SECURITIES EXCHANGE AND AMENDMENT AGREEMENT
EXHIBIT
10.1
This
Securities Exchange and Amendment Agreement (this “Agreement”)
is
dated as of December 31, 2007, among GigaBeam Corporation, a Delaware
corporation (the “Company”)
and
each holder identified on the signature pages hereto (each, including its
successors and assigns, a “Holder”
and
collectively the “Holders”).
WHEREAS,
each Holder is party to that certain Securities Purchase Agreement, dated
November 7, 2005 (the “Series
B Agreement”)
pursuant to which the Company issued Series B Convertible Preferred Stock (the
“Series
B Preferred Stock”)
and
common stock purchase warrants (the “Series
B Warrants”)
and/or
that certain Securities Purchase Agreement, dated August 21, 2006 (the
“Series
C Agreement”
and
together with the Series B Agreement, the “Purchase
Agreements”)
pursuant to which the Company issued Series C Convertible Preferred Stock (the
“Series
C Preferred Stock”
and
together with the Series B Preferred Stock, the “Outstanding
Preferred Stock”)
and
common stock purchase warrants (the “Series
C Warrants”
together with the Series B Warrants, the “Outstanding
Warrants”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Sections 3(a)(9) and 4(2) of the Securities Act of 1933, as amended (the
“Securities
Act”),
the
Company desires to issue and exchange with each Holder, and each Holder,
severally and not jointly, desires to exchange with the Company, all Outstanding
Preferred Stock for Preferred Stock as more fully described in this
Agreement.
WHEREAS,
subject to the terms and conditions set forth in this Agreement, the Company
and
the Holders have agreed to amend certain terms of the Purchase
Agreements;
WHEREAS,
certain triggering events have occurred and are continuing pursuant to the
Certificate of Designation to the Outstanding Preferred Stock and certain
defaults of the Purchase Agreements have occurred as of the date
hereof.
WHEREAS,
the Company has accrued liquidated damages to the Holders pursuant to the
Registration Rights Agreements entered into in connection with the registration
rights entered into in connection with the Purchase Agreements.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Holder agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms
that are not otherwise defined herein have the meanings given to such
terms in the Certificate of Designation (as defined herein), and (b) the
following terms have the meanings set forth in this Section 1.1:
“Acquiring
Person”
shall
have the meaning ascribed to such term in Section 4.7.
“Action”
shall
have the meaning ascribed to such term in Section 3.1(h).
“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. With
respect to a Holder, any investment fund or managed account that is managed
on a
discretionary basis by the same investment manager as such Holder will be deemed
to be an Affiliate of such Holder.
“Authorized
Shares Deficiency”
shall
have the meaning ascribed to such term in Section 4.10(b).
“Authorized
Share Action”
shall
have the meaning ascribed to such term in Section 4.10(b).
“Benefited
Parties”
shall
have the meaning ascribed to such term in Section 4.16.
“Business
Day”
means
any day except Saturday, Sunday, any day which shall be a federal legal holiday
in the United States or any day on which banking institutions in the State
of
New York are authorized or required by law or other governmental action to
close.
“Certificate
of Designation”
means
the Certificate of Designation to be filed prior to the Closing by the Company
with the Secretary of State of Delaware in the form of Exhibit
A.
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and, subject to Section 5.1, all
conditions precedent set forth in Section 2.3 below have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any other
class
of securities into which such securities may hereafter be reclassified or
changed into.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Company
Counsel”
means
Xxxxxxx Business Law, with offices located at 0000 Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, XX 00000.
“Conversion
Price”
shall
have the meaning ascribed to such term in the Certificate of
Designation.
“Discussion
Time”
shall
have the meaning ascribed to such term in Section 3.2(f).
“Effective
Date”
means
the date that the Registration Statement of the applicable Underlying Shares
is
filed by the Company pursuant to this Agreement is first declared effective
by
the Commission.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Exchange
Amount”
shall
mean, as to each Holder as applicable, as of the Closing, the aggregate
outstanding amount of (i) all indebtedness (principal and interest and all
other
amounts due under each respective underlying obligation, including but not
limited to dividends); (ii) all amounts due in the nature of liquidated damages
or any similar remedy or recovery; (iii) preferred stock; and (iv) warrants,
each as beneficially owned by such Holder and to be exchanged for the Preferred
Stock purchased hereunder, in each case to the extent specified below such
Holder’s name on the signature page of this Agreement and next to the heading
“Exchange Amount”.
“Exempt
Issuance”
shall
have the meaning ascribed to such term in Section 2.1(c).
“FWS”
means
Xxxxxxx Xxxxxxxxx & Xxxxx LLP with offices located at 000 Xxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
“Holder
Party”
shall
have the meaning ascribed to such term in Section 4.9.
“Indebtedness”
means
(a) any liabilities for borrowed money or amounts owed in excess of $25,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(c)
the present value of any lease payments
in excess of $25,000 due under leases required to be capitalized in accordance
with GAAP.
“Legend
Removal Date”
shall
have the meaning ascribed to such term in Section 4.1(c).
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
shall
have the meaning assigned to such term in Section 3.1(b).
“Maximum
Rate”
shall
have the meaning ascribed to such term in Section 4.16.
“NASD”
shall
have the meaning ascribed to such term in Section 4.15(x).
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Preferred
Stock”
means
the 28,000 shares of the Company’s Series D Convertible Preferred Stock issued
hereunder, in addition to such shares issued as dividends on such preferred
stock, having the rights, preferences and privileges set forth in the
Certificate of Designation, in the form of Exhibit
A
attached
hereto.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Required
Minimum”
means,
as of any date, the maximum aggregate number of shares of Common Stock then
issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon conversion in full
of
all shares of Preferred Stock, ignoring any conversion limits set forth
therein.
“Registration
Statement”
shall
mean a registration statement registering for resale the Underlying Shares
as
provided for under this Agreement.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially
the
same effect as such Rule.
“Securities”
means
the Preferred Stock, the Warrants and the Underlying Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Short
Sales”
means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).
“Subsidiary”
means
any subsidiary of the Company as identified in Section 3.1(a).
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market; provided that
if
the Company is not listed or quoted for trading on a Trading Market, “Trading
Day” shall mean “Business Day” unless the context otherwise
requires.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the
New York Stock Exchange or the OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the Certificate of Designation, the Warrants and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
“Underlying
Shares”
means
the shares of Common Stock issued and issuable upon conversion of the Preferred
Stock,
the
exercise of the Warrants
and the
issuance of Common Stock pursuant to this Agreement.
“VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b) if the
Common Stock is not then quoted for trading on a Trading Market and if prices
for the Common Stock are then reported in the “Pink Sheets” published by Pink
Sheets, LLC (or a similar organization or agency succeeding to its functions
of
reporting prices), the most recent bid price per share of the Common Stock
so
reported; or (c) in all other cases, the fair market value of a share
of
Common Stock as determined by an independent appraiser selected in good faith
by
the Holder and reasonably acceptable to the Company, the fees and expenses
of
which shall be paid by the Company.
“Warrants”
means,
collectively, the Common Stock purchase warrants delivered to the Purchasers
at
the Closing in accordance with Section 2.1(b) hereof, which Warrants shall
be
exercisable immediately and have a term of exercise until December 31, 2012,
in
the form of Exhibit
C
attached
hereto and an exercise price of $1 per Warrant Share.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II
EXCHANGE,
RESETS AND AMENDMENTS
2.1 Agreements.
(a) Exchange
of All Outstanding Preferred Stock.
On the
Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement
by
the parties hereto, the Company agrees to issue to each Holder shares of
Preferred Stock, and each Holder agrees, severally and not jointly, to accept
the shares of Preferred Stock in exchange for such Holder’s Outstanding
Preferred Stock and all accrued dividends and other amounts thereunder, as
summarized on Schedule
A
attached
hereto and incorporated herein by reference. Upon the consummation of the
exchange hereunder, all obligations of the Company under the Outstanding
Preferred Stock shall be deemed satisfied in full and the Company shall have
no
other obligations thereunder.
(b) Exchange
of All Outstanding Warrants.
On the
Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement
by
the parties hereto, the Company agrees to exchange each outstanding common
stock
purchase warrant issued in connection with the Series B and Series C Preferred
Stock of the Company (“Outstanding
Warrants”)
with
each Holder a Warrant to purchase the number of shares of Common Stock as
summarized on Schedule
A
attached
hereto and incorporated herein by reference, and each Holder agrees, severally
and not jointly, to accept such Warrants in exchange for such Holder’s
Outstanding Warrants, as summarized on Schedule
A
attached
hereto and incorporated herein by reference. Upon the consummation of the
exchange hereunder, all obligations of the Company under the Outstanding
Warrants shall be deemed satisfied in full and the Company shall have no other
obligations thereunder.
Additionally, each Holder that exercised Outstanding Warrants for cash pursuant
to that certain notice from the Company dated on or about October 1, 2007 shall
receive, for each share underlying such Outstanding Warrants exercised
pursuant thereto, 2 additional shares of Common Stock in connection with such
exercise.
(c) Waiver
of Existing Defaults.
Each
Holder hereby agrees, solely in connection with the existence of any
current
Triggering Events, to waive, forever more in respect of the Outstanding
Preferred Stock its right to enforce its rights in connection therewith.
Additionally, the Holder hereby agrees to waive any breach of any of the
outstanding
Transaction Documents that relate, directly or indirectly, to an existing
default. Notwithstanding anything herein to the contrary, this waiver is limited
only to the existing defaults and any other future
Triggering Events, including a breach of this Agreement, shall not be deemed
waived hereunder.
(d) Waiver
of Liquidated Damages.
The
payment of all accrued and unpaid liquidated damages payable pursuant to Section
2(b) of the Registration Rights Agreements entered into in connection with
the
Purchase Agreements (the “Registration
Rights Agreements”).
2.2
Deliveries.
(a) On
or
prior to the Closing Date, the Company shall deliver or cause to be delivered
to
each Holder the following:
(i)
this
Agreement duly executed by the Company;
(ii) a
legal
opinion of Company Counsel, in the form of Exhibit
B
attached
hereto;
(iii) one
or
more certificates evidencing the shares of Preferred Stock issuable to such
Holder pursuant to Section 2.1(a); and
(iv) a
certificate evidencing the Warrant issuable to such Holder pursuant to Section
2.1(b).
(b) On
the
Closing Date, each Holder shall deliver or cause to be delivered to the Company
the following:
(i) this
Agreement duly executed by such Holder; and
(ii) such
Holder’s certificate(s) representing the securities comprising the Exchange
Amount.
2.3
Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met (or waived by the Company in its sole
discretion):
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of each of the Holders contained
herein;
(ii) all
obligations, covenants and agreements of the Holders required to be performed
at
or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Holders of the items set forth in Section 2.2(b) of this
Agreement; and
(iv) other
than the Indebtedness set forth on Schedule 2.3(a)(iv) attached hereto, all
outstanding Indebtedness of the Company shall have been surrendered and paid
off
in full.
(b) The
obligations of each Holder hereunder in connection with the Closing are subject
to the following conditions being met (or waived by such Holder in its sole
discretion):
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) the
execution and delivery by 90%
of
the Holders in interest
with an
entry set forth on Schedule
A
attached
hereto (Exchange Amounts) of this Agreement and all documents and instruments
contemplated to be delivered hereunder; and
(v) there
shall have been no Material Adverse Effect with respect to the Company since
the
date hereof.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to each
Holder:
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth in the
Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006, as
filed with the Commission. The Company owns, directly or indirectly, all of
the
capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe
for
or purchase securities.
(b) Organization
and Qualification.
The
Company and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on
the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and
the consummation by it of the transactions contemplated hereby and thereby
have
been duly authorized by all necessary action on the part of the Company and
no
further action is required by the Company, its board of directors or its
stockholders in connection therewith other than in connection with the Required
Approvals. Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except
(i)
as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby do not and will not: (i) conflict with or violate any provision of
the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any
of
the properties or assets of the Company or any Subsidiary, or give to others
any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which
any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or
a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii),
such
as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings,
Consents and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
(other than the Holders) in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than (i) the
Authorized Share Action, (ii) filings required pursuant to Section 4.6, (iii)
the filing of Form D with the Commission and such filings as are required to
be
made under applicable state securities laws, (iv) filing of the registration
statement contemplated hereby and (v) filing of any of the foregoing with the
appropriate Trading Market(s) (collectively, the “Required
Approvals”).
(f) Issuance
of the Securities.
As of
the Closing Date, the Securities will be duly authorized and, when issued and
paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company or any other Person other than restrictions on transfer
provided for in the Transaction Documents and, if applicable, pledges or other
actions taken by any particular Holder with respect to such Holder’s Securities.
The Underlying Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company.
(g) Capitalization.
The
capitalization of the Company as of the date hereof, immediately prior to the
Closing, is as set forth on Schedule
3.1(g)(i),
and
the
capitalization of the Company immediately following the Closing, assuming
consummation of the transactions contemplated by this Agreement and the Purchase
Agreement, will be as set forth on Schedule
3.1(g)(ii),
each of
which schedule shall include the number of shares of Common Stock and all other
equity securities or convertible debt securities owned or to be owned
beneficially, and of record, by each security holder of the Company (other
than
security holders who hold less than 1% of the Common Stock as of the date hereof
and are not Affiliates of any party to the Exchange or the Purchase Agreement,
which security holders are denominated as a group as Other Common Stockholders),
together with the outstanding options, warrants, scrip rights to subscribe
to,
calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for,
or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares
of
Common Stock or Common Stock Equivalents. Except for the Authorized Shares
Increase Action, no further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among
any
of the Company’s stockholders.
(h) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents or the Securities or (ii) could, if there
were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.
(i) Transactions
with Affiliates and Employees.
None of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary, including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has
a
substantial interest
or is an officer, director, trustee or partner, in each case in excess of
$60,000 other than for (i) payment of salary, consulting fees and directors’
fees for services rendered in the ordinary course of business consistent with
past practices, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits granted in the ordinary course of
business, including stock option agreements under any stock option plan of
the
Company disclosed in filings with the Commission.
(j) Certain
Fees.
(i)
Except as otherwise disclosed on Schedule
3.1(j)
attached
hereto and incorporated herein, no brokerage or finder’s fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents;
and
(ii) the Holders shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(k) Private
Placement.
Assuming the accuracy of the Holders’ representations and warranties set forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Holders as contemplated
hereby.
(l) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act.
(m) Disclosure.
All
disclosure furnished by or on behalf of the Company to the Holders regarding
the
Company, its business and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, is true and correct and does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of
this
Agreement taken as a whole do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements, in light of the circumstances under which
they
were made and when made, not misleading. The Company acknowledges and agrees
that no Holder makes or has made any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in Section 3.2 hereof.
(n) No
Integrated Offering.
Assuming
the accuracy of the Holders’ representations and warranties set forth in Section
3.2, neither the Company, nor any of its Affiliates, nor any Person acting
on
its or their behalf has, directly or indirectly, made any offers or sales of
any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provision of any Trading Market
on
which any of the securities of the Company are listed or
designated.
(o) No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
(i) any of the Securities by any form of general solicitation or general
advertising, or (ii) any other securities of the Company with comparable rights
and preferences by any form of general solicitation or general advertising
within two months of the date hereof. The Company has offered such Securities
for sale only to the Holders and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.
(p) Acknowledgment
Regarding Holders’ Purchase of Securities.
The
Company acknowledges and agrees that, to the best of its knowledge, each of
the
Holders is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated thereby.
The Company further acknowledges that no Holder is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Holder or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Holders’ purchase of the Securities. The
Company further represents to each Holder that the Company’s decision to enter
into this Agreement and the other Transaction Documents has been based solely
on
the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(q) Acknowledgement
Regarding Holders’ Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(f) and 4.16 hereof), it is understood and acknowledged
by the Company (i) that none of the Holders have been asked to agree, nor has
any Holder agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that
past
or future open market or other transactions by any Holder, including Short
Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Holder, and counter-parties in
“derivative” transactions to which any such Holder is a party, directly or
indirectly, presently may have a “short” position in the Common Stock; and (iv)
that each Holder shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction.
The
Company further understands and acknowledges that (a) one or more Holders may
engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Underlying Shares deliverable with respect to
Securities are being determined and (b) such hedging activities (if any) could
reduce the value of the existing stockholders' equity interests in the Company
at and after the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.
(r) Regulation
M Compliance.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
securities of the Company, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid
to
the Company’s placement agent in connection with the placement of the
Securities.
(s) 3(a)(9)
Exchange.
The
exchange of securities comprising the Exchange Amounts and the Warrants is
being
consummated pursuant to Sections 3(a)(9) and 18(b)(4)(C) of the Securities
Act.
Accordingly, pursuant to Rule 144(d), the holding period of the Underlying
Shares shall tack back to the original issue date of the securities comprising
the Exchange Amount and the Warrants, respectively.
(t) $500,000
Principal Amount 14% Secured Debenture.
The
Company represents that Midsummer Investment, Ltd. has indicated its intent
to
the Company that it will roll the $500,000 principal
amount 14% Secured Debenture
into a
future debt financing acceptable to Midsummer.
3.2 Representations
and Warranties of the Holders.
Each
Holder hereby, for itself and for no other Holder, represents and warrants
as of
the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority.
Such
Holder is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with full right, corporate
or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder (or,
as
appropriate, is an individual with full right, power and authority to enter
into
and to consummate the transactions contemplated by the Transaction Documents
and
otherwise to carry out his obligations hereunder and thereunder).
The
execution, delivery and performance by such Holder of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Holder. Each Transaction
Document to which it is a party has been duly executed by such Holder, and
when
delivered by such Holder in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Holder, enforceable against
it
in accordance
with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
(b) Own
Account.
Such
Holder understands that the Securities are “restricted securities” and have not
been registered under the Securities Act or any applicable state securities
law
and is acquiring the Securities as principal for its own account and not with
a
view to or for distributing or reselling such Securities or any part thereof
in
violation of the Securities Act or any applicable state securities law, has
no
present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to distribute
or
regarding the distribution of such Securities in violation of the Securities
Act
or any applicable state securities law (this representation and warranty not
limiting such Holder’s right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Holder is acquiring the Securities hereunder in the
ordinary course of its business.
(c) Holder
Status.
At the
time such Holder was offered the Securities, it was, and at the date hereof
it
is, and on each date on which it converts any shares of Preferred Stock or
exercises any Warrants, it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act. Such Holder is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
(d) Experience
of Such Holder.
Such
Holder, 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
Holder is able to bear the economic risk of an investment in the Securities
and,
at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Such
Holder is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Short
Sales and Confidentiality Prior To The Date Hereof.
Other
than the transaction contemplated hereunder, such Holder has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding
with such Holder, executed any disposition, including Short Sales, in the
securities of the Company during the period commencing from the time that such
Holder first received a term sheet (written or oral) from the Company or any
other Person setting forth the material terms of the transactions contemplated
hereunder until the date hereof (“Discussion
Time”).
Notwithstanding the foregoing, in the case of a Holder that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions
of such Holder's assets and the portfolio managers have no direct knowledge
of
the investment decisions made by the portfolio managers managing other portions
of such Holder's assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that
made
the investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement, such Holder has maintained
the confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this
transaction).
(g) No
Commission or Other Recommendation for Solicitation of Exchange.
The
Holder has not received any commission or other remuneration for the
solicitation of any of the participants in, or recommendation with respect
to,
the share exchange contemplated by this Agreement.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company
or
to an Affiliate of a Holder or in connection with a pledge as contemplated
in
Section 4.1(b), the Company may require the transferor thereof to provide to
the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing
to
be bound by the terms of this Agreement and shall have the rights of a Holder
under this Agreement. Upon a cashless exercise of the Warrants, the holdings
period for purpose of Rule 144 shall tack back to the original issue date of
such Warrants.
(b) The
Holders agree to the imprinting, so long as is required by this Section 4.1,
of
a legend on any of the Securities in the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
[EXERCISE] [CONVERSION] OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH
A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that a Holder may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Holder may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required
in
connection therewith. Further, no notice shall be required of such pledge.
At
the appropriate Holder’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, if the Securities are subject to registration, the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
covering the resale of such security is effective under the Securities Act,
or
(ii) following any sale of such Underlying Shares pursuant to Rule 144, or
(iii)
if such Underlying Shares are eligible for sale under Rule 144(k), or (iv)
if
such legend is not required under applicable requirements of the Securities
Act
(including judicial interpretations and pronouncements issued by the staff
of
the Commission). Upon a sale pursuant to a Registration Statement or pursuant
to
Rule 144, the Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly upon any such request, so long as the Holder
provides the Company’s counsel with all such information counsel reasonably and
customarily requests to provide such opinion. If all or any shares of
Preferred Stock is converted or the Warrants are exercised at a time when there
is an effective registration statement to cover the resale of the Underlying
Shares, or if such Underlying Shares may be sold (as to the Warrants, via
cashless exercise only) under Rule 144 without volume or manner restrictions
or
if such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued
by
the staff of the Commission) then such Underlying Shares shall be issued free
of
all legends. The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section 4.1(c), it will,
no
later than five Trading Days following the delivery by a Holder to the Company
or the Company’s transfer agent of a certificate representing Underlying Shares,
as applicable, issued with a restrictive legend (such fifth Trading Day, the
“Legend
Removal Date”),
deliver or cause to be delivered to such Holder a certificate representing
such
shares that is free from all restrictive and other legends; provided however
that the Company has been provided with such information as is reasonably and
customarily required to make the determination that the legend should be
removed. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. Certificates for Underlying Shares
subject to legend removal hereunder shall be transmitted by the transfer agent
of the Company to the Holders by crediting the account of the Holder’s prime
broker with the Depository Trust Company System.
(d) In
addition to such Holder’s other available remedies, the Company shall pay to a
Holder, in cash, as partial liquidated damages and not as a penalty, for each
$5,000 of Underlying Shares (based on the VWAP of the Common Stock on the date
such Securities are submitted to the Company’s transfer agent) delivered for
removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading
Day for each Trading Day after the fourth Trading Day following the Legend
Removal Date until such certificate is delivered without a legend; provided
however that if the Company is not listed or quoted on a Trading Market, no
such
payment shall be required. Nothing herein shall limit such Holder’s right to
pursue actual damages for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, and such
Holder shall have the right to pursue all remedies available to it at law or
in
equity including, without limitation, a decree of specific performance and/or
injunctive relief.
(e)
Each
Holder, severally and not jointly with the other Holders, agrees that the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 4.1 is predicated upon the Company’s reliance that the
Holder will sell any Securities pursuant to either the registration requirements
of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a Registration Statement, they will be sold in compliance with
the
plan of distribution set forth therein.
4.2 Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities will result in
substantial dilution of the outstanding shares of Common Stock. The Company
further acknowledges that its obligations under the Transaction Documents,
including without limitation its obligation to issue the Underlying Shares
pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless
of
the effect of any such dilution or any claim the Company may have against any
Holder and regardless of the dilutive effect that such issuance may have on
the
ownership of the other stockholders of the Company.
4.3
Furnishing
of Information.
From
and after the date hereof and as long as any Holder owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Holder owns Securities, if the Company is not required to file reports pursuant
to the Exchange Act, it will prepare and furnish to the Holders and make
publicly available in accordance with Rule 144(c) such information as is
required for the Holders to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time
to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule 144,
including providing a legal opinion of counsel if required by the Transfer
Agent
to effect such transfer.
4.4
Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Holders or that would be integrated with the offer
or
sale of the Securities for purposes of the rules and regulations of any Trading
Market.
4.5
Conversion
and Exercise Procedures.
The
form of Notice of Conversion included in the Certificate of Designation and
the
form of Notice of Exercise set forth in the Warrants sets forth the totality
of
the procedures required of the Holders in order to convert the Preferred Stock
or exercise the Warrants. No additional legal opinion or other information
or
instructions shall be required of the Holders to convert their Preferred Stock
or exercise their Warrants. The Company shall honor conversions of the Preferred
Stock, exercises of the Warrants and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.6
Securities
Laws Disclosure;
Publicity.
The
Company shall, by the fourth Business Day following the date hereof, issue
a
Current Report on Form 8-K, disclosing the material terms of the transactions
contemplated hereby and including the Transaction Documents as exhibits thereto.
The Company and each Holder shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Holder shall issue any such press release or otherwise
make
any such public statement without the prior consent of the Company, with respect
to any press release of any Holder, or without the prior consent of each Holder,
with respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required
by
law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Holder, or include
the
name of any Holder in any filing with the Commission or any regulatory agency
or
Trading Market, without the prior written consent of such Holder, except (i)
as
required by federal securities law in connection with (A) any registration
statement contemplated by this Agreement and (B) the filing of final Transaction
Documents (including signature pages thereto) with the Commission and (ii)
to
the extent such disclosure is required by law or Trading Market regulations,
in
which case the Company shall provide the Holders with prior notice of such
disclosure permitted under this subclause (ii).
4.7 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or, with the consent of the
Company, any other Person, that any Holder is an “Acquiring Person” under any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter adopted by the Company, or that any Holder
could be deemed to trigger the provisions of any such plan or arrangement,
by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Holders.
4.8
Non-Public
Information.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company covenants and agrees
that
neither it nor any other Person acting on its behalf will provide any Holder
or
its agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Holder shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Holder shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.9 Indemnification
of Holders.
Subject
to the provisions of this Section 4.9, the Company will indemnify and hold
each
Holder and its directors, officers, shareholders, members, partners, employees
and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other
title), each Person who controls such Holder (within the meaning of Section
15
of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
person (each, a “Holder
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Holder Party may suffer or incur as a result of
or
relating to (a) any material breach of any of the material representations,
warranties, covenants or agreements made by the Company in this Agreement or
in
the other Transaction Documents or (b) any action instituted against a Holder,
or any of them or their respective Affiliates, by any stockholder of the Company
who is not an Affiliate of such Holder, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon
a
breach of
such
Holder’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Holder may have with any
such
stockholder or any violations by the Holder of state or federal securities
laws
or any conduct by such Holder which constitutes fraud, gross negligence, willful
misconduct or malfeasance). If any action shall be brought against any Holder
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Holder Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Holder Party. Any Holder Party shall
have
the right to employ separate counsel in any such action and participate in
the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Holder Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense
and
to employ counsel or (iii) in such action there is, in the reasonable opinion
of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Holder Party, in which case
the
Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel for each class of Holder Parties with
substantially identical interests in all pending issues. The Company will not
be
liable to any Holder Party under this Agreement (i) for any settlement by a
Holder Party effected without the Company’s prior written consent, which shall
not be unreasonably withheld or delayed; or (ii) to the extent, but only to
the
extent that a loss, claim, damage or liability is attributable to any Holder
Party’s breach of any of the representations, warranties, covenants or
agreements made by such Holder Party in this Agreement or in the other
Transaction Documents.
4.10 Reservation
and Listing of Securities.
(a) Subject
to Sections 4.10(b) and (c), 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 in full
under the Transaction Documents.
(b) Subject
to Section 4.10(c), if, on any date, the number of authorized but unissued
(and
otherwise unreserved) shares of Common Stock is less than 100% of (i) the
Required Minimum on such date, minus (ii) the number of shares of Common Stock
previously issued pursuant to the Transaction Documents (an “Authorized
Share Deficiency”)
then
the Company shall immediately take commercially reasonable efforts to provide
the Company with authorized shares of Common Stock in an amount sufficient
to
allow the Company to reserve the Required Minimum. Without limiting the
generality of the forgoing sentence, as soon as practicable after the date
of
the occurrence of an Authorized Share Deficiency, but in no event later than
forty-five (45) days after the occurrence of such Authorized Share Deficiency,
the Company shall use its best efforts to obtain stockholder approval of an
increase in the number of authorized shares of Common Stock (such action, an
“Authorized
Share Action”);
provided that the Company will not be required at any time to authorize a number
of shares of Common Stock greater than the maximum remaining number
of
shares of Common Stock that could possibly be issued after such time pursuant
to
the Transaction Documents and any other agreements binding on the Company,
including any Underlying Shares issuable upon conversion in full of all
Preferred Stock, ignoring any conversion limits set forth therein.
(c) The
Holders acknowledge that the Company does not have sufficient Common Stock
authorized as of the Closing Date to reserve the Required Minimum and meet
its
other reserve requirements. Notwithstanding Section 4.10(a) and 4.10(b) to
the
contrary, the parties agree that: (i) such failure shall not be considered
an
Authorized Share Deficiency until August 1, 2008; (ii) prior to such date,
the
Company shall use its best efforts to take an Authorized Share Action; (iii)
the
Holders, to the extent each owns any Common Stock or Preferred Stock, will
vote
in favor of the Authorized Share Action; and (iv) pending such Authorized Share
Action, the Company will reserve all unreserved Common Stock with respect to
the
Securities.
(d) The
Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing on such Trading Market as soon as possible thereafter,
(iii) provide to the Holders evidence of such listing, and (iv) maintain the
listing of such Common Stock on any date at least equal to the Required Minimum
on such date on such Trading Market or another Trading Market.
4.11 Equal
Treatment of Holders.
No
consideration shall be offered or paid to any Person to amend or consent to
a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents. For clarification purposes, this provision constitutes
a
separate right granted to each Holder by the Company and negotiated separately
by each Holder, and is intended for the Company to treat the Holders as a class
and shall not in any way be construed as the Holders acting in concert or as
a
group with respect to the purchase, disposition or voting of Securities or
otherwise.
4.12 Short
Sales and Confidentiality After The Date Hereof.
Each
Holder severally and not jointly with the other Holders covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any understanding
with
it will execute any Short Sales during the period commencing at the Discussion
Time and ending at the time that the transactions contemplated by this Agreement
are first publicly announced as described in Section 4.6. Each
Holder, severally and not jointly with the other Holders, covenants that until
such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.6, such Holder will maintain
the confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Each Holder
understands and acknowledges, severally and not jointly with any other Holder,
that the Commission currently takes the position
that coverage of short sales of shares of the Common Stock “against the box”
prior to the Effective Date of the Registration Statement with the Securities
is
a violation of Section 5 of the Securities Act, as set forth in Item 65, Section
A, of the Manual of Publicly Available Telephone Interpretations, dated July
1997, compiled by the Office of Chief Counsel, Division of Corporation Finance.
Notwithstanding
the foregoing, no Holder makes any representation, warranty or covenant hereby
that it will not engage in Short Sales in the securities of the Company after
the time that the transactions contemplated by this Agreement are first publicly
announced as described in Section 4.6. Notwithstanding
the foregoing, in the case of a Holder that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Holder’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions
of
such Holder’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement.
4.13 Form
D; Blue Sky Filings.
The
Company agrees to timely file, if necessary, a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof,
promptly upon request of any Holder. The Company shall take such action as
the
Company shall reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Holders at the Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Holder.
4.14 Director
Compensation.
Any
compensation paid to members of the Board of Directors shall be reasonable
and
commensurate with what is customary in the industry.
4.15 Registration
Rights.
(a) Piggy-Back
Registration Rights.
If, at
any time, the Company shall determine to proceed with the preparation and filing
of a registration statement, in connection with the proposed offer and sale
of
any of its securities by it or any of its security holders (other than a
registration statement on Form X-0, X-0 or other similar limited purpose form),
the Company will give written notice of its determination to the Holders. Upon
receipt of a written request from the Holders within 5 calendar days after
receipt of any such notice from the Company, the Company will, except as herein
provided, cause all Underlying Shares, to the extent requested by the Holders,
to be included in such Registration Statement, all to the extent required to
permit the resale or other disposition by the Holders of such Underlying Shares.
If any registration pursuant to this Section 4.15(a) shall be underwritten
in
whole or in part, the Company may require that the shares of Common Stock,
including the Underlying Shares, requested for inclusion pursuant to this
Section 4.15(a) (to the extent issued) be included in the underwriting on the
same terms and conditions as the securities otherwise being sold through the
underwriters. In the event that the Underlying Shares requested for inclusion
pursuant to this Section 4.15(a) together with any other shares would,
in
the good faith judgment of the managing underwriter of such public offering,
reduce the number of Underlying Shares to be offered by the Company or interfere
with the successful marketing of the securities offered by the Company, the
Company will include in such registration the number of the Holders’ Underlying
Shares which is pro rata, based on the number of securities which in the opinion
of such underwriters can be sold and on the number of securities which all
holders request be included in the registration, provided that any shares of
Common Stock proposed to be included in such Registration Statement that are
owned by directors or officers of the Company or their Affiliates shall be
excluded prior to exclusion of any Underlying Shares requested to be included
by
the Holders. The obligation of the Company under this Section 4.15(a) shall
be
unlimited as to the number of Registration Statements to which it applies.
The
Company shall not be obligated to register any Underlying Shares that the Holder
can sell pursuant to Rule 144 without volume or manner
restrictions.
(b) Registration
Procedures.
In the
case of each registration effected by the Company pursuant to Section 4.15
hereof, the Company will keep the Holder advised, in writing, as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
i. Use
its
best efforts to keep such registration effective until the earlier of (i) 24
months from its filing date and (ii) the date all Registrable Securities covered
by such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144 as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable
to
the Company’s transfer agent and the affected Holders (the “Effectiveness
Period”);
provided,
however,
that
(i) such Effectiveness Period shall be extended for a period of time equal
to
the period Holder refrains from selling any Underlying Shares included in such
registration at the request of an underwriter of securities of the Company
or at
the request of the Company or a Trading Market, and (ii) in the case of any
registration of securities on Form S-3 or comparable successor form which are
intended to be offered on a continuous or delayed basis, such Effectiveness
Period shall be extended, if necessary, to keep the Registration Statement
effective until all securities are sold, provided that applicable rules and
regulations under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (x) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (y) reflects facts or events representing a material or fundamental
change in the information set forth in the Registration Statement, the
incorporation by reference of information required to be included in (x) and
(y)
hereof to be contained in periodic reports filed pursuant to Section 13 or
15(d)
of the Exchange Act in the Registration Statement;
ii. Prepare
and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to a disposition of all securities
covered by such Registration Statement;
iii. Make
available to each Holder and its designated legal counsel (i) promptly after
the
same is prepared and filed with the Commission, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto, and (ii) such number of copies of
a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, and such other documents as each Holder may reasonably
request in order to facilitate the resale of the Underlying Shares owned by
such
Holder;
iv. Notify
each Holder at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result
of
which the prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or incomplete in light of the circumstances then existing, and
at
the request of such Holder, prepare and furnish to it a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to such Holder, such prospectus shall not
include 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 not
misleading or incomplete in light of the circumstances then
existing;
v. Use
its
best efforts to prevent the issuance of any stop order or other suspension
of
effectiveness of a Registration Statement, and, if such an order is issued,
to
obtain the withdrawal of such order at the earliest possible moment and to
notify each Holder (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof;
vi. Use
best
efforts to cause all the Underlying Shares to be listed or included for
quotation on a Trading Market on which the Common Stock is then listed, traded
or included for quotation;
vii. Provide
a
transfer agent and registrar for all such Underlying Shares and CUSIP number
for
all such Underlying Shares, in each case not later than the effective date
of
such registration;
viii. Furnish
to each Holder or its counsel a copy of all correspondence from or to the
Commission in connection with any such registration;
ix. Hold
in
confidence and not make any disclosure of information concerning each Holder
provided to the Company unless (i) disclosure of such information is necessary
to comply with federal or state securities laws or the rules and regulations
of
any applicable Trading Market, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction or (iv) such information has been made generally available to
the
public other than by disclosure in violation of this or any other agreement;
and, upon learning that disclosure of such information concerning the Holder
is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to Holder and, at its expense, undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
x. If
requested by a Holder, effect a filing with respect to the public offering
contemplated by each Registration Statement (an “Issuer
Filing”)
with
the National Association of Securities Dealers, Inc. (“NASD”)
Corporate Financing Department pursuant to NASD Rule 2710(b)(10)(A)(i) within
one Trading Day of the date that the Registration Statement is first filed
with
the Commission and pay the filing fee required by such Issuer Filing. The
Company shall use commercially reasonable efforts to pursue the Issuer Filing
until the NASD issues a letter confirming that it does not object to the terms
of the offering contemplated by the Registration Statement as described in
the
plan of distribution included in the Registration Statement (which plan of
distribution shall be in a customary form that is reasonably acceptable to
the
Holders); and
4.16 RELEASE.
THE COMPANY (FOR ITSELF AND ITS AFFILIATES) HEREBY UNCONDITIONALLY RELEASES
AND
FOREVER DISCHARGES EACH HOLDER AND ITS RESPECTIVE SUCCESSORS, ASSIGNS, AGENTS,
DIRECTORS, OFFICERS, EMPLOYEES, AFFILIATES, ACCOUNTANTS, CONSULTANTS,
CONTRACTORS, ADVISORS AND ATTORNEYS (COLLECTIVELY, THE “BENEFITED
PARTIES”)
FROM ALL CLAIMS (AS DEFINED BELOW) FROM THE BEGINNING OF TIME THROUGH THE DATE
HEREOF. AS USED IN THIS AGREEMENT, THE TERM “CLAIMS” MEANS ANY AND ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTIONS, COSTS, EXPENSES AND LIABILITIES
WHATSOEVER, KNOWN OR UNKNOWN, AT LAW OR IN EQUITY, WHICH THE COMPANY, OR ANY
OF
ITS AGENTS, EMPLOYEES OR AFFILIATES, MAY HAVE AS OF THE DATE HEREOF,
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR OTHERWISE IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS,
INCLUDING ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR
RECEIVING INTEREST IN EXCESS OF THE MAXIMUM RATE ON INTEREST
CHARGEABLE
UNDER APPLICABLE LAW AND ANY LOSS, COST OR DAMAGE, OF ANY KIND OR CHARACTER,
ARISING OUT OF OR IN ANY WAY CONNECTED WITH OR IN ANY WAY RESULTING FROM THE
ACTIONS OR OMISSIONS OF THE BENEFITED PARTIES, INCLUDING ANY BREACH OF FIDUCIARY
DUTY, BREACH OF ANY DUTY OF GOOD FAITH OR FAIR DEALING, UNDUE INFLUENCE, DURESS,
ECONOMIC COERCION, CONFLICT OF INTEREST, NEGLIGENCE, BAD FAITH, MALPRACTICE,
VIOLATIONS OF THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT,
INTENTIONAL OR NEGLIGENT INFLICTION OF MENTAL DISTRESS, TORTIOUS INTERFERENCE
WITH CONTRACTUAL RELATIONS, TORTIOUS INTERFERENCE WITH CORPORATE GOVERNANCE
OR
PROSPECTIVE BUSINESS ADVANTAGE, BREACH OF CONTRACT, DECEPTIVE TRADE PRACTICES,
LIBEL, SLANDER, CONSPIRACY OR ANY CLAIM FOR WRONGFULLY ACCELERATING ANY
OBLIGATIONS OR WRONGFULLY ATTEMPTING TO FORECLOSE ON ANY COLLATERAL. THE COMPANY
(FOR ITSELF AND ITS AFFILIATES) AGREES THAT NONE OF THE BENEFITED PARTIES HAS
FIDUCIARY OR SIMILAR OBLIGATIONS TO THE COMPANY OR ANY AGENTS, EMPLOYEES OR
AFFILIATES OF THE COMPANY AND THAT THEIR RELATIONSHIPS ARE STRICTLY THAT OF
CREDITOR AND DEBTOR. THIS RELEASE IS ACCEPTED BY HOLDERS PURSUANT TO THIS
AGREEMENT AND SHALL NOT BE CONSTRUED AS AN ADMISSION OF LIABILITY BY HOLDERS
OR
ANY OTHER BENEFITED PARTY.
THE
COMPANY (FOR ITSELF AND ITS AFFILIATES) ACKNOWLEDGES THAT THE FOREGOING
PROVISIONS ARE INTENDED TO, AND THE TRANSACTION DOCUMENTS CONTAIN PROVISIONS
WHICH, RELEASE HOLDERS FROM LIABILITY AND/OR INDEMNIFY AND HOLD HARMLESS HOLDERS
FOR, AMONG OTHER THINGS, THE ORDINARY NEGLIGENCE OF HOLDERS. THE COMPANY (FOR
ITSELF AND ITS AFFILIATES) AGREES THAT THE RELEASE AND/OR INDEMNITY PROVISIONS
CONTAINED IN THESE DOCUMENTS ARE CAPTIONED TO CLEARLY IDENTIFY THE RELEASE
AND/OR INDEMNITY PROVISIONS AND, THEREFORE, ARE SO CONSPICUOUS THAT THE COMPANY
AND ITS AFFILIATES HAVE FAIR NOTICE OF THE EXISTENCE AND CONTENTS OF SUCH
PROVISIONS.
ARTICLE
V
MISCELLANEOUS
5.1
Termination.
This
Agreement may be terminated by any Holder, as to such Holder’s obligations
hereunder only and without any effect whatsoever on the obligations between
the
Company and the other Holders, by written notice to the other parties, if the
Closing has not been consummated on or before December 31, 2007; provided,
however,
that
such termination will not affect the right of any party to xxx for any breach
by
the other party (or parties).
5.2
Fees
and Expenses.
At the
Closing, the Company has agreed to reimburse Midsummer Capital, LLC
(“Midsummer”)
for
its reasonable legal fees and expenses incurred in connection with the
transactions contemplated herein. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Holders.
5.3
Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.4 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading
Day
or via “.pdf” data file via e-mail at the e-mail address provided to the Company
by a Holder, (b) the next Trading Day after the date of such transmission,
if
such notice or communication is delivered on a day that is not a Trading Day
or
later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
2nd
Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
5.5 Amendments;
Waivers.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment prior to
the
Automatic Conversion Date (as defined in the Certificate of Designation), by
the
Company and all holders of Preferred Stock then outstanding, in the case of
an
amendment after the Automatic Conversion Date, by the Company and Holders
holding at least 51% in interest of the shares of Preferred Stock and Warrants
then outstanding or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of any party to exercise any right hereunder in
any
manner impair the exercise of any such right.
5.6 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
5.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Holder (provided that nothing herein shall prevent the Company
from assigning the remaining obligations after the Closing Date through merger
or comparable corporate transactions consummated in accordance with applicable
law). Any Holder may assign any or all of its rights under this Agreement to
any
Person to whom such Holder assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
“Holders”.
5.8 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.9.
5.9 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. The parties hereby waive all rights to a trial by
jury.
If either party shall commence an action or proceeding to enforce any provisions
of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
5.10 Survival.
The
representations and warranties shall survive the Closing and the delivery of
Securities for the applicable statue of limitations.
5.11 Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered
hereunder,
it being understood that both parties need not sign the same counterpart. In
the
event that any signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature
is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
5.12 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.
5.13 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) any of the other Transaction Documents, whenever any
Holder exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Holder may rescind or withdraw, in
its
sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to
its
future actions and rights.
5.14 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof (in the case of mutilation),
or
in lieu of and substitution therefor, a new certificate or instrument, but
only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction. The applicant for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.
5.15 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Holders and the Company will
be
entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the Transaction
Documents and hereby agrees to waive and not to assert in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.16 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Holder pursuant
to
any Transaction Document or a Holder enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not
occurred.
5.17 Independent
Nature of Holders’ Obligations and Rights.
The
obligations of each Holder under any Transaction Document are several and not
joint with the obligations of any other Holder, and no Holder shall be
responsible in any way for the performance or non-performance of the obligations
of any other Holder under any Transaction Document. Nothing contained herein
or
in any other Transaction Document, and no action taken by any Holder pursuant
thereto, shall be deemed to constitute the Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert or as a group
with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Holder 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 Holder to be joined as an additional party in any
proceeding for such purpose. Each Holder has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Holders and their
respective counsel have chosen to communicate with the Company through FWS.
FWS
does not represent all of the Holders but only Midsummer. The Company has
elected to provide all Holders with the same terms and Transaction Documents
for
the convenience of the Company and not because it was required or requested
to
do so by the Holders.
5.18 Liquidated
Damages.
The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
5.19 Construction.
The
parties agree that each of them and/or their respective counsel has reviewed
and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
5.20 Effectiveness
of Agreement.
This
Agreement shall not be effective unless and until all Holders shall have agreed
to the terms and conditions hereunder. Other than the indemnification provisions
included therein, the rights and obligations of the Company to the Holders
under
this Agreement shall supersede and replace the rights and obligations of the
Company to the Holders under the Purchase Agreements and the other agreements
entered into in connection therewith.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Exchange and
Amendment Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
GIGABEAM
CORPORATION
|
Address/Facsimile
Number/E-mail
Address
for Notice:
|
||
By:
|
/s/
S. Xxx Xxxxxxxx
|
GigaBeam
Corporation
|
|
Name:
S. Xxx Xxxxxxxx
|
Attention:
S. Xxx Xxxxxxxx
|
||
Title:
Chief Executive Officer
|
0000
Xxxxxxx Xxxxx Xxxxx, Xxxxx 000
|
||
Xxxxxx,
XX 00000
|
|||
Facsimile:
(000) 000-0000
|
|||
With
a copy to (which shall not constitute notice):
|
Xxxxxxx
Business Law
|
||
Xxx
Xxxxxxx, Esq.
|
Attention:
Xxx Xxxxxxx, Esq.
|
||
0000
Xxxxxx Xxxxxx, Xxxxx 000
|
|||
Xxxxxx,
XX 00000
|
|||
Facsimile:
(000) 000-0000
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR HOLDER FOLLOWS]