SECURITIES PURCHASE AGREEMENT
EXHIBIT 99.1
This Securities Purchase Agreement (this “Agreement”) is dated as of August 15, 2006, among
Tvia, Inc., a Delaware corporation (the “Company”), and the investors identified on the signature
pages hereto (each, an “Investor” and collectively, the “Investors”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Investor, and each Investor, severally and not jointly,
desires to purchase from the Company certain securities of the Company, as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Investors agree as follows:
ARTICLE 1.
DEFINITIONS
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms shall have the meanings indicated in this Section
1.1:
“Accounts Receivable” has the meaning set forth in Section 3.1(bb).
“Action” means any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened in writing against
or affecting the Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency, regulatory authority (federal, state,
county, local or foreign), stock market, stock exchange or trading facility.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144.
“Bonanza” has the meaning set forth in Section 6.1.
“Business Day” means any day except Saturday, Sunday and any day which is a federal legal
holiday or a day on which banking institutions in the State of New York are authorized or required
by law or other governmental action to close.
“Buy-In” has the meaning set forth in Section 4.1(c).
“Closing” means the closing of the purchase and sale of the Securities pursuant to Article II.
“Closing Date” means the Business Day on which all of the conditions set forth in Sections 5.1
and 5.2 hereof are satisfied, or such other date as the parties may agree.
“Commission” means the Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any
securities into which such common stock may hereafter be reclassified.
“Common Stock Equivalents” means any securities of the Company or any Subsidiary which entitle
the holder thereof to acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any time convertible into
or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common Stock.
“Company Counsel” means DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP.
“Company Deliverables” has the meaning set forth in Section 2.2(a).
“Disclosure Materials” has the meaning set forth in Section 3.1(h).
“Effective Date” means the date that the Registration Statement required by Section 2(a) of
the Registration Rights Agreement is first declared effective by the Commission.
“Evaluation Date” has the meaning set forth in Section 3.1(s).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“GAAP” means U.S. generally accepted accounting principles.
“Intellectual Property Rights” has the meaning set forth in Section 3.1(p).
“Investment Amount” means, with respect to each Investor, the Investment Amount indicated on
such Investor’s signature page to this Agreement.
“Investor Deliverables” has the meaning set forth in Section 2.2(b).
“Investor Party” has the meaning set forth in Section 4.7.
“Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other
restrictions of any kind (other than restrictions on transfer, under applicable securities laws or
other restrictions imposed under the Transaction Documents).
“Material Adverse Effect” means any of (i) a material and adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the
results of operations, assets, prospects, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) an adverse
impairment to the Company’s ability to perform its obligations under any Transaction Document.
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“New York Courts” means the state and federal courts sitting in the City of New York, Borough
of Manhattan.
“Outside Date” means September 15, 2006.
“Participation Maximum” has the meaning set forth in Section 4.11(a).
“Per Unit Purchase Price” equals $2.50.
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
“Pre-Notice” has the meaning set forth in Section 4.11(b).
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date
of this Agreement, among the Company and the Investors, in the form of Exhibit A hereto.
“Registration Statement” means a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale by the Investors of the Shares and the
Warrant Shares.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.
“SEC Filings” means the Company’s (i) Form 10-K for the fiscal year ended March 31, 2006 and
(ii) Form 10-Q for the fiscal quarter ended June 30, 2006, each of which shall be attached hereto
as Exhibit B.
“SEC Reports” has the meaning set forth in Section 3.1(h).
“Securities” means the Shares, the Warrants and the Warrant Shares.
“Securities Act” means the Securities Act of 1933, as amended.
“Share Delivery Date” has the meaning set forth in Section 4.1(c).
“Shares” means the shares of Common Stock issued or issuable to the Investors pursuant to this
Agreement.
“Short Sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect
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stock
pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on
a total return basis), and sales and other transactions through non-US broker dealers or foreign
regulated brokers.
“Subsequent Financing” has the meaning set forth in Section 4.11(a).
“Subsequent Financing Notice” has the meaning set forth in Section 4.11(b).
“Subsidiary” means any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation
S-X promulgated by the Commission under the Exchange Act.
“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other
than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other
than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any
Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting prices); provided, that in the event that the Common Stock
is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.
“Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.
“Transaction Documents” means this Agreement, the Warrants, the Registration Rights Agreement,
and any other documents or agreements executed in connection with the transactions contemplated
hereunder.
“Warrants” means the Common Stock purchase warrants in the form of Exhibit C, which
are issuable to the Investors at the Closing.
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE 2.
PURCHASE AND SALE
PURCHASE AND SALE
2.1. Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and
not jointly, purchase from the Company, the Shares and the Warrants representing such Investor’s
Investment Amount, which in the aggregate shall not exceed fifteen million United States dollars
($15,000,000.00). The Closing shall take place at the offices of Xxxxx Xxxx LLP, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000 on the Closing Date or at such other location or time as the
parties may agree.
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2.2. Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be
delivered to each Investor the following (the “Company Deliverables”):
(i) a certificate evidencing a number of Shares equal to such Investor’s Investment Amount
divided by the Per Unit Purchase Price, registered in the name of such Investor;
(ii) a Warrant, registered in the name of such Investor, pursuant to which such Investor shall
have the right to acquire the number of shares of Common Stock equal to 35% of the number of Shares
issuable to such Investor pursuant to Section 2.2(a)(i);
(iii) the legal opinion of Company Counsel, in agreed form, addressed to the Investors; and
(iv) the Registration Rights Agreement, duly executed by the Company.
(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
following (the “Investor Deliverables”):
(i) its Investment Amount, in United States dollars and in immediately available funds, by
wire transfer to an account designated in writing by the Company for such purpose; and
(ii) the Registration Rights Agreement, duly executed by such Investor.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby makes the following
representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than as
specified in the SEC Filings. Except as disclosed in Schedule 3.1(a), the Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all
Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. The Company and each Subsidiary are duly
incorporated or otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other organizational or charter
documents. The Company and each Subsidiary are duly qualified to conduct its respective businesses
and are in good standing as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such qualification
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necessary,
except
where the failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing with the Commission of the Registration Statement in
accordance with the requirements of the Registration Rights Agreement, (ii) filings
required by state securities laws, (iii) the filing of a Notice of Sale of Securities on Form
D with the Commission under Regulation D of the Securities Act, (iv) the filings required in
accordance with Section 4.5 and (v) those that have been made or obtained prior to the date of this
Agreement.
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(f) Issuance of the Securities. The Securities have been duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens. The Company has reserved from its duly
authorized capital stock the shares of Common Stock issuable pursuant to this Agreement and the
Warrants in order to issue the Shares and the Warrant Shares.
(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance
under the Company’s various option and incentive plans, is specified in the SEC Filings. Except as
specified in the SEC Filings, no securities of the Company are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the Transaction Documents.
Except as specified in the SEC Filings, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person any right to subscribe
for or acquire, any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common
Stock. The issue and sale of the Securities will not, immediately or with the passage of time,
obligate the Company to issue shares of Common Stock or other securities to any Person (other than
the Investors) and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all reports required to
be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a)
or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the
Company was required by law to file such reports) (the foregoing materials being collectively
referred to herein as the “SEC Reports” and, together with the Schedules to this Agreement (if
any), the “Disclosure Materials”) on a timely basis or has timely filed a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any such extension.
As of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP applied on a consistent basis
during the periods involved, except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial position of
the Company and its consolidated Subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments.
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(i) Press Releases. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made and
when made, not misleading.
(j) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC Filings, (i) there has
been no event, occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of
cash or other property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing Company stock option
plans. The Company does not have pending before the Commission any request for confidential
treatment of information.
(k) Litigation. There is, to the knowledge of the Company, no Action which (i)
adversely affects or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as specifically disclosed in the SEC Filings, could, if
there were an unfavorable decision, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof (in his or her capacity as such), is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as specifically disclosed in the SEC Filings. There has not been,
and to the knowledge of the Company, there is not pending any investigation by the Commission
involving the Company or any current or former director or officer of the Company (in his or her
capacity as such). The Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of
any governmental authority, including without limitation all foreign, federal, state and local laws
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relating to taxes, environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. Except as specifically
disclosed in the SEC Filings, the Company is in compliance with all effective requirements of the
Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and regulations thereunder, that are
applicable to it, except where such noncompliance could not reasonably be expected to result in a
Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Filings,
except where the failure to possess such permits could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or modification of any
such permits.
(o) Title to Assets. The Company and the Subsidiaries have good and marketable title
in fee simple to all real property owned by them that is material to their respective businesses
and good and marketable title in all personal property owned by them that is material to their
respective businesses, in each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance,
except as could not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
(p) Patents and Trademarks. Except as set forth in the SEC Filings, the Company and
the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and other similar rights
that are necessary or material for use in connection with their respective businesses as described
in the SEC Filings and which the failure to so have could, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect (collectively, the “Intellectual
Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. Except as set forth in the SEC Filings, to the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
(q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary for the type and scope of properties and businesses in which the Company and the
Subsidiaries own and are engaged. The Company has no reason to believe that
it will not be able to renew its and the Subsidiaries’ existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business on terms consistent with market for the Company’s and such Subsidiaries’
respective lines of business.
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(r) Transactions With Affiliates and Employees. Except as set forth in the SEC
Filings, none of the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction with the Company or
any Subsidiary (other than as holders of stock options and for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
(s) Internal Accounting Controls. The Company and the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with GAAP and
to maintain asset accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s Form 10-K or 10-Q, as the case may be, is
being prepared. The Company’s certifying officers have evaluated the effectiveness of the
Company’s controls and procedures in accordance with Item 307 of Regulation S-K under the Exchange
Act for the Company’s most recently ended fiscal quarter or fiscal year-end for which a Form 10-K
or Form 10-Q has been filed with the Commission (such date, the “Evaluation Date”). The Company
presented in its most recently filed Form 10-K or Form 10-Q the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item 308(c) of Regulation
S-K under the Exchange Act) or, to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal controls.
(t) Solvency. Based on the financial condition of the Company as of the Closing Date
(and assuming that the Closing shall have occurred), (i) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, and projected capital requirements
and capital availability thereof, and (ii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its debt).
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(u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Investors shall have no obligation with respect
to any fees or with respect to any claims (other than such fees or commissions owed by an Investor
pursuant to written agreements executed by such Investor which fees or commissions shall be the
sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions contemplated by
this Agreement.
(v) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(e), no registration under the
Securities Act is required for the offer and sale of the Shares and Warrants and the offer of the
Warrant Shares by the Company to the Investors under the Transaction Documents. The Company is
eligible to register its Common Stock for resale by the Investors under Form S-3 promulgated under
the Securities Act. Except as specified in Schedule 3.1(v), the Company has not granted or
agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any
securities of the Company registered with the Commission or any other governmental authority that
have not been satisfied.
(w) Listing and Maintenance Requirements. Except as specified in the SEC Filings, the
Company has not, in the two years preceding the date hereof, received notice from any Trading
Market to the effect that the Company is not in compliance with the listing or maintenance
requirements thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing and maintenance requirements for
continued listing of the Common Stock on the Trading Market on which the Common Stock is currently
listed or quoted. The issuance and sale of the Securities under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common Stock is currently
listed or quoted, and no approval of the shareholders of the Company thereunder is required for the
Company to issue and deliver to the Investors the Securities contemplated by Transaction Documents.
(x) Investment Company. The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.
(y) Application of Takeover Protections. The Company has taken all necessary action,
if any, in order to render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the Company’s
issuance of the Securities and the Investors’ ownership of the Securities.
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(z) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.
(aa) Disclosure. The Company confirms that neither it nor any Person acting on its
behalf has provided any Investor or its respective agents or counsel with any information that the
Company believes constitutes material, non-public information except insofar as the existence and
terms of the proposed transactions hereunder may constitute such information. The Company
understands and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure provided to the
Investors regarding the Company, its business and the transactions contemplated hereby, furnished
by or on behalf of the Company (including the Company’s representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
(bb) Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries that are reflected on the Company’s balance sheet or interim balance sheet included in
the SEC Reports or on the accounting records of the Company and its Subsidiaries as of the Closing
Date (collectively, the “Accounts Receivable”) represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary course of business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing
Date current and collectible net of the respective reserves shown on the balance sheet or interim
balance sheet or on the accounting records of the Company and its Subsidiaries as of the Closing
Date (which reserves are adequate and calculated consistent with past practice and, in the case of
the reserve as of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the interim balance sheet
represented of the Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected in full without any
set-off, within ninety days after the day on which it must becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the ordinary course of business, under
any agreement and/or contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable.
3.2. Representations and Warranties of the Investors. Each Investor hereby, for itself and
for no other Investor, represents and warrants to the Company as follows:
(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such Investor of the
transactions contemplated by this Agreement has been duly authorized by all necessary corporate or,
if such Investor is not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Investor. Each of this Agreement and the Registration
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Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in
accordance with the terms hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the Securities as principal for its
own account for investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such Investor’s right at all
times to sell or otherwise dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws. Subject to the immediately preceding sentence,
nothing contained herein shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time. Such Investor is acquiring the Securities hereunder in the
ordinary course of its business. Such Investor does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities.
(c) Investor Status. At the time such Investor was offered the Securities, it was,
and at the date hereof it is, and on each date on which it exercises Warrants it will be, an
“accredited investor” as defined in Rule 501(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) No General Solicitation. Such Investor acknowledges that the Securities were not
offered to such Investor by means of any form of general or public solicitation or general
advertising, or publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or (ii) any seminar or meeting to which such
Investor was invited by any of the foregoing means of communications.
(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Shares and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect to the investment.
Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or
its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and
warranties contained in the Transaction Documents.
(f) General. Such Investor understands that the Securities are being offered and sold
in reliance on a transactional exemption from the registration requirements of federal and state
securities laws and the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Investor
13
set forth herein in
order to determine the applicability of such exemptions and the suitability of such Investor to
acquire the Securities. Such Investor understands that no United States federal or state agency or
any government or governmental agency has passed upon or made any recommendation or endorsement of
the Securities.
(g) Certain Fees. Such Investor has not employed any broker or finder or incurred any
liability for any brokerage or investment banking fees, commissions, finders’ structuring fees,
financial advisory fees or other similar fees in connection with the Transaction Documents.
(h) Certain Trading Activities. Such Investor has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any
transactions in the securities of the Company (including, without limitations, any Short Sales
involving the Company’s securities) since the earlier to occur of (1) the time that such Investor
was first contacted by the Company or Xxxx Capital Partners, LLC regarding an investment in the
Company and (2) the 30th day prior to the date of this Agreement. Other than the
transactions contemplated hereunder, such Investor covenants that neither it nor any Person acting
on its behalf or pursuant to any understanding with it will engage in any transactions in the
securities of the Company prior to the earlier to occur of (1) the termination of this Agreement in
accordance with Section 6.5 hereof or (2) the time that the transactions contemplated by this
Agreement are publicly disclosed as described in Section 4.5 hereof. Additionally, such Investor
covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with
it will engage in any Short Sales prior to the earliest to occur of (1) the termination of this
Agreement in accordance with Section 6.5 hereof, (2) the Effective Date or (3) the Effectiveness
Date (as defined in the Registration Rights Agreement).
(i) Independent Investment Decision. Such Investor has independently evaluated the
merits of its decision to purchase Securities pursuant to the Transaction Documents, and such
Investor confirms that it has not relied on the advice of any other Investor’s business and/or
legal counsel in making such decision. Such Investor has not relied on the business or legal
advice of Xxxx Capital Partners, LLC or any of its agents, counsel or Affiliates in making its
investment decision hereunder, and confirms that none of such Persons has made any representations
or warranties to such Investor in connection with the transactions contemplated by the Transaction
Documents. Such Investor acknowledges that it (i) has such knowledge and experience in financial
and business matters such that Investor is capable of evaluating the merits and risks of Investor’s
investment in the Company and (ii) is able to bear the financial risks associated with an
investment in the Securities.
(j) Limited Ownership. The purchase by such Investor of the Securities issuable to it
at the Closing will not result in such Investor (individually or together with any other Person
with whom such Investor has identified, or will have identified, itself as part of a “group” in a
public filing made with the Commission involving the Company’s securities) acquiring, or obtaining
the right to acquire, in excess of 19.999% of the outstanding shares of
Common Stock or the voting power of the Company on a post transaction basis that assumes that
the Closing shall have occurred. Such Investor does not presently intend to, alone or together
with others, make a public filing with the Commission to disclose that it has (or that it together
with such other Persons have) acquired, or obtained the right to acquire, as a result of the
Closing
14
(when added to any other securities of the Company that it or they then own or have the
right to acquire), in excess of 19.999% of the outstanding shares of Common Stock or the voting
power of the Company on a post transaction basis that assumes that the Closing shall have occurred.
(k) No Conflicts. The execution, delivery and performance of the Transaction
Documents by such Investor and the consummation by such Investor of the transactions contemplated
thereby and hereby do not and will not (i) violate any provision of such Investor’s charter or
organizational documents, (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, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to which such Investor is
a party or by which such Investor’s respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable to such Investor or
by which any property or asset of such Investor are bound or affected, except, in all cases, other
than violations pursuant to clauses (ii) or (iii) (with respect to federal and state securities
laws) above, for such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, materially and adversely affect such
Investor’s ability to perform its obligations under the Transaction Documents.
(l) Rule 144. Such Investor understands that the Securities must be held indefinitely
unless such Securities are registered under the Securities Act or an exemption from registration is
available. Such Investor acknowledges that such person is familiar with Rule 144 and that such
Investor has been advised that Rule 144 permits resales only under certain circumstances. Such
Investor understands that to the extent that Rule 144 is not available, such Investor will be
unable to sell any Securities without either registration under the Securities Act or the existence
of another exemption from such registration requirement.
The Company acknowledges and agrees that no Investor has made or makes any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set
forth in this Section 3.2.
ARTICLE 4.
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
4.1. (a) Securities may only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of the Securities other than pursuant to an effective
registration statement, to the Company, to an Affiliate of an Investor or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities Act.
(b) Certificates evidencing the Securities will contain the following legend, until such time
as they are not required under Section 4.1(c):
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[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE
OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT
BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO THE COMPANY. [THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
SECURITIES.
The Company acknowledges and agrees that an Investor may from time to time pledge, and/or
grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement
in connection with a bona fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent of the Company and
no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice shall be required
of such pledge. At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.
Except as otherwise provided in Section 4.1(c), any Shares subject to a pledge or security
interest as contemplated by this Section 4.1(b) shall
continue to bear the legend set forth in this Section 4.1(b) and be subject to the
restrictions on transfer set forth in Section 4.1(a).
(c) Certificates evidencing Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b)): (i) following a sale or transfer of such Shares or Warrant
Shares pursuant to an effective registration statement (including the Registration Statement), or
(ii) following a sale or transfer of such Shares or Warrant Shares
16
pursuant to Rule 144 (assuming
the transferee is not an Affiliate of the Company), or (iii) while such Shares or Warrant Shares
are eligible for sale under Rule 144(k). If an Investor shall make a sale or transfer of Shares or
Warrant Shares either (x) pursuant to Rule 144 or (y) pursuant to a registration statement and in
each case shall have delivered to the Company or the Company’s transfer agent (with written notice
to the Company) the certificate representing Shares or Warrant Shares containing a restrictive
legend which are the subject of such sale or transfer and a representation letter in customary
form (the date of such sale or transfer and Share or Warrant Share, as the case may be,
delivery being the “Share Delivery Date”) and (1) the Company shall fail to deliver or cause to be
delivered to such Investor a certificate representing such Shares or Warrant Shares that is free
from all restrictive or other legends by the third Trading Day following the Share Delivery Date
and (2) following such third Trading Day after the Share Delivery Date and prior to the time such
Shares or Warrant Shares are received free from restrictive legends, the Investor, or any third
party on behalf of such Investor, purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Investor of such Shares or Warrant Shares
(a “Buy-In”), then the Company shall pay in cash to the Investor (for costs incurred either
directly by such Investor or on behalf of a third party) the amount by which the total purchase
price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any)
exceed the proceeds received by such Investor as a result of the sale to which such Buy-In relates.
The Investor shall provide the Company written notice indicating the amounts payable to the
Investor in respect of the Buy-In.
4.2. Furnishing of Information. As long as any Investor owns the Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to the Investors and make publicly
available in accordance with Rule 144(c) such information as is required for the Investors to sell
the Shares and Warrant Shares under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell the Shares and Warrant Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144.
4.3. Integration. The Company shall not, and shall use its best efforts to ensure that no
Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale
of the Securities to the Investors, or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market in a manner that would
require stockholder approval of the sale of the securities to the Investors.
4.4. Subsequent Registrations. Other than pursuant to the Registration Statement, prior to
the Effective Date, the Company may not file any registration statement (other than on Form S-8)
with the Commission with respect to any securities of the Company.
4.5. Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the Trading
Day following the execution of this Agreement, and by 9:00 a.m. (New York time) on
17
the Trading Day
following the Closing Date, the Company shall issue press releases disclosing the transactions
contemplated hereby and the Closing. On the Trading Day following the execution of this Agreement
the Company will file a Current Report on Form 8-K disclosing the material terms of the Transaction
Documents (and attach as exhibits thereto the Transaction Documents), and on the Trading Day
following the Closing Date the Company will file an additional Current Report on Form 8-K to
disclose the Closing. In addition, the Company will make such other filings and notices in the
manner and time required by the Commission and the Trading Market on which the Common Stock is
listed. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any
Investor, or include the name of any Investor in any filing with the Commission (other than the
Registration Statement and any exhibits to filings made in respect of this transaction in
accordance with periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to the extent such
disclosure is required by law or Trading Market regulations.
4.6. Limitation on Issuance of Future Priced Securities. During the six months following
the Closing Date, the Company shall not issue any “Future Priced Securities” as such term is
described by NASD IM-4350-1.
4.7. Indemnification of Investors. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the Investors and their
directors, officers, shareholders, partners, employees and agents (each, an “Investor Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs
and expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Investor Party
may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy of
any representation, warranty, covenant or agreement made by the Company in any Transaction
Document. In addition to the indemnity contained herein, the Company will reimburse each Investor
Party for its reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection therewith, as such expenses
are incurred.
4.8. Non-Public Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will
provide any Investor or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor shall have executed
a written agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
4.9. Listing of Securities. The Company agrees, (i) if the Company applies to have the
Common Stock traded on any other Trading Market, it will include in such application the Shares and
Warrant Shares, and will take such other action as is necessary or desirable to cause the Shares
and Warrant Shares to be listed on such other Trading Market as promptly as possible, and (ii) it
will take all action reasonably necessary to continue the listing and trading of its Common Stock
on a Trading Market and will comply in all material respects with the Company’s reporting, filing
and other obligations under the bylaws or rules of the Trading Market.
18
4.10. Use of Proceeds. The Company will use the net proceeds from the sale of the
Securities hereunder for working capital purposes and not for the satisfaction of any portion of
the Company’s debt (other than payment of trade payables and accrued expenses in the ordinary
course of the Company’s business and consistent with prior practices), or to redeem any Common
Stock or Common Stock Equivalents.
4.11. Participation in Future Financing.
(a) From the date hereof until the date that is the 12 month anniversary of the Effective
Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock
Equivalents for cash consideration (a “Subsequent Financing”), each Investor shall have the right
to participate in up to an amount of the Subsequent Financing equal to 50% of the Subsequent
Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.
(b) At least 5 Trading Days prior to the closing of the Subsequent Financing, the Company
shall deliver to each Investor a written notice of its intention to effect a Subsequent Financing
(“Pre-Notice”), which Pre-Notice shall ask such Investor if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of a
Investor, and only upon a request by such Investor, for a Subsequent Financing Notice, the Company
shall promptly, but no later than 1 Trading Day after such request, deliver a Subsequent Financing
Notice to such Investor. The Subsequent Financing Notice shall describe in reasonable detail the
proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person or Persons through or with whom such Subsequent Financing is proposed to be
effected, and attached to which shall be a term sheet or similar document relating thereto.
(c) Any Investor desiring to participate in such Subsequent Financing must provide written
notice to the Company by not later than 5:30 p.m. (New York City time) on the 5th
Trading Day after all of the Investors have received the Pre-Notice that the Investor is willing to
participate in the Subsequent Financing, the amount of the Investor’s participation, and that the
Investor has such funds ready, willing, and available for investment on the terms set forth in the
Subsequent Financing Notice. If the Company receives no notice from a Investor as of such
5th Trading Day, such Investor shall be deemed to have notified the Company that it does
not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the 5th Trading Day after all of the
Investors have received the Pre-Notice, notifications by the Investors of their willingness to
participate in the Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the
remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the 5th Trading Day after all of the
Investors have received the Pre-Notice, the Company receives responses to a Subsequent Financing
Notice from Investors seeking to purchase more than the aggregate amount of the Participation
Maximum, each such Investor shall have the right to purchase the greater of (a)
19
their Pro Rata
Portion (as defined below) of the Participation Maximum and (b) the difference between the
Participation Maximum and the aggregate amount of participation by all other Investors. “Pro Rata
Portion” is the ratio of (x) the Investment Amount of Securities purchased on the Closing Date by
an Investor participating under this Section 4.11 and (y) the sum of the aggregate Investment
Amounts of Securities purchased on the Closing Date by all Investors participating under this
Section 4.11.
(f) The Company must provide the Investors with a second Subsequent Financing Notice, and the
Investors will again have the right of participation set forth above in this Section 4.11, if the
Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any
reason on the terms set forth in such Subsequent Financing Notice within 60 Trading Days after the
date of the initial Subsequent Financing Notice.
(g) Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of (i) an
Exempt Issuance or (ii) an underwritten public offering of Common Stock.
(h) As used herein, “Exempt Issuance” means the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock or option plan
duly adopted by a majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established for such purpose,
(b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder
and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such securities have not been
amended since the date of this Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of such securities, and (c) securities issued pursuant
to acquisitions or strategic transactions approved by a majority of the disinterested directors of
the Company, provided that
any such issuance shall only be to a Person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company and in which the
Company receives benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities.
4.12. Subsequent Equity Sales.
(a) From the date hereof until 60 days after the Effective Date, neither the Company nor any
Subsidiary shall issue shares of Common Stock or Common Stock Equivalents; provided, however, the
60 day period set forth in this Section 4.12 shall be extended for the number of Trading Days
during such period in which (i) trading in the Common Stock is suspended by any Trading Market, or
(ii) following the Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Investors for the resale of the
Shares and Warrant Shares.
(b) From the date hereof until such time as no Investor holds any of the Securities, the
Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent
Financing involving a “Variable Rate Transaction”. The term “Variable Rate Transaction” shall mean
a transaction in which the Company issues or sells (i) any debt or
20
equity securities that are
convertible into, exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is
based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at
any time after the initial issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for the Common Stock or
(ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby
the Company may sell securities at a future determined price. Any Investor shall be entitled to
obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.
(c) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance (as defined in Section 4.11(h), except that no Variable Rate Transaction shall be an
Exempt Issuance.
ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING
CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to the Obligations of the Investors to Purchase Securities. The
obligation of each Investor to acquire Securities at the Closing is subject to the satisfaction or
waiver by such Investor, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of the date when made and as
of the Closing as though made on and as of such date;
(b) Performance. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably could have or result in a Material Adverse
Effect;
(e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock
shall not have been suspended by the Commission or any Trading Market (except for any suspensions
of trading of not more than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this Agreement, and the Common
Stock shall have been at all times since such date listed for trading on a Trading Market;
21
(f) Company Deliverables. The Company shall have delivered the Company Deliverables
in accordance with Section 2.2(a);
(g) Nasdaq Listing. If applicable, the Nasdaq Stock Market shall have waived
application of the 15 day prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) or such
timeframe shall have expired without objection; and
(h) Termination. This Agreement shall not have been terminated as to such Investor in
accordance with Section 6.5.
5.2. Conditions Precedent to the Obligations of the Company to sell Securities. The
obligation of the Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made on and as of such date;
(b) Performance. Each Investor shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Investors Deliverables. Each Investor shall have delivered its Investors
Deliverables in accordance with Section 2.2(b);
(e) Nasdaq Listing. If applicable, the Nasdaq Stock Market shall have waived
application of the 15 day prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) or such
timeframe shall have expired without objection; and
(f) Termination. This Agreement shall not have been terminated as to such Investor in
accordance with Section 6.5.
ARTICLE 6.
MISCELLANEOUS
MISCELLANEOUS
6.1. Fees and Expenses. At the Closing, the Company has agreed to reimburse Bonanza Master
Fund Ltd. (“Bonanza”) the non-accountable sum of $15,000, for its out-of-pocket legal fees and
expenses. Accordingly, in lieu of the foregoing payments, the aggregate amount that Bonanza is to
pay for the Securities at the Closing shall be reduced by $15,000 in lieu thereof. Except as
otherwise set forth herein, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of the
22
Transaction Documents.
The Company shall pay all stamp and other taxes and duties levied in connection with the issuance
of the Securities.
6.2. Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules
thereto, contain the entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements, understandings, discussions and representations, oral or
written, with respect to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
6.3. Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:
If to the Company: | Tvia, Inc. | |||
0000 Xxxxxx Xxxxx | ||||
Xxxxx Xxxxx, Xxxxxxxxxx 00000 | ||||
Attn: Chief Executive Officer | ||||
Facsimile: (000) 000-0000 | ||||
With a copy to: | DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP | |||
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000 | ||||
Xxx Xxxxx, XX 00000 | ||||
Attn: Xxxxxxxxx Xxxxx | ||||
Facsimile: (000) 000-0000 | ||||
If to an Investor: | To the address set forth under such Investor’s name on the signature pages hereof; |
or such other address as may be designated in writing hereafter, in the same manner, by such
Person.
6.4. Amendments; Waivers; No Additional Consideration. No provision of this Agreement may
be waived or amended except in a written instrument signed by the Company and the Investors who
then hold a majority of the Shares. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right. No consideration shall be offered or paid to any
Investor to amend or consent to a waiver or modification of any provision
23
of any Transaction
Document unless the same consideration is also offered to all Investors who then hold Shares.
6.5. Termination. This Agreement may be terminated prior to Closing:
(a) by written agreement of the Investors and the Company; and
(b) by the Company or an Investor (as to itself but no other Investor) upon written notice to
the other, if the Closing shall not have taken place by 6:30 p.m. Eastern time on the Outside Date;
provided, that the right to terminate this Agreement under this Section 6.5(b) shall not be
available to any Person whose failure to comply with its obligations under this Agreement has been
the cause of or resulted in the failure of the Closing to occur on or before such time.
In the event of a termination pursuant to this Section, the Company shall promptly notify all
non-terminating Investors. Upon a termination in accordance with this Section 6.5, the Company and
the terminating Investor(s) shall not have any further obligation or liability (including as
arising from such termination) to the other and no Investor will have any liability to any other
Investor under the Transaction Documents as a result therefrom.
6.6. Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The language used in this
Agreement will be deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement
or any of the Transaction Documents.
6.7. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the Investors
who then hold a majority of the Shares. Upon prior written notice to the Company, any Investor may
assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided such transferee agrees in writing to be bound, with respect to
the transferred Securities, by the provisions hereof that apply to the “Investors.”
6.8. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.7 (as to each Investor Party).
6.9. Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
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Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper
or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then the prevailing
party in such Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees
and other costs and expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
6.10. Survival. The representations, warranties, agreements and covenants contained herein
shall survive the Closing and the delivery of the Securities.
6.11. Execution. This Agreement may be executed in two or more counterparts, all of which
when taken together shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered
by facsimile transmission, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such
facsimile signature page were an original thereof.
6.12. Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.
6.13. Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained
in (and without limiting any similar provisions of) the Transaction Documents, whenever any
Investor exercises a right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein provided and such
failure of the Company to timely perform materially prejudices the rights of such Investor, then
such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice
to the Company, any relevant notice, demand or election in whole or in part without prejudice to
its future actions and rights.
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6.14. Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities. If a replacement certificate or
instrument evidencing any Securities is requested due to a mutilation thereof, the Company may
require delivery of such mutilated certificate or instrument as a condition precedent to any
issuance of a replacement.
6.15. Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law would be adequate.
6.16. Payment Set Aside. To the extent that the Company makes a payment or payments to any
Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
6.17. Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor independently of
any other Investor. Nothing contained herein or in any Transaction Document, and no action taken
by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other Transaction Documents, and
it shall not be necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of
26
the Investors has been provided
with the same Transaction Documents for the purpose of closing a transaction with multiple
Investors and not because it was required or requested to do so by any Investor.
6.18. Limitation of Liability. Notwithstanding anything herein to the contrary, the
Company acknowledges and agrees that the liability of an Investor arising directly or indirectly,
under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of
the assets of such Investor, and that no trustee, officer, other investment vehicle or any other
Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest
of such a Investor shall be personally liable for any liabilities of such Investor.
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SIGNATURE PAGES FOLLOW]
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.
TVIA, INC. | ||
Name: | ||
Title: |
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SIGNATURE PAGES FOR INVESTORS FOLLOW]
SIGNATURE PAGES FOR INVESTORS FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.
NAME OF INVESTOR | ||||
By: | ||||
Name: | ||||
Title: |
Investment Amount: $ | ||||
Tax ID No.: | ||||
ADDRESS FOR NOTICE | ||||
c/o: | ||||
Street: | ||||
City/State/Zip: | ||||
Attention: | ||||
Tel: | ||||
Fax: | ||||
DELIVERY INSTRUCTIONS | ||||
(if different from above) | ||||
c/o: | ||||
Street: | ||||
City/State/Zip: | ||||
Attention: | ||||
Tel: | ||||
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