SECURITIES PURCHASE AGREEMENT
EXHIBIT
10.1
THIS
SECURITIES PURCHASE AGREEMENT
(the
“Agreement”),
is
dated as of October 19, 2007, by and among Intelligentias, Inc., a Nevada
corporation (the “Company”)
and
the investors listed on Exhibit
A
hereto
(each an “Investor”
and
collectively, the “Investors”).
BACKGROUND
A. The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from registration afforded by Section 4(2) of
the Securities Act of 1933, as amended (the “Securities
Act”),
and
Rule 506
of
Regulation D
(“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“SEC”)
under
the Securities Act.
B. The
Investors wish, severally, and not jointly, to purchase, and the Company wishes
to sell and issue to the Investors, upon the terms and subject to the conditions
stated in this Agreement, (i) an aggregate of up to 12,500,000 shares of the
Company’s Series A Preferred Stock, par value $0.0001 per share (“Preferred
Stock”),
which
will be convertible into shares (“Conversion
Shares”)
of the
Company’s Common Stock (as hereinafter defined) at the Rate of Conversion (as
hereinafter defined), and which will have the rights, preferences and privileges
set forth in the form of Certificate of Designation attached hereto as
Exhibit
B
(the
“Certificate
of Designation”);
(ii)
warrants to purchase an aggregate of up to 6,250,000 shares of Common Stock
at a
price per share of $1.25 (the “Market
Warrants”)
in the
form attached hereto as Exhibit
C;
and
(iii) warrants to purchase an aggregate of up to 5,000,000 shares of Common
Stock at a price per share of $1.80 (the “Premium
Warrants”)
in the
form attached hereto as Exhibit
D.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investors agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement, the following terms
have the meanings indicated:
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144
under
the Securities Act.
“Agreement”
has
the
meaning set forth in the Preamble.
“Best
Efforts”
means
the efforts that a prudent person desirous of achieving a result would use
in
similar circumstances to ensure that such result is achieved as expeditiously
as
practical.
“Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
“Certificate
of Designation”
has
the
meaning set forth in the Background.
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing
Date”
means
the date and time of the Closing and shall be on such date and time as is
mutually agreed to by the Company and each Investor.
“Company”
has
the
meaning set forth in the Preamble.
“Company
Counsel”
means
Xxxxxxxxx
Xxxxxxx, LLP,
counsel
to the Company.
“Common
Stock”
means
the common stock of the Company, par value
$0.0001 per
share.
“Conversion
Price”
means,
initially, $0.80 per share, subject to the anti-dilution adjustment set forth
in
Section 6.4 of the Certificate of Designation.
“Conversion
Shares”
has
the
meaning set forth in the Background.
“Covering
Shares”
has
the
meaning set forth in Section
4.1(b).
“Disclosure
Materials”
has
the
meaning set forth in Section 3.1(g).
“Effective
Date”
means
the date that the Registration Statement is first declared effective by the
SEC.
“Effectiveness
Period”
has
the
meaning set forth in Section 6.1(b).
“Environmental
Laws”
has
the
meaning set forth in Section
3.1(r).
“Equity
Securities”
has
the
meaning set forth in Section 7.1.
“Event”
has
the
meaning set forth in Section 6.1(d).
“Event
Payments”
has
the
meaning set forth in Section 6.1(d).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
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“Excluded
Securities”
has
the
meaning set forth in Section 7.5.
“Filing
Date”
means
thirty (30)
days
after the Closing Date.
“GAAP”
has
the
meaning set forth in Section
3.1(g).
“Hazardous
Materials”
has
the
meaning set forth in Section
3.1(r).
“Indemnified
Party”
has
the
meaning set forth in Section 6.4(c).
“Indemnifying
Party”
has
the
meaning set forth in Section 6.4(c).
“Insolvent”
has
the
meaning set forth in Section
3.1(h).
“Intellectual
Property”
means
any and all patents, patent applications, trademarks, trademark applications,
trade names, service marks, copyrights, copyright applications, licenses,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems, or procedures) and other
similar rights and proprietary knowledge.
“Investor”
has
the
meaning set forth in the Preamble.
“Investors”
has
the
meaning set forth in the Preamble.
“Lien”
means
any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.
“Lock-Up
Agreements”
has
the
meaning set forth in Section
5.1(c).
“Losses”
means
any and all losses, claims, damages, liabilities, settlement costs and expenses,
including, without limitation, reasonable attorneys’ fees.
“Market
Warrants”
has
the
meaning set forth in the Background.
“Material
Adverse Effect”
means
(i) a material adverse effect on the results of operations, prospects, assets,
business or financial condition of the Company and the Subsidiaries, taken
as a
whole on a consolidated basis, or (ii) materially and adversely impair the
Company’s ability to perform its obligations under any of the Transaction
Documents.
“Material
Permits”
has
the
meaning set forth in Section 3.1(q).
“Person”
means
any individual, corporation, limited liability company, partnership, joint
venture, trust, incorporated or unincorporated association, joint stock company,
unincorporated organization, or a government or any department or agency
thereof.
“Plan
of Distribution”
has
the
meaning set forth in Section
6.1(a).
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“Preferred
Stock”
has
the
meaning set forth in the Background.
“Premium
Warrants”
has
the
meaning set forth in the Background.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, or a partial proceeding, such as a deposition), whether commenced
or
threatened in writing.
“Prospectus”
means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Purchase
Price”
has
the
meaning set forth in Section
2.1.
“Purchase
Rights”
has
the
meaning set forth in Section
7.1.
“Purchasing
Investors”
has
the
meaning set forth in Section
7.2(b).
“Rate
of Conversion”
means
the number of shares of Common Stock into which each share of Preferred Stock
may be converted, as determined by dividing (i) the original purchase price
of
$0.80 per share by (ii) the Conversion Price.
“Registrable
Securities”
means
the
Conversion Shares and the Warrant Shares issued or issuable pursuant to the
Transaction Documents,
together with any securities issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.
“Registration
Statement”
means
each registration statement required to be filed under Article VI,
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or
deemed to be incorporated by reference in such registration
statement.
“Regulation
D”
has
the
meaning set forth in the Background.
“Required
Effectiveness Date”
means
the
date
which is one hundred and eighty (180) days after the Closing Date.
“Resale
Registration Statement”
has
the
meaning set forth in Section
6.1(e).
-4-
“Rule 144,” “Rule
144(k),” “Rule 415,”
and
“Rule 424”
means
Rule 144,
Rule
144(k), Rule 415
and
Rule 424,
respectively, promulgated by the SEC pursuant to the Securities Act, as such
Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such
Rule.
“SEC”
has the
meaning set forth in the Background.
“SEC
Reports”
has
the
meaning set forth in Section 3.1(g).
“Securities”
means,
collectively, the Preferred Stock, the Conversion
Shares,
the
Warrants and the Warrant Shares.
“Securities
Act”
has
the
meaning set forth in the Background.
“Staff”
has
the
meaning set forth in Section
6.1(e).
“Subsidiary”
means
any direct
or
indirect subsidiary of the Company.
“Trading
Day”
means
(a) any day on which the Securities are listed or quoted and traded on their
primary Trading Market, or (b) if trading ceases to occur on any Trading Market,
any Business Day.
“Trading
Market”
means
the
over-the-counter market or any national securities exchange,
market or trading or quotation facility on which the Common Stock or Preferred
Stock is then listed or quoted.
“Transaction
Documents”
means
this Agreement, the schedules and exhibits attached hereto, the Warrants, the
Certificate of Designation, and the Transfer Agent Instructions.
“Transfer
Agent”
means
Xxxxxxxx Stock Transfer, Inc. or
any
successor transfer agent for the Company.
“Transfer
Agent Instructions”
means,
with respect to the Company, the Irrevocable Transfer Agent Instructions, in
the
form of Exhibit F,
executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.
“Warrants”
means,
collectively, the Market Warrants and the Premium Warrants.
“Warrant
Shares”
means
the issuance of Common Stock to be issued upon exercise of the
Warrants.
ARTICLE
II
PURCHASE
AND SALE
2.1 Purchase
and Sale of the Preferred Stock and Warrants.
Subject
to the terms and conditions of this Agreement, each of the Investors hereby
severally, and not jointly, agrees to purchase, and the Company hereby agrees
to
sell and issue to each of the Investors, the number of shares of Preferred
Stock
and Warrants set forth opposite such Investor’s name on Exhibit
A
for the
aggregate purchase price (the “Purchase
Price”)
set
forth opposite such Investor’s name on Exhibit
A.
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2.2 Closing.
At
Closing, the Company shall deliver to the Investors (a) the Preferred Stock
and
Warrants, registered in the names of the Investors as indicated on Exhibit
A;
(b)
evidence
of filing of the Certificate of Designation, in the form provided on
Exhibit
B,
with
the State of Nevada; (c) executed Transfer Agent Instructions in the form
provided on Exhibit
F;
(d)
a legal
opinion from Company Counsel in the form set forth on Exhibit
G;
(e)
evidence of notification of
filing
with each applicable Trading
Market of
an
additional shares listing application covering all of the Registrable
Securities; (f) Lock-up Agreements in the form set forth on Exhibit
H
with all
executives and directors of the Company;
and (g)
a certificate, in the form set forth on Exhibit
I,
executed by the secretary of the Company and dated as of the Closing Date,
as to
the Articles of Incorporation, by-laws, foreign qualification, and good standing
of the Company and the resolutions adopted by the Company’s Board of Directors
authorizing the transactions contemplated by the Transaction Documents. The
Investors shall deliver the Purchase Price to the Company by wire transfer
of
immediately available funds to the account specified by the Company in writing,
subject to the execution and delivery of such other documents contemplated
hereby on or prior to the Closing.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Investors on and as of the date
hereof as follows (which representations and warranties shall be deemed to
apply, where appropriate, to each Subsidiary of the Company):
(a) Subsidiaries.
The
Company has no Subsidiaries other than those listed in Schedule 3.1(a)
hereto.
Except as disclosed in Schedule 3.1(a)
hereto,
the Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien and all the
issued and outstanding shares of capital stock or comparable equity interest
of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
(b) Organization
and Qualification.
Each of
the Company and, except as would not have a Material Adverse Effect, its
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite legal authority to own or lease and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries
is
duly qualified to do 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,
would not, individually or in the aggregate, reasonably be expected to result
in
a Material Adverse Effect.
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(c) Authorization;
Enforcement.
The
Company has the requisite corporate authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents to which
it
is a party 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 corporate action on the part of
the
Company and no further consent or action is required by the Company, its
officers, its Board of Directors or its stockholders. Each of the Transaction
Documents to which it is a party has been (or upon delivery will be) duly
executed by the Company and is, or when delivered in accordance with the terms
hereof, will constitute, the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as may
be
limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors rights generally; and (ii) the effect of rules of law governing
the availability of specific performance and other equitable remedies.
(d) No
Conflicts.
The
execution, delivery and performance by the Company of the Transaction Documents
to which it is a party and the consummation by the Company of the 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;
(ii) conflict with, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which
any
property or asset of the Company or any Subsidiary is bound or affected; or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are subject,
including all applicable Trading Markets), or by which any property or asset
of
the Company or a Subsidiary is bound or affected, except, in the case of clause
(ii) or (iii), to the extent that such conflict or violation would not
reasonably be expected to have a Material Adverse Effect.
(e) The
Securities.
The
Securities are duly authorized and, when issued and paid for in accordance
with
the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens and will not be subject to preemptive
rights, rights of first refusal, or similar rights of stockholders (other than
those imposed by the Investors). The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
upon exercise of the Warrants and conversion of the Preferred Stock. The offer,
issuance and sale of the Securities to the Investors pursuant to the Agreement,
in the case of the Conversion Shares, pursuant to the Certificate of
Designation, and in the case of the Warrant Shares, pursuant to the Warrants,
are exempt from the registration requirements of the Securities
Act.
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(f) Capitalization.
Just
prior to Closing, the aggregate number of shares and type of all authorized,
issued and outstanding classes of capital stock, options and other securities
of
the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) consists of (i)
300,000,000 authorized shares of Common Stock, par value $0.0001 per share,
with
114,555,468 shares of Common Stock outstanding; (ii) 200,000,000 shares of
blank
check preferred stock, with no shares outstanding; (iii) 12,781,250 shares
of
Common Stock, on a diluted basis, reserved for issuance upon the exercise of
outstanding warrants; and (iv) 2,000,000 shares of Common Stock, on a diluted
basis, reserved for issuance upon the exercise of outstanding employee stock
options. All outstanding shares of capital stock are duly authorized, validly
issued, fully paid and nonassessable and have been issued in compliance with
all
applicable securities laws and regulations. Except as disclosed in this
Section
3.1(f),
the
Company does not have outstanding any other options, warrants, 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 entered into any agreement giving any Person any right
to
subscribe for or acquire, any shares of Preferred Stock or Common Stock, or
securities or rights convertible or exchangeable into shares of Preferred Stock
or Common Stock. Except as set forth on Schedule
3.1(f)
hereto
or in the SEC Reports, there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and 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 Investors) and will not result in a right of any holder
of securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as disclosed in
Schedule
3.1(f)
hereto,
no Person or group of related Persons beneficially owns (as determined pursuant
to Rule 13d-3 under the Exchange Act) or has the right to acquire, by agreement
with or by obligation binding upon the Company, beneficial ownership of in
excess of five percent (5%) of the outstanding Common Stock.
(g) SEC
Reports; Financial Statements.
Except
as set forth on Schedule
3.1(g),
the
Company has filed all reports required to be filed by it under Exchange Act
Sections 13(a) or 15(d), 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. Such reports required to be filed by the Company under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, together with any
materials filed or furnished by the Company under the Exchange Act, whether
or
not any such reports were required being collectively referred to herein as
the
“SEC
Reports”
and,
together with this Agreement and the Schedules to this Agreement, the
“Disclosure
Materials”.
Except
as otherwise disclosed in later dated SEC Reports, as of their respective dates,
or to the extent corrected by a subsequent restatement filed with the SEC,
the
SEC Reports filed by the Company complied as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations of
the
SEC promulgated thereunder, and none of the SEC Reports, when filed by the
Company, 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. Except as otherwise disclosed in later dated SEC Reports,
the financial statements of the Company included in the SEC Reports comply
as to
form in all material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto as in effect at the time
of filing. Except as otherwise disclosed in later dated SEC Reports, 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, the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP or may be condensed or summary statements, and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries taken as a whole as of and for the
dates thereof and the results of operations and cash flows for the periods
then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments. All material agreements to which the Company or any Subsidiary
is a
party or to which the property or assets of the Company or any Subsidiary are
subject are included as part of or identified in the SEC Reports, to the extent
such agreements are required to be included or identified pursuant to the rules
and regulations of the SEC.
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(h) No
Change.
Since
the date of the latest unaudited financial statements included within the SEC
Reports, except as disclosed in Schedule
3.1(h)
hereto,
(i) there has been no event, occurrence or development that, individually
or in the aggregate, has had or that would reasonably be expected to result
in a
Material Adverse Effect; (ii) the Company has not incurred any liabilities
other than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past practice,
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with
the
SEC, and (C) other liabilities that would not, individually or in the aggregate,
have a Material Adverse Effect; (iii) the Company has not altered its
method of accounting or the changed its auditors, except as disclosed in its
SEC
Reports; (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders, in their capacities
as such, or purchased, redeemed or made any agreements to purchase or redeem
any
shares of its capital stock (except for repurchases by the Company of shares
of
capital stock held by employees, officers, directors, or consultants pursuant
to
an option of the Company to repurchase such shares upon the termination of
employment or services); and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock-based plans. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company believe that
its
creditors intend to initiate involuntary bankruptcy Proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company is not Insolvent (as hereinafter defined) as of the date hereof, and
will not be Insolvent after giving effect to the transactions contemplated
hereby to occur at the applicable Closing. For purposes of this Section 3.1(h),
“Insolvent”
means
(i) the present fair saleable value of the Company’s assets is less than the
amount required to pay the Company’s total indebtedness, (ii) the Company is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured or (iii) the Company
has unreasonably small capital with which to conduct the business in which
it is
engaged as such business is now conducted and is proposed to be
conducted.
-9-
(i) Obligations
to Related Parties.
Except
as set forth in Schedule
3.1(i),
there
are no arrangements which would be required to be disclosed by Item 404 of
Regulation S-B under the Securities Act except as disclosed in the SEC Reports.
(j) Title
to Properties and Assets.
Each of
the Company and its Subsidiaries has good and valid title to all of the
properties and assets reflected as owned in the Company’s financial statements,
free and clear of all Liens, mortgages (statutory or otherwise), security
interests, pledges, claims or encumbrances except those, if any, disclosed
in
the Company’s financial statements and except as would not have a Material
Adverse Effect. Each of the Company and its Subsidiaries holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company or the
Subsidiary. Each of the Company and its Subsidiaries owns or leases all of
the
properties which, to its knowledge, are necessary to its operations as now
conducted.
(k) Intellectual
Property.
Except
as set forth in Schedule
3.1(k),
each of
the Company and its Subsidiaries owns or possesses adequate and enforceable
rights to use all Intellectual Property used or necessary for the conduct of
its
business as now being conducted, proposed to be conducted, and as described
in
the Company’s SEC Reports. To the Company’s knowledge, neither the Company nor
any Subsidiary of the Company infringes on or is in conflict with any right
of
any other person with respect to any Intellectual Property nor is there any
claim of infringement made by a third party against or involving the Company
or
any of its Subsidiaries, which infringement, conflict or claim, individually
or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect. None of the Intellectual Property used
in
the Company’s business is expected to expire or terminate within two (2) years
from the date of this Agreement, except where such expiration or termination
would not result, either individually or in the aggregate, in a Material Adverse
Effect. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual
Property. The Company has never agreed to indemnify any person for or against
any interference. infringement, misappropriation or other conflict with respect
to any Intellectual Property, except as would not have a Material Adverse
Effect. To the Company’s knowledge, none of the key employees of the Company are
obligated under any contract (including, without limitation, licenses,
covenants, or commitments of any, nature) or other agreement, or subject to
any
judgment, decree, or order of any court or administrative agency, that would
interfere with the use of his or her reasonable diligence to promote the
interests of the Company or that would conflict with the Company’s business as
presently conducted, except as would not have a Material Adverse Effect.
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(l) Compliance
with Other Instruments.
Except
as would not have a Material Adverse Effect, the Company is not in violation
or
default of any provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any
judgment, decree, order or writ. None of the Company’s Subsidiaries is in
violation or default of any provision of any material mortgage, indenture,
contract, agreement, instrument or contract to which it is party or by which
it
is bound or of any judgment, decree, order or writ.
(m) Litigation.
Except
as disclosed in Schedule
3.1(m),
there
is no Proceeding pending or, to the Company’s knowledge, currently threatened
against the Company or any Subsidiary that questions the validity of this
Agreement, or the Transaction Documents, or the right of the Company to enter
into any of such agreements or to consummate the transactions contemplated
hereby or thereby, or which might result, either individually or in the
aggregate, in any material adverse change in the assets, condition, affairs
or
prospects of the Company or any Subsidiary, financially or otherwise, or any
change in the current equity ownership of the Company or any Subsidiary, nor
is
the Company aware that there is any basis for any of the foregoing. The
foregoing includes, without limitation, actions pending or, to the Company’s
knowledge, threatened involving the prior employment of any of the employees
of
the Company or any Subsidiary, their use in connection with the business of
the
Company or any Subsidiary of any information or techniques allegedly proprietary
to any of their former employers, or their obligations under any agreements
with
prior employers. Except as disclosed in Schedule
3.1(m),
neither
the Company nor any Subsidiary is a party or subject to the provisions of any
material order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no material Proceeding by the Company or
any
Subsidiary currently pending or which the Company or any Subsidiary intends
to
initiate.
(n) Labor
Matters.
The
Company and its Subsidiaries are in compliance in all respects with all federal,
state, local and foreign laws and regulations respecting labor, employment
and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(o) Key
Employees.
Neither
the Company nor any of its Subsidiaries has collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company’s knowledge, threatened with respect to the Company or any
Subsidiary. Except as disclosed on Schedule
3.1(o),
neither
the Company nor any of its Subsidiaries is a party to or bound by any currently
effective employment contract, consulting agreement, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement.
(p) Registration
Rights and Voting Rights.
Except
as required pursuant Article
VI
of this
Agreement and as disclosed in Schedule
3.1(p),
the
Company is presently not under any obligation, and has not granted any rights,
to register any of the Company’s presently outstanding securities or any of its
securities that may hereafter be issued. To the Company’s knowledge, except as
disclosed in Schedule
3.1(p),
no
stockholder of the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
-11-
(q) Compliance
with Laws; Permits.
Neither
the Company nor any of its Subsidiaries is in violation of any applicable
statute, rule, regulation, order or restriction of any domestic or foreign
government or any instrumentality or agency thereof, in respect of the conduct
of its business or the ownership of its properties which violation would have
a
Material Adverse Effect. Except as disclosed in Schedule
3.1(q),
no
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to
be
filed in connection with the execution and delivery of this Agreement and the
issuance of the Securities, the issuance of the Conversion Shares pursuant
to
the Certificate of Designation, or issuance of the Warrant Shares upon exercise
of the Warrants, except such as has been duly and validly obtained or filed,
or
with respect to any filings that must be made after the Closing, as will be
filed in a timely manner. Except as disclosed in Schedule
3.1(q),
each of
the Company and is 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 (“Material
Permits”),
except where the failure to possess such permits is not, individually or in
the
aggregate, reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any written notice of
Proceedings relating to the revocation or modification of any Material
Permit.
(r) Environmental
and Safety Laws.
The
Company and its Subsidiaries (i) are in compliance in all respects with any
and
all Environmental Laws (as hereinafter defined); (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses; and (iii) are in
compliance in all respects with all terms and conditions of any such permit,
license or approval where, in each of the foregoing clauses (i), (ii) and (iii),
the failure to so comply would be reasonably expected to have, individually
or
in the aggregate, a Material Adverse Effect. The term “Environmental
Laws”
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous
Materials”)
into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(s) Offering
Valid.
Assuming the accuracy of the representations and warranties of the Investors
contained in Section
3.2
hereof,
the offer, sale and issuance of the Preferred Stock, the Warrants, and the
Warrant Shares will be exempt from the registration requirements of the
Securities Act, and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the Company nor
any agent on its behalf has solicited or will solicit any offers to sell or
has
offered to sell or will offer to sell all or any part of the Securities to
any
person or persons so as to bring the sale of such Securities by the Company
within the registration provisions of the Securities Act or any state securities
laws.
-12-
(t) Private
Placement.
Neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale
of the Securities. Neither the Company nor any of its Affiliates nor, any Person
acting on the Company’s behalf has, directly or indirectly, at any time within
the past six months, made any offer or sale of any security or solicitation
of
any offer to buy any security under circumstances that would (i) eliminate
the availability of the exemption from registration under Regulation D in
connection with the offer and sale by the Company of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant
to the Transaction Documents to be integrated with prior offerings by the
Company for purposes of any applicable law, regulation or stockholder approval
provisions, including, without limitation, under the rules and regulations
of
any Trading Market in a manner which would require any stockholder or other
approval.
(u) Insurance.
The
Company maintains insurance of the types and in the amounts it deems adequate
for its business covering all risks customarily insured against, provided
that the
Company has a general directors and officers liability insurance policy with
coverage customary for companies similarly situated to the Company.
(v) Illegal
Payments.
The
Company and its Subsidiaries have not, and to the best knowledge of the Company,
no director, officer, agent or employee of the Company or any of its
Subsidiaries has paid, caused to be paid, or agreed to pay, directly or
indirectly, in connection with the business of the Company (i) to any government
or agency thereof, any agent or any supplier or customer, any bribe, kickback
or
other similar payment; (ii) any contribution to any political party or candidate
(other than from personal funds of directors. officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law; or (iii) intentionally established or maintained any unrecorded fund or
asset or made any false entries on any books or records for any
purpose.
(w) Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income taxes)
required to be paid in connection with the sale and transfer of the Shares
to be
sold to the Purchasers hereunder will be, or will have been, fully paid or
provided for by the Company, and all laws imposing such taxes will be or will
have been complied with fully.
(x) Placement
Agent’s Fees.
The
Company is not, directly or indirectly, obligated to pay any placement agent’s
fees, financial advisory fees, or brokers’ commission (other than for persons
engaged by any Investor or its investment advisor) relating to or arising out
of
the execution, delivery or performance of the Transaction Documents or issuance
of the Securities. The Company shall pay, and hold each Investor harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any such claim for fees arising out of the issuance of the Securities
pursuant to this Agreement.
-13-
(y) Application
of Takeover Protections.
Except
as described in Schedule
3.1(y),
there
is no control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar anti-takeover
provision under
the
Company’s charter documents or the laws of its state of incorporation or
otherwise, that is or could become applicable to any of the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including, without
limitation, as a result of the Company’s issuance of the Securities and the
Investors’ ownership of the Securities.
(z) Disclosure.
All
disclosure provided by the Company to the Investors regarding the Company,
its
business and the transactions contemplated hereby, including the Schedules
to
this Agreement, furnished by or on the behalf of the Company are true and
correct in all material respects and do not contain any untrue statement of
a
material fact or omit to state any material fact necessary in order to make
the
statements made therein, in the light of the circumstances under which they
were
made, not misleading. To the Company’s knowledge, except for the transactions
contemplated by this Agreement, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or
its
or their business, properties, operations or financial condition, which, under
applicable law, rule or regulation, required public disclosure or announcement
by the Company prior to the date hereof but which has not been so publicly
announced or disclosed. The Company acknowledges and agrees that no Investor
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those set forth in the Transaction
Documents.
(aa) Acknowledgment
Regarding Investors’ Purchase of Securities.
Based
upon the assumption that the transactions contemplated by this Agreement are
consummated in all material respects in conformity with the Transaction
Documents, the Company acknowledges and agrees it has been advised that each
of
the Investors is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that no Investor is acting as
a
financial advisor or fiduciary of the Company (or in any similar capacity)
with
respect to this Agreement and the transactions contemplated hereby and any
advice given by any Investor or any of their respective representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investors’ purchase
of the Securities. The Company further represents to each Investor that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
-14-
(bb) Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to
any differences.
(cc) Xxxxxxxx-Xxxxx
Act.
Except
as disclosed in SEC Reports, the Company is in compliance in all material
respects with applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 and
applicable rules and regulations promulgated by the SEC thereunder, except
where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
(dd) Tax
Status.
Except
as disclosed in Schedule
3.1(dd),
the
Company and each of its Subsidiaries (i) has made or filed all foreign, federal,
state and local income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, to the extent the final
deadlines for which were on or before the date hereof; (ii) has paid all taxes
and other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith; and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
(ee) Investment
Company.
The
Company is not now, and after the sale of the Securities under the Transaction
Documents and the application of net proceeds from the sale of the Securities
described in Section
4.6
herein
will not be, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
3.2 Representations,
Warranties and Covenants of the Investors.
Each
Investor hereby, as to itself only and for no other Investor, represents,
warrants and covenants to the Company as follows:
(a) Organization;
Authority.
Such
Investor is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate, partnership or other 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 purchase
by
such Investor of the Securities hereunder has been duly authorized by all
necessary corporate, partnership or other action on the part of such Investor.
This Agreement has been duly executed and delivered by such Investor and
constitutes the valid and binding obligation of such Investor, enforceable
against it in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditors rights
generally, and (ii) the effect of rules of law governing the availability
of specific performance and other equitable remedies.
-15-
(b) No
Public Sale or Distribution.
Such
Investor is (i) acquiring the Preferred Stock and the Warrants and
(ii) upon exercise of the Warrants will acquire the Warrant Shares issuable
upon exercise thereof, not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered under the Securities Act or under an exemption from such registration
and in compliance with applicable federal and state securities laws, and such
Investor does not have a present arrangement to effect any distribution of
the
Securities to or through any person or entity; provided,
however,
that by
making the representations herein, such Investor does not agree to hold any
of
the Securities for any minimum or other specific term and reserves the right
to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
(c) Investor
Status.
At the
time such Investor was offered the Securities, it was, and at the date hereof
it
is, an “accredited investor” as defined in Rule 501(a) under the Securities Act
or a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act.
(d) Experience
of Such Investor.
Such
Investor, 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
Investor understands that it must bear the economic risk of this investment
in
the Securities indefinitely, and is able to bear such risk and is able to afford
a complete loss of such investment.
(e) Access
to Information.
Such
Investor acknowledges that it has had access to the Disclosure Materials and
information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management
and
prospects sufficient to enable it to evaluate its investment. No information,
inquiry, or investigation conducted by or on behalf of such Investor or its
representatives or counsel shall modify, amend or affect such Investor’s right
to rely on the truth, accuracy and completeness of the Disclosure Materials
and
the Company’s representations and warranties contained in the Transaction
Documents.
(f) Restricted
Securities.
The
Investors understand that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances.
-16-
(g) Short
Sales.
No
Investor, directly or indirectly, and no Person acting on behalf of any
Investor, has engaged in any purchases or sales of any securities, including
any
derivatives, of the Company (including, without limitation, any Short Sales
involving any of the Company’s securities) since the time that such Investor was
first contacted by the Company regarding the sale of Securities as contemplated
under the Transaction Documents. “Short Sales” include, without limitation, all
“short sales” as defined in Rule 200 promulgated under Regulation SHO under the
Exchange Act and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, short sales, swaps, derivatives and similar
arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker-dealers or foreign regulated
brokers.
(h) Legends.
It is
understood that, except as provided in Section
4.1(b)
of this
Agreement, certificates evidencing such Securities may bear the legend set
forth
in Section
4.1(b).
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Investors covenant that the Securities will only be disposed of pursuant to
an
effective registration statement under, and in compliance with the requirements
of, the Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company,
or
pursuant to Rule 144(k), the Company may require the transferor to provide
to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company,
to
the effect that such transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to and agrees
to
register on the books of the Company and with its Transfer Agent, without any
such legal opinion, except to the extent that the Transfer Agent requests such
legal opinion, any transfer of Securities by an Investor to an Affiliate of
such
Investor, provided
that the
transferee certifies to the Company that it is an “accredited investor,” as
defined in Rule 501(a) under the Securities Act, and provided
that
such Affiliate does not request any removal of any existing legends on any
certificate evidencing the Securities.
(b) The
Investors agree to the imprinting, so long as is required by this Section 4.1(b),
of the
following legend on any certificate evidencing any of the Securities:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS 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
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
-17-
Certificates
evidencing Securities shall not be required to contain such legend or any other
legend (i) while a registration statement (including the Registration Statement)
covering the resale of the Securities is effective under the Securities Act;
(ii) following any sale of such Securities pursuant to Rule 144
if
the
holder provides the Company with a legal opinion reasonably acceptable to the
Company to the effect that the Securities can be sold under Rule 144; (iii)
if
the Securities
are eligible for sale under Rule 144(k); or (iv) if the
holder provides the Company with a legal opinion reasonably acceptable to the
Company to the effect that the
legend
is not required under applicable requirements of the Securities Act (including
controlling judicial interpretations and pronouncements issued by the staff
of
the SEC). Subject to receipt of the undertaking referred to above, the Company
shall use its Best Efforts to cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Transfer Agent on the
Effective Date. Following the Effective Date or at such earlier time as a legend
is no longer required for certain Securities, the Company will no later than
three
(3)
Trading Days following the delivery by an Investor to the Company or the
Transfer Agent of (i) a legended certificate representing such Securities,
and
(ii) an opinion of counsel to the extent required by Section
4.1(a),
deliver
or cause to be delivered to such Investor a certificate representing such
Securities that is free from the legend referred to above. 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.
If
within
three
(3)
Trading Days after the Company’s receipt of a legended certificate and the other
documents as specified in clauses (i) and (ii) of the paragraph immediately
above, the Company shall fail to issue and deliver to such Investor a
certificate representing such Securities that is free from the legend referred
to above, and if on or after such third Trading Day the Investor purchases
(in
an open market transaction) shares of Common Stock to deliver in satisfaction
of
a sale by the Investor of shares of Common Stock that the Investor anticipated
receiving from the Company without any restrictive legend (the “Covering
Shares”),
then
the Company shall, within three
(3)
Trading Days after the Investor’s
request,
pay cash
to the Investor in an amount equal to the excess
(if any) of the Investor’s
total
purchase price (including reasonable brokerage commissions, if any) for the
Covering Shares,
over the
product of (A) the number of Covering Shares, times (B) the closing sale
price
on the
date of delivery of such certificate.
(c) The
Company will not object to and shall permit (except as prohibited by law) an
Investor to pledge or grant a security interest in some or all of the Securities
in connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities, and if required under the terms of such
agreement, loan or arrangement, the Company will not object to and shall permit
(except as prohibited by law) such Investor to transfer pledged or secured
Securities to the pledges or secured parties. Except as required by law, such
a
pledge or transfer would not be subject to approval of the Company, no legal
opinion of the pledgee, secured party or pledgor shall be required in connection
therewith, and no notice shall be required of such pledge. Each Investor
acknowledges that the Company shall not be responsible for any pledges relating
to, or the grant of any security interest in, any of the Securities or for
any
agreement, understanding or arrangement between any Investor and its pledgee
or
secured party. At the appropriate Investor’s expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the
Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of selling
stockholders thereunder. Provided that the Company is in compliance with the
terms of this Section
4.1(c),
the
Company’s indemnification obligations pursuant to Section
6.4
shall
not extend to any Proceeding or Losses arising out of or related to this
Section
4.1(c).
-18-
4.2 Furnishing
of Information.
During
the time the Registration Statement is required to be effective, 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.
4.3 Integration.
The
Company shall not, and shall use its commercially reasonably efforts to ensure
that no Affiliate thereof shall, sell, offer for sale or solicit offers to
buy
or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investors or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.4 Reservation
of Securities.
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 be
required to fulfill its obligations to issue Conversion Shares and Warrant
Shares under the Transaction Documents. In the event that at any time the then
authorized shares of Common Stock are insufficient for the Company to satisfy
its obligations to issue such Conversion Shares and Warrant Shares under the
Transaction Documents, the Company shall promptly take such actions as may
be
required to increase the number of authorized shares.
4.5 Use
of
Proceeds.
The
Company intends to use the net proceeds from the sale of the Securities for
working capital and general corporate purposes.
-19-
ARTICLE
V
CONDITIONS
AND COVENANTS
5.1 Conditions
Precedent to the Obligations of the Investors.
The
obligation of each Investor to acquire Securities at the Closing is subject
to
the satisfaction or waiver by such Investor, at or before the Closing, of each
of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects (other than those representations and
warranties that are qualified by materiality or Material Adverse Effect
qualifiers, which shall be true and correct in all respects) as of the date
when
made and as of the Closing as though made on and as of such date;
(b) Performance.
The
Company and each other Investor shall have performed, satisfied and complied
in
all material respects with all covenants, agreements and conditions required
by
the Transaction Documents to be performed, satisfied or complied with by it
at
or prior to the Closing;
and
(c) Lock-Up
Agreements.
Lock-up
agreements, in the form attached as Exhibit
H
shall
have been put in place covering all shares of Common Stock held by Company
executive officers and directors (the “Lock-Up
Agreements”).
The
lock-up restrictions in such Lock-Up Agreements will be released only after
one
hundred eighty (180) days following the Effective Date of the Registration
Statement referred to in Section
6.1(b)
below.
(d) Payment
of Expenses.
The
Company shall pay, in accordance with Section
8.2,
the
reasonable fees, expenses and disbursements of Ropes & Xxxx LLP, as counsel
to the Investors.
5.2 Conditions
Precedent to the Obligations of the Company.
The
obligation of the Company to sell the Securities at the Closing is subject
to
the satisfaction or waiver by the Company, at or before the Closing, of each
of
the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Investors contained herein shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date; and
(b) Performance.
The
Investors shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investors at or
prior to the Closing.
5.3
Covenants
of the Company.
The
Company hereby covenants as follows:
(a) Observation
Rights.
So long
as Investors own a majority of the shares of Preferred Stock acquired hereunder,
at any time that the Investors do not choose to designate a director to serve
on
the Board of Directors of the Company pursuant to Section 2 of the Certificate
of Designation, Investors will be entitled to designate one individual as an
observer to attend all meetings of the Board of Directors and to receive all
information provided to the directors. The Company will reimburse all costs
associated with the attendance of the meetings of the Board of Directors, or
any
committees thereof, by any director or observer designated by the Investors.
-20-
(b) NASDAQ
Listing.
If
requested by the Investors, the Company will use its Best Efforts to list its
shares for trading on the NASDAQ Global Market, NASDAQ Global Select Market,
or
NASDAQ Capital Market (or any other exchange specified by the Investors) as
promptly as practicable, including using its Best Efforts to take all action
necessary to meet, and maintain compliance, with all qualifications for such
listing.
ARTICLE
VI
REGISTRATION
RIGHTS
6.1 Registration
Statement.
(a) As
soon
as practicable but in no event later than the Filing Date, the Company shall
prepare and file with the SEC a Registration Statement covering the resale
of
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except
if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance with the Securities Act and the Exchange Act)
and
shall contain (except if otherwise directed by the Investors or requested by
the
SEC) the “Plan
of Distribution”
in
substantially the form attached hereto as Exhibit E.
(b) The
Company shall use its reasonable Best Efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as practical after
the
filing thereof, but in any event prior to the Required Effectiveness Date,
and
shall use its reasonable Best Efforts to keep the Registration Statement
continuously effective under the Securities Act for all Registrable Securities
until the date that all Conversion Shares and Warrant Shares covered by such
Registration Statement have been sold or can be sold publicly under Rule 144
on
a single day (the “Effectiveness
Period”).
(c) The
Company shall notify the Investors in writing promptly (and in any event within
two (2) Trading Days) after receiving notification from the SEC that the
Registration Statement has been declared effective.
(d) Should
an
Event (as defined below) occur, then upon the occurrence of such Event, and
on
every monthly anniversary thereof for fifteen (15) months or until the
applicable Event is cured, whichever is longer, as relief for the damages
suffered therefrom by the Investors (the parties hereto agreeing that the
liquidated damages provided for in this Section
6.1(d)
constitute a reasonable estimate of the damages that may be incurred by the
Investors by reason of the Event and that such liquidated damages represent
the
exclusive monetary remedy for the Investors for damages suffered due to an
Event), the Company shall pay to each Investor an amount in cash, as liquidated
damages and not as a penalty, equal to one and a half percent (1.5%) of the
aggregate Purchase Price paid by such Investor hereunder, subject to a cap
of
twenty-two and a half percent (22.5%) (provided
that, to
the extent an Event occurs with respect to only a portion of the Registrable
Securities, the Event Payments with respect to such Event shall be reduced
proportionately to the portion of Registrable Securities with regard to which
no
Event has occurred). The payments to which an Investor shall be entitled
pursuant to this Section 6.1(d)
are
referred to herein as “Event
Payments.”
Any
Event Payments payable pursuant to the terms hereof shall apply on a pro rated
basis for any portion of a month prior to the cure of an Event. In the event
the
Company fails to make Event Payments in a timely manner, such Event Payments
shall bear interest at the rate of one percent (1.0%) per month (prorated for
partial months) until paid in full. All pro rated calculations made pursuant
to
this Section
6.1
shall be
based upon the actual number of days in such pro rated month.
For
such
purposes, each of the following shall constitute an “Event”:
-21-
(i) the
Registration Statement is not filed on or prior to the Filing Date or is not
declared effective on or prior to the Required Effectiveness Date;
(ii) the
Registration Statement is not kept continuously effective under the Securities
Act during the Effectiveness Period;
(iii) the
exercise rights of the Investors pursuant to the Warrants are
suspended.
(e) Notwithstanding
anything to the contrary contained in this Agreement, if the staff of the SEC
(the “Staff”)
or the
SEC seeks to characterize any offering pursuant to a Registration Statement
filed pursuant to this Agreement as constituting a primary offering of
securities by or on behalf of the Company, or in any other manner, such that
the
Staff or the SEC does not permit such Registration Statement to become effective
and used for resales in a continuous at the market offering pursuant to Rule
415
under the Securities Act by the Investors (or as otherwise may be acceptable
to
each Investor) without being named therein as “underwriters” (a “Resale
Registration Statement”),
and
the Company has used its Best Efforts to contest such determination, and as
a
result the Company is not able to register all of the Registrable Securities,
but is able to register at least eighty percent (80%) of the Registrable
Securities, then no Event shall be deemed to have accrued as a result of such
failure. If any reduction in the number of Registrable Securities included
in a
Registration Statement is made pursuant to this Section
6.1(e),
then an
affected Investor shall have the right, upon delivery of a written request
to
the Company signed by the Investor, to require the Company to file a Resale
Registration Statement under Rule 415 within ninety (90) days after its receipt
of such request (subject to any restrictions imposed by Rule 415 or required
by
the Staff or the SEC) for resale by such Investor in a manner reasonably
acceptable to such Investor, and the Company shall, following such request,
use
its Best Efforts to cause such registration statement to be declared and kept
effective in the same manner as otherwise contemplated in this Agreement for
registration statements hereunder, in each case for a period equal to that
specified in Section
6.1(b)
herein
(it being understood that the special demand right under this sentence may
be
exercised by a Investor multiple times and with respect to limited amounts
of
Registrable Securities to the extent limitations are required in order to permit
the resale thereof by such Investor pursuant to a Resale Registration Statement
as contemplated above); and the Company shall otherwise use its Best Efforts
to
satisfy the registration rights set forth in Sections
6.1
through
6.8
herein
as promptly as practicable.
-22-
(f) The
Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement
relating to an offering for cash for its own account, or for the account of
any
other person, under the Securities Act of any of its equity securities,
other
than any registration statement or post-effective amendment to a registration
statement (or supplement thereto) relating to the Company’s employee benefit
plans registered on Form S-8.
(g) The
Company may require each Investor to provide such information regarding such
Investor as may be required under the Securities Act to effect the registration
contemplated hereunder.
6.2 Registration
Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
shall:
(a) (i) Prepare
and file with the SEC such amendments, including post-effective amendments,
to
each Registration Statement and the Prospectus used in connection therewith
as
may be necessary to keep the Registration Statement continuously effective,
as
to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the SEC such additional Registration Statements in order
to register for resale under the Securities Act all of the Registrable
Securities during the Effectiveness Period; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably practical, and in any event within
ten (10) Trading Days (except to the extent that the Company reasonably requires
additional time to respond to accounting comments), to any comments received
from the SEC with respect to the Registration Statement or any amendment
thereto; and (iv) comply in all material respects with the provisions of
the Securities Act and the Exchange Act applicable to the Company with respect
to the disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the Investors thereof set forth in the Registration Statement
as so amended or in such Prospectus as so supplemented.
(b) Notify
the Investors as promptly as reasonably practical, and confirm such notice
in
writing no later than two (2) Trading Days thereafter, of any of the following
events: (i) any Registration Statement or any post-effective amendment is
declared effective; (ii) the SEC issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (iii) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities
for
sale in any jurisdiction, or the initiation or threat of any Proceeding for
such
purpose; or (iv) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any Registration Statement
or Prospectus or other document contains any untrue statement of a material
fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
-23-
(c) Use
its
reasonable Best Efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in
any jurisdiction, as soon as possible.
(d) If
requested by an Investor, promptly provide such Investor, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, and all exhibits to
the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with
the
SEC.
(e) Promptly
deliver to each Investor, without charge, as many copies of the Prospectus
or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Investors in connection with the offering and sale of
the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto to the extent permitted by federal and state securities
laws
and regulations.
(f) Prior
to
any public offering of Registrable Securities, use its reasonable Best Efforts
to register or qualify or cooperate with the selling Investors in connection
with the registration or qualification (or exemption from such registration
or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as
any Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective for so long as required, but
not to exceed the duration of the Effectiveness Period, and to do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided,
however,
that
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject.
(g) Cooperate
with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to
the
extent permitted by this Agreement and under law, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Investors may reasonably
request.
-24-
(h) Promptly
upon the occurrence of any event described in Section
6.1(d),
prepare a supplement or amendment, including a post-effective amendment, to
the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement
of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(i) Comply
with all rules and regulations of the SEC applicable to the Company in
connection with the registration of the Securities.
(j) The
Company shall comply with all applicable rules and regulations of the SEC under
the Securities Act and the Exchange Act, including, without limitation, Rule
172
under the Securities Act, file any final Prospectus, including any supplement
or
amendment thereof, with the SEC pursuant to Rule 424 under the Securities Act,
promptly inform the Holders in writing if, at any time during the Effectiveness
Period, the Company does not satisfy the conditions specified in Rule 172 and,
as a result thereof, the Holders are required to make available a Prospectus
in
connection with any disposition of Registrable Securities and take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder.
6.3 Registration
Expenses.
The
Company shall pay all fees and expenses incident to the performance of or
compliance with Article VI
of this
Agreement, but excluding underwriting discounts and commissions of the
Investors, including without limitation (a) all registration and filing
fees and expenses, including without limitation those related to filings with
the SEC, any Trading Market and in connection with applicable state securities
or Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities),
(c) messenger, telephone and delivery expenses incurred by the Company,
(d) fees and disbursements of counsel for the Company, (e) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, (f) reasonable
fees and expenses of one special counsel for the Investors; and (g) all
listing fees to be paid by the Company to the Trading Market.
6.4 Indemnification
(a) Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Investor, the officers, directors, partners, members, agents
and employees of each of them, each Person who controls or is alleged to control
any such Investor (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, partners,
members, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all Losses, as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus
or
any form of Company prospectus or in any amendment or supplement thereto or
in
any Company preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein
or
necessary to make the statements therein (in the case of any Prospectus or
form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, provided,
however,
that
the Company shall not be liable in any such case to the extent that such Loss
arises out of, or is based upon, an untrue statement or omission or alleged
untrue statement or omission made in such Registration Statement in reliance
upon and in conformity with information that relates to such Investor or such
Investor’s proposed method of distribution of Registrable Securities and was
provided by such Investor in writing for use in the Registration Statement,
such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
-25-
(b) Indemnification
by Investors.
Each
Investor shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising out of any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising out of or relating to any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, in each case, on the effective date thereof, but only
to
the extent that such untrue statement or omission is based solely upon
information regarding such Investor furnished to the Company by such Investor
in
writing expressly for use therein, or to the extent that such information
relates to such Investor or such Investor’s proposed method of distribution of
Registrable Securities and was provided by such Investor for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. In no event shall the liability of any selling
Investor under this Section
6
be
greater in amount than the excess of the dollar amount of the net proceeds
received by such Investor upon the sale of the Registrable Securities giving
rise to such indemnification obligation over the dollar amount of an other
damages incurred by Investor in connection with such registration.
(c) Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party
and
the payment of all reasonable fees and expenses incurred in connection with
defense thereof; provided,
that
the failure of any Indemnified Party to give such notice shall not relieve
the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that such failure shall have materially and
adversely prejudiced the Indemnifying Party. An Indemnified Party shall have
the
right to employ separate counsel in any such Proceeding and to participate
in
the defense thereof, but the fees and expenses of such counsel shall be at
the
expense of such Indemnified Party or Parties unless: (i) the Indemnifying
Party has agreed in writing to pay such fees and expenses; (ii) the
Indemnifying Party shall have failed promptly to assume the defense of such
Proceeding; or (iii) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party or that additional or
different defenses may be available to the Indemnified Party (in which case,
if
such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of separate counsel shall be at the expense
of
the Indemnifying Party). It being understood, however, that the Indemnifying
Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be
liable for the fees and expenses of more than one separate firm of attorneys
at
any time for all Indemnified Parties, which firm shall be appointed by a
majority of the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
unless such consent is unreasonably withheld or delayed. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of
such Proceeding. All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within twenty (20) Trading Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that
an
Indemnified Party is not entitled to indemnification hereunder; provided,
that
the Indemnifying Party shall reimburse all such fees and expenses to the extent
it is finally judicially determined that such Indemnified Party is not entitled
to indemnification hereunder).
-26-
(d) Contribution.
If a
claim for indemnification under Section
6.4(a)
or (b)
is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
of a
material fact, has been taken or made by, or relates to information supplied
by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section
6.4(c),
any
reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been
indemnified for such fees or expenses if the indemnification provided for in
this Section was
available to such party in accordance with its terms.
-27-
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section
6.4(d)
were
determined by pro rata allocation or by any other method of allocation that
does
not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section
6.4(d),
no
Investor shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the net proceeds actually received by such Investor
from
the sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Investor has otherwise been required to pay
by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section
11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
6.5 Dispositions.
Each
Investor agrees that it will comply with the prospectus delivery requirements
of
the Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement and shall sell its Registrable
Securities in accordance with the Plan of Distribution set forth in the
Prospectus. Each Investor further agrees that, upon receipt of a notice from
the
Company of the occurrence of any event of the kind described in Sections
6.2(b)(ii),
(iii)
or
(iv),
such
Investor will use commercially reasonable efforts to discontinue disposition
of
such Registrable Securities under the Registration Statement until such Investor
is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be used. The Company may provide appropriate
stop
orders to enforce the provisions of this paragraph.
6.6 Assignment
of Registration Rights.
The
registration rights under Article
VI
of this
Agreement shall be automatically assignable by the Investors to any transferee
of all or any potion of such Investor’s Registrable Securities if (i) the
Investor agrees in writing with the transferee or assignee to assign such rights
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment; (ii) the Company is furnished with written notice of
(a) the name and address of such transferee or assignee, and (b) the securities
with respect to which such registration rights are being transferred or
assigned; (iii) following such transfer or assignment, the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws; (iv) at or before the
time
the Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing to be bound by all of
the
provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of this Agreement.
6.7 No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Investors in such
capacity pursuant hereto)
may
include
securities of the Company in the Registration Statement other than the
Registrable Securities. The Company will not file a registration statement
relating to the resale of Company securities for the account of any other holder
of Company securities prior to the Effective Date.
-28-
6.8 Piggy-Back
Registrations.
If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the SEC a registration statement relating
to
an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8 (each
as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Investor
not then eligible to sell all of its Registrable Securities under Rule 144(k),
written notice of such determination and if, within ten (10) days after receipt
of such notice, any such Investor shall so request in writing, the Company
shall
include in such registration statement all or any part of such Registrable
Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public
offering, the managing underwriter(s) thereof shall impose a limitation on
the
number of shares which may be included in the Registration Statement because,
in
such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. If an offering
in
connection with which an Investor is entitled to registration under this
Section
6.8
is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Preferred
Stock and Common Stock included in such underwritten offering and
shall
enter into an underwriting agreement in a form and substance reasonably
satisfactory to the Company and the underwriter or underwriters.
ARTICLE
VII
PURCHASE
RIGHTS
7.1 Subsequent
Offerings.
So long
as a majority of the shares of Preferred Stock remain outstanding, the Investors
will have the right of first refusal (the “Purchase
Rights”)
to
purchase, on the same terms as other investors, up to twenty-five percent (25%)
of any equity securities, securities convertible into equity securities, or
options or warrants therefor (“Equity
Securities”)
that
the Company proposes to offer, other than the securities excluded by
Section
7.5
hereof.
7.2 Exercise
of Rights.
(a) If
the
Company proposes to issue any Equity Securities, it shall give each Investor
written notice of its intention, describing the Equity Securities, the price
and
the terms and conditions upon which the Company proposes to issue the same.
Each
Investor shall have fifteen (15) days from the giving of such notice to elect
to
purchase its pro rata share (based on the number of shares of Preferred Stock
owned by it in relation to the number of shares of Preferred Stock owned by
all
Investors) of Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of such Equity Securities to be purchased.
-29-
(b) If
not
all of the Investors elect to purchase their share of the Equity Securities,
then the Company shall promptly notify in writing the Investors who have
elected to purchase their full share of such Equity Securities
and
shall offer such Investors (the “Purchasing
Investors”)
the
right to acquire such unsubscribed shares. The Purchasing Investors shall have
ten (10) days after receipt of such notice to notify the Company of their
election to purchase all or a portion thereof of the unsubscribed shares. If
the
Purchasing Investors have, in the aggregate, elected to purchase more than
the
number of unsubscribed shares being offered in such notice, then the
unsubscribed shares shall be allocated according to each Purchasing Investor’s
share up to the number of unsubscribed shares set forth in the notice to the
Purchasing Investors. The Purchasing Investors shall then effect the purchase
of
the Equity Securities at the closing of the issuance of Equity Securities
described in the notice delivered by the Company pursuant to Section
7.2(a).
On the
date of such closing, the Company shall deliver to the Investors the
certificates representing the Equity Securities to be purchased by the
Purchasing Investors, each certificate to be properly endorsed for transfer,
and
at such time, the Purchasing Investors shall pay the purchase price for the
Equity Securities.
7.3 Issuance
of Equity Securities to Other Persons.
If the
Investors fail to exercise in full their Purchase Rights, the Company shall
have
forty-five (45) days thereafter to sell the Equity Securities in respect of
which the Investor’s rights were not exercised, at a price and upon general
terms and conditions no more favorable to the purchasers thereof than specified
in the Company’s notice to the Investors pursuant to Section
7.2(a)
hereof.
If the Company has not sold such Equity Securities within such forty-five (45)
days, the Company shall not thereafter issue or sell any Equity Securities,
without first again complying with this Article
VII.
7.4 Transfer
of Purchase Rights.
The
Purchase Rights of each Investor under this Article
VII
may be
transferred to any Affiliate of such Investor.
7.5 Excluded
Securities.
The
Purchase Rights established by this Article
VII
shall
have no application to any of the following issuances of Equity Securities
(collectively, the “Excluded
Securities”):
(a) shares
of
Common Stock issued or issuable to employees, directors or consultants pursuant
to equity holder plans maintained by the Company and registered with the SEC
on
Form S-8;
(b) shares
of
Common Stock issued or issuable upon the exercise or conversion of currently
outstanding options, warrants, or convertible securities;
(c) shares
of
Common Stock issued or issuable on the exercise of the Warrants or conversion
of
the Preferred Stock;
(d) shares
of
Common Stock issued or issuable solely as consideration for bank financings,
equipment leases, investor relations/public relations services, business
acquisitions, mergers or strategic partnerships, and not for financing purposes.
-30-
ARTICLE
VIII
MISCELLANEOUS
8.1 Termination.
This
Agreement may be terminated by the Company or any Investor, by written notice
to
the other parties, if the Closing has not been consummated by the third Business
Day following the date of this Agreement; provided
that no
such termination will affect the right of any party to xxx for any breach by
the
other party (or parties).
8.2 Fees
and Expenses.
The
Company shall pay, reimburse and hold the Investors harmless from liability
for
the payment of all reasonable fees and expenses incurred by them in connection
with the preparation and negotiation of this Agreement and the consummation
of
the transactions contemplated hereby. The fees and expenses of the Investors
may
include, without limitation, the fees and expenses of counsel (which shall
not
exceed, without the Company’s prior written consent, the sum of $[ ]) and
accountants and out of pocket expenses of the Investors arising in connection
with the preparation, negotiation and execution of the Transaction Documents
and
the consummation of the transactions contemplated thereby (an estimate of the
fees and expenses of such counsel may be paid by check delivered or wire
transfer to such counsel at the Closing by the Investors, the amount of such
check or wire transfer being deducted from the aggregate amount to be paid
by
the Investors at the Closing for the Preferred Stock to be purchased by them
under this Agreement). The Company shall pay all Transfer Agent fees, stamp
taxes and other taxes and duties levied in connection with the sale and issuance
of the Securities.
8.3 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.
8.4 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 or email at the facsimile number or
email address specified in this Section prior
to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered
via
facsimile or email at the facsimile number or email address specified in this
Section on a day that is not a Trading Day or later than 6:30 p.m. (New York
City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
addresses, facsimile numbers and email addresses for such notices and
communications are as follows:
Notices
for the Company:
000
Xxxx
Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx
Xxxx, Xxxxxxxxxx 00000
Attention:
Xx. Xxx Xxxx, Chairman and CEO
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
with
a
copy to:
Xxxxxxxxx
Xxxxxxx, LLP
MetLife
Building
000
Xxxx
Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Telephone
No.: 000-000-0000
Facsimile
No.: 212-801-6400
Email
Address: xxxxxxxx@xxxxx.xxx
Notices
for the Investors:
Kingdon
Capital Management, LLC
000
Xxxx
00xx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxxxxxx
Telephone
No.: 000-000-0000
Email
Address: xxxxxx.xxxxxxxxxx@xxxxxxx.xxx
with
a
copy to:
Ropes
& Xxxx LLP
Xxx
Xxxxxxxxxxxxx Xxxxx
Xxxxxx,
XX 00000
Attention:
Xxxx X. Xxxxxxxx
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
8.5 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and the holders
of at least 80% of the Registrable Securities held on the date of such amendment
or, in the case of a waiver, by the party against whom enforcement of any such
waiver 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 either party to exercise any right hereunder in any manner impair
the exercise of any such right. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Investors under Article VI
may be
given by Investors holding at least a majority of the Registrable Securities
to
which such waiver or consent relates, and any such amendment shall be binding
upon the Company and all holders of Registrable Securities.
-31-
8.6 Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
8.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. Any Investor may assign its rights under this
Agreement to any Person to whom such Investor assigns or transfers any
Securities, provided (i)
the
Investor agrees in writing with the transferee or assignee to assign such rights
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment; (ii) the Company is furnished with written notice
of
(a) the name and address of such transferee or assignee, and (b) the Registrable
Securities with respect to which such rights are being transferred or assigned;
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities
Act
and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance
with
the applicable requirements of this Agreement.
8.8 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 that each Indemnified
Party is an intended third party beneficiary of Section 6.4
and (in
each case) may enforce the provisions of such Sections directly against the
parties with obligations thereunder.
8.9 Governing
Law; Venue; Waiver of Jury Trial.
ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS
OF THE STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT
TO
THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, 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
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY
THE
COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
-32-
8.10 Survival.
The
representations and warranties contained herein shall survive the
Closing.
8.11 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 email attachment, 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 email-attached
signature page were an original thereof.
8.12 Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
8.13 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall promptly issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument at no cost to the
Investor. The Company may require the execution by the holder thereof of a
customary lost certificate affidavit of that fact and a customary agreement
to
indemnify and hold harmless the Company (and Transfer Agent, if applicable)
for
any losses in connection therewith.
8.14 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Investors and the Company will
be entitled to seek specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation (other than in connection with any action for temporary
restraining order) the defense that a remedy at law would be adequate.
-33-
8.15 Adjustments
in Share Numbers and Prices.
In the
event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof and prior to the Closing, each reference in any Transaction
Document to a number of shares or a price per share shall be amended to
appropriately account for such event.
8.16 Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to this Agreement has been made by such Investor
independently of any other Investor and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company which may have been made or given by
any
other Investor or by any agent or employee of any other Investor, and no
Investor or any of its agents or employees shall have any liability to any
other
Investor (or any other person) relating to or arising from any such information,
materials, statements or opinions. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no other
Investor will be acting as agent of such Investor in connection with monitoring
its investment hereunder. Each Investor shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Investor to be joined as an additional party
in
any Proceeding for such purpose.
[SIGNATURE
PAGES TO FOLLOW]
-34-
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.
INTELLIGENTIAS, INC. | ||
|
|
|
By: | /s/ Xxxxx Xxxxxxxx | |
Name: Xxxxx Xxxxxxxx |
||
Title: President |
INVESTORS: | ||
Kingdon Capital Management, LLC,
the Investment Manager to X. Xxxxxxx Offshore Ltd. |
||
|
|
|
By: | /s/ Xxxx X. Xxxxxxx | |
Name: Xxxx X. Xxxxxxx |
||
Title: Chief Operating Officer |
By: Kingdon Capital Management, LLC,
the Investment Adviser to Kingdon Associates |
||
|
|
|
By: | /s/ Xxxx X. Xxxxxxx | |
Name: Xxxx X. Xxxxxxx |
||
Title: Chief Operating Officer |
By: Kingdon Capital Management,
LLC, the
Investment Adviser to Kingdon Family Partnership, L.P. |
||
|
|
|
By: | /s/ Xxxx X. Xxxxxxx | |
Name: Xxxx X. Xxxxxxx |
||
Title: Chief Operating Officer |
Exhibit A
Schedule
of Investors
Investor
|
Preferred
Stock
|
Market
Warrants
|
Premium
Warrants
|
Purchase
Price
|
||||
X.
Xxxxxxx Offshore Ltd.
|
8,875,000
|
4,437,500
|
3,550,000
|
7,100,000
|
||||
Kingdon
Associates
|
3,143,750
|
1,571,875
|
1,257,500
|
2,515,000
|
||||
Kingdon
Family Partnership, L.P.
|
481,250
|
240,625
|
192,500
|
385,000
|
||||
TOTAL
|
12,500,000
|
6,250,000
|
5,000,000
|
$10,000,000
|