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Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of September 30,
1999, by and among WAVO Corporation, an Indiana corporation, with headquarters
located at 0000 X. Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 (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, no par value per share, which shall be called the Company's Series D
Convertible Preferred Stock (the "PREFERRED STOCK"), which shall be convertible
into shares of the Company's common stock, no par value per share (the "COMMON
STOCK") (as converted, the "CONVERSION SHARES"), in accordance with the terms of
the Company's Articles of Amendment to the Company's Articles of Incorporation
in the form attached hereto as Exhibit A (the "ARTICLES OF AMENDMENT");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, initially (i) an aggregate of 1,500 shares of the Preferred
Stock (the "INITIAL PREFERRED SHARES") in the respective amounts set forth
opposite each Buyer's name on the Schedule of Buyers, and (ii) warrants (the
"INITIAL WARRANTS") to purchase up to 600 shares of Common Stock (as exercised
collectively, the "INITIAL WARRANT SHARES") for each Initial Preferred Share
purchased by such Buyer on the Initial Closing Date (as defined below), such
Initial Warrants to be substantially in the form attached hereto as Exhibit B;
D. Subject to the terms and conditions set forth in this Agreement, the
Company may have the right to cause the Buyers to purchase (i) up to an
aggregate of 500 shares of Preferred Stock (pro rata based on the number of
Initial Preferred Shares each Buyer purchased in relation to the total number of
Initial Preferred Shares) (the "ADDITIONAL PREFERRED SHARES" and, collectively
with the Initial Preferred Shares, the "PREFERRED SHARES") and (ii) warrants
(the "ADDITIONAL WARRANTS" to purchase up to 500 shares of Common Stock (as
exercised, collectively, the "ADDITIONAL WARRANT SHARES" for each Additional
Preferred Share purchased by such Buyer on the Additional Closing Date (as
defined below), such Additional Warrants to be substantially in the form
attached hereto as Exhibit B;
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the
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Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares. Subject to satisfaction (or waiver)
of the conditions set forth in Sections 6(a) and 7(a), the Company shall issue
and sell to the Buyers and the Buyers severally agree to purchase from the
Company 1,500 Initial Preferred Shares, along with the related Initial Warrants
(the "INITIAL CLOSING"). Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 1(c), 1(d), 6(b) and 7(b), the Company may
require that the Buyers purchase up to an aggregate of 500 Additional Preferred
Shares along with the related Additional Warrants (the "ADDITIONAL CLOSINGS"
and, together with the Initial Closing, the "CLOSINGS"). The purchase price (the
"PURCHASE PRICE") of each Preferred Share and the related Warrants at each of
the Closings shall be an aggregate of $10,000 plus $10.00 from each Buyer for
the related Warrants. "BUSINESS DAY" means any day other than Saturday, Sunday
or other day on which commercial banks in the city of New York are authorized or
required by law to remain closed.
b. The Initial Closing Date. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m., Eastern Time, within
three (3) Business Days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) (or such later date as is mutually agreed to by the Company and the Buyer).
The Initial Closing shall occur on the Initial Closing Date by facsimile. In the
event either party sends the other party written notice that a physical closing
is desired, at least two (2) Business Days prior to the Initial Closing Date,
then the Initial Closing shall occur on the Initial Closing Date at the offices
of Xxxxxx Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx
00000-0000.
c. The Additional Closing Date. The date and time of the Additional
Closings (the "ADDITIONAL CLOSING DATES") shall be 10:00 a.m., Eastern Time, on
the third Business Day following the date of receipt by each Buyer of an
Additional Effectiveness Notice (as defined below) which Additional Closing
Dates shall be no more than 85 days following the applicable Additional Share
Notice Date (as defined below), subject to satisfaction (or waiver) of the
conditions to the Additional Closings set forth in Sections 6(b) and 7(b) and
the conditions set forth in this Section 1(c) and Section 1(d), (or such later
date as is mutually agreed to by the Company and the Buyer). During the period
beginning on and including the date which is 90 days after the Initial Closing
Date and ending on and including the date which is 180 days after the Initial
Closing Date (the "ADDITIONAL NOTICE PERIOD"), but subject to the requirements
of Sections 6(b) and 7(b) and satisfaction of the Additional Notice Conditions
and the Effectiveness Conditions (both as defined in Section 1(d) below), the
Company on not more than two (2) occasions may require the Buyers to purchase
Additional Preferred Shares and the related Additional Warrants by delivering
written notice to each Buyer (an "ADDITIONAL SHARE NOTICE") on any date during
the Additional Notice Period (the "ADDITIONAL SHARE NOTICE DATE"). Any
Additional Share Notice
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shall set forth (i) the aggregate number of Additional Preferred Shares and
related Additional Warrants the Company is requiring the Buyers to purchase at
the Additional Closing, which number shall not exceed, in the aggregate, 500
shares of Preferred Stock and which number shall be, in the aggregate, at least
200 shares of Preferred Stock, and (ii) the pro rata number of Additional
Preferred Shares which the Company is requiring each Buyer to purchase at the
Additional Closing (based on the number of Initial Preferred Shares each Buyer
purchased in relation to the total number of Initial Preferred Shares). The
Company shall deliver written notice to each Buyer (the "ADDITIONAL
EFFECTIVENESS NOTICE") by facsimile and overnight delivery within two (2)
Business Days of the satisfaction of the Effectiveness Conditions. The
Additional Closings shall occur on each Additional Closing Date by facsimile. In
the event either Party sends the other Party written notice that a physical
closing is desired, at least two (2) Business Days prior to an Additional
Closing Date, then such Additional Closing shall occur on the Additional Closing
Date at the offices of Xxxxxx Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 00000-0000. The Initial Closing Date and the Additional
Closing Dates collectively are referred to in this Agreement as the "CLOSING
DATES."
d. The Additional Notice Conditions and the Effectiveness
Conditions. Notwithstanding anything in this Agreement to the contrary, the
Company shall not be entitled to deliver an Additional Share Notice unless all
of the following conditions (the "ADDITIONAL NOTICE CONDITIONS") are satisfied:
(i) at all times during the period beginning on the date the Initial
Registration Statement registering the Initial Registrable Securities is
declared effective by the SEC (which date shall not be later than 10 Business
Days prior to the Additional Share Notice Date) and ending on and including the
Additional Share Notice Date, the Initial Registration Statement shall have been
effective and available for sale of all of the Registrable Securities (as
defined in the Registration Rights Agreement) to be included in such
Registration Statement; (ii) at all times during the period beginning on the
Initial Closing Date and ending on and including the Additional Share Notice
Date, the Common Stock shall have been designated for quotation on The New York
Stock Exchange, Inc. (the "NYSE"), the Nasdaq National Market or the American
Stock Exchange, Inc. ("AMEX") and shall not have been suspended from trading
(other than suspensions of not more than one (1) day due to business
announcements by the Company) on such exchanges nor shall delisting or
suspension by such exchanges have been threatened either (A) in writing by such
exchanges or (B) by falling below the minimum listing maintenance requirements
of such exchanges; (iii) during the period beginning on the Initial Closing Date
and ending on and including the Additional Share Notice Date, there shall not
have occurred either (A) the consummation of a Change of Control (as defined in
the Articles of Amendment) or a public announcement of a pending Change of
Control which has not been abandoned or terminated or (B) a Triggering Event (as
defined in the Articles of Amendment) or an event which, with the passage of
time, would constitute a Triggering Event assuming it were not cured; (iv)
during the period beginning on the Initial Closing Date and ending on and
including the Additional Share Notice Date, the Company shall have delivered
Conversion Shares upon conversion of the Preferred Shares on a timely basis as
set forth in Section 2(d)(ii) of the Articles of Amendment and the Company
otherwise shall have been in compliance in all material respects with the
Transaction Documents (as defined below) and the Articles of Amendment and shall
not have breached in any material respect any provision of the Transaction
Documents and the Articles of Amendment; (v) on each trading day during the 10
consecutive trading days ending on and including the
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Additional Share Notice Date, the Weighted Average Price (as defined in the
Articles of Amendment) of the Common Stock is not less than the arithmetic
average of the Weighted Average Prices of the Common Stock on each of the 10
consecutive trading days immediately preceding the Initial Closing Date (subject
to equitable adjustment for stock splits, stock dividends, stock combinations
and other similar transactions); (vi) the Company previously has not delivered
more than one Additional Share Notice; and (vii) in the event the sum of (A) the
number of shares of Common Stock previously issued upon conversion of any of the
Preferred Shares, (B) the number of shares of Common Stock issuable upon
conversion of all Additional Preferred Shares set forth in the Additional Share
Notice based on the Conversion Price (as defined in the Articles of Amendment)
in effect on such date of determination (as if all such Additional Preferred
Shares were outstanding and without regard to any limitation on conversions) and
(C) the number of shares of Common Stock issuable upon conversion of all of the
outstanding Preferred Shares based on the Conversion Price in effect on such
date of determination (without regard to any limitations on conversions), is
equal to or exceeds 12% of the number of shares of Common Stock issued and
outstanding immediately prior to the Initial Closing Date, the Company shall
have received shareholder approval for the issuance of the Conversion Shares and
the Warrant Shares. Notwithstanding anything in this Agreement to the contrary,
the Company shall not be entitled to require the Buyer to purchase the
Additional Preferred Shares unless, in addition to the satisfaction of the
Additional Notice Conditions and the requirements of Sections 6(b) and 7(b), all
of the following conditions (the "EFFECTIVENESS CONDITIONS") are satisfied: (i)
at all times during the period beginning on the Additional Share Notice Date and
ending on and including the Additional Closing Date, the Initial Registration
Statement shall have been effective and available for sale of all of the
Registrable Securities required to be included on such Registration Statement
(other than days during allowable Grace Periods (as defined in the Registration
Rights Agreement); (ii) at all times during the period beginning on the
Additional Share Notice Date and ending on and including the Additional Closing
Date, the Common Stock shall have been designated for quotation on the NYSE, the
Nasdaq National Market or AMEX and shall not have been suspended from trading on
such exchanges nor shall delisting or suspension by such exchanges have been
threatened either (A) in writing by such exchanges or (B) by falling below the
minimum listing maintenance requirements of such exchanges; (iii) during the
period beginning on the Additional Share Notice Date and ending on and including
the Additional Closing Date, there shall not have occurred either (A) the
consummation of a Change of Control or a public announcement of a pending Change
of Control which has not been abandoned or terminated or (B) a Triggering Event
or an event which, with the passage of time, would constitute a Triggering Event
assuming it were not cured; (iv) the Weighted Average Price of the Common Stock
on the date immediately preceding the date the Company files the Additional
Registration Statement (as defined in the Registration Rights Agreement) with
the SEC is not less than the arithmetic average of the Weighted Average Prices
of the Common Stock on each of the 10 consecutive trading days immediately
preceding the Initial Closing Date (subject to equitable adjustment for stock
splits, stock dividends, stock combinations and other similar transactions); (v)
during the period beginning on the Additional Share Notice Date and ending on
and including the Additional Closing Date, the Company shall have delivered
Conversion Shares upon conversion of the Preferred Shares on a timely basis as
set forth in Section 2(d)(ii) of the Articles of Amendment and otherwise shall
have been in compliance in all material respects with the Transaction Documents
and the Articles of Amendment and shall not have breached in any material
respect any provision of the
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Transaction Documents or the Articles of Amendment; and (vi) at all times during
the period beginning on the date the Additional Registration Statement is
declared effective by the SEC (which date shall not be later than 10 Business
Days prior to the Additional Share Closing Date) and ending on and including the
Additional Share Closing Date, the Additional Registration Statement shall have
been effective and available for sale of at least 150% of the number of shares
issuable upon conversion of the Additional Preferred Shares and exercise of the
Additional Warrants on each such date (without regard to any limitations on
conversions or exercises and assuming the Additional Preferred Shares and the
Additional Warrants had been issued and outstanding on each such date).
e. Form of Payment. On each of the Closing Dates (i) each Buyer
shall pay the Purchase Price to the Company for the Preferred Shares and the
related Warrants to be issued and sold to such Buyer by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer stock
certificates (in the denominations as such Buyer shall request) (the "STOCK
CERTIFICATES") representing such number of the Preferred Shares which such Buyer
is then purchasing along with the related Warrants, duly executed on behalf of
the Company and registered in the name of such Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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, will
acquire the Conversion Shares then issuable and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares issuable upon exercise thereof (the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares,
collectively are referred to herein as the "SECURITIES"), for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
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 United States federal and state securities
laws and that the Company is relying in part 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 such Securities.
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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 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 Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. 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)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably satisfactory to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) 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
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Preferred Shares and the Warrants and, until such
time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a form reasonably satisfactory to the Company, to the
effect that a public sale, assignment or transfer of such Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that such Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold. Such Buyer acknowledges,
covenants and agrees to sell the Securities represented by a certificate(s) from
which the legend has been removed, only pursuant to (i) a registration statement
effective under the 1933 Act, or (ii) advice of counsel to such holder that such
sale is exempt from registration required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and are valid and binding agreements of such Buyer
enforceable against such Buyer in accordance with their terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
i. Residency. Such Buyer is a resident of that jurisdiction
specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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) (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and
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authorization to own properties and to carry on their business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined below) or the Articles of Amendment.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section
5), the Warrants and each of the other agreements entered into by the parties
hereto in connection with the transactions contemplated by this Agreement
(collectively, the "TRANSACTION DOCUMENTS"), and to issue the Securities in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents by the Company and the execution and filing of the
Articles of Amendment by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Preferred Shares and the Warrants and the reservation for
issuance and the issuance of the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders (except such
stockholder approval as may be required by the Nasdaq National Market for the
issuance of a number of shares of Common Stock which is greater than 19.99% of
the number of shares of Common Stock outstanding on the Initial Closing Date),
(iii) the Transaction Documents have been duly executed and delivered by the
Company, (iv) this Agreement and the Registration Rights Agreement and, when
executed and delivered, the other Transaction Documents, constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
prior to each of the Closing Dates, the Articles of Amendment will have been
filed with the Secretary of State of the State of Indiana and will be in full
force and effect, enforceable against the Company in accordance with its terms.
c. Capitalization. The authorized capital stock of the Company
consists of (i) 100,000,000 shares of Common Stock, of which as of the date
hereof 28,924,230 shares were issued and outstanding, 15,491,089 shares were
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and 1,967,954 shares are issuable and reserved for issuance
pursuant to securities (other than the Preferred Shares and the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common Stock and
(ii) 25,000,000 shares of preferred stock, of which as of the date hereof,
501,963 shares have been designated as Series
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1994 Cumulative Convertible Preferred Stock and of which 501,963 are
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) there are no outstanding debt
securities issued by the Company; (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement); (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement; and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation,
as amended and as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and non-assessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Articles of Amendment. At least 9,700,000 shares of
Common Stock (subject to adjustment pursuant to the Company's covenant set forth
in Section 4(f) below) have been duly authorized and reserved for issuance upon
conversion of the Preferred Shares and exercise of the Warrants. Upon conversion
or exercise in accordance with the Articles of Amendment or the Warrants, as the
case may be, the Conversion Shares and the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The issuance by the Company of the
Securities is exempt from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Articles of
Amendment and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the reservation for issuance
and issuance of the Conversion Shares and the Warrant Shares) will not
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(i) result in a violation of the Articles of Incorporation, any articles of
amendment of any outstanding series of preferred stock of the Company or the
By-laws; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party; or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Except as disclosed in
Schedule 3(e), neither the Company nor its Subsidiaries is in violation of any
term of (i) its Articles of Incorporation, any articles of amendment of any
outstanding series of preferred stock or By-laws or their organizational charter
or by-laws, respectively, or (ii) any statute, rule or regulation applicable to
the Company or its Subsidiaries and neither the Company nor its Subsidiaries is
in default under any contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order, except for defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company and its Subsidiaries is not being conducted, and shall not be
conducted, in violation of any law, ordinance or regulation of any governmental
entity except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Affect.
Except as specifically contemplated by this Agreement and except such as have
been obtained as of the date hereof, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or the Articles of Amendment in
accordance with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and such consents shall have
been obtained prior to the applicable Closing. The Company and its Subsidiaries
are unaware of any facts or circumstances which might reasonably be expected to
give rise to any of the foregoing. The Company is not in violation of the
listing requirements of the Nasdaq National Market as in effect on the date
hereof and on each of the Closing Dates and has no actual knowledge of any facts
which would reasonably lead to delisting or suspension of the Common Stock by
the Nasdaq National Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since December 31, 1997, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act, (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC DOCUMENTS"). All of the Company's SEC Documents are available to the public
through XXXXX. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
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therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, 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). Neither the Company
nor any of its Subsidiaries or any of their officers, directors, employees or
agents have provided the Buyers with any material, nonpublic information. The
Company meets the requirements for the use of Form S-3 for registration of the
resale of the Registrable Securities (as defined in the Registration Rights
Agreement by each Buyer).
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since December 31, 1998 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities, results of operations or prospects of the Company or its
Subsidiaries, taken as a whole. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings or any knowledge of any fact which would reasonably lead a creditor
to do so.
h. Absence of Litigation. Except as disclosed in Schedule 3(h),
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as expressly set forth
in Schedule 3(h). Except as set forth in Schedule 3(h), to the knowledge of the
Company none of the directors or officers of the Company have been involved in
securities related litigation during the past five years.
i. Acknowledgment Regarding the Buyer's Purchase of Preferred
Shares. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the Articles of Amendment and the transactions contemplated
thereby. The Company further acknowledges that Buyer is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the Articles of Amendment and the
transactions contemplated 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 Articles of Amendment and the transactions
contemplated 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.
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j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the issuance of the Preferred Shares and Warrants
contemplated by this Agreement, no event, liability, development or circumstance
has occurred or exists with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly disclosed.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the Nasdaq National Market, nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union, neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer (as defined in Rule 501(f)
of the 0000 Xxx) has notified the Company's Board of Directors that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company.
n. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(n), none of the
Company's trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademarks, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secrets or other similar rights of others, or of any such
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development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(n), no claim, action or proceeding
has been made or brought against, or to the Company's knowledge, has been
threatened against, the Company or its Subsidiaries regarding trademarks, trade
name rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service xxxx registrations, trade secrets or other
infringement; and the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
o. Regulatory Permits. Except the absence of which would not have a
Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
p. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
q. Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
r. Transactions With Affiliates. Except as set forth on Schedule
3(r) and in the SEC Documents filed at least ten days prior to the date hereof
and other than the grant of stock options disclosed on Schedule 3(c), none of
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other
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entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
s. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
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 Articles of Amendment and its
obligation to issue the Warrant Shares in accordance with this Agreement and the
Warrants is, in each case, absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
t. Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyers as
a result of the Buyers and the Company fulfilling their obligations under the
Transaction Documents and the Articles of Amendment, including, without
limitation, the Company's issuance of the Securities and the Buyers' ownership
of the Securities.
u. Rights Agreement. As of the date hereof, the Company has not
adopted a shareholder rights plan or similar arrangement relating to
accumulation of beneficial ownership of Common Stock or a change in control of
the Company.
v. Year 2000 Compliance. The Company has initiated a review and
assessment of all areas within its and each Subsidiary's business and operations
that could be materially adversely affected by the "YEAR 2000 PROBLEM" (that is,
the risk that computer applications used by the Company or any of the
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, the Company believes that the computer
applications that are currently material to its or any Subsidiary's business and
operations are reasonably expected to be able to perform properly data-sensitive
functions for all dates before and after January 1, 2000, except to the extent
that the failure to do so would not reasonably be expected to have a Material
Adverse Effect.
w. 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 are described in Schedule 3(w) or such as do not
materially affect the value of such property and do not interfere 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
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
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x. 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.
y. No Other Agreements. The Company has not, directly or indirectly,
made any agreements with any Buyer relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
z. No Materially Adverse Contracts. Except as specifically disclosed
in the SEC Documents, or as set forth in Schedule 3(z), 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. Except as specifically disclosed in the SEC Documents,
or as set forth in Schedule 3(z), 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.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts to satisfy
timely 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 each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Buyers at each of the Closings
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such action so
taken to the 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 each of the Closing Dates.
c. Reporting Status. Until the earlier of (i) the date which is one
year after the date on which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto) and (ii) the date on which (A) the Investors
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 shall file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
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d. Use of Proceeds. The Company will use the proceeds from the sale
of the Preferred Shares for substantially the same purposes and in substantially
the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the following
to each Investor (as defined in the Registration Rights Agreement) during the
Reporting Period: (i) unless the following are filed with the SEC through XXXXX
and are available to the public through XXXXX, within two (2) Business Days
after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act; (ii) on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of its Subsidiaries
and (iii) copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the sum of (A) 200% of the number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares and (B) 100%
of the number of shares of Common Stock needed to provide for the issuance of
the Warrant Shares (without regard to any limitations on conversions or exercise
thereof).
g. Proxy Statement. 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 60 days
after the Proxy Statement Triggering Date (as defined below) and (B) the date of
the Company's next annual meeting of stockholders (the "STOCKHOLDER MEETING
DEADLINE"), a proxy statement, which has been previously reviewed by the Buyers
and a counsel of their choice, soliciting each such stockholder's affirmative
vote at such stockholder meeting for approval of the Company's issuance of all
of the Securities as described in this Agreement, and the Company shall use its
best efforts to (i) solicit its stockholders' approval of such issuance of the
Securities and (ii) 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 equal to the product of
(i) $10,000; multiplied by (ii) .02; 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
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Shares and (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), equals or exceeds 15% of the number of
shares of Common Stock issued and outstanding immediately prior to the Initial
Closing Date.
h. Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system (including
the Nasdaq National Market), 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 Articles of Amendment. The Company shall maintain
the Common Stock's authorization for listing on the Nasdaq National Market, the
NYSE or AMEX. Neither the Company nor any of its Subsidiaries shall take any
action which may result in the delisting or suspension of the Common Stock on
the Nasdaq National Market, the NYSE or AMEX (other than to switch listings from
the Nasdaq National Market to the NYSE or AMEX). The Company shall promptly, and
in no event later than the following Business Day, provide to such Buyer copies
of any notices it receives from the Nasdaq National Market or NYSE regarding the
continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange, provided that such notices shall not
contain any material nonpublic information. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, at the Closing, the
Company shall pay a non-accountable expense allowance of $50,000 to the Buyers.
j. Transactions With Affiliates. So long as (i) any Preferred Shares
or Warrants are outstanding or (ii) any Buyer owns Conversion Shares or Warrant
Shares with a market value of $500,000 the Company shall not, and shall cause
each of its Subsidiaries not to, enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "RELATED PARTY"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company or
(c) any agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been obtainable
from a person other than such Related Party. For purposes hereof, any director
who is also an officer of the Company or any Subsidiary of the Company shall not
be a disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or
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entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "CONTROL" or "CONTROLS" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
k. Filing of Form 8-K. On or before the first Business Day following
each of the Closing Dates and each of the Additional Share Notice Dates, the
Company shall file a Form 8-K with the SEC describing the terms of the
transaction contemplated by the Transaction Documents and consummated at such
Closing, in each case in the form required by the 1934 Act.
l. Corporate Existence. So long as any Buyer beneficially owns any
Preferred Shares or Warrants, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company's assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq National Market or the NYSE.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the 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 (in the form attached hereto as Exhibit E, the "IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS"). Prior to registration of the Conversion Shares and the
Warrant Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and the
Warrant Shares, prior to registration of the Conversion Shares and the Warrant
Shares under the 0000 Xxx) will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
each Buyer's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel, in a
form reasonable satisfactory to the Company, that registration of a resale by
such Buyer of any of such Securities is not required under the 1933 Act or such
Buyer provides the Company with reasonable assurances that the Securities can be
sold pursuant to Rule 144, the Company shall permit the transfer, and, in the
case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legends.
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
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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
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company hereunder to
issue and sell the Initial Preferred Shares and the Initial Warrants to each
Buyer at the Initial Closing is subject to the satisfaction, at or before the
Initial Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
(i) Such Buyer shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(ii) Articles of Amendment shall have been filed with the Secretary
of State of the State of Indiana.
(iii) Such Buyer shall have delivered to the Company the Purchase
Price for the Initial Preferred Shares and the related Warrants being
purchased by such Buyer at the Initial Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by
the Company.
(iv) The representations and warranties of such Buyer contained
herein shall be true and correct as of the date when made and as of the
Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by such Buyer at or prior to the
Initial Closing Date.
b. Additional Closing Date. The obligation of the Company hereunder
to issue and sell the Additional Preferred Shares and the Additional Warrants to
each Buyer at the Additional Closing is subject to the satisfaction, at or
before the Additional 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 by providing each Buyer
with prior written notice thereof:
(i) Such Buyer shall have delivered to the Company the Purchase
Price for the Additional Preferred Shares and the related Warrants being
purchased by such Buyer at the Additional Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by
the Company.
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(ii) The representations and warranties of such Buyer contained
herein shall be true and correct as of the date when made and as of the
applicable Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by such Buyer at or prior to the
applicable Additional Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Buyer hereunder to
purchase the Initial Preferred Shares and the Additional Warrants at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company and each Buyer with prior written notice
thereof:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Articles of Amendment shall have been filed with the
Secretary of State of the State of Indiana, and a copy thereof certified
by the Secretary of State of the State of Indiana shall have been
delivered to such Buyer.
(iii) The Common Stock shall be designated for quotation on the
Nasdaq National Market, or listed on the NYSE or AMEX, and shall not have
been suspended from trading on or delisted from such exchanges nor shall
delisting or suspension by such exchanges have been threatened either (A)
in writing by such exchanges or (B) by falling below the minimum listing
maintenance requirements of such exchanges and the Company has complied
with the listing requirements of the Nasdaq National Market for the
Conversion Shares and the Warrant Shares issuable upon conversion or
exercise of the Initial Preferred Shares and the related Warrants, as the
case may be.
(iv) The representations and warranties of the Company contained
herein shall be true and correct as of the date when made and as of the
Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents or
Articles of Amendment to be performed, satisfied or complied with by the
Company at or prior to the Initial Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Initial Closing Date, to the foregoing effect and
as to such other matters as such Buyer may reasonably request, including,
without limitation, an update as of the Initial Closing Date regarding the
representation contained in Section 3(c) above.
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(v) Such Buyer shall have received the opinions of Xxxxxx &
Xxxxxxxxx and Xxxxx & Xxxxxx LLP dated as of the Initial Closing Date, in
substantially the forms of Exhibit D, attached hereto.
(vi) The Company shall have executed and delivered to such Buyer the
Stock Certificates for the Initial Preferred Shares and the Initial
Warrants being purchased by the Buyer at the Initial Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "RESOLUTIONS").
(viii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares and exercise
of the Warrants, at least 9,700,000 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit E 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 and each
Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within ten
days of the Initial Closing Date.
(xi) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) the Articles of
Incorporation and (C) the By-laws, each as in effect at the Initial
Closing Date.
(xii) The Company shall have delivered to such Buyer a certified
copy of its Articles of Incorporation as certified by the Secretary of
State of the State of Indiana within ten days of the Initial Closing Date.
(xiii) 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 Initial Closing
Date.
(xiv) 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.
b. Additional Closing Date. The obligation of each Buyer hereunder
to purchase the Additional Preferred Shares and the Additional Warrants at the
Additional Closing is subject to the satisfaction, at or before each Additional
Closing Date, of each of the following
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conditions, provided that these conditions are for such Buyer's sole benefit and
may be waived by the Buyer at any time in its sole discretion by providing the
Company and each Buyer with prior written notice thereof:
(i) The Company shall have complied with the requirements of Section
1(c) and all of the Additional Notice Conditions and Effectiveness
Conditions set forth in Section 1(d) shall have been satisfied as of the
Additional Closing Date.
(ii) The Articles of Amendment shall be in full force and effect and
shall not have been amended since the Initial Closing Date, and a copy
thereof certified by the Secretary of State of the State of Indiana shall
have been delivered to such Buyer.
(iii) The Common Stock shall be authorized for quotation on the
Nasdaq National Market, or listed on the NYSE or AMEX, and shall not have
been suspended from trading on or delisted from such exchanges nor shall
delisting or suspension by such exchanges have been threatened either (A)
in writing by such exchanges or (B) by falling below the minimum listing
maintenance requirements of such exchanges and the Company has complied
with the listing requirements of the Nasdaq National Market or the NYSE,
as applicable, for the Conversion Shares and the Warrant Shares issuable
upon conversion or exercise of the Additional Preferred Shares and the
related Warrants as the case may be.
(iv) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Additional Closing Date
as though made at that time (except for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents or the Articles of Amendment to be
performed, satisfied or complied with by the Company at or prior to the
Additional Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Additional Closing Date, to the foregoing effect and as to such other
matters as such Buyer may reasonably request, including, without
limitation, an update as of the Additional Closing Date regarding the
representation contained in Section 3(c) above.
(v) Such Buyer shall have received the opinions of Xxxxxx &
Xxxxxxxxx and Xxxxx & Xxxxxx LLP dated as of the Additional Closing Date
in substantially the forms of Exhibit D, attached hereto.
(vi) The Company shall have executed and delivered to such Buyer the
Stock Certificates for the Additional Preferred Shares and the Additional
Warrants being purchased by the Buyer at the Additional Closing.
(vii) The Board of Directors of the Company shall have adopted, and
shall not have amended, the Resolutions.
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(viii) As of the Additional Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, a number of
shares of Common Stock equal to at least 100% of the sum of (A) the number
of shares of Common Stock which would be issuable upon conversion in full
of the then outstanding Preferred Shares and (B) the number of shares of
Common Stock which would be issuable upon conversion in full of the then
outstanding Warrants (without regard to any limitations on conversion),
including for such purposes the Additional Preferred Shares and related
Additional Warrants to be issued at such Additional Closing.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit E attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent and shall be in effect as of
the Additional Closing.
(x) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in the state of such corporation's state of incorporation
issued by the Secretary of State of such state of incorporation as of a
date within ten days of the Additional Closing Date.
(xi) The Company shall have delivered to such Buyer a certified copy
of its Articles of Incorporation as certified by the Secretary of State of
the State of Indiana within ten days of the Additional Closing Date.
(xii) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) the Articles of
Incorporation and (C) By-laws, each as in effect at the Additional
Closing.
(xiii)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 Additional Closing
Date.
(xiv) The Additional Registration Statement (as defined in the
Registration Rights Agreement) shall have been declared effective by the
SEC on or before the date which is 80 days after the Additional Share
Notice Date.
(xv) The Company shall have delivered to the Buyers such other
documents relating to the transactions contemplated by this Agreement 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 Articles of Amendment, 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
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limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
Articles of Amendment or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or the Articles
of Amendment or any other certificate, instrument or document contemplated
hereby or thereby or (c) any cause of action, suit or claim brought or made
against such Indemnitee (other than a cause of action, suit or claim which is
(x) brought or made by the Company and is not a shareholder derivative suit or
(y) to the extent that such Buyer receives material nonpublic information
concerning the Company or any of its Subsidiaries as a result of the carrying
out of any obligations imposed by the Transaction Documents or the Articles of
Amendment and such cause of action, suit or claim is based on Buyer's failure to
comply with all applicable provisions of Federal Securities Laws with respect to
trading securities of the Company based on such material nonpublic information)
and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of the Transaction Documents or the Articles of Amendment, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) solely
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.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of Indiana shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting the City of New York, borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any
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right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyers which purchased at least two-thirds (2/3) of the Initial
Preferred Shares on the Initial Closing Date or, if prior to the Initial Closing
Date, the Buyers listed on the Schedule of Buyers as being obligated to purchase
at least two-thirds (2/3) of the Initial Preferred Shares, then outstanding, and
no provision hereof may be waived other than by an instrument in writing signed
by the party against whom enforcement is sought. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Preferred Shares or Warrants 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 Articles of Amendment
unless the same consideration also is offered to all of the parties to the
Transaction Documents or holders of the Preferred Shares, as the case may be.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally
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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:
WAVO Corporation
0000 X. Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chief Executive Officer and General Counsel
With a copy to:
Xxxxx & Xxxxxx LLP
One Arizona Center
Phoenix, Arizona
Telephone: 000-000-0000
Facsimile: 602-382-6070
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Transfer Agent:
American Securities Transfer & Trust, Inc.
00000 X. Xxxxxxx Xxxxxxx, Xxxxx 00
Xxxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxxx
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 communications, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares. The Company shall not assign
this Agreement or any rights or obligations
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hereunder without the prior written consent of the Buyers which purchased at
least two-thirds (2/3) of the Initial Preferred Shares on the Initial Closing
Date, including by merger or consolidation. A Buyer and any Permitted Assignees
(as defined below) may assign some or all of its rights hereunder to (i) without
the consent of the Company, any person or entity who, immediately prior to such
assignment, is (A) an affiliate of such Buyer or Permitted Assignee, (B) a
holder of Preferred Shares or (C) an entity or fund which has the same principal
investment adviser or manager as the Buyer or Permitted Assignee or any other
holder of Preferred Shares or Warrants, provided such adviser or manager has the
sole power to make decisions regarding any actions taken by such entity or fund
in connection with the Transaction Documents (each such person or entity
described in the immediately preceding clause (A), (B) and (C) is referred to as
"PERMITTED ASSIGNEE") and (ii) with the prior written consent of the Company,
which consent shall not be unreasonably withheld, to any person or entity;
provided, however, that any such assignment shall not release such Buyer or
Permitted Assignee from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption, which consent shall not be unreasonably withheld. Notwithstanding
anything to the contrary contained in the Transaction Documents or the Articles
of Amendment, Buyers shall be entitled to pledge the Securities in connection
with a bona fide margin account.
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 9(l),
the representations and warranties of the Company and the 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 each of
the Closings. 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 the Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (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.
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l. Termination. In the event that the Initial Closing shall not have
occurred with respect to a Buyer on or before three (3) Business Days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse a
non-breaching Buyer for expenses up to the amount described in Section 4(i)
above.
m. Placement Agent. The Company acknowledges that it has engaged
Xxxxxxxxx Lufkin & Xxxxxxxx ("DLJ") as an investment banking consultant in
connection with the sale of the Preferred Shares and the related Warrants. The
Company shall be responsible for the payment of any fee to DLJ and any placement
agent's 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,
attorneys' 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 Articles
of Amendment and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a payment
or payments to any Buyer hereunder or pursuant to the Registration Rights
Agreement, the Articles of Amendment or the Warrants or such Buyer enforces or
exercises its rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
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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: BUYER:
WAVO CORPORATION HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By:_________________________________
Name:_______________________________
Title:______________________________ By:_________________________________
Xxxxx X. X'Xxxxx, Xx.
Managing Member
XXXXXXXX, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.
By:_________________________________
Xxxxxxx X. Xxxxxx
Chief Operating Officer
30
SCHEDULE OF BUYERS
NUMBER OF
INITIAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES AND FACSIMILE NUMBER
------------- -------------------- ------ --------------------
HFTP Investment L.L.C. c/o Promethean Asset Management, 750 Promethean Investment Group, L.L.C.
L.L.C. 000 Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx 00xx Xxxxx
00xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxx Xxxx, Xxx Xxxx 00000 Attn: Xxxxx X. X'Xxxxx, Xx.
Attn: Xxxxx X. X'Xxxxx, Xx. Xxxx Xxxxxxx
Xxxx Xxxxxxx Telephone: 000-000-0000
Telephone: 000-000-0000 Facsimile: 000-000-0000
Facsimile: 000-000-0000
Residence: New York Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 312-902-1061
Xxxxxxxx, L.P. c/o Xxxxxx, Xxxxxx & Co., L.P. 750 c/o Xxxxxx, Xxxxxx & Co., L.P.
000 Xxxx Xxxxxx - 26th
Floor 000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx or Xxx Xxxxxx Attention: Xxxx Xxxx or Xxx Xxxxxx
Telephone: 000-000-0000 Telephone: 000-000-0000
Facsimile: 000-000-0000 Facsimile: 000-000-0000
Residence: Cayman Islands Residence: Cayman Islands
31
SCHEDULES
Schedule of Buyers
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(g) - Material Changes
Schedule 3(h) - Litigation
Schedule 3(n) - Intellectual Property
Schedule 3(r) - Transactions with Affiliates
Schedule 3(w) - Liens
Schedule 3(z) - Certain Agreements
Schedule 4(d) - Use of Proceeds
EXHIBITS
Exhibit A - Form of Articles of Amendment
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Company Counsel Opinions
Exhibit E - Form of Irrevocable Transfer Agent Instructions
