SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of October 16, 2008 between Enable Holdings, Inc., a Delaware
corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Sections 4(2) and 4(6) of the Securities Act of 1933, as amended (the
“Securities
Act”),
and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of
which
are hereby acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I
DEFINITIONS
1.1
Definitions.
In addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms that are not otherwise defined herein have the meanings given to such
terms in the Debentures (as defined herein), and (b) the following terms have
the meanings set forth in this Section 1.1:
“Action”
shall
have the meaning ascribed to such term in Section 3.1(j).
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 405 under the Securities
Act.
“Board
of Directors”
means
the board of directors of the Company.
“Business
Day”
means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of Illinois are authorized or required by law or other governmental action
to close.
“Class
A Warrants”
means
the Common Stock purchase warrants delivered to the Purchasers at the Closing
in
accordance with Section 2.2(a) hereof, which Warrants shall be exercisable
immediately and have a term of exercise equal to 5 years, in the form of
Exhibit
B
attached
hereto.
“Class
B Warrants”
means
the Common Stock purchase warrants delivered to the Purchasers at the Closing
in
accordance with Section 2.2(a) hereof, which Warrants shall be exercisable
immediately and have a term of exercise equal to 5 years, in the form of
Exhibit
C
attached
hereto.
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Company
Counsel”
means
Xxxxxxxxxx & Xxxxx, P.A., with offices located at 000 Xxxxx Xxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxxxxxx, XX 00000.
“Consent
and Waiver”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Debentures”
means
the 18% Senior Secured Debentures due, subject to the terms therein, 3 months
from their date of issuance, issued by the Company to the Purchasers hereunder,
in the form of Exhibit
A
attached
hereto.
“Disclosure
Schedules”
shall
have the meaning ascribed to such term in Section 3.1.
“Evaluation
Date”
shall
have the meaning ascribed to such term in Section 3.1(r).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers
or
directors of the Company pursuant to any stock or option plan duly adopted
for
such purpose by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise, redemption
or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.
“Exercise
Price”
shall
have the meaning ascribed to such term in the Warrants.
“GAAP”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness”
shall
have the meaning ascribed to such term in Section 3.1(aa).
“Intellectual
Property Rights”
shall
have the meaning ascribed to such term in Section 3.1(o).
“Legend
Removal Date”
shall
have the meaning ascribed to such term in Section 4.1(c).
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
shall
have the meaning assigned to such term in Section 3.1(b).
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(m).
“Maximum
Rate”
shall
have the meaning ascribed to such term in Section 5.17.
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
“Purchaser
Party”
shall
have the meaning ascribed to such term in Section 4.10.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Required
Minimum”
means,
as of any date, the maximum aggregate number of shares of Common Stock then
issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise in full of
all
Warrants, ignoring any conversion or exercise limits set forth therein, and
assuming that the Exercise Price is at all times on and after the date of
determination 75% of the then Exercise Price on the Trading Day immediately
prior to the date of determination.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means
the Debentures, the Warrants, and the Underlying Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Security
Agreement”
means
the Security Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit
D
attached
hereto.
“Security
Documents”
shall
mean the Security Agreement and any other documents and filings required
thereunder in order to grant the Purchasers a first priority security interest
in the assets of the Company as provided in the Security Agreement, including
all UCC-1 filing receipts.
“Short
Sales”
means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).
“Subscription
Amount”
means,
as to each Purchaser, the aggregate amount to be paid for Debentures and
Warrants purchased hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.
“Subsidiary”
means
any subsidiary of the Company as set forth on Schedule
3.1(a)
and
shall, where applicable, include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.
“Trading
Day”
means
a
day on which the New York Stock Exchange is open for trading.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the
New York Stock Exchange or the OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the Debentures, the Security Agreement, the Warrants, all
exhibits and schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
“Transfer
Agent”
means
American Pacific Stock Transfer Company, the current transfer agent of the
Company with a mailing address of 000 X. Xxxx Xxxxxxx Xxxx, Xxxxx 000, Xxx
Xxxxx
XX 00000, and a facsimile number of (000) 000-0000 and any successor transfer
agent of the Company.
“Underlying
Shares”
means
the shares of Common Stock issued and issuable upon exercise of the
Warrants.
“Variable
Rate Transaction”
shall
have the meaning ascribed to such term in Section 4.13(b).
“VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. Central time to 4:02 p.m. Central time); (b) if the OTC Bulletin
Board is not a Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin Board;
(c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board
and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the most recent bid price per share of
the
Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected
in
good faith by the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and expenses
of
which shall be paid by the Company.
“Warrants”
means,
collectively, the Class A Warrants and the Class B Warrants.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II
PURCHASE
AND SALE
2.1
Closing.
On the Closing Date, upon the terms and subject to the conditions set forth
herein, substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and the Purchasers,
severally and not jointly, agree to purchase, a minimum of $2,000,000 (“Minimum
Amount”) and a maximum of $4,000,000 (the “Maximum Amount”) in principal amount
of the Debentures. Each Purchaser shall deliver to the Company, via wire
transfer or a certified check, immediately available funds, or evidence of
indebtedness which the holder shall agree to cancel, in each case in an amount
equal to its Subscription Amount and the Company shall deliver to each Purchaser
its respective Debenture and Warrants, as determined pursuant to Section 2.2(a),
and the Company and each Purchaser shall deliver the other items set forth
in
Section 2.2 deliverable at the Closing. Upon satisfaction of the
conditions set forth in Sections 2.3, the Closing shall occur at the offices
of
Company Counsel or such other location as the parties shall mutually agree.
Provided the Minimum Amount has been subscribed for at the Closing (the “Initial
Closing”), additional Closings of this Offering shall be held thereafter at the
discretion of the Company for the sixty (60) days thereafter as additional
subscription proceeds are received and cleared up to the Maximum Amount.
2.2
Deliveries.
(a)
On the Closing Date, the Company shall deliver or cause to be delivered to
each
Purchaser the following:
(i) this
Agreement duly executed by the Company; and
(ii) a
Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
registered in the name of such Purchaser; and
(iii) a
Class A
Warrant registered in the name of such Purchaser to purchase up to a number
of
shares of Common Stock equal to 100% of such Purchaser’s Principal Amount
divided by the Exercise Price, with an initial Exercise Price equal to $0.20,
subject to adjustment therein;
(iv) a
Class B
Warrant registered in the name of such Purchaser to purchase up to a number
of
shares of Common Stock equal to 100% of such Purchaser’s Principal Amount
divided by the Exercise Price, with an initial Exercise Price equal to $0.10,
subject to adjustment therein;
(v) the
Security Agreement, along with all of the Security Documents, duly executed
by
the Company;
(vi) an
officer’s certificate from the Chief Executive Officer of the Company, dated as
of the Closing Date, certifying and setting forth (i) the names, signatures
and
positions of the Persons authorized to execute this Agreement and any other
Transaction Documents to which the Company is a party and (ii) a copy of the
resolutions of the Company authorizing the execution, delivery and performance
of this Agreement; and
(b)
On the Closing Date, each Purchaser shall deliver or cause to be delivered
to
the Company the following:
(i)
this
Agreement duly executed by such Purchaser;
(ii) the
Security Agreement duly executed by such Purchaser; and
(ii)
such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company or by delivery to the Company of evidence of indebtedness
and an endorsement or acknowledgement that said indebtedness will be cancelled
upon issuance of the Debentures subscribed for hereunder.
2.3
Closing
Conditions.
(a)
The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:
(i)
the
accuracy in all material respects on the Closing Date of the representations
and
warranties of the Purchasers contained herein;
(ii)
all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the Closing Date shall have been performed; and
(iii)
the
delivery by each Purchaser of the items set forth in Section 2.2 (b) of this
Agreement.
(b)
The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
(i)
the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;
(ii)
all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date shall have been performed;
(iii)
the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv)
there shall have been no Material Adverse Effect with respect to the Company
since the date hereof; and
(v)
from
the date hereof to the Closing Date, trading in the Common Stock shall not
have
been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at
any
time prior to the Closing Date, trading in securities generally as reported
by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or Illinois State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable
to
purchase the Securities at the Closing.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1.
Representations
and Warranties of the Company.
Except as set forth in the Disclosure Schedules, which Disclosure Schedules
shall be deemed a part hereof and shall qualify any representation or otherwise
made herein to the extent of the disclosure contained in the corresponding
section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to each Purchaser:
(a)
Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule
3.1(a).
The Company owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens, and all of
the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.
(b)
Organization
and Qualification.
The Company and each of the Subsidiaries is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of
the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c)
Authorization;
Enforcement.
The Company has the requisite corporate power and authority to enter into and
to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and
the consummation by it of the transactions contemplated hereby and thereby
have
been duly authorized by all necessary action on the part of the Company and
no
further action is required by the Company, the Board of Directors or the
Company’s stockholders in connection therewith other than in connection with the
Required Approvals. Each Transaction Document has been (or upon delivery
will have been) duly executed by the Company and, when delivered in accordance
with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with
its
terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d)
No
Conflicts.
The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not: (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice
or
lapse of time or both would become a default) under, result in the creation
of
any Lien upon any of the properties or assets of the Company or any Subsidiary
(other than as a result of the Liens imposed by the Secured Parties under the
Security Agreement contemplated hereby), or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which
any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or
a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii),
such
as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e)
Filings,
Consents and Approvals.
The Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of
the
Transaction Documents, other than (i) filings required pursuant to Section
4.6,
(ii) the notice and/or application(s) to each applicable Trading Market for
the
issuance and sale of the Securities and the listing of the Underlying Shares
for
trading thereon in the time and manner required thereby and (iii) the filing
of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required
Approvals”).
(f)
Issuance
of the Securities.
The Securities are duly authorized and, when issued and paid for in accordance
with the applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer provided for in the Transaction
Documents. The Underlying Shares, when issued in accordance with the terms
of the Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The Company
has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares in an amount set forth on
Schedule
3.1(f)
attached
hereto.
(g)
Capitalization.
The capitalization of the Company is as set forth on Schedule
3.1(g),
which
Schedule
3.1(g)
shall
also include the number of shares of Common Stock owned beneficially, and of
record, by Affiliates of the Company as of the date hereof. Except as set forth
on Schedule
3.1(g),
the
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee stock purchase
plans and pursuant to the conversion or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under
the
Exchange Act. No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on
Schedule
3.1(g)
and as a
result of the purchase and sale of the Securities, there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock
or
Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to
any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have
been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
(h)
SEC
Reports; Financial Statements.
Except as set forth on Schedule
3.1(h),
the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required
by
law or regulation to file such material) (the foregoing materials, including
the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension.
As of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable,
and none of the SEC Reports, when filed, contained any untrue statement of
a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i)
Material
Changes.
Since the date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in a subsequent SEC Report filed
prior to the date hereof, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent
or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has
not
altered its method of accounting, (iv) the Company has not declared or made
any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock and (v) the Company has not issued any equity securities
to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information. Except for the issuance
of the Securities contemplated by this Agreement or as set forth on Schedule
3.1(i),
no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or
deemed made that has not been publicly disclosed at least one Trading Day prior
to the date that this representation is made.
(j)
Litigation.
Except as set forth on Schedule
3.1(j),
there
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents or the Securities or (ii) could, if there
were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director
or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities
Act.
(k)
Labor
Relations.
No material labor dispute exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company which could
reasonably be expected to result in a Material Adverse Effect. None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to
such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. No executive officer, 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 or non-competition agreement, or any other contract or agreement
or
any restrictive covenant in favor of any third party, 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. The Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to employment
and employment practices, terms and conditions of employment and wages and
hours, except where the failure to be in compliance could not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(l)
Compliance.
Except as set forth on Schedule
3.1(l),
neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could
not
have or reasonably be expected to result in a Material Adverse
Effect.
(m)
Regulatory
Permits.
The Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the
SEC Reports, except where the failure to possess such permits could not
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(n)
Title
to Assets.
Except as set forth on Schedule
3.1(n),
the
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them and good and marketable title in all personal
property owned by them that is material to the business of the Company and
the
Subsidiaries, in each case free and clear of all Liens, except for Liens as
do
not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries and Liens for the payment of federal, state or other taxes,
the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries
are
held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
(o)
Patents
and Trademarks.
The Company and the Subsidiaries have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade
names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights necessary or material for use in connection
with their respective businesses as described in the SEC Reports and which
the
failure to so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the Company
or
any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(p)
Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any 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 without a significant increase in cost.
(q)
Transactions
with Affiliates and Employees.
Except as set forth in the SEC Reports, none of the officers or directors of
the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than for (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(r)
Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act of 2002 which are applicable to it as of the Closing Date. The Company
has established disclosure controls and procedures (as defined in Exchange
Act
Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f) for the Company
and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits
under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms. The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures and internal controls over financial reporting (as
such
term is defined in Item 307(c) of Regulation S-K) as of the end of the period
covered by the Company’s most recently filed periodic report under the Exchange
Act (such date, the “Evaluation
Date”).
The Company presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of
the
Evaluation Date. Since the Evaluation Date, there have been no changes in
the Company’s internal controls over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
(s)
Certain
Fees.
Except as set forth on Schedule
3.1(s),
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or
on
behalf of other Persons for fees of a type contemplated in this Section that
may
be due in connection with the transactions contemplated by the Transaction
Documents.
(t)
Private
Placement.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, no registration under the Securities Act is required
for
the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market.
(u)
Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it
will not become subject to the Investment Company Act of 1940, as
amended.
(v)
Registration
Rights.
Except as set forth in Schedule 3.1(v), no Person has any right to cause the
Company to effect the registration under the Securities Act of any securities
of
the Company.
(w)
Listing
and Maintenance Requirements.
The Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to
its
knowledge is likely to have the effect of, terminating the registration of
the
Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common Stock is
or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market. The Company
is in compliance with all such listing and maintenance
requirements.
(x)
Intentionally
Omitted.
(y)
Disclosure.
Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither
it
nor any other Person acting on its behalf has provided any of the Purchasers
or
their agents or counsel with any information that it believes constitutes or
might constitute material, nonpublic information. The Company understands
and confirms that the Purchasers will rely on the foregoing representation
in
effecting transactions in securities of the Company. All disclosure
furnished by or on behalf of the Company to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the
Disclosure 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 light of the
circumstances under which they were made, not misleading. The press
releases disseminated by the Company during the twelve months preceding the
date
of this Agreement taken as a whole do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made and when made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
(z)
No
Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of (i) the
Securities Act which would require the registration of any such securities
under
the Securities Act, or (ii) any applicable shareholder approval provisions
of
any Trading Market on which any of the securities of the Company are listed
or
designated.
(aa)
Indebtedness.
The Company does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be payable
on or in respect of its debt). Schedule
3.1(aa)
sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary
has
commitments. For the purposes of this Agreement, “Indebtedness”
means
(a) any liabilities for borrowed money or amounts owed in excess of $150,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments in excess of $150,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
(bb)
Tax
Status.
Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, the Company and each
Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted
or
threatened against the Company or any Subsidiary.
(cc)
No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.
(dd)
Foreign
Corrupt Practices.
Neither the Company, nor to the knowledge of the Company, any agent or other
person acting on behalf of the Company, has (i) directly or indirectly, used
any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or
to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made
by
any person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision of
the
Foreign Corrupt Practices Act of 1977, as amended.
(ee)
Accountants.
The Company’s accounting firm is set forth on Schedule
3.1(ee)
of the
Disclosure Schedule. To the knowledge and belief of the Company, such
accounting firm (i) is a registered public accounting firm as required by the
Exchange Act and (ii) shall express its opinion with respect to the financial
statements to be included in the Company’s Annual Report on Form 10-K for the
year ending December 31, 2008.
(ff)
Seniority.
As of the Closing Date, except as set forth on Schedule
3.1(ff),
no
Indebtedness or other claim against the Company is senior to the Debentures
in
right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets covered
thereby) and capital lease obligations (which is senior only as to the property
covered thereby).
(gg)
No
Disagreements with Accountants and Lawyers.
There are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants
and
lawyers formerly or presently employed by the Company and the Company is current
with respect to any fees owed to its accountants and lawyers which could affect
the Company’s ability to perform any of its obligations under any of the
Transaction Documents.
(hh)
Acknowledgment
Regarding Purchasers’ Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser 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 thereby and any advice given by
any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the Company’s decision to
enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby
by
the Company and its representatives.
(ii)
Acknowledgment
Regarding Purchasers’ Trading Activity.
Notwithstanding anything in this Agreement or elsewhere herein to the contrary
(except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged
by the Company that (i) none of the Purchasers has been asked to agree by the
Company, nor has any Purchaser 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, (ii) past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s
publicly-traded securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, may presently have a “short” position in the Common Stock, and (iv)
each Purchaser shall not be deemed 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 Purchasers
may
engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Underlying Shares deliverable with respect to Securities
are being determined and (b) such hedging activities (if any) could reduce
the
value of the existing stockholders’ equity interests in the Company at and after
the time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute
a
breach of any of the Transaction Documents.
(jj)
Regulation
M Compliance.
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) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
securities of the Company or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid
to
the Company’s placement agent in connection with the placement of the
Securities.
3.2
Representations
and Warranties of the Purchasers.
Each Purchaser, for itself and for no other Purchaser hereby, represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:
(a)
Organization;
Authority.
Such Purchaser is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of
the
Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized by all
necessary corporate or similar action on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except (i)
as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be
limited by applicable law.
(b)
Own
Account.
Such Purchaser understands that the Securities are “restricted securities” and
have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or
any
part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the Securities Act or any applicable state securities law and
has no direct or indirect arrangement or understandings with any other persons
to distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to a registration statement or otherwise in compliance
with
applicable federal and state securities laws) in violation of the Securities
Act
or any applicable state securities law. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.
(c)
Purchaser
Status.
At the time such Purchaser was offered the Securities, it was, and as of the
date hereof it is, and on each date on which it exercises any Warrants or
converts any Debentures it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act. Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
(d)
Experience
of Such Purchaser.
Such Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(e)
General
Solicitation.
Such Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(f)
Short
Sales and Confidentiality Prior To The Date Hereof.
Other than consummating the transactions contemplated hereunder, such Purchaser
has not directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company during the
period commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder
until the date hereof (“Discussion
Time”).
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction).
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1
Transfer
Restrictions.
(a)
The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company
or
to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in
Section 4.1(b), the Company may require the transferor thereof to provide to
the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing
to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement.
(b)
The
Purchasers agree to the imprinting, so long as is required by this Section
4.1,
of a legend on any of the Securities in the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]]
HAS
[NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] OF
THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR
OTHER LOAN SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.
Such
a pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor shall
be
required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the
Securities.
(c)
Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a
registration statement covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Underlying Shares pursuant
to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule
144, without the requirement for the Company to be in compliance with the
current public information required under Rule 144 as to such Underlying Shares
and without volume or manner-of-sale restrictions or (iv) if such legend is
not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission).
Upon
the receipt of the documentation customary in connection with requests to remove
legends, except as expressly provided in this Section 4.1, the Company shall
cause its counsel to issue a legal opinion to the Transfer Agent promptly but
in
any event within three (3) Trading Days if required by the Transfer Agent to
effect the removal of the legend hereunder. If all or any portion of a the
Underlying Shares are converted by an effective registration statement to cover
the resale of the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144, without the requirement for the Company to be in compliance
with
the current public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions or if such legend
is
not otherwise required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff
of
the Commission) then such Underlying Shares shall be issued free of all legends.
The Company agrees that at such time as such legend is no longer required under
this Section 4.1(c), it will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Transfer Agent of a certificate
representing Underlying Shares, as applicable, issued with a restrictive legend
(such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is
free
from all restrictive and other legends. The Company may not make any notation
on
its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section 4. Certificates for
Underlying Shares subject to legend removal hereunder shall be transmitted
by
the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company System as directed by such
Purchaser.
(d)
Each
Purchaser, severally and not jointly with the other Purchasers, agrees that
such
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a registration statement, they will be sold in compliance with
the
plan of distribution set forth therein, and acknowledges that the removal of
the
restrictive legend from certificates representing Securities as set forth in
this Section 4.1 is predicated upon the Company’s reliance upon this
understanding.
4.2
Acknowledgment
of Dilution.
The Company acknowledges that the issuance of the Securities may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further
acknowledges that its obligations under the Transaction Documents, including
without limitation its obligation to issue the Underlying Shares pursuant to
the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect
of
any such dilution or any claim the Company may have against any Purchaser and
regardless of the dilutive effect that such issuance may have on the ownership
of the other stockholders of the Company.
4.3
Furnishing
of Information.
Until the earliest of the time that no Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange
Act. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to the Exchange Act, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the
Securities under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, to
the
extent required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the requirements of the
exemption provided by Rule 144.
4.4
Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities to the
Purchasers in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.5
Exercise
Procedures.
The form of Notice of Exercise included in the Warrants set forth the totality
of the procedures required of the Purchasers in order to exercise the Warrants
and no additional legal opinion or other information or instructions shall
be required of the Purchasers to exercise their Warrants. The Company
shall honor exercises of the Warrants and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.6
Securities
Laws Disclosure; Publicity.
The Company shall, by 8:30 a.m. (Central Time) on the second (2nd)
Trading
Day following the date hereof, issue a Current Report on Form 8-K disclosing
the
material terms of the transactions contemplated hereby and attaching the
Transaction Documents as exhibits thereto. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except: (a) as required by federal securities law in connection with the filing
of final Transaction Documents (including signature pages thereto) with the
Commission and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers
with
prior notice of such disclosure permitted under this clause (b).
4.7
Shareholder
Rights Plan.
No claim will be made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement,
by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.
4.8
Non-Public
Information.
Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, and the Transaction Documents which
will be attached as exhibits to the Form 8-K, the Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto
such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that
each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
4.9
Use
of
Proceeds.
Except as set forth on Schedule
4.9
attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for
(a)
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents
or (c) the settlement of any outstanding litigation.
4.10
Indemnification
of Purchasers.
Subject to the provisions of this Section 4.10, the Company will indemnify
and
hold each Purchaser and its directors, officers, shareholders, members,
partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser (within
the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act),
and the directors, officers, shareholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title)
of
such controlling person (each, a “Purchaser
Party”)
harmless from any and all:
(i) losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in
this
Agreement or in the other Transaction Documents or (b) any action instituted
against a Purchaser in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with
any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance).
(ii) losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Purchaser may suffer or
incur as a result of or relating to, or arising out of or based upon the failure
of the Company to register shares other than those held by Purchaser or
otherwise obtain the registration of any holder disclosed in Schedule 3.1(v)
other than Purchaser whose consent is required to effectuate the Purchaser’s
right hereunder to be registered prior to and to the exclusion of such holder(s)
under any registration rights or other similar agreement existing prior to
this
Agreement.
If
any
action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right
to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Any Purchaser Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense
and
to employ counsel or (iii) in such action there is, in the reasonable opinion
of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party, in which
case
the Company shall be responsible for the reasonable fees and expenses of no
more
than one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser
Party
effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction
Documents.
4.11
Reservation
and Listing of Securities.
(a)
The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may then
be
required to fulfill its obligations in full under the Transaction
Documents.
(b)
If,
on any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then
the
Board of Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the Required Minimum
at such time, as soon as possible and in any event not later than the 75th
day
after such date.
(c)
The
Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing on such Trading Market as soon as possible thereafter,
(iii) provide to the Purchasers evidence of such listing and (iv) maintain
the
listing of such Common Stock on any date at least equal to the Required Minimum
on such date on such Trading Market or another Trading Market.
4.12
Board
of Directors.
Purchasers holding a majority in principal amount of the Debentures shall have
the right to appoint one (1) member to the Board of Directors which shall
constitute a majority of the Board of Directors. Within the fourth (4th) Trading
Day following the date hereof, issue a Current Report on Form 8-K disclosing
the
name and other biographical information concerning such member.
4.13
Subsequent
Equity Sales.
(a)
From
the date hereof until such time as no Purchaser holds any of the Securities,
the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a Variable Rate Transaction.
“Variable
Rate Transaction”
means
a
transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at
a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or
(B)
with a conversion, exercise or exchange price that is subject to being reset
at
some future date after the initial issuance of such debt or equity security
or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock or
(ii) enters into any agreement, including, but not limited to, an equity line
of
credit, whereby the Company may sell securities at a future determined
price.
(c)
Notwithstanding the foregoing, this Section 4.13 shall not apply (i) in respect
of an Exempt Issuance, except that no Variable Rate Transaction shall be an
Exempt Issuance.
4.14
Equal
Treatment of Purchasers.
No consideration (including any modification of any Transaction Document) 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 is also offered to all of the parties to the Transaction
Documents. Further, the Company shall not make any payment of principal or
interest on the Debentures in amounts which are disproportionate to the
respective principal amounts outstanding on the Debentures at any applicable
time. For clarification purposes, this provision constitutes a separate
right granted to each Purchaser by the Company and negotiated separately by
each
Purchaser, and is intended for the Company to treat the Purchasers as a class
and shall not in any way be construed as the Purchasers acting in concert or
as
a group with respect to the purchase, disposition or voting of Securities or
otherwise.
4.15
Short
Sales and Confidentiality After The Date Hereof.
Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this Agreement are first publicly announced as described in Section
4.6. Each Purchaser, severally and not jointly with the other Purchasers,
covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company as described in Section 4.6,
such Purchaser will maintain the confidentiality of the existence and terms
of
this transaction and the information included in the Disclosure Schedules.
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities
of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced as described in Section 4.6; provided, however,
each Purchaser agrees, severally and not jointly with any other Purchasers,
that
they will not enter into any Net Short Sales (as hereinafter defined) from
the
period commencing on the Closing Date and ending on the date that is the earlier
of (x) the 6 month anniversary of the Closing Date or (y) the date that such
Purchaser no longer holds any Debentures. For purposes of this
Section 4.15, a “Net
Short Sale”
by
any
Purchaser shall mean a sale of Common Stock by such Purchaser that is marked
as
a short sale and that is made at a time when there is no equivalent offsetting
long position in Common Stock held by such Purchaser. For purposes of
determining whether there is an equivalent offsetting long position in Common
Stock held by the Purchaser, Underlying Shares that have not yet been converted
pursuant to the Debentures and Warrant Shares that have not yet been exercised
pursuant to the Warrants shall be deemed to be held long by the Purchaser,
and
the amount of shares of Common Stock held in a long position shall be all
unconverted Underlying Shares and unexercised Warrant Shares (ignoring any
exercise limitations included therein) issuable to such Purchaser on such date,
plus any shares of Common Stock or Common Stock Equivalents otherwise then
held
by such Purchaser. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.
4.16
Form
D; Blue Sky Filings.
The Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof, promptly upon request
of any Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
4.17
Capital
Changes.
Until such time that the Debentures are no longer outstanding, the Company
shall not undertake a reverse stock split of the Common Stock without the prior
written consent of the Purchasers holding 75% of the principal amount
outstanding of the Debentures.
4.18
Most
Favored Nation Provision.
From the date hereof until such time that the Debentures are no longer
outstanding, if the Company or any Subsidiary proposes to issue any Common
Stock
or Common Stock Equivalents (such an issuance, a “Subsequent
Financing”),
each
Purchaser may elect, in its sole discretion, to exchange all or some of the
Debentures then held by such Purchaser for any securities issued in a Subsequent
Financing on a $1.00 for $1.00 basis based on the outstanding principal amount
of such Debentures, along with any liquidated damages and other amounts owing
thereon, and the effective price at which such securities are to be sold in
such
Subsequent Financing; provided,
however,
that
this Section 4.18 shall not apply with respect to (i) an Exempt Issuance or
(ii)
an underwritten public offering of Common Stock. At least 10 Trading Days prior
to the closing of any Subsequent Financing, the Company shall deliver to each
Purchaser a written notice of its intention to effect a Subsequent Financing
(“Pre-Notice”),
which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent
Financing Notice”).
Upon the request of a Purchaser, and only upon a request by such Purchaser,
for
a Subsequent Financing Notice, the Company shall promptly, but no later than
1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser. The Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of proceeds
intended to be raised thereunder and the Person or Persons through or with
whom
such Subsequent Financing is proposed to be effected and shall include a term
sheet or similar document relating thereto as an
attachment. Any Purchaser desiring to exercise its rights
pursuant to this Section in respect of such Subsequent Financing must
provide written notice to the Company by not later than 5:30 p.m. (Central
time)
on the 10th
Trading
Day after all of the Purchasers have received the Pre-Notice that the Purchaser
desires to exercise its rights pursuant to this Section and the amount of
Debentures as to which it desires to exercise such rights.
4.19
Public
Information.
At any time during the period commencing from the six (6) month anniversary
of
the Closing Date and ending at such time that all of the Securities, may be
sold
without the requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, if the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public
Information Failure”)
then,
in addition to such Purchaser’s other available remedies, the Company shall pay
to a Purchaser, in cash, as partial liquidated damages and not as a penalty,
by
reason of any such delay in or reduction of its ability to sell the Securities,
an amount in cash equal to two percent (2.0%) of the aggregate Subscription
Amount of such Purchaser’s Securities on the day of a Public Information Failure
and on every thirtieth (30th)
day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required for the Purchasers
to transfer the Underlying Shares pursuant to Rule 144. The payments to
which a Purchaser shall be entitled pursuant to this Section 4.19 are referred
to herein as “Public
Information Failure Payments.”
Public Information Failure Payments shall be paid on the earlier of (i) the
last
day of the calendar month during which such Public Information Failure Payments
are incurred and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month (prorated for partial
months) until paid in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and such Purchaser
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
ARTICLE
V
MISCELLANEOUS
5.1
Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the initial Closing has not been consummated on or before October
15, 2008; provided,
however,
that
such termination will not affect the right of any party to xxx for any breach
by
the other party (or parties).
5.2
Fees
and Expenses. The
Company shall deliver to each Purchaser, prior to the Closing, a completed
and
executed copy of the Closing Statement attached hereto as Annex
A.
Except as expressly set forth in the Transaction Documents to the contrary,
each
party shall pay the fees and expenses of its advisers, counsel, accountants
and
other experts, if any, and all other expenses incurred by such party incident
to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities
to the Purchasers.
5.3
Entire
Agreement.
The Transaction Documents, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
5.4
Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto prior to 5:30 p.m. (Central time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
set
forth on the signature pages attached hereto on a day that is not a Trading
Day
or later than 5:30 p.m. (Central time) on any Trading Day, (c) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.
5.5
Amendments;
Waivers.
No provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers of at least 75% in interest of the Securities still
held by Purchasers or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise
any
right hereunder in any manner impair the exercise of any such
right.
5.6
Headings.
The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
5.7
Successors
and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser (other than by merger). Any Purchaser
may assign any or all of its rights under this Agreement to any Person to whom
such Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
“Purchasers.”
5.8
No
Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of,
nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.10.
5.9
Governing
Law.
All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of Illinois,
without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
Chicago. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago,
for
the adjudication of any dispute hereunder or in connection herewith or with
any
transaction contemplated hereby or discussed herein (including with respect
to
the enforcement of any of the Transaction Documents), 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 improper or is an inconvenient venue for
such
proceeding. 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 via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address
in
effect for notices to it under this Agreement and agrees that such service
shall
constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
5.10
Survival.
The representations and warranties shall survive the Closing and the delivery
of
the Securities for the applicable statute of limitations.
5.11
Execution.
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
5.12
Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
5.13
Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) any of the other Transaction Documents, whenever any
Purchaser 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 Purchaser 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; provided,
however,
in the
case of a rescission of an exercise of a Warrant, the Purchaser shall be
required to return any shares of Common Stock delivered in connection with
any
such rescinded exercise notice.
5.14
Replacement
of Securities.
If any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof (in the case of mutilation),
or in lieu of and substitution therefor, a new certificate or instrument, but
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction. The applicant for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance of such
replacement Securities.
5.15
Remedies.
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchasers and the Company
will be entitled to specific performance under the Transaction Documents.
The parties agree that monetary damages may not be adequate compensation for
any
loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agrees to waive and not to assert in any action
for specific performance of any such obligation the defense that a remedy at
law
would be adequate.
5.16
Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.17
Usury.
To the extent it may lawfully do so, the Company hereby agrees not to insist
upon or plead or in any manner whatsoever claim, and will resist any and all
efforts to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum
Rate”),
and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract
rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever,
interest in excess of the Maximum Rate is paid by the Company to any Purchaser
with respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.
5.18
Independent
Nature of Purchasers’ Obligations and Rights.
The obligations of each Purchaser under any Transaction Document are several
and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained
herein or in any other Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or
as
a group with respect to such obligations or the transactions contemplated by
the
Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Purchaser to be joined as an additional party
in
any proceeding for such purpose. Each Purchaser has been represented by
its own separate legal counsel in their review and negotiation of the
Transaction Documents.
5.19
Liquidated
Damages.
The Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
5.20
Saturdays,
Sundays, Holidays, etc. If
the last or appointed day for the taking of any action or the expiration of
any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.
5.21
Construction.
The
parties agree that each of them and/or their respective counsel has reviewed
and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
5.22
Waiver
of Jury Trial.
In any action, suit or proceeding in any jurisdiction brought by any party
against any other party, the parties each knowingly and intentionally, to the
greatest extent permitted by applicable law, hereby absolutely, unconditionally,
irrevocably and expressly waives forever trial by jury.
(Signature
Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
By:
|
|
Name:
Xxxxxxx X. Xxxxxxx
Title:
CEO
|
Address
for Notice:
0000
X.
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Attn:
Xxxxxxx X. Xxxxxxx, CEO
With
a
copy to (which shall not constitute notice):
Xxxxxxxxxx
& Xxxxx, P.A.
000
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxxxx, Esq.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE
FOR
PURCHASERS FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO ENABLE SECURITIES PURCHASE
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Purchaser ________________
Signature
of Authorized Signatory of Purchaser:
__________________________________
Name
of
Authorized Signatory:
____________________________________________________
Title
of
Authorized Signatory:
_____________________________________________________
Email
Address of Purchaser:
________________________________________________
Facsimile
Number of Purchaser:
________________________________________________
Address
for Notice of Purchaser:
Address
for Delivery of Securities for Purchaser (if not same as address for
notice):
Subscription
Amount: $___________________
Class
A
Warrant Shares: _________________
Class
B
Warrants Shares:_________________
EIN
Number: [PROVIDE
THIS UNDER SEPARATE COVER]
[SIGNATURE
PAGES CONTINUE]
Annex
A
CLOSING
STATEMENT
Pursuant
to the attached Securities Purchase Agreement, dated as of the date hereto,
the
purchasers shall purchase up to $4,000,000 of Debentures and Warrants from
Enable Holdings, Inc. (the “Company”).
All funds will be wired into an account maintained by the Company. All
funds will be disbursed in accordance with this Closing
Statement.
Disbursement
Date:
October 16, 2008
I.
PURCHASE
PRICE
|
||||
Gross
Proceeds to be Received
|
$
|
|||
|
||||
II.
DISBURSEMENTS
|
||||
|
||||
Enable:
|
$
|
|||
|
||||
Total
Amount Disbursed:
|
$
|
|
WIRE
INSTRUCTIONS: