanding. 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 Designations unless the same consideration also
is offered to all of the parties to the Transaction Documents or holders of
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) one
(1) Business Day after deposit with a nationally recognized overnight 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:
Alloy Online, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
ATTN: Xxxxxxx Xxxxx, Vice President
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Telephone:
Facsimile: (000) 000-0000
If to a Buyer, to it at the address and facsimile
number set forth on the Schedule of Buyers, with copies to such 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
communication, (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 holders of at least 66 2/3%
of the Preferred Shares then outstanding, including by merger or consolidation,
except pursuant to a Change of Control (as defined in Section 4(b) of the
Certificate of Designations) with respect to which the Company is in compliance
with Section 4 of the Certificate of Designations and Section 4(j) of this
Agreement. A Buyer may assign some or all of its rights hereunder without the
consent of the Company; provided, however, that such transferee will not be
deemed a Buyer hereunder unless such transferee has acquired at least 50 shares
of Preferred Stock (as adjusted to reflect any stock splits, reverse stock
splits and similar capital events) and such transferee has agreed in writing in
form and substance reasonably satisfactory to the Company to be bound by the
applicable provisions of this Agreement. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Buyers shall be entitled to
pledge the Securities in connection with a bona fide margin account or other
loan secured by the Securities.
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 Buyers 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 the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each 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 the Company reasonably believes upon
consultation with its outside counsel is required by applicable law and
regulations or the rules of its Principal Market (although each 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 Closing
shall not have occurred with respect to a Buyer on or before five (5) Business
Days from the date hereof due to the Company's or such Buyer's failure to
satisfy the conditions set forth in Sections 6(a) and 7(a) above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)), the
nonbreaching 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 any nonbreaching Buyer for the expenses described in
Section 4(l) above.
m. Placement Agent. The Company acknowledges
that other than Xxxxxx Brothers, Inc. it has not engaged a placement agent in
connection with the sale of the Preferred Share. The Company shall be
responsible for the payment of any placement agent's fees (including those of
Xxxxxx Brothers, Inc.), financial advisory fees, or brokers' commissions
relating to or arising out of the transactions contemplated hereby. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney's fees and out-of-pocket expenses)
arising in connection with any such claim.
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. Each Buyer and each holder
of the Securities shall have all rights and remedies set forth in the
Transaction Documents and the Certificate of Designations 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 any Buyer hereunder or pursuant to
the Registration Rights Agreement, the Certificate of Designations or the Buyers
enforce or exercise their 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.
q. Equitable Relief. The Company recognized
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages.
[signature page follows]
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
written above.
COMPANY:
ALLOY ONLINE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: CEO
BUYERS:
BAYSTAR CAPITAL, L.P.,
a Delaware limited partnership
BY: BayStar Capital Management LLC,
Its General Partner
By: /s/ Xxxxx Xxxxx
-----------------------------
Name: Xxxxx Xxxxx
Title: Vice President
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax:
BAYSTAR INTERNATIONAL LTD.,
a British Virgin Islands corporation
BY: BayStar International Management LLC,
Its Investment Manager
By: /s/ Xxxxx Xxxxx
-----------------------------
Name: Xxxxx Xxxxx
Title: Vice President
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax:
XXXXXXX, X.X.,
a Missouri limited partnership
BY: CJ Capital Management, LLC
Its Registered Investment Advisor
By: /s/ C. Xxxxxx Xxxxxx
-----------------------------
Name: C. Xxxxxx Xxxxxx
Title: President
000 X. Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000
Fax: (000) 000-0000
CROSSLINK CROSSOVER FUND III, L.P.,
a Delaware limited partnership
By: /s/ Xxxxxx X. Xxxx
--------------------------------------
Name: Xxx Xxxx
Title: Managing Member
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
OFFSHORE CROSSLINK CROSSOVER FUND III UNIT TRUST,
a Cayman Islands Unit Trust
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Name: Xxx Xxxx
Title: Managing Member
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
BAYVIEW PARTNERS
By: /s/ Xxxxxxx X. Xxx Xxxx XX
-------------------------------------
Name: Xxxxxxx X. Xxx Xxxx XX
Title: Managing Partner
000 Xxx Xxx Xxxxx
Xxx Xxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
(Hit * to indicate it is a fax)
XXXXX X. XXXXXX MONEY PURCHASE
PLAN AND TRUST
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Trustee
000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
XXXXXX XXXXXXXXX
/s/ Xxxxxx Xxxxxxxxx
----------------------
00 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
SCHEDULE OF BUYERS
Investor Address, Principal Amount of
Telephone and Series A Preferred Amount of Investor's Advisor and Legal
Investor Name Facsimile Number Shares Warrants Counsel Address
------------- ----------------- -------------------- ---------- ----------------------------
BayStar Capital, L.P. c/o BayStar Capital $8,750,000 242,248 Xxxxxxx Xxxxx, Esq.
(Delaware) Management, LLC (875 shares) Xxxxxxx Xxxx & Xxxxx LLP
0000 Xxxx Xxxxxx Xxxxxx 000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxx Xxx Xxxx, XX 00000
53092 Fax: (000) 000-0000
BayStar International, Ltd. c/o BayStar $3,750,000 103,821 Xxxxxxx Xxxxx, Esq.
(British Virgin Islands) International (375 shares) Xxxxxxx Xxxx & Xxxxx LLP
Management, LLC 000 Xxxxx Xxxxxx
0000 Xxxx Xxxxxx Xxxxxx Xxx Xxxx, XX 00000
Mequon, Wisconsin Fax: (000) 000-0000
53092
Xxxxxxx, X.X. 230 S. Bemiston, $500,000 13,843
Suite 1400 (50 shares)
Xx. Xxxxx, XX 00000
Fax: 000-000-0000
Crosslink Crossover Fund III, Two Embarcadero $3,750,000 103,821
L.P. Center, Suite 2200 (375 shares)
(Delaware) Xxx Xxxxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Offshore Crosslink Crossover Two Embarcadero $250,000 6,921
Fund III Xxxx Xxxxx Xxxxxx, Xxxxx 0000 (25 shares)
(Cayman Islands) Xxx Xxxxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Bayview Partners 000 Xxx Xxx Xxxxx $600,000 16,611
Xxx Xxxxxxx, XX 00000 (60 shares)
Phone: 000-000-0000
Fax: 000-000-0000 (Hit
* to indicate it is a
fax)
Investor Address, Principal Amount of
Telephone and Series A Preferred Amount of Investor's Advisor and Legal
Investor Name Facsimile Number Shares Warrants Counsel Address
------------- ----------------- -------------------- ---------- ----------------------------
Xxxxx X. Xxxxxx Money Purchase 000 Xxxxxxx Xxxxxx $300,000 8,306
Xxxx xxx Xxxxx Xxxxxxxx, XX 00000 (30 shares) (Warrant issued
Phone: 000-000-0000 directly to
Fax: 000-000-0000 Xxxxx X. Xxxxxx)
Xxxxxx Xxxxxxxxx 00 Xxxxxx Xxxxxx $250,000 6,921
Xxx Xxxx, XX 00000 (25 shares)
Phone: 000-000-0000
Fax: 000-000-0000
List of Exhibits
Exhibit A Form of Certificate of Designations
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Transfer Agent Instructions
Exhibit E Form of Opinion of Xxxxx. Xxxxx
Exhibit F Form of Resolutions of Board
List of Schedules
3(a) Organization and Qualification
3(c) Capitalization
3(e) No Conflicts
3(f) SEC Documents; Financial Statements
3(g) Absence of Certain Changes
3(h) Absence of Litigation
3(j) No Undisclosed Events, Liabilities, Developments or Circumstances
3(l) No Integrated Offering
3(m)(ii) Employment Matters; ERISA Matters
3(n) Intellectual Property Rights
3(w) Transactions With Affiliates
4(d) Use of Proceeds
INDEX
Page
19.99% Rule............................................................5
1933 Act...............................................................1
1934 Act...............................................................8
Affiliate.............................................................20
Agreement..............................................................1
Buyer..................................................................1
Buyers.................................................................1
By-laws................................................................6
Certificate of Designations............................................1
Certificate of Incorporation...........................................6
Closing................................................................2
Closing Date...........................................................2
Code..................................................................11
Common Stock...........................................................1
Company................................................................1
Control...............................................................20
Controls..............................................................20
Conversion Shares......................................................1
Convertible Securities................................................19
Environmental Laws....................................................12
ERISA.................................................................11
Hazardous Materials...................................................12
Indemnified Liabilities...............................................23
Indemnitees...........................................................23
Irrevocable Transfer Agent Instructions...............................20
Material Adverse Effect................................................5
NASDAQ.................................................................5
Permits...............................................................13
Plans.................................................................11
Preferred Shares.......................................................1
Preferred Stock........................................................1
Principal Market......................................................16
Proxy Statement Triggering Date.......................................17
Purchase Price.........................................................2
Registration Rights Agreement..........................................1
Regulation D...........................................................1
Related Party.........................................................19
Reporting Period......................................................15
Resolutions...........................................................22
Rule 144...............................................................3
SEC....................................................................1
SEC Documents..........................................................8
Securities.............................................................2
Stock Certificates.....................................................2
Stockholder Approval..................................................17
Stockholder Meeting Deadline..........................................17
Strategic Financing...................................................19
Subsidiaries...........................................................5
Transaction Documents..................................................5
Warrant Shares.........................................................1
Warrants...............................................................1
