EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July 30,
2006, by and among Raptor Networks Technology, Inc., a Colorado corporation,
with headquarters located at 0000 X. Xxxx Xxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx
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 each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and
Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act.
B. The Company has authorized a new series of senior convertible notes
of the Company which notes shall be convertible into the Company's common stock,
par value $0.001 per share (the "COMMON STOCK"), in accordance with the terms of
the Notes (as defined below).
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate principal
amount of the Notes, in substantially the form attached hereto as EXHIBIT A (the
"NOTES"), set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers attached hereto (which aggregate amount for all Buyers shall be
$5,000,000) (as converted, collectively, the "CONVERSION SHARES"), (ii)
warrants, in substantially the form attached hereto as EXHIBIT B (the "SERIES L
WARRANTS"), to acquire that number of shares of Common Stock set forth opposite
such Buyer's name in column (4) on the Schedule of Buyers and (iii) warrants in
substantially the form attached hereto as EXHIBIT C (the "SERIES M WARRANTS" and
together with the Series L Warrants the "WARRANTS") to acquire that number of
shares of Common Stock set forth opposite such Buyer's name in column (5) on the
Schedule of Buyers (as exercised, collectively, the "WARRANT SHARES").
D. 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 D (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement) under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
E. The Notes, the Conversion Shares, the Warrants and the Warrant
Shares collectively are referred to herein as the "SECURITIES".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
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(a) PURCHASE OF NOTES AND WARRANTS. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each Buyer severally, but
not jointly, agrees to purchase from the Company on the Closing Date (as defined
below), (x) a principal amount of Notes as is set forth opposite such Buyer's
name in column (3) on the Schedule of Buyers and (y) Series L Warrants to
acquire that number of Warrant Shares as is set forth opposite such Buyer's name
in column (4) on the Schedule of Buyers and (z) Series M Warrants to acquire
that number of Warrant Shares as is set forth opposite such Buyer's name in
column (5) on the Schedule of Buyers (the "CLOSING").
(b) PURCHASE PRICE. The purchase price for each Buyer of the
Notes and the Warrants to be purchased by each such Buyer at the Closing (the
"PURCHASE PRICE") shall be the amount set forth opposite such Buyer's name in
column (6) of the Schedule of Buyers (the "PURCHASE PRICE"). Each Buyer shall
pay $1.00 for each $1.00 of principal amount of Notes and the related Warrants
to be purchased at the Closing.
(c) CLOSING DATE. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m., New York City Time, on the date hereof
after notification of satisfaction (or waiver) of the conditions to the Closing
set forth in Sections 6 and 7 below (or such later date as is mutually agreed to
by the Company and each Buyer). The Closing shall occur on the Closing Date at
the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
(d) FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall
pay the Purchase Price to the Company for the Notes and the Warrants to be
issued and sold to such Buyer at the Closing by wire transfer of immediately
available funds in accordance with the Company's written wire instructions and
(ii) the Company shall deliver to each Buyer (A) the Notes (in the principal
amounts as set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers) which such Buyer is then purchasing and (B) the Warrants (in the amounts
as set forth opposite such Buyer's name in columns (4) and (5) on the Schedule
of Buyers) which such Buyer is purchasing, in each case duly executed on behalf
of the Company and registered in the name of such Buyer or its designee (so long
as any such designee is an "accredited investor" as that term is defined in Rule
501(d) of Regulation D).
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself
that:
(a) NO PUBLIC SALE OR DISTRIBUTION. Such Buyer is (i)
acquiring the Notes and the Warrants and (ii) upon conversion of the Notes and
exercise of the Warrants (other than pursuant to a Cashless Exercise (as defined
in the Warrants)) will acquire the Conversion Shares issuable upon conversion of
the Notes and the Warrant Shares issuable upon exercise of the Warrants, for its
own account 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
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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. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any
Person (as defined herein) to distribute any of the Securities.
(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 the Securities.
(d) INFORMATION. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of 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 herein. 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 generally acceptable form, 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 or Rule 144A promulgated
under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
"RULE 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be
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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 (as defined in Section 3(s)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other Person is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder. The Securities may be pledged in connection with a
bona fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
(g) LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Notes and the Warrants and, until such time
as the resale 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 any legend as required by
the "blue sky" laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at DTC (as defined below), unless otherwise required by state securities
laws, (i) such Securities as are registered for resale under the 1933 Act, (ii)
in connection with a sale, assignment or other transfer, of such Securities, in
the event that such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that such sale, assignment or transfer
of the Securities may be made without registration under the applicable
requirements of the 1933 Act, or (iii) in the event that such holder provides
the Company with an opinion of counsel, in a generally acceptable form, to the
effect that the Securities can be sold, assigned or transferred pursuant to Rule
144 or Rule 144A.
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(h) VALIDITY; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or 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) NO CONFLICTS. The execution, delivery and performance by
such Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer, except
in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of such
Buyer to perform its obligations hereunder.
(j) RESIDENCY. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers
that:
(a) ORGANIZATION AND QUALIFICATION. Each of the Company and
its "SUBSIDIARIES" (which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns any of the capital stock or
holds an equity or similar interest) are entities duly organized and validly
existing in good standing under the laws of the jurisdiction in which they are
formed, and have the requisite power and authorization to own their properties
and to carry on their business as now being conducted. Each of the Company and
its Subsidiaries is duly qualified as a foreign entity 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, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents. The Company has no Subsidiaries
except as set forth on SCHEDULE 3(a).
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(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b) below), 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, subject to obtaining the Stockholder Approval
(as defined in Section 4(q) below), to issue the Securities in accordance with
the terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Notes and the Warrants, the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion of the Notes and the reservation for
issuance and issuance of Warrant Shares issuable upon exercise of the Warrants
(other than the filing with the SEC of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement) require
no further filing, subject to obtaining the Stockholder Approval, 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 other than obtaining the Stockholder Approval. This Agreement and
the other Transaction Documents of even date herewith have been duly executed
and delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective 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 applicable creditors' rights and remedies.
(c) ISSUANCE OF SECURITIES. The issuance of the Notes and the
Warrants are duly authorized and are free from all taxes, liens and charges with
respect to the issue thereof. As of the Closing, 34,078,554 shares of Common
Stock shall have been duly authorized and reserved for issuance pursuant to the
transactions contemplated hereby. From and after the Stockholder Approval Date,
a number of shares of Common Stock shall have been duly authorized and reserved
for issuance which equals at least 130% of the sum of the maximum number of
shares of Common Stock issuable (i) upon conversion of the Notes and (ii) upon
exercise of the Warrants. Upon conversion in accordance with the Notes or
exercise in accordance with the Warrants, as the case may be, the Conversion
Shares and the Warrant Shares, respectively, will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights, 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 offer and issuance by
the Company of the Securities is exempt from registration under the 1933 Act.
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Notes and the Warrants, and subject to obtaining the
Stockholder Approval, reservation for issuance and issuance of the Conversion
Shares and the Warrant Shares) will not (i) result in a violation of the
Articles of Incorporation (as defined in Section 3(r)) of the Company or any of
its Subsidiaries, any capital stock of the Company or Bylaws (as defined in
Section 3(r)) of the Company or any of its Subsidiaries or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
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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 OTC Bulletin Board (the "PRINCIPAL MARKET")) 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 in the case of
clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(e) CONSENTS. Neither the Company nor any of its Subsidiaries
is required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof. 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 Closing Date, and the Company and its Subsidiaries
are unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant
to the preceding sentence. The Company is not in violation of the listing
requirements of the Principal Market and has no knowledge of any facts which
would reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.
(f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES.
The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby and that no Buyer is (i) an
officer or director of the Company, (ii) to the Company's knowledge, an
"affiliate" of the Company (as defined in Rule 144) or (iii) to the knowledge of
the Company, a "beneficial owner" of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the "1934 ACT")). The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each Buyer
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
(g) NO GENERAL SOLICITATION; PLACEMENT AGENT'S FEES. 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) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has engaged Xxxxxxxxxx &
Co., LLC,, as placement agent (the "PLACEMENT AGENT") in connection with the
sale of the Securities. Other than the Placement Agent, the Company has not
engaged any placement agent or other agent in connection with the sale of the
Securities.
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(h) NO INTEGRATED OFFERING. None of the Company, its
Subsidiaries, any of their affiliates, and any Person acting on 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 the 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 any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. None of the Company, its Subsidiaries, their affiliates
and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Notes and
the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Notes in accordance with this
Agreement and the Notes and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants, in
each case, is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
(j) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. 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 jurisdiction of its formation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.
(k) SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed
in SCHEDULE 3(K), during the two (2) years prior to the date hereof, 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, notes and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC DOCUMENTS"). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of the SEC Documents not
available on the XXXXX system. As of their respective dates or as a result of
subsequent amendment or modification prior to the date hereof, 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, as amended or modified, at the time
they were filed with the SEC or as a result of subsequent amendment or
modification prior to the date hereof, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
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circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
(l) ABSENCE OF CERTAIN CHANGES. Except as disclosed in
SCHEDULE 3(L), since December 31, 2005, there has been no material adverse
change and no material adverse development in the business, properties,
operations, condition (financial or otherwise), results of operations or
prospects of the Company or its Subsidiaries. Except as disclosed in SCHEDULE
3(L), since December 31, 2005, the Company has not (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, in excess of
$100,000 outside of the ordinary course of business or (iii) had capital
expenditures, individually or in the aggregate, in excess of $100,000. The
Company has not taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(l), "INSOLVENT" means with
respect to any Person, (i) the present fair saleable value of such Person's
assets is less than the amount required to pay such Person's total Indebtedness
(as defined in Section 3(s)), (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
(m) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. Except as contemplated by this Agreement or the Transaction
Documents, no event, liability, development or circumstance has occurred or
currently exists with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form SB-2 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
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(n) CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the
Company nor its Subsidiaries is in violation of any term of or in default under
any certificate of designations of any outstanding series of preferred stock,
its Articles of Incorporation or Bylaws or their organizational charter or
articles of incorporation or bylaws, respectively. Neither the Company nor any
of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in violation of any of the rules, regulations or requirements of the
Principal Market and has no knowledge of any facts or circumstances which would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. Since December 31, 2005, the Common Stock has
been designated for quotation on the Principal Market. During the two years
prior to the date hereof, (i) trading in the Common Stock has not been suspended
by the SEC or the Principal Market and (ii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding
the suspension or delisting of the Common Stock from the Principal Market. The
Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, 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.
(o) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company or any of its Subsidiaries (i)
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) XXXXXXXX-XXXXX ACT. The Company is in compliance with any
and all requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective and
applicable to the Company as of the date hereof, and any and all applicable
rules and regulations promulgated by the SEC thereunder that are effective as of
the date hereof.
(q) TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3(Q), none of the officers, directors or employees of the Company or
any Subsidiary is presently a party to any transaction with the Company or any
of its Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any of
its Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
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(r) EQUITY CAPITALIZATION. As of June 30, 2006, the authorized
capital stock of the Company consists of (i) 110,000,000 shares of Common Stock,
of which as of the date hereof, 54,204,367 are issued and outstanding, 1,501,500
shares are reserved for issuance pursuant to the Company's stock option and
purchase plans and 16,255,087 shares are reserved for issuance pursuant to
securities (other than the aforementioned options, the Notes and the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common Stock and
(ii) 5,000,000 shares of preferred stock, no par value of which as of the date
hereof, none are issued and outstanding. Since June 30, 2006, there have been no
changes to the authorized capital stock of the Company and there have been no
material changes to the number of shares of capital stock issued, outstanding or
reserved for issuance. All of such outstanding shares have been, or upon
issuance will be, validly issued, fully paid and nonassessable. Except as
disclosed in SCHEDULE 3(R): (i) none of the Company's capital stock is 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 options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any 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 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, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company or any of its
Subsidiaries; (v) 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 pursuant to the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii) the
Company does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in the
SEC Documents but not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company's or its Subsidiaries' respective
businesses and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect. The Company has furnished to the Buyers true, correct
and complete 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 Bylaws, as amended and as in effect on the date hereof (the "BYLAWS"),
and the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof in
respect thereto.
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(s) INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed in
SCHEDULE 3(s), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default (or an event which
with notice or lapse of time or both would become a default) under which, by the
other party(ies) to such contract, agreement or instrument would result in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. SCHEDULE 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"INDEBTEDNESS" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"PERSON" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by the Principal Market, any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries, the Common Stock or the capital stock of any
of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
officers or directors in their capacities as such, except as set forth in
SCHEDULE 3(t) or except where the Company reasonably believes that such action,
suit, proceeding, inquiry or investigation is not expected to have a Material
Adverse Effect.
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(u) 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. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(v) EMPLOYEE RELATIONS. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company or any such Subsidiary that such officer intends to leave or otherwise
terminate such officer's employment with the Company or any such Subsidiary. No
executive officer of the Company or any of its Subsidiaries, to the knowledge of
the Company, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.
(ii) The Company and its Subsidiaries are in
compliance with all applicable federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
(w) TITLE. Except as set forth on SCHEDULE 3(w), the Company
and its Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each
case free and clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property, buildings 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, buildings
and facilities by the Company and its Subsidiaries.
(x) INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
businesses as now conducted. Except as set forth in SCHEDULE 3(x), none of the
Intellectual Property Rights of the Company or any Subsidiary have expired or
terminated, or are expected to expire or terminate, within three years from the
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date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others. There is no claim, action or proceeding being made or brought, or to
the knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights. The Company is unaware
of any facts or circumstances which would be reasonably expected to give rise to
any of the foregoing infringements or claims, actions or proceedings. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.
(y) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i)
are in compliance with any and all applicable Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(z) SUBSIDIARY RIGHTS. Except as set forth in SCHEDULE 3(z),
the Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) INVESTMENT COMPANY STATUS. The Company is not, and upon
consummation of the sale of the Securities will not be, an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(bb) TAX STATUS. The Company and each of its Subsidiaries (i)
has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and (iii)
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.
-14-
(cc) INTERNAL ACCOUNTING AND DISCLOSURE 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 and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is accumulated and communicated to the
Company's management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure.
(dd) OFF BALANCE SHEET ARRANGEMENTS. There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its SEC Documents and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(ee) RANKING OF NOTES. Except as set forth on SCHEDULE 3(ee),
no Indebtedness of the Company is senior to or ranks PARI PASSU with the Notes
in right of payment, whether with respect of payment of redemptions, interest,
damages or upon liquidation or dissolution or otherwise.
(ff) FORM SB-2 ELIGIBILITY. The Company is eligible to
register the Conversion Shares and the Warrant Shares for resale by the Buyers
using Form SB-2 promulgated under the 1933 Act.
(gg) TRANSFER TAXES. On the Closing Date, all stock transfer
or other taxes (other than income or similar taxes) which are required to be
paid in connection with the sale and transfer of the Securities to be sold to
each Buyer hereunder will be, or will have been, fully paid or provided for by
the Company, and all applicable laws imposing such taxes will be or will have
been complied with, except where the failure to comply would not reasonably be
expected to have a Material Adverse Effect.
(hh) MANIPULATION OF PRICE. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) other than the Placement Agent, sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) other than the Placement Agent, paid or agreed to pay to
any person any compensation for soliciting another to purchase any other
securities of the Company.
-15-
(ii) ACKNOWLEDGEMENT REGARDING BUYERS' TRADING ACTIVITY.
Except pursuant to Section 4(r) hereto, it is understood and acknowledged by the
Company (i) that none of the Buyers have been asked to agree, nor has any Buyer
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or "derivative" securities based on securities issued by the
Company or to hold the Securities for any specified term, (except as to the SEC
position that short sales "against the box" prior to the effective date of a
registration statement may not be covered with shares registered under such
registration statement); (ii) that any Buyer, and counter parties in
"derivative" transactions to which any such Buyer is a party, directly or
indirectly, presently may have a "short" position in the Common Stock, and (iii)
that each Buyer shall not be deemed by the Company to have any affiliation with
or control over any arm's length counter-party in any "derivative" transaction.
The Company further understands and acknowledges that (a) one or more Buyers may
engage in hedging and/or trading activities at various times during the period
that the Securities are outstanding, including, without limitation, during the
periods that the value of the Conversion Shares and the Warrant Shares
deliverable with respect to Securities are being determined and (b) such hedging
and/or trading activities, if any, can reduce the value of the existing
stockholders' equity interest in the Company both at and after the time the
hedging and/or trading activities are being conducted. The Company acknowledges
that such aforementioned hedging and/or trading activities do not constitute a
breach of this Agreement, the Notes, the Warrants or any of the documents
executed in connection herewith.
(jj) U.S. REAL PROPERTY HOLDING CORPORATION. The Company is
not, nor has ever been, a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the
Company shall so certify upon any Buyer's request.
(kk) DISCLOSURE. The Company confirms that neither it, nor to
the Company's knowledge, any other Person acting on its behalf has provided any
of the Buyers or their agents or counsel with any information that constitutes
or could reasonably be expected to constitute material, nonpublic information.
The Company understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities of the
Company. All disclosure provided by the Company, its Subsidiaries, its officers
or directors, its agents or its counsel to the Buyers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. Each press release issued by the Company during the
twelve (12) months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed, except
where the failure to make any such filing or report would not have a Material
Adverse Effect.
-16-
4. COVENANTS.
----------
(a) BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
(b) FORM D 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 reasonably promptly after such filing. The Company
shall, reasonably promptly (and in no event later than 15 days) after the
Closing Date, take such action as the Company shall reasonably determine is
necessary (taking into account The National Securities Markets Improvement Act
of 1996, as amended), in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers reasonably promptly after
such filing. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or "Blue
Sky" laws of the states of the United States following the Closing Date. The
Company shall have no obligations with respect to the securities laws of any
jurisdiction outside of the United States, regardless of the foreign residence
of such Buyer.
(c) REPORTING STATUS. Until the date on which the Investors
(as defined in the Registration Rights Agreement) shall have sold all the
Conversion Shares and Warrant Shares and none of the Notes or Warrants is
outstanding (the "REPORTING PERIOD"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Securities as set forth on 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 the XXXXX system, within
one (1) Business Day after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K or 10-KSB, any Quarterly Report on Form 10-Q or 10-QSB, 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 or e-mailed 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. As used herein, "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.
(f) LISTING. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon the Principal Market and each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed
(subject to official notice of issuance) and shall thereafter maintain such
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listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market. Neither the Company nor any
of its Subsidiaries shall take any action which would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g) FEES. The Company shall reimburse Buyers or their
designee(s) (in addition to any other expense amounts paid to any Buyer prior to
the date of this Agreement) for all reasonable costs and expenses incurred in
connection with the transactions contemplated by the Transaction Documents
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), which amount
shall be withheld by such Buyer from its Purchase Price at the Closing. The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or broker's commissions (other than for Persons engaged
by any Buyer) relating to or arising out of the transactions contemplated
hereby, including, without limitation, any fees or commissions payable to the
Placement Agent. The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorney's fees and out-of-pocket expenses) arising in connection with any claim
relating to any such payment, other than for placement agents, financial
advisors or brokers engaged by any Buyer. Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.
(h) PLEDGE OF SECURITIES. The Company acknowledges and agrees
that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
(i) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION.
On or before 8:30 a.m., New York City time, on the first Business Day following
the date of this Agreement, the Company shall issue a press release and file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement, the form of the Notes, the form of Warrant and the form of the
Registration Rights Agreement) as exhibits to such filing (including all
attachments, the "8-K FILING"). From and after the filing of the 8-K Filing with
the SEC, no Buyer shall be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of their respective
officers, directors, employees or agents, that is not disclosed in the 8-K
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Filing. The Company shall not, and shall cause each of its Subsidiaries and its
and each of their respective officers, directors, employees and agents, not to,
provide any Buyer with any material, nonpublic information regarding the Company
or any of its Subsidiaries from and after the filing of the 8-K Filing with the
SEC without the express written consent of such Buyer. If a Buyer has, or
believes it has, received any such material, nonpublic information regarding the
Company or any of its Subsidiaries, it shall promptly provide the Company with
written notice thereof. The Company shall, within five (5) Trading Days of
receipt of such notice, make public disclosure of such material, nonpublic
information. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Buyer shall have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders
or agents for any such disclosure, except where, as a result of the willful
misconduct or gross negligence of such Buyer, any such disclosure contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Subject
to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of any applicable Buyer, and except as contemplated by the
prior subsection (i) or as required by applicable law or regulation, neither the
Company nor any of its Subsidiaries or affiliates shall disclose the name of
such Buyer in any filing, announcement, release or otherwise.
(j) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. So long as
any Notes are outstanding, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, the Common Stock
without the prior express written consent of the holders of Notes representing
not less than a majority of the aggregate principal amount of the then
outstanding Notes.
(k) ADDITIONAL NOTES; VARIABLE SECURITIES; DILUTIVE ISSUANCES.
(i) So long as any Buyer beneficially owns any
Securities, the Company will not issue any Notes other than to the Buyers as
contemplated hereby and the Company shall not issue any other securities that
would cause a breach or default under the Notes. For so long as any Notes or
Warrants remain outstanding, the Company shall not, in any manner, issue or sell
any rights, warrants or options to subscribe for or purchase Common Stock or
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed price unless
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the conversion, exchange or exercise price of any such security cannot be less
than the then applicable Conversion Price (as defined in the Notes) with respect
to the Common Stock into which any Note is convertible or the then applicable
Exercise Price (as defined in the Warrants) with respect to the Common Stock
into which any Warrant is exercisable. For so long as any Notes or Warrants
remain outstanding, the Company shall not, in any manner, enter into or affect
any Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive
Issuance is to cause the Company to be required to issue upon conversion of any
Note or exercise of any Warrant any shares of Common Stock in excess of that
number of shares of Common Stock which the Company may issue upon conversion of
the Notes and exercise of the Warrants without breaching the Company's
obligations under the rules or regulations of the Principal Market or any
applicable Eligible Market (as defined in the Registration Rights Agreement).
(ii) Until the Stockholder Approval Date has occurred
and the Registration Statement filed pursuant to the Registration Rights
Agreement is effective and available for the resale of the number of Registrable
Securities contemplated in clause (B) of the definition of Required Registration
Statement (as defined in the Registration Rights Agreement), the Company will
not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its equity or Common Stock Equivalents
(as defined in Section 4(o) below), including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for shares of common equity of the Company, without the prior
written consent of the Required Holders.
(iii) The restrictions contained in subsection (ii)
of this Section 4(k) shall not apply in connection with the issuance of any
securities issuable upon the conversion or exercise of Common Stock Equivalents
outstanding as of the date hereof or the issuance of up to 3,000,000 stock
options in the aggregate under the Company's Approved Stock Plan (as defined in
the Notes) as in existence on the date hereof (such maximum number to include
stock options previously issued under such Approved Stock Plan).
(l) CORPORATE EXISTENCE. So long as any Buyer beneficially
owns any Securities, the Company shall not be party to any Fundamental
Transaction (as defined in the Notes) unless the Company is in compliance with
the applicable provisions governing Fundamental Transactions set forth in the
Notes and the Warrants.
(m) RESERVATION OF SHARES. So long as any Buyer owns any
Securities, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than (I) prior to
the Stockholder Approval Date, 34,078,554 shares of Common Stock and (II) from
and after the Stockholder Approval Date, 130% of the sum of the number of shares
of Common Stock issuable (i) upon conversion of the Notes and (ii) upon exercise
of the Series L Warrants then outstanding (without taking into account any
limitations on the conversion of the Notes or exercise of the Series L Warrants
set forth in the Notes and Series L Warrants, respectively).
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(n) CONDUCT OF BUSINESS. The business of the Company and its
Subsidiaries shall not be conducted in violation of any applicable law,
ordinance or regulation of any governmental entity, except where such violations
would not result, either individually or in the aggregate, in a Material Adverse
Effect.
(o) ADDITIONAL ISSUANCES OF SECURITIES.
(i) For purposes of this Section 4(o), the following
definitions shall apply.
(1) "CONVERTIBLE SECURITIES" means any stock
or securities (other than Options) convertible into or exercisable or
exchangeable for shares of Common Stock.
(2) "OPTIONS" means any rights, warrants or
options to subscribe for or purchase shares of Common Stock or
Convertible Securities.
(3) "COMMON STOCK EQUIVALENTS" means,
collectively, Options and Convertible Securities.
(ii) From the date hereof until the date that is 120
Business Days following the Effective Date (as defined in the Registration
Rights Agreement) (the "TRIGGER DATE"), the Company will not, (i) directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' debt, equity or equity
equivalent securities, including without limitation any debt, preferred stock or
other instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "SUBSEQUENT PLACEMENT") or
(ii) be party to any solicitations, negotiations or discussions with regard to
the foregoing.
(iii) From the Trigger Date until the later to occur
of (i) the date on which none of the Notes is outstanding and (ii) the date two
(2) years from the date hereof, the Company will not, directly or indirectly,
effect any Subsequent Placement unless the Company shall have first complied
with this Section 4(o)(iii).
(1) The Company shall deliver to each Buyer
written notice (the "OFFER NOTICE") of any proposed or intended
issuance or sale or exchange (the "OFFER") of the securities being
offered (the "OFFERED SECURITIES") in a Subsequent Placement, which
Offer Notice shall (w) identify and describe the Offered Securities,
(x) describe the price and other terms upon which they are to be
issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities are
to be offered, issued, sold or exchanged and (z) offer to issue and
sell to or exchange with such Buyers all of the Offered Securities,
allocated among such Buyers (a) based on such Buyer's pro rata portion
of the aggregate principal amount of Notes purchased hereunder (the
"BASIC AMOUNT"), and (b) with respect to each Buyer that elects to
purchase its Basic Amount, any additional portion of the Offered
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Securities attributable to the Basic Amounts of other Buyers as such
Buyer shall indicate it will purchase or acquire should the other
Buyers subscribe for less than their Basic Amounts (the
"UNDERSUBSCRIPTION AMOUNT").
(2) To accept an Offer, in whole or in part,
such Buyer must deliver a written notice to the Company prior to the
end of the tenth (10th) Business Day after such Buyer's receipt of the
Offer Notice (the "OFFER PERIOD"), setting forth the portion of such
Buyer's Basic Amount that such Buyer elects to purchase and, if such
Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase
(in either case, the "NOTICE OF ACCEPTANCE"). If the Basic Amounts
subscribed for by all Buyers are less than the total of all of the
Basic Amounts, then each Buyer who has set forth an Undersubscription
Amount in its Notice of Acceptance shall be entitled to purchase, in
addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; PROVIDED, HOWEVER, that if the
Undersubscription Amounts subscribed for exceed the difference between
the total of all the Basic Amounts and the Basic Amounts subscribed for
(the "AVAILABLE UNDERSUBSCRIPTION AMOUNT"), each Buyer who has
subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as
the Basic Amount of such Buyer bears to the total Basic Amounts of all
Buyers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent it deems reasonably necessary.
(3) The Company shall have ten (10) Business
Days from the expiration of the Offer Period above to offer, issue,
sell or exchange all or any part of such Offered Securities as to which
a Notice of Acceptance has not been given by the Buyers (the "REFUSED
SECURITIES"), but only to the offerees described in the Offer Notice
(if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer Notice.
(4) In the event the Company shall propose
to sell less than all the Refused Securities (any such sale to be in
the manner and on the terms specified in Section 4(o)(iii)(3) above),
then each Buyer may, at its sole option and in its sole discretion,
reduce the number or amount of the Offered Securities specified in its
Notice of Acceptance to an amount that shall be not less than the
number or amount of the Offered Securities that such Buyer elected to
purchase pursuant to Section 4(o)(iii)(2) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue, sell or
exchange (including Offered Securities to be issued or sold to Buyers
pursuant to Section 4(o)(iii)(3) above prior to such reduction) and
(ii) the denominator of which shall be the original amount of the
Offered Securities. In the event that any Buyer so elects to reduce the
number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until
such securities have again been offered to the Buyers in accordance
with Section 4(o)(iii)(1) above.
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(5) Upon the closing of the issuance, sale
or exchange of all or less than all of the Refused Securities, the
Buyers shall acquire from the Company, and the Company shall issue to
the Buyers, the number or amount of Offered Securities specified in the
Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(3)
above if the Buyers have so elected, upon the terms and conditions
specified in the Offer. The purchase by the Buyers of any Offered
Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Buyers of a purchase agreement relating
to such Offered Securities reasonably satisfactory in form and
substance to the Buyers and their respective counsel.
(6) Any Offered Securities not acquired by
the Buyers or other persons in accordance with Section 4(o)(iii)(3)
above may not be issued, sold or exchanged until they are again offered
to the Buyers under the procedures specified in this Agreement.
(iv) The restrictions contained in subsections (ii)
and (iii) of this Section 4(o) shall not apply in connection with the issuance
of any Excluded Securities (as defined in the Notes).
(p) ADDITIONAL REGISTRATION STATEMENTS. Until the Trigger
Date, the Company will not file a registration statement (other than on Form
S-8) under the 1933 Act relating to securities that are not the Securities,
except that the Company shall be permitted to include up to 455,100 of shares of
Common Stock underlying the Xxxxxxxxxx Warrants (as defined in Section 30(u) of
the Notes) in the same registration statement as the Securities. Notwithstanding
anything to the contrary in this Agreement or the Transaction Documents, the
Company may file such supplements, amendments or other filings as may be deemed
reasonably necessary or appropriate by the Company to maintain the effectiveness
of its registration statement on Form SB-2 declared effective by the SEC on June
16, 2006.
(q) STOCKHOLDER APPROVAL.
(i) The Company shall provide each stockholder
entitled to vote at a special or annual meeting of stockholders of the Company
(the "STOCKHOLDER MEETING"), which initially shall be promptly called and held
not later than April 30, 2007 (the "STOCKHOLDER MEETING DEADLINE"), a proxy
statement, substantially in the form which has been previously reviewed by the
Buyers and Xxxxxxx Xxxx & Xxxxx LLP at the expense of the Company, soliciting
each such stockholder's affirmative vote at the Stockholder Meeting for approval
of resolutions (the "RESOLUTIONS") providing for the increase in the authorized
Common Stock from 110,000,000 shares to at least 150,000,000 shares (such
affirmative approval being referred to herein as the "STOCKHOLDER APPROVAL" and
the date such approval is obtained, the "STOCKHOLDER APPROVAL DATE"), and the
Company shall use its reasonable best efforts to solicit its stockholders'
approval of the Resolutions and to cause the Board of Directors of the Company
to recommend to the stockholders that they approve the Resolutions. The Company
shall be obligated to seek to obtain the Stockholder Approval by the Stockholder
Meeting Deadline. If, despite the Company's reasonable best efforts the
Stockholder Approval is not obtained on or prior to the Stockholder Meeting
Deadline, the Company shall cause an additional Stockholder Meeting to be held
each six month period thereafter until such Stockholder Approval is obtained,
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provided that if the Board of Directors of the Company does not recommend to the
stockholders that they approve the Resolutions at any such Stockholder Meeting
and the Stockholder Approval is not obtained, or the Notes are no longer
outstanding, the Company shall cause an additional Stockholder Meeting to be
held each calendar quarter thereafter until such Stockholder Approval is
obtained.
(ii) If the Common Stock is listed on an Eligible
Market (as defined in the Registration Rights Agreement) other than the
Principal Market (the "New Principal Market") and the issuance of the Conversion
Shares and Warrant Shares as contemplated under the Transaction Documents would
exceed that number of shares of Common Stock which the Company may issue without
breaching the Company's obligations under the rules or regulations of the New
Principal Market, then the Company shall obtain the approval of its stockholders
as required by the applicable rules of the New Principal Market for issuances of
the Conversion Shares and Warrant Shares in excess of such amount. At such time,
the Company shall provide each stockholder entitled to vote at a special or
annual meeting of stockholders of the Company (the "Additional Stockholder
Meeting"), which shall be promptly called and held not later than 75 days after
the earlier of (i) the New Principal Market indication of and (ii) the Company
becoming aware of, any limitation imposed by the New Principal Market on the
issuance of Conversion Shares or Warrant Shares (the "Additional Stockholder
Meeting Deadline"), a proxy statement, substantially in the form which has been
previously reviewed by the Buyers and Xxxxxxx Xxxx & Xxxxx LLP, at the expense
of the Company, soliciting each such stockholder's affirmative vote at the
Additional Stockholder Meeting for approval of resolutions providing for the
Company's issuance of all of the Securities as described in the Transaction
Documents in accordance with applicable law and the rules and regulations of the
New Principal Market and such affirmative approval being referred to herein as
the "Additional Stockholder Approval"), and the Company shall use its reasonable
best efforts to (i) solicit its stockholders' approval of such resolutions and
to (ii) cause the Board of Directors of the Company to recommend to the
stockholders that they approve such resolutions. The Company shall be obligated
to use its reasonable best efforts to obtain the Additional Stockholder Approval
by the Additional Stockholder Meeting Deadline. If, despite the Company's
reasonable best efforts the Additional Stockholder Approval is not obtained on
or prior to the Additional Stockholder Meeting Deadline, the Company shall cause
an additional Additional Stockholder Meeting to be held every six (6) months
thereafter until such Additional Stockholder Approval is obtained or the Notes
and the Warrants are no longer outstanding.
(r) TRADING RESTRICTIONS. Neither the Buyer, nor any affiliate
of the Buyer that is controlled by the Buyer or is otherwise aware of this
restriction, may purchase, sell or enter into any put option, short position or
similar arrangement with respect to securities of the Company that violates
Current Securities Laws (as defined below) or otherwise trade in the securities
of the Company in violation of applicable Current Securities Laws. In addition,
during each Company Conversion Measuring Period (as defined in the Notes)
neither the Buyer, nor any affiliate of the Buyer that is controlled by the
Buyer or is otherwise aware of this restriction, may engage in a Restricted
Activity other than the sale of shares of Common stock received upon a Company
Conversion, a Mandatory Conversion or an Optional Conversion (as such terms are
defined in the Notes), upon a conversion, amortization or redemption of Notes
pursuant to terms contained therein, upon exercise of any Warrants, or the
transfer of any Notes or Warrants as permitted by their terms. "RESTRICTED
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ACTIVITY" means, (a) any Acquisition or Disposition, in open market transactions
of (i) any shares of Common Stock or (ii) any securities convertible into or
exchangeable for or derivative of shares of Common Stock and (b) any other
action taken intentionally for the purpose of manipulating the price of shares
of Common Stock. "ACQUISITION" means any direct or indirect voluntary
acquisition or purchase (other than by merger, consolidation, combination,
recapitalization or other reorganization, or by operation of law). "DISPOSITION"
means any direct or indirect voluntary sale, or monetization, including through
a subsidiary or by means of an equity offering by any such subsidiary, but shall
not include, any of the actions contemplated by Section 4(h) or any disposition
thereunder. "CURRENT SECURITIES LAWS" means the rules and regulations, as then
in effect, of the 1933 Act and the 1934 Act, in each case as are set forth in
currently disseminated interpretations by the SEC in writing, through rules,
regulations, releases, no-action letters or published telephone interpretations.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
--------------------------------------
(a) REGISTER. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Securities), a register for the Notes and
the Warrants in which the Company shall record the name and address of the
Person in whose name the Notes and the Warrants have been issued (including the
name and address of each transferee), the principal amount of Notes held by such
Person, the number of Conversion Shares issuable upon conversion of the Notes
and Warrant Shares issuable upon exercise of the Warrants held by such Person.
The Company shall keep the register open and available at all times during
business hours for inspection of any Buyer or its legal representatives.
(b) TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"), registered in the name of each Buyer or
its respective nominee(s), for the Conversion Shares and the Warrant Shares
issued at the Closing or upon conversion of the Notes or exercise of the
Warrants in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Notes or exercise of the Warrants in the form of
EXHIBIT E attached hereto (the "IRREVOCABLE TRANSFER AGENT Instructions"). The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(g) hereof, 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 permitted by applicable
federal and state securities laws and as provided in this Agreement and the
other Transaction Documents. If a Buyer effects a sale, assignment or transfer
of the Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer
involves Conversion Shares or Warrant Shares sold, assigned or transferred
pursuant to an effective registration statement or pursuant to Rule 144, the
transfer agent shall issue such Securities to the Buyer, assignee or transferee,
as the case may be, without any restrictive legend. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
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a Buyer. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5(b) will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 5(b), that a Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------
CLOSING DATE. The obligation of the Company hereunder to issue
and sell the Notes and the related Warrants to each Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for 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 the
Transaction Documents to which it is a party and delivered the same to the
Company.
(ii) Such Buyer and each other Buyer shall have
delivered to the Company the Purchase Price (less the amounts withheld
pursuant to Section 4(g)) for the Notes and the related Warrants being
purchased by such Buyer at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the
Company.
(iii) The representations and warranties of such
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
--------------------------------------------------
CLOSING DATE. The obligation of each Buyer hereunder to
purchase the Notes and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(i) The Company shall have executed and delivered to
such Buyer (A) each of the Transaction Documents, (B) the Notes (in such
principal amounts as such Buyer shall request) being purchased by such Buyer at
the Closing pursuant to this Agreement, and (C) the Warrants (in such amounts as
such Buyer shall request) being purchased by such Buyer at the Closing pursuant
to this Agreement.
(ii) Such Buyer shall have received the opinion of
Xxxxx & Xxxxxx, LLP and Xxxx Xxxxx LLP, each, one of the Company's outside
counsel, dated as of the Closing Date, in substantially the form of EXHIBIT F
attached hereto.
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(iii) The Company shall have delivered to such Buyer
a copy of the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT E
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(iv) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity's jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within 10 days of the Closing Date.
(v) The Company shall have delivered to such Buyer a
certificate evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company is required to be so qualified, as of a date
within 10 days of the Closing Date.
(vi) The Company shall have delivered to such Buyer a
certified copy of the Articles of Incorporation as certified by the Secretary of
State (or comparable office) of the State of Colorado within ten (10) days of
the Closing Date.
(vii) The Company shall have delivered to such Buyer
a certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in
effect at the Closing, in the form attached hereto as EXHIBIT G.
(viii) The representations and warranties of the
Company shall be true and correct as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as EXHIBIT H.
(ix) The Company shall have delivered to such Buyer a
letter from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five days of the Closing Date.
(x) The Common Stock (I) shall be designated for
quotation or listed on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by the SEC or the Principal
Market have been threatened, as of the Closing Date, either (A) in writing by
the SEC or the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.
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(xi) Subject to obtaining the Stockholder Approval,
the Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities.
(xii) Contemporaneously with the consummation of the
transactions contemplated hereby, Bridge Bank, National Association and Agility
Capital LLC shall have acknowledged the payoff of the loans made by them as
contemplated in Schedule 3(s) and shall have released all liens with respect
thereto and shall have authorized the Buyers to terminate all UCC financing
statements and other releases, discharges and terminations with respect thereto
as set forth in the Payoff Agreement, dated as of July 27, 2006 (the "PAYOFF
AGREEMENT").
(xiii) All rights of first refusal, participation, or
similar rights that would entitle any Person to participate in the transactions
contemplated hereby shall have expired.
(xiv) The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
8. TERMINATION.
------------
In the event that the Closing shall not have occurred with respect to a
Buyer on or before five (5) Business Days from the date hereof due to the
Company's or such Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, HOWEVER, that if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching Buyers for
the expenses described in Section 4(g) above.
9. MISCELLANEOUS.
--------------
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other 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 exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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(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 and the other
Transaction Documents supersede 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, the
other Transaction Documents and the instruments referenced herein and therein
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 holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, and any amendment to this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Securities, as applicable. 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 applicable
Securities 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 unless the same consideration also is offered to
all of the parties to the Transaction Documents, holders of Notes or holders of
the Warrants, as the case may be. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or
promise or has any other obligation to provide any financing to the Company or
otherwise.
(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 Business Day
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after deposit with an overnight courier 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:
Raptor Networks Technology, Inc.
0000 X. Xxxx Xxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
With a copy (for informational purposes only) to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxx., 00xx Xxxxx
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
If to the Transfer Agent:
First American Stock Transfer
000 X. Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
If to a Buyer, to its 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,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to 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 (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
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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 an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
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 Notes or the Warrants. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of at least a majority of the aggregate
number of Registrable Securities issued and issuable hereunder, including by way
of a Fundamental Transaction (unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the Notes
and the Warrants). A Buyer may assign some or all of its rights hereunder
without the consent of the Company, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(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 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3 and the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive the Closing. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) 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 any 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. Without limiting the foregoing, in connection
with the Payoff Agreement, the Company shall (i) provide the Buyers with all
instruments and documents as any Buyer may deem necessary or appropriate to
effect the releases, discharges and terminations contemplated by the Payoff
Agreement, including, without limitation, any UCC termination statements,
mortgage satisfactions, releases of liens on intellectual property and other
collateral release documents requested by any Buyer, and (ii) take such further
actions as may be requested by any Buyer to fully effect the releases,
discharges and terminations contemplated by the Payoff Agreement.
(k) 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, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
-31-
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 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
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
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the same
as those set forth in Section 6 of the Registration Rights Agreement. This
Section 9(k) shall not apply to any Indemnified Liabilities to the extent that
such Indemnified Liabilities result from or relate to the willful misconduct or
gross negligence of any Buyer.
(l) 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.
(m) REMEDIES. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents 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.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under the Transaction
Documents, any remedy at law may prove to be inadequate relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages and without posting a bond or other security.
(n) RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, whenever any Buyer exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Buyer may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
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(o) PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, 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.
(p) INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents and the Company
acknowledges that, to the Company's knowledge, the Buyers are not acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Buyer confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. Each Buyer shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
COMPANY:
RAPTOR NETWORKS TECHNOLOGY, INC.
By: /S/ XXXXXX X. XXXXXXXXXXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxxxxxxxx
Title: CEO
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IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
CASTLERIGG MASTER INVESTMENTS LTD.
By: /S/ XXXXXXX X. XXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Senior Managing Director
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IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
CEDAR HILL CAPITAL PARTNERS ONSHORE, LP
By: /S/ XXXXXXX XXXXXXXXXX
----------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Principal
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IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
CEDAR HILL CAPITAL PARTNERS OFFSHORE, LTD.
By: /S/ XXXXXXX XXXXXXXXXX
----------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Principal
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SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7)
AGGREGATE
PRINCIPAL NUMBER OF NUMBER OF
ADDRESS AND AMOUNT OF SERIES L SERIES M PURCHASE LEGAL REPRESENTATIVE'S
BUYER FACSIMILE NUMBER NOTES WARRANT SHARES WARRANT SHARES PRICE ADDRESS AND FACSIMILE NUMBER
------------------------------------------------------------------------------------------------------------------------------------
c/o Sandell Asset $3,000,000 10,239,374 4,437,062 $3,000,000 Xxxxxxx Xxxx & Xxxxx LLP
CASTLERIGG MASTER Management 000 Xxxxx Xxxxxx
INVESTMENTS LTD. 00 Xxxx 00xx Xx Xxx Xxxx, Xxx Xxxx 00000
26th Floor Attention: Xxxxxxx Xxxxx,
Xxx Xxxx, XX 00000 Esq.
Attention: Cem Facsimile: (000) 000-0000
Hacioglu/Xxxxxxx Xxxxxxx Telephone: (000) 000-0000
Fax: 000-000-0000
Telephone: 000-000-0000
Residence: British Virgin
Islands
CEDAR HILL CAPITAL 000 Xxxxx Xxxxxx, 00xx $1,080,000 3,686,175 1,597,342 $1,080,000 Sadis & Xxxxxxxx LLC
PARTNERS ONSHORE, LP Floor 000 0xx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Attention: Xxx Xxxxxxx,
Cascarilla Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: New York
CEDAR HILL CAPITAL 000 Xxxxx Xxxxxx, 00xx $920,000 3,140,074 1,360,699 $920,000 Sadis & Xxxxxxxx LLC
PARTNERS OFFSHORE, LTD. Floor 000 0xx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Attention: Xxx Xxxxxxx,
Cascarilla Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Cayman Islands
EXHIBITS
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Exhibit A Form of Notes
Exhibit B Form of Series L Warrants
Exhibit C Form of Series M Warrants
Exhibit D Registration Rights Agreement
Exhibit E Irrevocable Transfer Agent Instructions
Exhibit F Form of Outside Company Counsel Opinion
Exhibit G Form of Secretary's Certificate
Exhibit H Form of Officer's Certificate
SCHEDULES
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Schedule 3(a) Subsidiaries
Schedule 3(k) SEC Documents; Financial Statements
Schedule 3(l) Absence of Certain Changes
Schedule 3(q) Transactions with Affiliates
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(w) Title
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
Schedule 3(z) Subsidiary Rights
Schedule 3(ee) Ranking of Notes
Schedule 4(d) Use of Proceeds
