Nestor, Inc. Securities Purchase Agreement as of July 23, 2007
EXECUTION
COPY
▇▇▇▇▇▇,
Inc.
as
of
July
23, 2007
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1.
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2.
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FEES.
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3.
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3.1
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3.2
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4.
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4.1
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4.2
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4.3
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4.4
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4.5
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4.6
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4.7
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4.8
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4.9
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4.10
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4.11
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4.12
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4.13
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4.14
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4.15
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4.16
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4.17
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4.18
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4.19
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4.20
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4.21
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4.22
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4.23
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4.24
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5.
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-i-
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5.1
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5.2
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5.3
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5.4
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5.5
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5.6
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5.7
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5.8
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5.9
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6.
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6.1
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6.2
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6.4
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6.5
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6.6
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6.7
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6.8
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6.9
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7.
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7.1
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7.2
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7.3
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7.4
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7.5
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8.
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8.1
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8.2
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9.
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9.1
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9.2
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9.3
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9.4
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10.
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25
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-ii-
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11.
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26
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12.
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12.1
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12.2
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27
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12.3
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12.4
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12.5
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12.6
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12.7
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28
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12.8
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28
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12.9
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28
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12.10
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28
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12.11
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28
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12.12
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29
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▇▇▇▇▇▇,
Inc.
This
Securities Purchase Agreement (the “Agreement”) is
made and entered into as of July 23, 2007, by and between ▇▇▇▇▇▇, Inc., a
Delaware corporation (the “Company”), and each of the Investors
set forth on the signature page hereof (the
“Investors”).
Recitals
Whereas,
the Company has authorized the sale to the Investors of up to $6 million
aggregate purchase price of shares (the “Shares”) of the
Company’s common stock, $0.01 par value per share (the “Common
Stock”);
Whereas,
Investors desire to purchase the Shares on the terms and conditions set forth
herein; and
Whereas,
the Company desires to issue and sell the Shares to Investors on the terms
and
conditions set forth herein (the “Offering”).
Agreement
Now,
Therefore, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
Pursuant
to the terms and conditions set forth in this Agreement, on the Closing Date
(as
defined in Section 3), the Company agrees to sell to each Investor, and each
Investor hereby agrees to purchase from the Company the number of Shares of
Common Stock set forth immediately next to such Investor’s name on the signature
page hereto at a price per share of $0.5802, for an aggregate purchase price
in
an amount equal to the figure immediately next to such Investor’s name on
Exhibit A hereto (the “Purchase
Price”) and the Shares are sometimes referred to as the
“Securities”.
Each
party hereto shall be responsible for its own costs, fees and expenses with
respect to the transactions contemplated hereby. The Company shall be
responsible for all filing and similar fees related to the
Offering.
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3.1
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Subject
to the terms and conditions herein, the closing of the transactions contemplated
hereby (the “Closing”), shall take place on the date hereof, at
such time or place as the Company and Investors may mutually agree (such date
is
hereinafter referred to as the “Closing Date”). The
Closing shall occur, if at all, on or prior to July 31, 2007 (the
“Outside Closing Date”) unless the parties mutually agree in
writing to a later Closing.
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3.2
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At
the
Closing, subject to the terms and conditions hereof, the Company will deliver
to
each Investor a certificate for the Shares purchased by such Investor against
payment of the Purchase Price therefor. Payment of the Purchase Price
for the Shares purchased by each Investor shall be made by such Investor to
the
Company in federal or other funds immediately available in U.S. dollars and
shall be made by wire transfer to the Company. The certificate for
the Shares shall be registered in the name of each Investor or, if so indicated
on the signature page hereto, in the name of a nominee designed by such
Investor.
The
Company hereby represents and warrants to the Investors as of the date of this
Agreement as set forth below which disclosures are supplemented by, and subject
to the Company’s filings and other filings identifying the Company as issuer
under the Securities Exchange Act of 1934, as amended (collectively, the
“Exchange Act Filings”).
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has the
corporate power and authority to own and operate its properties and assets,
to
execute and deliver this Agreement, and all other documents to be issued in
connection with this Agreement and all other agreements referred to herein
(collectively, the “Related Agreements”), to issue and sell the
Shares, to carry out the provisions of this Agreement and the Related Agreements
and to carry on its business as presently conducted. The Company is
duly qualified and is authorized to do business and is in good standing as
a
foreign corporation in all jurisdictions in which the nature of its activities
and of its properties (both owned and leased) makes such qualification
necessary, except for those jurisdictions in which failure to do so has not,
or
could not reasonably be expected to have, individually or in the aggregate,
a
material adverse effect on the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the Company
and
its subsidiaries, taken individually and as a whole (a “Material Adverse
Effect”).
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4.2
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Except
as
disclosed in its Exchange Act Filings, the Company does not own or control
any
equity security or other interest of any other corporation, limited partnership
or other business entity.
(a) The
authorized capital stock of the Company, as of the date hereof and immediately
prior to the consummation of the Offering, consists of 50,000,000 shares of
Common Stock, par value $0.01 per share, of which 20,421,816 are issued and
outstanding and 10,000,000 shares of preferred stock, par value $1.00 per share,
of which 180,000 shares are outstanding.
(b) Except
as disclosed on Schedule 4.3, other than (i) the shares reserved for
issuance under the Company’s stock option plans; and (ii) shares which may be
issued pursuant to this Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, or arrangements or agreements of any kind
for
the purchase or acquisition from the Company of any of its
securities. Except as disclosed on Schedule 4.3, neither the offer,
issuance or sale of any of the Shares, nor the consummation of any transaction
contemplated hereby will result in a change in the price or number of any
securities of the Company outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.
(c) All
issued and outstanding shares of the Company’s Common Stock (i) have been
duly authorized and validly issued and are fully paid and nonassessable and
(ii) were issued in compliance with all applicable state and federal laws
concerning the issuance of securities.
(d) The
rights, preferences, privileges and restrictions of the shares of the Common
Stock are as stated in the Company’s Certificate of Incorporation (the
“Charter”). The Shares have been duly authorized by
the Company. When issued in compliance with the provisions of this
Agreement and the Company’s Charter, the Securities will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances;
provided, however, that the Securities may be subject to restrictions
on transfer under state and/or federal securities laws as set forth herein
or as
otherwise required by such laws at the time a transfer is proposed.
All
corporate action on the part of the Company, its officers and directors
necessary for the authorization of this Agreement and the Related Agreements,
the performance of all obligations of the Company hereunder at the Closing
and,
the authorization, sale, issuance and delivery of the Shares has been taken
or
will be taken prior to the Closing. The Agreement and the Related
Agreements, when executed and delivered and to the extent it is a party thereto,
will be valid and binding obligations of the Company enforceable in accordance
with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights, and (b) general principles of
equity that restrict the availability of equitable or legal
remedies. The sale of the Shares will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with.
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4.5
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Except
as
set forth in its Exchange Act Filings, the Company, to the best of its
knowledge, knows of no material contingent liabilities, except current
liabilities incurred in the ordinary course of business.
Except
as
contemplated by this Agreement or as disclosed in any Exchange Act
Filings:
(a) There
are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company is a
party or to its knowledge by which it is bound which may involve
(i) obligations (contingent or otherwise) of, or payments to, the Company
in excess of $50,000 (other than obligations of, or payments to, the Company
arising from purchase or sale agreements entered into in the ordinary course
of
business), or (ii) the transfer or license of any patent, copyright, trade
secret or other proprietary right to or from the Company (other than licenses
arising from the purchase or sale of “off the shelf” or other standard
products), or (iii) provisions restricting the development, manufacture or
distribution of the Company’s products or services, or (iv) indemnification
by the Company with respect to infringements of proprietary rights (other than
obligations of the Company arising from purchase or sale agreements entered
into
in the ordinary course of business).
(b) The
Company has not (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $50,000 or, in the case of indebtedness
and/or liabilities individually less than $50,000, in excess of $100,000 in
the
aggregate, (iii) made any loans or advances to any person not in excess,
individually or in the aggregate, of $100,000, other than ordinary advances
for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of
its assets or rights, other than the sale of its inventory in the ordinary
course of business.
(c) For
the purposes of subsections (a) and (b) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such
subsections.
(d) The
Company maintains disclosure controls and procedures (“Disclosure
Controls”) designed to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) is
recorded, processed, summarized, and reported, within the time periods specified
in the rules and forms of the Securities and Exchange Commission
(“SEC”).
(e) The
Company makes and keeps books, records, and accounts, that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of
the
Company’s assets. The Company maintains internal control over
financial reporting (“Financial Reporting Controls”) designed
by, or under the supervision of, the Company’s principal executive and principal
financial officers, and effected by the Company’s board of directors,
management, and other personnel, to provide reasonable assurance regarding
the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles (“GAAP”), including that:
i) transactions
are executed in accordance with management’s general or specific
authorization;
ii) unauthorized
acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements are prevented or timely
detected;
iii) transactions
are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that the Company’s receipts and expenditures are being
made only in accordance with authorizations of the Company’s management and
board of directors;
iv) transactions
are recorded as necessary to maintain accountability for assets;
and
v) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
(f) There
is no material weakness in any of the Company’s Disclosure Controls or Financial
Reporting Controls that is required to be disclosed in any of the Exchange
Act
Filings, except as so disclosed.
There
are
no obligations of the Company to officers, directors, stockholders or employees
of the Company other than (a) for payment of salary for services rendered
and for bonus payments, (b) reimbursement for reasonable expenses incurred
on behalf of the Company, (c) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors
of
the Company) and (d) obligations listed in the Company’s financial statements or
disclosed in any of its Exchange Act Filings. Except as described
above or disclosed in any Exchange Act Filings, none of the officers, directors
or, to the best of the Company’s knowledge, key employees or stockholders of the
Company or any members of their immediate families, are indebted to the Company,
individually or in the aggregate, in excess of $50,000 or have any direct or
indirect ownership interest in any firm or corporation with which the Company
is
affiliated or with which the Company has a business relationship, or any firm
or
corporation which competes with the Company, other than passive investments
in
publicly traded companies (representing less than 1% of such company) which
may
compete with the Company. Except as described above, no
officer, director or stockholder, or any member of their immediate families,
is,
directly or indirectly, interested in any material contract with the Company
and
no agreements, understandings or proposed transactions are contemplated between
the Company and any such person. Except as set forth in any Exchange
Act Filings, the Company is not a guarantor or indemnitor of any indebtedness
of
any other person, firm or corporation.
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4.8
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Since
March 31, 2007, except as disclosed in any Exchange Act Filing or in any
Schedule to this Agreement or to any of the Related Agreements, there has not
been:
(a) Any
change in the assets, liabilities, financial
condition, prospects or operations of the Company, other
than changes in the ordinary course of business, none of which individually
or
in the aggregate has had or is reasonably expected to have a Material Adverse
Effect;
(b) Any
resignation or termination of any officer, key employee or group of employees
of
the Company;
(c) Any
material change, except in the ordinary course of business, in the contingent
obligations of the Company by way of guaranty, endorsement, indemnity, warranty
or otherwise;
(d) Any
damage, destruction or loss, whether or not covered by insurance, materially
and
adversely affecting the properties, business or prospects or financial condition
of the Company;
(e) Any
waiver by the Company of a valuable right or of a material debt owed to
it;
(f) Any
direct or indirect material loans made by the Company to any stockholder,
employee, officer or director of the Company, other than advances made in the
ordinary course of business;
(g) Any
material change in any compensation arrangement or agreement with any executive
employee, officer, director or stockholder;
(h) Any
declaration or payment of any dividend or other distribution of the assets
of
the Company;
(i) Any
labor organization activity related to the Company;
(j) Any
debt, obligation or liability incurred, assumed or guaranteed by the Company,
except those for immaterial amounts and for current liabilities incurred in
the
ordinary course of business;
(k) Any
sale, assignment or transfer of any patents, trademarks, copyrights, trade
secrets or other intangible assets;
(l) Any
change in any material agreement to which the Company is a party or by which
it
is bound which may materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the
Company;
(m) Any
other event or condition of any character that, either individually or
cumulatively, has or may materially and adversely affect the business, assets,
liabilities, financial condition, prospects or operations
of the Company; or
(n) Any
arrangement or commitment by the Company to do any of the acts described in
subsection (a) through (m) above.
Except
as
disclosed in any Exchange Act Filings, the Company has good and marketable
title
to its properties and assets, and good title to its leasehold estates, in each
case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
than (a) those resulting from taxes which have not yet become delinquent,
(b) minor liens and encumbrances which do not materially detract from the
value of the property subject thereto or materially impair the operations of
the
Company, and (c) those that have otherwise arisen in the ordinary course of
business. All facilities, machinery, equipment, fixtures, vehicles
and other properties owned, leased or used by the Company are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as disclosed in any Exchange Act
Filings, the Company is in compliance with all material terms of each lease
to
which it is a party or is otherwise bound.
(a) The
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information
and
other proprietary rights and processes necessary for its business as now
conducted and to the Company’s knowledge as presently proposed to be conducted
(the “Intellectual Property”), without any known infringement
of the rights of others. Except as disclosed in any Exchange Act
Filings, there are no outstanding options, licenses or agreements of any kind
relating to the foregoing proprietary rights, nor is the Company bound by or
a
party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of “off the shelf” or standard products.
(b) Except
as disclosed in any Exchange Act Filings, the Company has not received any
communications alleging that the Company has violated any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity, nor is the Company aware
of
any basis therefor.
(c) The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior
to
their employment by the Company, except for inventions, trade secrets or
proprietary information that have been rightfully assigned to the
Company.
The
Company is not in violation or default of any term of its Charter or Bylaws,
or
of any material provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any
judgment, decree, order or writ. The execution, delivery and
performance of and compliance with this Agreement and the Related Agreements
to
which it is a party, and the issuance and sale of the Securities by the Company
each pursuant hereto, will not, with or without the passage of time or giving
of
notice, result in any such material violation, or be in conflict with or
constitute a default under any such term or provision, or result in the creation
of any mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company or the suspension, revocation, impairment, forfeiture
or nonrenewal of any permit, license, authorization or approval applicable
to
the Company, its business or operations or any of its assets or
properties.
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4.12
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Except
as
set forth in the Exchange Act Filings, there is no action, suit,
proceeding or investigation pending or, to the Company’s knowledge, currently
threatened against the Company that prevents the Company to enter into this
Agreement or the Related Agreements, or to consummate the transactions
contemplated hereby or thereby, or which might have or
result, in a Material Adverse Effect, or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis
for
any of the foregoing. The Company is not a party or subject to the provisions
of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. Except as set forth in the Exchange Act
Filings, there is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
The
Company has timely filed all tax returns (federal, state and local) required
to
be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and to the Company’s knowledge all other taxes
due and payable by the Company on or before the Closing, have been paid or
will
be paid prior to the time they become delinquent. The
Company has not been advised (a) that any of its returns, federal, state or
other, have been or are being audited as of the date hereof, or (b) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes. Except as set forth on Schedule 4.13, the Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided
for.
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4.14
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The
Company has no collective bargaining agreements with any of its
employees. There is no labor union organizing activity pending or, to
the Company’s knowledge, threatened with respect to the
Company. Except as disclosed in the Exchange Act Filings,
the Company is not a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employee compensation plan or
agreement. To the Company’s knowledge, no employee of the Company,
nor any consultant with whom the Company has contracted, is in violation of
any
term of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or
to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company’s knowledge the continued employment by the
Company of its present employees, and the performance of the Company’s contracts
with its independent contractors, will not result in any such
violation. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of
any nature) or other agreement, or subject to any judgment, decree or order
of
any court or administrative agency, that would interfere with their duties
to
the Company. The Company has not received any notice alleging that
any such violation has occurred. Except for employees who have a
current effective employment agreement with the Company, no employee of the
Company has been granted the right to continued employment by the Company or
to
any material compensation following termination of employment with the
Company. The Company is not aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with the
Company.
Except
as
disclosed in Exchange Act Filings, the Company is presently not under any
obligation, and has not granted any rights, to register any of the Company’s
presently outstanding securities or any of its securities that may hereafter
be
issued. To the Company’s knowledge, no stockholder of the Company has
entered into any agreement with respect to the voting of equity securities
of
the Company.
To
its
knowledge, the Company is not in violation in any material respect of any
applicable statute, rule, regulation, order or restriction of any domestic
or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation
would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental
orders, permissions, consents, approvals or authorizations are required to
be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement and the issuance
of
any of the Securities, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing,
as
will be filed in a timely manner. The Company has all material
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which would
materially and adversely affect the business, properties, prospects or financial
condition of the Company.
The
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, except for any
violations that, individually or in the aggregate, have not had and would not
reasonably be expected materially and adversely affect the business, properties,
prospects or financial condition of the Company, and to its knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation. No Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by the Company
or, to the Company’s knowledge, by any other person or entity on any property
owned, leased or used by the Company, except for any use, storage or disposal
that, individually or in the aggregate, have not had and would not reasonably
be
expected materially and adversely affect the business, properties, prospects
or
financial condition of the Company. For the purposes of the preceding
sentence, “Hazardous Materials” shall mean (a) materials
which are listed or otherwise defined as “hazardous” or
“toxic” under any applicable local, state, federal
and/or
foreign laws and regulations that govern the existence and/or remedy of
contamination on property, the protection of the environment from contamination,
the control of hazardous wastes, or other activities involving hazardous
substances, including building materials, or (b) any petroleum products or
nuclear materials.
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4.18
|
Assuming
the accuracy of the representations and warranties of the Investors contained
in
this Agreement, the offer, sale and issuance of the Securities will be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”), and will have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws.
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4.19
|
All
disclosure concerning the Company contained in this Agreement, including the
Schedules to this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
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4.20
|
The
Company has general commercial, product liability, fire and casualty insurance
policies with coverage customary for companies similarly situated to the Company
in the same or similar business.
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4.21
|
The
Company has filed all proxy statements, reports and other documents required
to
be filed by it under the Exchange Act (the “SEC
Reports”). Each SEC Report was, at the time of its filing,
in substantial compliance with the requirements of its respective form and
none
of the SEC Reports, nor the financial statements (and the notes thereto)
included in the SEC Reports, as of their respective filing dates, contained
any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of
the circumstances under which they were made, not misleading.
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4.22
|
The
outstanding shares of the Company’s Common Stock are listed for quotation on The
Nasdaq Capital Market (“Nasdaq”) under the trading symbol
“NEST”. The Company has taken no action designed
to,
or likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or delisting the Common Stock from Nasdaq, nor,
except as disclosed in the Exchange Act Filings, has the Company received any
notification that the SEC or the Nasdaq is contemplating terminating such
registration or listing. The issuance of the Shares does not require
stockholder approval, including, without limitation, pursuant to the rules
of
the National Association of Securities Dealers, Inc. (the
“NASD”).
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
the offering of the Securities pursuant to this Agreement to be integrated
with
prior offerings by the Company for purposes of the Securities Act which would
prevent the Company from selling the Securities pursuant to Rule 506 under
the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be so
integrated with other offerings.
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4.24
|
The
Securities are restricted securities as of the date of this
Agreement. The Company will not issue any stop transfer order or
other order impeding the sale and delivery of any of the Securities at such
time
as the Securities are registered for public sale or an exemption from
registration is available, except as required by federal securities
laws.
Each
Investor, severally and not jointly, represents and warrants to the Company
as
follows:
The
Investor has all necessary power and authority under all applicable provisions
of law to execute and deliver this Agreement and the Related Agreements and
to
carry out their provisions. All corporate action on Investor’s part
required for the lawful execution and delivery of this Agreement and the Related
Agreements have been or will be effectively taken prior to the
Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Investor,
enforceable in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights,
and (b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
The
Investor understands that the Securities are being offered and sold pursuant
to
an exemption from registration contained in the Securities Act based in part
upon the Investor’s representations contained in the Agreement, including,
without limitation, that the Investor is an “accredited investor” within the
meaning of Regulation D under the Securities Act. The Investor has
received or has had full access to all the information it considers necessary
or
appropriate to make an informed investment decision with respect to the Shares
to be purchased by it under this Agreement. The Investor further has had an
opportunity to ask questions and receive answers from the Company regarding
the
Company’s business, management and financial affairs and the terms and
conditions of the Offering, and the Securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Investor or to which the Investor had
access. The Investor has, in connection with its decision to purchase
the number of Shares set forth on the signature page hereto, (i) relied only
upon the Exchange Act Filings, the representations and warranties of the Company
contained in this Agreement and any other information received from the Company
pursuant to this Section 5.2; (ii) has not relied on any information or
advice furnished by or on behalf of any other person.
Investor
has substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company
and
has the capacity to protect its own interests. Investor must bear the
economic risk of this investment until the Securities are sold pursuant to
(i)
an effective Registration Statement under the Securities Act, or (ii) an
exemption from registration. At no time was the Investor presented
with or solicited by any publicly issued or circulated newspaper, mail, radio,
television or, to the Investor’s knowledge, any other form of general
advertising or solicitation in connection with the offer, sale and purchase
of
the Securities.
Investor
is acquiring the Shares for Investor’s own account for investment only, and not
as a nominee or agent and with no present intention of distributing any Shares,
or any arrangement or understanding with any other person regarding the
distribution thereof.
Investor
represents that by reason of its, or of its management’s, business and financial
experience, Investor has the capacity to evaluate the merits and risks of its
investment in the Securities and to protect its own interests in connection
with
the transactions contemplated in this Agreement and the Related
Agreements. The Investor understands that nothing in this Agreement
or any other materials presented to the Investor in connection with the purchase
and sale of Securities constitutes legal, tax, accounting or investment
advice. The Investor has consulted such legal, tax, accounting and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Securities.
Investor
represents that it is an accredited investor within the meaning of
Regulation D under the Securities Act.
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5.7
|
The
Investor acknowledges the following:
(a) The
certificate evidencing the Shares shall bear substantially the following
legend:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR, IF APPLICABLE, STATE SECURITIES
LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ▇▇▇▇▇▇,
INC.
THAT SUCH REGISTRATION IS NOT REQUIRED.”
(b)
The Company shall, immediately prior to a registration statement covering the
resale of the Securities being declared effective, deliver to its transfer
agent
an opinion letter of counsel, opining that at any time such registration
statement is effective, the transfer agent shall issue, in connection with
the
issuance of the Shares, certificates representing such Conversion Shares and
Shares without the restrictive legend above. Upon receipt of such
opinion, the Company shall cause the transfer agent to confirm, for the benefit
of the holders, that no further opinion of counsel is required in order to
issue
such shares without such restrictive legend.
(c) The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it
is
stamped or issue to such holder by electronic delivery at the applicable balance
account at DTC, if, unless otherwise required by state securities laws, (i)
the
sale of such Security is registered under the Securities Act (including
registration pursuant to Rule 416 thereunder); (ii) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect
that
a public sale or transfer of such Security may be made without registration
under the Securities Act; or (iii) such holder provides the Company with
reasonable assurances that such Security can be sold under Rule 144(k) or has
been, or is to be otherwise, sold under Rule 144. In the event the
above legend is removed from any Security and thereafter the effectiveness
of a
registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance written notice to such Investor
the Company may require that the above legend be placed on any such Security
that cannot then be sold pursuant to an effective registration statement or
under Rule 144 and such Investor shall cooperate in the replacement of such
legend. Such legend shall thereafter be removed when such Security
may again be sold pursuant to an effective registration statement or under
Rule
144.
(d) The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at Depository Trust Company, registered in the
name
of each Investor or its respective nominee(s), for the Shares issued at the
Closing in a form reasonably acceptable to the Investors (the “Irrevocable
Transfer Agent Instructions”). The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to
in this Section 5.7(d), will be given by the Company to its transfer agent,
and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this
Agreement.
The
Company confirms that neither it nor any other person acting on its behalf
has
provided any of the Investors or their respective agents or counsel with any
information that constitutes or might constitute material, nonpublic information
other than the materials terms of the transactions contemplated by this
Agreement. The Company agrees to timely file a Current Report on Form
8-K in compliance with its obligations under the Exchange Act, describing the
material terms of the transactions contemplated by this
Agreement. The Company agrees that, after the filing of such Form
8-K, none of the Company’s communications to any Investor will include material,
nonpublic information, unless otherwise agreed by the Company and such Investor
in accordance with law.
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5.9
|
Other
than the transaction contemplated hereunder, the Investor has not directly
or
indirectly, nor has any person acting on behalf of or pursuant to any
understanding with such Investor, executed any disposition, including Short
Sales (but not including the location and/or reservation of borrowable shares
of
Common Stock), in the securities of the Company during the period commencing
from the time that such Investor first received a term sheet 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 an
Investor that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Investor’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Investor’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 Investor has maintained the
confidentiality of all disclosures made to it in connection with the transaction
contemplated hereby (including the existence and terms of the transaction
contemplated hereby).
The
Company covenants and agrees with each Investor as follows:
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|
6.1
|
The
Company shall maintain the listing of the Shares (subject to official notice
of
issuance, if applicable) on Nasdaq so long as any other shares of Common Stock
shall be so listed or traded and will comply in all material respects with
the
Company’s reporting, filing and other obligations under the bylaws or rules of
the NASD and Nasdaq, as applicable.
The
Company shall notify the SEC, NASD and applicable state authorities, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may
be
required and permitted by applicable law, rule and regulation, for the legal
and
valid issuance of the Securities to the Investors.
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|
6.3
|
The
Company agrees that it will use the proceeds of the sale of the Shares for
general working capital.
The
Company agrees to reissue certificates representing the Securities without
the
legends set forth in Section 5.7 above at such time as (a) the holder thereof
is
permitted to dispose of such Securities pursuant to Rule 144(k) under the
Securities Act, or (b) upon resale subject to an effective Registration
Statement after such Securities are registered under the Securities
Act. The Company agrees to cooperate with an Investor in connection
with all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal
opinions necessary to allow such resales provided the Company and its counsel
receive reasonably requested representations from the selling Investor and
broker, if any.
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6.5
|
On
the
Closing Date, the Company will deliver to each Investor an opinion from the
Company’s legal counsel substantially in the form set forth in
Exhibit B hereto.
The
Company acknowledges and agrees that the Securities may be pledged by any
Investor in connection with a bona fide margin agreement or other loan
or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall
be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document. The Company shall execute and deliver such documentation as a
pledgee of the Securities may reasonably request in connection with a pledge
of
the Securities to such pledgee by an Investor, provided that any expenses
incurred by the Company in connection with any such request shall be the
exclusive responsibility of the Investor making such request.
Nothing
in this Agreement shall be deemed a restriction on any Investor’s right or
ability to transfer the Securities in a private placement to an accredited
investor in a manner consistent with federal and state securities
laws. The Company will take such actions as are reasonably necessary
to assist any investor in any such private placement.
The
Company shall not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of the
Securities being offered or sold hereunder under the Securities Act or cause
this offering of the Securities to be integrated with any other offering of
securities by the Company for purposes of any stockholder approval provision
applicable to the Company or its securities.
The
Company shall conduct its business and the business of its Subsidiaries in
compliance with all laws, ordinances or regulations of governmental entities
applicable to such businesses, except where the failure to do so would not
have
a Material Adverse Effect.
Each
Investor, severally and not jointly, covenants and agrees with the Company
as
follows:
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|
7.1
|
The
Investor agrees that it will not disclose the existence, nature, terms,
conditions or status of the transactions contemplated by this Agreement, and
will not include in any public announcement, the name of the Company in
connection with the transactions contemplated by this Agreement, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
The
Investor shall not disclose to any other person (other than to its directors,
officers, employees, agents, advisors or representatives to the extent necessary
or advisable in connection with the investment decision to purchase Securities
hereunder) any information concerning this Agreement or the placement of
Securities under this Agreement or any nonpublic information disclosed to the
Investor by or on behalf of the Company in connection with the offer and sale
of
Shares under this Agreement, until the Company shall have made a public
announcement of such information as described in Section 5.8
above. The Investor agrees not to effect any sales in the shares of
the Company’s Common Stock while in possession of material, non-public
information regarding the Company.
The
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit offers to buy, purchase or otherwise acquire
or
take a pledge of) any of the Securities, except in compliance with the
Securities Act, applicable state and other securities laws and the respective
rules and regulations promulgated thereunder. The Investor will
deliver a prospectus upon any resale of Shares whenever such delivery is
required by law.
The
Investor will have, on or prior to the Closing Date, furnished to the Company
a
fully completed Investor Questionnaire substantially in the form attached hereto
as Exhibit C for use in preparation of the Registration Statement,
and all of the information contained therein will be true and correct in all
material respects as of such date and as of the Closing Date.
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|
7.5
|
Neither
the Investor nor any of the Investor’s affiliates acting on such Investor’s
behalf or pursuant to any understanding with such Investor will execute any
Short Sales during the period after the Discussion Time and ending at the time
that the transactions contemplated by this Agreement are first publicly
announced as described in Section 5.8 above. Each Investor
understands and acknowledges, severally and not jointly with any other Investor,
that the Commission currently takes the position that entering into a short
sale
of the Common Stock “against the box” while holding unregistered shares of the
Common Stock, followed by coverage of the short sale with such shares after
the
Registration Statement has been declared effective by the Commission, is a
violation of Section 5 of the Securities Act, as set forth in Item 65,
Section 5 under 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 Investor 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 5.8 or until the Outside Closing Date if
the
Closing has not occurred by such Outside Closing
Date. Notwithstanding the foregoing, in the case of an Investor that
is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Investor’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor’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.
The
Company agrees to indemnify, hold harmless, reimburse and defend each Investor,
each of such Investor’s officers, directors, agents, affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of
any
nature, incurred by or imposed upon the Investor which results, arises out
of or
is based upon (i) any misrepresentation by Company or breach of any warranty
by
Company in this Agreement or in any exhibits or schedules attached hereto or
any
Related Agreement, or (ii) any breach or default in performance by Company
of
any covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and such Investor relating
hereto.
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|
8.2
|
The
procedures and limitations set forth in Section 9.4 shall apply to the
indemnifications set forth in Sections 8.1 above.
The
Company hereby grants the following registration rights to the
Investors. The Company shall:
(a) prepare
and file with the Commission, as soon as reasonably practicable, but in no
event
later than the date that is thirty (30) business days after the earlier of
(a)
the date the Company files its Annual Report on Form 10-K for the fiscal year
ending December 31, 2007 or (b) the last day on which the Company could timely
file such Annual Report on Form 10-K in accordance with SEC rules (such date,
the “Filing Deadline Date”), a Registration Statement on Form
S-3 (the “Registration Statement”) to enable the resale of
Shares (the “Registrable Securities”) by the Investors from
time-to-time under the Securities Act (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in
which
case such registration shall be on another appropriate form in accordance
herewith);
(b) use
its best efforts, subject to receipt of information from the Investors set
forth
in Exhibit C, to cause the Registration Statement to be declared
effective under the Securities Act as soon as practicable but in no event later
than the date (the “Effectiveness Deadline Date”) that is 60
calendar days after the Filing Deadline;
(c) during
the period from the date on which the Registration Statement is declared
effective until the earlier of (i) such time as all Investors may immediately
sell all of the Shares purchased under this Agreement under Rule 144(b) (without
giving effect to the volume limitations of Rule 144(e)) and (ii) such time
as
all Investors have sold all of the Registrable Securities that the Investors
purchased under this Agreement (such period, the “Effectiveness
Period”), the Company shall: (A) use its best efforts to prepare and
file with the SEC such amendments and supplements to the Registration Statement
as may be necessary or appropriate to keep such Registration Statement current
and continuously effective (including any amendment or supplement through
incorporation by reference of any report filed under the Exchange Act); (B)
cause the Prospectus used in connection with such Registration Statement to
be
supplemented by any required Prospectus supplement, and as so supplemented
to be
filed pursuant to Rule 424 (or any similar provisions then in force) under
the
Securities Act; and (C) use its best efforts to comply with the provisions
of
the Securities Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the Effectiveness
Period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement, as so amended, or such
Prospectus, as so supplemented;
(d) as
soon as practicable, but in any event within three business days, give notice
to
each Investor when any Prospectus, Prospectus supplement, or the Registration
Statement or any post-effective amendment to the Registration Statement has
been
filed with the SEC and, with respect to a Registration Statement or any
post-effective amendment, when the same has been declared
effective;
(e) furnish
to each Investor such number of copies of the Registration Statement,
Prospectuses (including Prospectus supplements) and preliminary versions of
the
Prospectus filed with the Commission (“Preliminary
Prospectuses”) in conformity with the requirements of the Securities
Act, and such other documents as such Investor may reasonably request, in order
to facilitate the public sale or other disposition of all or any of the Shares
by such Investor;
(f) file
documents required of the Company for normal blue sky clearance in all states
requiring blue sky clearance; provided that the Company will not be required
to
(i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for this
Agreement or (ii) take any action that would subject it to general service
of
process in suits or to taxation in any such jurisdiction where it is not then
so
subject;
(g) if
NASD Rule 2710 requires any broker-dealer to make a filing prior to executing
a
sale of Shares by an Investor, make an Issuer Filing with the NASD Corporate
Financing Department pursuant to NASD Rule 2710(b)(10)(A)(i) and respond within
five trading days to any comments received from NASD in connection therewith,
and pay the filing fee required in connection therewith;
(h) request
that the Registration Statement be declared effective by the SEC within five
(5)
days after receiving a “no comment” letter from the SEC;
(i) advise
the Investors at the earliest possible moment after the Company shall receive
notice or obtain knowledge of (i) the issuance of any stop order by the
Commission delaying or suspending the effectiveness of the Registration
Statement or (ii) suspension of the qualification (or exemption from
qualification) of any of the Shares for sale in any jurisdiction in which they
have been qualified for sale, or, in each case, the initiation of any proceeding
for that purpose; and promptly use its best efforts to prevent the issuance
of
any stop order or suspension or obtain its withdrawal at the earliest possible
moment if such stop order should be issued or suspension levied;
and
bear
all
fees and expenses (other than fees and expenses of each Investor’s legal counsel
or other advisers, and underwriting discounts, brokerage fees and commissions,
if any) incurred in connection with the performance by the Company of its
obligations under paragraphs (a) through (g) and the registration of Registrable
Securities pursuant to the Registration Statement, whether or not the
Registration Statement is declared effective.
(a) If
the Registration Statement is not filed by the Company with the SEC on or prior
to the Filing Deadline Date, then for each day following the Filing Deadline
Date, until but excluding the date the Registration Statement is filed, or
if
the Registration Statement is not declared effective by the SEC by the
Effectiveness Deadline Date, then for each day following the Effectiveness
Deadline Date, until but excluding the date the SEC declares the Registration
Statement effective (or if such Registration Statement is declared effective
the
Company thereafter fails to maintain the effectiveness of such Registration
Statement), the Company shall, for each such day, pay each Investor in cash
(“Registration Delay Payments”) as reasonable compensation and
not as a penalty, an amount equal to 0.0493% of the Purchase Price of each
Share
held by such Investor with respect to any such failure and for any such
day. Such payment shall be made no later than the fifth business day
of the calendar month next succeeding the month in which such day
occurs. Such Registration Delay Payments shall constitute the
Investors’ exclusive remedy for monetary damages at law, but not in equity, for
such events. Nothing herein shall diminish or limit any Investor’s
rights to seek equitable relief, including the remedy of specific
performance.
(b) Notwithstanding
the foregoing, no Registration Delay Payments shall be due or payable hereunder
if the Company has filed the Registration Statement with the SEC on or prior
to
the Filing Deadline Date, has received a “comment letter” from the SEC and has
responded within ten (10) days following the Company’s receipt of such comment
letter, provided that the Company has communicated the SEC’s comments to the
Investors within ten (10) days of the Company’s receipt thereof in a
professional and businesslike manner consistent with best practices before
the
Securities and Exchange Commission. The Investors shall be bound by
the provisions of this Agreement (including, without limitation, the provisions
of Section 7 hereof) with respect to any and all non-public information
communicated to them pursuant to this Section 0. Furthermore,
commencing on the date that that is one-year after the Closing Date, no
Registration Delay Payments shall be due or payable if all of an Investor’s
Registrable Securities can be immediately sold without restriction in reliance
on Rule 144(k).
(a) Each
Investor agrees that it will not effect any disposition of the Shares, or its
right to purchase Shares, that would constitute a sale within the meaning of
the
Securities Act except as contemplated in the Registration Statement referred
to
in Section 9 of this Agreement or, in accordance with Section 6.4 of this
Agreement or as otherwise permitted by law.
(b) Except
in the event that paragraph (c) below applies, the Company shall:
(1) if
it deems necessary, prepare and file from time to time with the SEC one or
more
post-effective amendments to the Registration Statement or supplements to the
related Prospectus so that such Registration Statement will not contain an
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary to make the statements therein not misleading,
and so that, as thereafter delivered to purchasers of the Registrable Securities
being sold thereunder, such Prospectus will not contain an untrue statement
of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (including any amendment or
supplement through incorporation by reference of any report filed under the
Exchange Act); and
(2) as
soon as practicable provide to each Investor copies of any documents filed
pursuant to the preceding Section 9.3(b)(i) (other than any amendment or
supplement through incorporation by reference of any report filed under the
Exchange Act).
(c) Subject
to paragraph (d) below, in the event of:
(3) any
request by the SEC or any other federal or state governmental authority during
the Effectiveness Period for amendments or supplements to the Registration
Statement or related Prospectus or for additional information;
(4) the
issuance by the SEC or any other federal or state governmental authority of
any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(5) the
receipt by the Company of any notification with respect to the suspension of
the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction in which they have been qualified for
sale or the initiation of any proceeding for such purpose; or
(6) any
event or circumstance which necessitates the making of any changes in the
Registration Statement or Prospectus so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
any
omission to state a material fact required to be stated therein or necessary
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading;
the
Company shall promptly deliver a certificate in writing to each Investor (the
“Suspension Notice”) to the effect of the foregoing and, upon
receipt of such Suspension Notice, such Investor will refrain from selling
any
Registrable Securities pursuant to the Registration Statement (a
“Suspension”) until such Investor receives from the Company
copies of a supplemented or amended Prospectus prepared and filed by the
Company, or until it is advised in writing by the Company that the current
Prospectus may be used. In the event of any Suspension, the Company
will use its best efforts to cause the use of the Prospectus so suspended to
be
resumed as soon as practicable after delivery of a Suspension Notice to the
Investor, and the Company shall as soon as practicable provide each Investor
with copies of any supplemented or amended Prospectus or, as the case may be,
advise each Investor in writing that the current Prospectus may be
used.
(d) In
addition, subject to compliance with applicable law, the Company shall use
its
best efforts to ensure that the Company’s transfer agent expeditiously effects
all sales of Registrable Securities under the Registration Statement that the
Investor may have from time to time, including the prompt removal of any
restrictive legends.
|
|
9.4
|
(a) In
the event of a registration of any Registrable Securities under the Securities
Act pursuant to this Agreement, the Company will indemnify and hold harmless
each Investor, and its officers, directors and each other person, if any, who
controls the Investor within the meaning of the Securities Act (each, a
“Selling Stockholder”), against any losses, claims, damages or
liabilities, joint or several, to which each Selling Stockholder may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Registrable Securities
were registered under the Securities Act pursuant to this Agreement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
the
Selling Stockholder, and each such person for any reasonable legal or other
expenses incurred by them in connection with investigating or defending any
such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by the Selling Stockholder or any such person in
writing specifically for use in any such document or the failure of such Selling
Stockholder to comply with its covenants and agreements contained
herein.
(b) In
the event of a registration of the Registrable Securities under the Securities
Act pursuant to this Agreement, each Investor will indemnify and hold harmless
the Company, and its officers, directors and each other person, if any, who
controls the Company within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement under
which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of
or
are based upon the omission or alleged omission to state therein a material
fact
required to be stated therein or necessary to make the statements therein not
misleading or the failure of such Selling Stockholder to comply with its
covenants and agreements contained herein, and will reimburse the Company and
each such person for any reasonable legal or other expenses incurred by them
in
connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that such Selling Stockholder will
be
liable in any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished in writing to the Company by such Selling Stockholder
specifically for use in any such document or the failure of such Selling
Stockholder to comply with its covenants and agreements contained herein;
provided, further, however, that the Selling Stockholder shall be liable under
Section 9.4(b) for only that amount of a loss, claim, damage or liability as
does not exceed the net proceeds received by such Selling Stockholder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of
any action, such indemnified party shall, if a claim in respect thereof is
to be
made against the indemnifying party hereunder, notify the indemnifying party
in
writing thereof, but the omission so to notify the indemnifying party shall
not
relieve it from any liability which it may have to such indemnified party other
than under this Section 9.4(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 9.4(c) if and
to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 9.4(c)
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof; if the indemnified party retains its own
counsel, then the indemnified party shall pay all fees, costs and expenses
of
such counsel, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified
party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by
the
indemnifying party as incurred.
(d) In
order to provide for just and equitable contribution in the event of joint
liability under the Securities Act in any case in which either (i) the Selling
Stockholder makes a claim for indemnification pursuant to this Section 9.4
but
it is judicially determined (by the entry of a final judgment or decree by
a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9.4 provides
for indemnification in such case, or (ii) contribution under the Securities
Act
may be required on the part of the Selling Stockholder in circumstances for
which indemnification is provided under this Section 9.4; then, and in each
such
case, the Company and the Selling Stockholder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the Selling Stockholder
is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the Registration Statement bears
to
the public offering price of all securities offered by such Registration
Statement, provided, however, that, in any such case, (A) the Selling
Stockholder will not be required to contribute any amount in excess of the
net
amount of proceeds received by such seller from the sale of such Registrable
Securities pursuant to such Registration Statement; and (B) no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
10 of the Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
In
any
proceeding relating to the Registration Statement filed pursuant to this Section
9, each party against whom contribution may be sought under this Section 9.4
hereby consents to the jurisdiction of any court having jurisdiction over any
other contributing party, agrees that process issuing from such court may be
served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
Each
Investor represents and warrants that no current directors and executive
officers of the Company (“Company Affiliates”) have any
interest as a member and/or manager of such Investor or is participating in
the
transactions contemplated hereby indirectly through such Investor.
The
obligations of each Investor under this Agreement are several and not joint
with
the obligations of any other Investor, and no Investor shall be responsible
in
any way for the performance of the obligations of any other Investor under
this
Agreement. The decision of each Investor to purchase the Securities
under this Agreement has been made by such Investor independently of any other
Investor and independently of any information, materials, statements or opinions
as to the business, affairs, operations, assets, properties, liabilities,
results of operations, condition (financial or otherwise) or prospects of the
Company or any of its subsidiaries that may have been made or given by any
other
Investor or by any agent or employee of any other Investor, other than with
respect to investment advisors who provide discretionary investment services
to
more than one Investor, and no Investor or any of its agents or employees shall
have any liability to any other Investor (or any other person) relating to
or
arising from any such information, materials, statements or
opinions. Nothing contained in this Agreement, and no action taken by
any Investor pursuant hereto, shall be deemed to constitute the Investors as
a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or
as a
group with respect to such obligations or the transactions contemplated by
this
Agreement. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no other Investor will be acting as agent of such Investor
in
connection with monitoring its investment hereunder. Each Investor
shall be entitled to independently protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not
be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose.
12. Miscellaneous.
|
|
12.1
|
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, without regard to principles of conflicts of
laws. Any action brought by either party against the other concerning
the transactions contemplated by this Agreement shall be brought only in the
state courts of Delaware or Rhode Island or in the federal courts located in
the
State of Delaware or State of Rhode Island. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial
by
jury. In the event that any provision of this Agreement or any other
agreement delivered in connection herewith is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform to such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.
|
|
12.2
|
The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by the Investors and the closing of the transactions
contemplated hereby to the extent provided therein. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by
the
Company hereunder solely as of the date of such certificate or
instrument.
|
|
12.3
|
This
Agreement, the exhibits and schedules hereto, the Related Agreements and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by
any
representations, warranties, covenants and agreements except as specifically
set
forth herein and therein.
|
|
12.4
|
In
case
any provision of the Agreement shall be invalid, illegal or unenforceable,
the
validity, legality and enforceability of the remaining provisions shall not
in
any way be affected or impaired thereby.
|
|
12.5
|
The
rights and obligations of each Investor under this Agreement shall be
automatically assigned by such Investor to any transferee of all or any portion
of such Investor’s Securities in any private transfer of such Securities;
provided, however, that within two business days prior to the transfer, (a)
such
Investor provides the Company notice of the transfer, including the name and
address of the transferee and the number of Securities transferred; and (b)
that
such transferee agrees in writing to be bound by the terms of this
Agreement. Upon any transfer permitted by this Section 12.5, the
Company shall be obligated to such transferee to perform all of its covenants
under this Agreement as if such transferee were the Investor.
(a) This
Agreement may be amended or modified only upon the written consent of the
Company and each Investor.
(b) The
obligations of the Company and the rights of an Investor under this Agreement
may be waived only with the written consent of such Investor.
(c) The
obligations of an Investor and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
|
|
12.7
|
It
is
agreed that no delay or omission to exercise any right, power or remedy accruing
to any party, upon any breach, default or noncompliance by another party under
this Agreement or the Related Agreements, shall impair any such right, power
or
remedy, nor shall it be construed to be a waiver of any such breach, default
or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either
under this Agreement or the Related Agreements, by law or otherwise afforded
to
any party, shall be cumulative and not alternative.
|
|
12.8
|
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b) when sent by telephonically confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be
sent to the Company at the address as set forth on the signature page hereof,
to
the Investor at the address set forth on the signature page hereto for such
Investor, with a copy in the case of the Company to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.,
at
the address of the Company or at such other address as the Company or the
Investor may designate by ten days advance written notice to the other parties
hereto.
The
titles of the sections and subsections of the Agreement are for convenience
of
reference only and are not to be considered in construing this
Agreement.
This
Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
|
|
12.11
|
The
Company represents and warrants that any agent, broker, investment banker,
person or firm acting on behalf of or under the authority of the Company that
is
or will be entitled to any broker’s or finder’s fee or any other commission
directly or indirectly in connection with the transactions contemplated herein
will be paid by the Company. The Company further agrees to indemnify
each Investor for any claims, losses or expenses incurred by it as a result
of
the representation in this Section 12.11 being untrue. Each Investor
represents and warrants that, no agent, broker, investment banker, person or
firm acting on behalf of or under the authority of such Investor is or will
be
entitled to any broker’s or finder’s fee or any other commission directly or
indirectly in connection with the transactions contemplated
herein. Each Investor further agrees to indemnify each other party
for any claims, losses or expenses incurred by such other party as a result
of
the representation in this Section 12.11 being untrue.
|
|
12.12
|
Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement to favor any party against the
other.
In
Witness Whereof, the parties hereto have executed the
Securities Purchase Agreement as of the date set forth in the
first paragraph hereof.
|
COMPANY:
|
|
|
▇▇▇▇▇▇,
INC.
|
|
|
By:
|
/s/▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
Name:
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
Title:
|
Executive
Vice President and CFO
|
|
Address:
|
▇▇▇▇▇▇,
Inc.
|
|
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
INVESTOR
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
By
executing this page in the space
provided, the undersigned hereby agrees that (a) the undersigned is a party,
for
all purposes, to the Securities Purchase Agreement dated as of July 23, 2007
by
and among ▇▇▇▇▇▇, Inc. and the persons and entities listed as signatories
thereto, and (b) upon becoming a party thereto, the undersigned will be deemed
an “Investor” thereunder and shall have the benefits of, and shall be subject to
the rights and restrictions contained in said Securities Purchase
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
▇▇▇▇▇▇
▇. ▇▇▇▇
|
||
|
Investor
Name
|
||
|
By:
|
/s/▇▇▇▇▇▇
▇. ▇▇▇▇
|
|
|
Name:
|
▇▇▇▇▇▇
▇. ▇▇▇▇
|
|
|
Title:
|
||
|
Address:
|
||
|
Number
of Shares:
|
4,739,745
|
|
|
Aggregate
Purchase Price:
|
$2,750,000
|
|
|
Tax
Identification Number:
|
||
|
Contact
Name:
|
||
|
Telephone:
|
||
|
Name
in which the Shares should be registered (if different):
|
||
|
Relationship
between Investor and the person in whose name the Shares should be
registered (if different):
|
INVESTOR
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
By
executing this page in the space
provided, the undersigned hereby agrees that (a) the undersigned is a party,
for
all purposes, to the Securities Purchase Agreement dated as of July 23, 2007
by
and among ▇▇▇▇▇▇, Inc. and the persons and entities listed as signatories
thereto, and (b) upon becoming a party thereto, the undersigned will be deemed
an “Investor” thereunder and shall have the benefits of, and shall be subject to
the rights and restrictions contained in said Securities Purchase
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Group Accredited Investors
|
||
|
Investor
Name
|
||
|
By:
|
/s/▇▇▇
▇▇▇▇
|
|
|
Name:
|
▇▇▇
▇▇▇▇
|
|
|
Title:
|
||
|
Address:
|
||
|
Number
of Shares:
|
2,500,000
|
|
|
Aggregate
Purchase Price:
|
$1,450,500
|
|
|
Tax
Identification Number:
|
||
|
Contact
Name:
|
||
|
Telephone:
|
||
|
Name
in which the Shares should be registered (if different):
|
||
|
Relationship
between Investor and the person in whose name the Shares should be
registered (if different):
|
INVESTOR
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
By
executing this page in the space
provided, the undersigned hereby agrees that (a) the undersigned is a party,
for
all purposes, to the Securities Purchase Agreement dated as of July 23, 2007
by
and among ▇▇▇▇▇▇, Inc. and the persons and entities listed as signatories
thereto, and (b) upon becoming a party thereto, the undersigned will be deemed
an “Investor” thereunder and shall have the benefits of, and shall be subject to
the rights and restrictions contained in said Securities Purchase
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
▇-▇
Holding, Inc.
|
||
|
Investor
Name
|
||
|
By:
|
/s/▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|
|
Name:
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|
|
Title:
|
||
|
Address:
|
||
|
Number
of Shares:
|
646,329
|
|
|
Aggregate
Purchase Price:
|
$375,000
|
|
|
Tax
Identification Number:
|
||
|
Contact
Name:
|
||
|
Telephone:
|
||
|
Name
in which the Shares should be registered (if different):
|
||
|
Relationship
between Investor and the person in whose name the Shares should be
registered (if different):
|
INVESTOR
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
By
executing this page in the space
provided, the undersigned hereby agrees that (a) the undersigned is a party,
for
all purposes, to the Securities Purchase Agreement dated as of July 23, 2007
by
and among ▇▇▇▇▇▇, Inc. and the persons and entities listed as signatories
thereto, and (b) upon becoming a party thereto, the undersigned will be deemed
an “Investor” thereunder and shall have the benefits of, and shall be subject to
the rights and restrictions contained in said Securities Purchase
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
Kuekenhof
Equity Fund, L.P.
|
||
|
Investor
Name
|
||
|
By:
|
/s/▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
|
|
Name:
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
|
|
Title:
|
||
|
Address:
|
||
|
Number
of Shares:
|
430,886
|
|
|
Aggregate
Purchase Price:
|
$250,000
|
|
|
Tax
Identification Number:
|
||
|
Contact
Name:
|
||
|
Telephone:
|
||
|
Name
in which the Shares should be registered (if different):
|
||
|
Relationship
between Investor and the person in whose name the Shares should be
registered (if different):
|
INVESTOR
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
By
executing this page in the space
provided, the undersigned hereby agrees that (a) the undersigned is a party,
for
all purposes, to the Securities Purchase Agreement dated as of July 23, 2007
by
and among ▇▇▇▇▇▇, Inc. and the persons and entities listed as signatories
thereto, and (b) upon becoming a party thereto, the undersigned will be deemed
an “Investor” thereunder and shall have the benefits of, and shall be subject to
the rights and restrictions contained in said Securities Purchase
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
▇.▇.
▇▇▇▇▇▇, ▇▇. NC ▇▇▇▇▇▇▇▇▇▇▇ Trustees for the
▇.
▇. ▇▇▇▇▇▇ Trust U/A 5/9/74
|
||
|
Investor
Name
|
||
|
By:
|
/s/▇.
▇. ▇▇▇▇▇▇, ▇▇. and /s/NC ▇▇▇▇▇▇▇▇▇▇▇
|
|
|
Name:
|
▇.
▇. ▇▇▇▇▇▇, ▇▇. and NC ▇▇▇▇▇▇▇▇▇▇▇
|
|
|
Title:
|
Trustees
|
|
|
Address:
|
||
|
Number
of Shares:
|
43,089
|
|
|
Aggregate
Purchase Price:
|
$25,000
|
|
|
Tax
Identification Number:
|
||
|
Contact
Name:
|
||
|
Telephone:
|
||
|
Name
in which the Shares should be registered (if different):
|
||
|
Relationship
between Investor and the person in whose name the Shares should be
registered (if different):
|
INVESTOR
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
By
executing this page in the space
provided, the undersigned hereby agrees that (a) the undersigned is a party,
for
all purposes, to the Securities Purchase Agreement dated as of July 23, 2007
by
and among ▇▇▇▇▇▇, Inc. and the persons and entities listed as signatories
thereto, and (b) upon becoming a party thereto, the undersigned will be deemed
an “Investor” thereunder and shall have the benefits of, and shall be subject to
the rights and restrictions contained in said Securities Purchase
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||
|
Investor
Name
|
||
|
By:
|
/s/▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|
|
Name:
|
||
|
Title:
|
||
|
Address:
|
||
|
Number
of Shares:
|
172,354
|
|
|
Aggregate
Purchase Price:
|
$100,000
|
|
|
Tax
Identification Number:
|
||
|
Contact
Name:
|
||
|
Telephone:
|
||
|
Name
in which the Shares should be registered (if different):
|
||
|
Relationship
between Investor and the person in whose name the Shares should be
registered (if different):
|
EXHIBIT
A
|
Name
of Purchaser
|
Principal
Amounts of Notes to be Purchased
|
Number
of Shares
|
|
▇▇▇▇▇▇
▇. ▇▇▇▇
|
$2,750,000
|
4,739,745
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Group, Inc.
|
$1,450,500
|
2,500,000
|
|
▇-▇
Holding, Inc.
|
$375,000
|
646,329
|
|
Kuekenhof
Equity Fund, L.P.
|
$250,000
|
430,886
|
|
▇.
▇. ▇▇▇▇▇▇, ▇▇. NC ▇▇▇▇▇▇▇▇▇▇▇ Trustees for the ▇. ▇. ▇▇▇▇▇▇ Trust
U/A
5/9/74
|
$25,000
|
43,089
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
$100,000
|
172,354
|
Schedule
4.3
Schedule
of Convertible Common Stock Instruments & Rights
|
Security
|
Shares
Reserved
|
Post-Deal
Ex.
Price
|
||||||
|
7%
Senior Convertible Notes Principal ($3.60)
|
6,344,444 | (a) | $ | 3.60 | (b) | |||
|
7%
Senior Convertible Notes Warrants ($4.35)
|
1,982,639
|
$ |
3.49
|
|||||
|
5%
Senior Convertible Notes Principal ($3.60)
|
791,667
|
$ | 3.60 | (b) | ||||
|
5%
Senior Convertible Notes Warrants ($4.35)
|
163,793
|
$ |
4.35
|
|||||
|
▇▇▇▇▇
Warrants ($3.60)
|
198,264
|
$ |
2.93
|
|||||
|
▇▇▇▇▇
Warrants ($4.35)
|
49,566
|
$ |
3.49
|
|||||
|
January
2006 Warrants ($4.91)
|
371,339
|
$ |
4.91
|
|||||
|
November
2004 Note Warrant ($5.21)
|
60,000
|
$ |
5.21
|
|||||
|
Laurus
May 2005 Note Warrant ($6.69)
|
60,000
|
$ |
6.69
|
|||||
|
Laurus
May 2005 Note Warrant ($7.28)
|
23,000
|
$ |
7.28
|
|||||
|
Laurus
May 2005 Note Warrant ($8.44)
|
17,000
|
$ |
8.44
|
|||||
|
Series
B Preferred Stock conversion right
|
18,000
|
$ |
10.00
|
|||||
Anti-Dilution
Provisions:
|
1.
|
Senior
Convertible Notes – Full Ratchet adjustment right through May 25, 2009,
weighted average dilution adjustment
thereafter.
|
|
2.
|
Warrants
– Weighted Average anti-dilution adjustment
rights.
|
|
|
(a)
|
Pursuant
to the 7% Senior Secured Convertible Notes, the company is required
to
reserve 120% of shares for issuance on conversion of the Notes &
Warrants. Based on the current conversion rate on the Notes
& Warrants, an additional 1,747,741 shares are
reserved.
|
|
|
(b)
|
Waiver
of anti-dilution rights on Senior Note principal obtained for current
transaction.
|
SCHEDULE
4.13
TAX
RETURNS AND PAYMENTS
The
Company has received notice from
the Los Angeles County Tax Assessor’s office that the office calculated the
value of all equipment, leaseholds and inventory located in Los Angeles County
from 2003 through 2006. The Company estimates that its tax exposure
to Los Angeles County may be as high as $100,000.00, though the Company believes
that the liability will be lower. The Company has reserved $30,000.00
in the second quarter of 2007 against this potential exposure.
EXHIBIT
B
to Securities Purchase
Agreement
OPINION
OF COUNSEL TO THE COMPANY
The
opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the Company, to be
delivered pursuant to Section 6.5 of this Agreement shall be substantially
to
the effect that:
1. The
Company has been duly incorporated and is validly existing and in good standing
as a corporation under the laws of the State of Delaware, with the requisite
corporate power and authority to own and lease its properties and conduct its
business as described in the Exchange Act Filings, and to execute, deliver
and
perform its obligations under the Agreement, the Escrow Agreement and the
Warrants.
2. The
Agreement has been duly authorized by all necessary corporate action by the
Company, and each has been executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.
3. The
authorized capital stock of the Company consists of 50,000,000 shares of common
stock, par value $.01 per share, and 10,000,000 shares of preferred stock,
par
value $1.00 per share.
4. The
Shares to be received by the Investors pursuant to the Agreement have been
duly
authorized and, upon issuance and delivery against payment therefor in
accordance with the terms of the Agreement, will be validly issued, fully paid
and nonassessable.
5. To
the knowledge of such counsel, except as set forth in the Agreement or in
Exchange Act Filings, the sale of the Shares is not subject to any preemptive
right or right of first refusal that has not been properly waived or with which
the Company has not complied.
6. The
execution and delivery of the Agreement and the consummation of the transactions
contemplated thereby (including, but not limited to, the issuance of the Shares,
the sale of the Securities and the fulfillment of the terms of the Agreement)
will not (a) violate or conflict with the Certificate of Incorporation or
By-laws of the Company or violate any statute, rule or regulation normally
applicable to transactions of the type contemplated by the Agreement or, to
such
counsel’s knowledge, violate any order of any court, regulatory body,
administrative agency or other governmental body applicable to the Company,
any
of its subsidiaries or any of the properties of the Company or any of its
subsidiaries.
7. To
the knowledge of such counsel, there is no approval, consent, order,
authorization, designation, declaration or filing by or with any court,
regulatory body, administrative agency or other governmental body necessary
in
connection with the execution and delivery by the Company of the Agreement
and
the consummation of the transactions contemplated thereby that has not been
obtained and is not in full force and effect, except any such approval, consent,
authorization, designation, declaration, or filing required by any securities
or
Blue Sky statute of any state in connection with the offer and sale of the
Securities, or by any U.S. federal or securities statute with respect to the
Company’s obligations under Section 9 of the Agreement.
8. Assuming
the accuracy of the representations and warranties of the Investors contained
in
the Agreement and the proper filing by the Company with the SEC of Form D
describing the sale of the Securities, the offer, sale and issuance of the
Securities by the Company to the Investors pursuant to the Agreement will be
exempt from the registration requirements of the Securities Act.
9. To
such counsel’s knowledge, there is not pending against the Company before any
court or administrative agency or overtly threatened in writing any action,
proceeding or investigation that questions the validity of the Agreement or
any
of the transactions contemplated thereby.
10. To
such counsel’s knowledge and except as set forth in Schedules to the Agreement
or the Exchange Act Filings, there are no legal or governmental actions, suits
or proceedings, pending or threatened, to which the Company or any of its
subsidiaries is a party or to which any of the property or assets of the Company
or any of its subsidiaries is subject that, if determined adversely to the
Company or any of its subsidiaries, would, individually or in the aggregate,
have a Material Adverse Effect.
EXHIBIT
C
to
Securities
Purchase Agreement
▇▇▇▇▇▇,
INC.
INVESTOR
QUESTIONNAIRE
This
Questionnaire requests information necessary to prepare a Registration Statement
(the “Registration Statement”) for the registration and resale under Rule 415 of
the Securities Act of 1933, as amended (the “Securities Act”), of certain shares
of common stock of ▇▇▇▇▇▇, Inc. (the “Company”), par value $.01 per share (the
“Common Stock”), to be filed by the Company with the Securities and Exchange
Commission (the “Commission”), in accordance with the terms of the Securities
Purchase Agreement dated as of July 23, 2007 (the “Purchase Agreement”), between
the Company and the undersigned beneficial owner (the “Selling Securityholder”)
of shares of Common Stock purchased pursuant to the Purchase Agreement (the
“Shares” or the “Registrable Securities”). All capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto
in
the Purchase Agreement.
In
order
to sell or otherwise dispose of any Registrable Securities pursuant to the
Registration Statement, you generally will be required to be named as a selling
securityholder in the related prospectus, deliver a prospectus to purchasers
of
the Registrable Securities and be bound by the provisions of the Purchase
Agreement (including certain indemnification provisions, as described
below). If you do not complete this Questionnaire and deliver it to
the Company as provided below you will not be named as a selling securityholder
in the prospectus and therefore will not be permitted to sell any Shares
pursuant to the Registration Statement. Please complete and deliver
this Questionnaire to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., General Counsel of the Company,
as
soon as possible and in any event no later than Closing Date (as defined in
the
Purchase Agreement).
Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly,
holders and beneficial owners of Shares are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
The
Selling Securityholder, by signing and returning this Questionnaire, understands
that it will be bound by the terms and conditions of this Questionnaire and
the
Purchase Agreement.
Pursuant
to the Purchase Agreement, the undersigned has agreed to indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of the Securities Act, from and against certain losses
arising in connection with statements concerning the undersigned made in the
Registration Statement or the related prospectus in reliance upon the
information provided in this Questionnaire.
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate and
complete:
QUESTIONNAIRE
|
|
1.
|
(a) Full
Legal Name of Selling
Securityholder:1
|
(b)
Except as set forth below in this Item 1(b), the undersigned does not hold
any
or all of the Shares on behalf of another person or entity.
State
any
exceptions here:
|
|
2.
|
Beneficial
Ownership:
|
Immediately
after the Closing, there will be no equity securities of the Company of which
the undersigned will be the “beneficial owner”2, except as set forth
below in this Item 2. The disclosure indicates the amount of equity
securities which the undersigned beneficially owns, which it has a right to
acquire within 60 days after the Closing Date, and as to which it has sole
voting power, shared voting power, sole investment power or shared investment
power.
|
|
3.
|
Except
as set forth below in this Item 3, the undersigned wishes that all
of the
_________ Shares that the undersigned purchased pursuant to the Purchase
Agreement are to be offered for the account of the undersigned in
the
Registration Statement.
|
State
any
exceptions here:
|
1
|
If
this Questionnaire is being completed by or on behalf of a person
other
than an individual, the entity on whose behalf the Questionnaire
is being
completed should be stated.
|
|
2
|
Defined
in Appendix A to this
questionnaire.
|
|
|
4.
|
Relationships
with the Company:
|
Except
as
set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (5% or more) has held any position or
office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.
State
any
exceptions here:
|
|
5.
|
Plan
of Distribution:
|
Except
as
set forth below, the undersigned (including its donees or pledgees) intends
to
distribute the Registrable Securities pursuant to the Registration Statement
only as follows (if at all): Such Registrable Securities may be sold
from time to time directly by the undersigned or, alternatively, through
underwriters, broker-dealers or agents. If the Registrable Securities
are sold through underwriters, broker-dealers or agents, the Selling
Securityholder will be responsible for underwriting discounts or commissions
or
agent’s commissions. Such Registrable Securities may be sold in one
more or transactions at fixed prices, at prevailing market prices at the time
of
sale, at varying prices determined at the time of sale, or at negotiated
prices. Such sales may be effected in transactions (which may involve
block transactions) (a) on any national securities exchange or quotation service
on which the Registrable Securities may be listed or quoted at the time of
sale,
(b) in the over-the-counter market, (c) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (d) through the
writing of options. Under the Purchase Agreement the undersigned may
not sell Registrable Securities short.
State
any
exceptions here:
Note:
In
no event will such method(s) of distribution take the form of an underwritten
offering of the Shares without the prior agreement of the Company.
The
undersigned acknowledges that it understands its obligation to comply with
the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
thereunder relating to stock manipulation, particularly Regulation M thereunder
(or any successor rules or regulations), in connection with any offering of
the
Shares pursuant to the Registration Statement. The undersigned agrees
that neither it nor any person acting on its behalf will engage in any
transaction in violation of such provisions.
In
accordance with the undersigned’s obligation under the Purchase Agreement, the
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 above and the inclusion
of
such information in the Registration Statement and the related
prospectus. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment
of
the Registration Statement and the related prospectus.
IN
WITNESS WHEREOF, the undersigned, by
authority duly given, has caused this Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
Dated: _____________,
2007
|
Name
of Selling Securityholder:
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
Appendix
A to EXHIBIT C
You
are
the “beneficial owner” of a security if you directly or indirectly, through any
contract, arrangement, understanding, relationship, or otherwise, have or share:
(i) voting power which includes the power to vote, or to direct the voting
of,
such security, or (ii) investment power which includes the power to dispose,
or
to direct the disposition of, such security. You are deemed the
beneficial owner of a security if you, directly or indirectly, create or use
a
trust, proxy, power of attorney, pooling arrangement or any other contract,
arrangement, or device with the purpose or effect of divesting yourself of
beneficial ownership of a security or preventing the vesting of such beneficial
ownership. Finally, you are deemed to be the beneficial owner of a
security if you have the right to acquire beneficial ownership of such security
at any time within sixty days, including but not limited to any right to acquire
(a) through the exercise of any option, warrant or right, or (b) through the
conversion of a security, or (c) pursuant to the power to revoke a trust,
discretionary account, or similar arrangement, or (d) pursuant to the automatic
termination of a trust, discretionary account or similar
arrangement. If you have acquired any security or power specified in
(a), (b), (c) or (d) above, with the purpose or effect of changing or
influencing the control of the issuer, or in connection with or as a participant
in any transaction having such purpose or effect, then immediately upon such
acquisition you are deemed to be the beneficial owner of the securities which
may be acquired through the exercise or conversion of such security or
power.
All
securities of the same class that are beneficially owned by you, regardless
of
the form which such beneficial ownership takes, must be aggregated in
calculating the number of shares beneficially owned by you.
The
above
definition is broad and although you may not actually have or share voting
or
investment power with respect to securities owned by persons in your family
or
living in your home, you should include such shares in your beneficial ownership
disclosure, and then, as appropriate, disclaim beneficial ownership of such
securities.