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EXHIBIT 10.7
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
By and Among
Multicom Publishing, Inc.
and
GEM Management Ltd.
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Dated as of March 31, 1997
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TABLE OF CONTENTS
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ARTICLE I CERTAIN DEFINITIONS .........................................................1
Section 1.1. Certain Definitions. .........................................................1
ARTICLE II PURCHASE OF SHARES .........................................................3
Section 2.1. Purchase of Shares; Closing ................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES ................................................3
Section 3.1. Representations and Warranties of the Company .....................3
Section 3.2. Representations and Warranties of the Purchaser .....................6
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES ................................................8
Section 4.1. Transfer Restrictions ..................................................8
Section 4.2. Stop Transfer Instruction.................................................9
Section 4.3. Furnishing of Information.......................................... ......9
Section 4.4. Notice of Certain Events..................................................9
Section 4.5. Copies and Use of Disclosure Materials ................................9
Section 4.6. Modification to Disclosure Materials ..............................10
Section 4.7. Blue Sky Laws ..........................................................10
Section 4.8. Integration .........................................................10
Section 4.9. Furnishing of Rule 144A Materials .......................................10
Section 4.10. Solicitation Materials ................................................10
Section 4.11. Subsequent Financial Statements ........................................11
Section 4.12. Right of First Refusal .................................................11
Section 4.13. Listing of Underlying Shares ........................................11
Section 4.14 Conversion Procedures .................................................11
ARTICLE V CONDITIONS PRECEDENT TO CLOSING ...............................................11
Section 5.1. Conditions Precedent to Obligations of the Purchaser ....................12
Section 5.2. Conditions Precedent to Obligations of the Company ....................13
ARTICLE VI TERMINATION ................................................................13
Section 6.1. Termination by Mutual Consent ......................................13
Section 6.2. Termination by the Company or the Purchaser .............................13
Section 6.3. Termination by the Company ..............................................14
Section 6.4. Termination by the Purchaser .....................................14
ARTICLE VII MISCELLANEOUS ....................................................................14
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Section 7.1. Fees and Expenses........................................................14
Section 7.2. Entire Agreement; Amendments ........................................15
Section 7.3. Notices..................................................................15
Section 7.4. Amendments; Waivers .................................................16
Section 7.5. Headings.................................................................16
Section 7.6. Successors and Assigns .................................................16
Section 7.7. No Third Party Beneficiaries ........................................16
Section 7.8. Governing Law ..........................................................16
Section 7.9. Survival.................................................................16
Section 7.10. Counterpart ..........................................................16
Section 7.11. Publicity ..........................................................17
Section 7.12. Severability ..........................................................17
Section 7.13. Remedies.................................................................17
Exhibit A Certificate of Designation
Exhibit B Registration Rights Agreement
Exhibit C Form of Opinion of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich, counsel for the Company
Exhibit D Conversion Procedures
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Default or Violation
Schedule 3.1(I) Disclosure Materials
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
March 31, 1997 (this "Agreement"), by and among Multicom Publishing, Inc., a
Washington corporation (the "Company"), and GEM Management Ltd., a corporation
organized and existing under the laws of B.V.I. (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the
Purchaser and the Purchaser desires to acquire shares of the Company's Series B
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. context requires a different
meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York are authorized or required by law or other government actions
to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section
2.1(b).
"Certificate of Designation" shall have the meaning set forth
in Section 2.1(a).
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.01 per share.
"Disclosure Materials" means the SEC Documents.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GEM" means GEM Advisors, Ltd.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of the Registrable Securities.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, charge or security interest of any kind in or on such asset
or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"NASD" means the National Association of Securities Dealers,
Inc.
"Per Share Consideration" shall have the meaning set forth in
Section 2.1(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as a part of an effective
registration statement in reliance upon Rule 430A promulgated under to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Purchase Price" shall have the meaning set forth in Section
2.1(a).
"Registration Rights Agreement" means the registration rights
agreement, substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in
Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section
3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" means the shares of Preferred Stock to be purchased
by the Purchaser pursuant to this Agreement as set forth at the foot of this
Agreement.
"Underlying Shares" means the shares of Common Stock into
which the Shares are convertible in accordance with the terms hereof and the
Certificate of Designation.
ARTICLE II
PURCHASE OF SHARES
Section 2.1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions herein set forth, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company, on the Closing Date, the Shares which shall have the
respective rights, preferences and privileges set forth in Exhibit A (the
"Certificate of Designation"), at a price per Share of US$1,000.00 (the "Per
Share Consideration"). The Per Share Consideration multiplied by the number of
Shares to be purchased by the Purchaser hereunder is hereinafter referred to as
the "Purchase Price."
(b) The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, immediately following the execution hereof, or at such other
time and/or place as the Purchaser and the Company may agree, provided, however,
in no case shall the Closing take place later than the fifth day after the last
of the conditions listed in Article V is satisfied or waived by the appropriate
party. The date of the Closing is hereinafter referred to as the "Closing Date".
(c) At the Closing, (i) the Company shall deliver to the
Purchaser (A) one or more stock certificates representing the Shares purchased
hereunder, registered in the name of the Purchaser and (B) all documents,
instruments and writings required to have been delivered at or prior to Closing
by the Company pursuant to this Agreement, (ii) the Purchaser shall deliver to
the Company (A) the Purchase Price as determined pursuant to this Article II in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company prior to the Closing and (B) all
documents, instruments and writings required to have been delivered at or prior
to Closing by the Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and
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assets and to carry on its business as currently conducted. The Company has no
subsidiaries. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company. Each of this
Agreement and the Registration Rights Agreement has been duly 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, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 3.1(c). No shares of
Common Stock are entitled to preemptive or similar rights. Except as
specifically disclosed in Schedule 3.1(c), there are no outstanding options,
warrants, or commitments of any character whatsoever relating to, or, except as
a result of the purchase and sale of the Shares hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The Company is not in
violation of any of the provisions of its certificate of incorporation or
bylaws.
(d) Issuance of Shares. The Shares are duly authorized and,
when paid for in accordance with the terms hereof, shall be validly issued,
fully paid and nonassessable. The Company has and at all times while the Shares
are outstanding will maintain an adequate reserve of shares of Common Stock to
enable it to perform its obligations under this Agreement and the Certificate of
Designation. When issued in accordance with the terms hereof, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its
certificate of incorporation or bylaws or (ii) subject to obtaining the consents
referred to in Section 3.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to
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which the Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth
in Schedule 3.1(f), the Company is not required to obtain any consent, waiver,
authorization or order of, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement, other than the filing of the
registration statement covering the Underlying Shares with the Commission and
the making of the applicable blue-sky filings under state securities laws, each
as contemplated by the Registration Rights Agreement and other than, in all
cases, where the failure to obtain such consent, waiver, authorization or order,
or to give or make such notice or filing, would not materially impair or delay
the ability of the Company to effect the Closing and deliver to the Purchaser
the Shares free and clear of all Liens (collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials or in Schedule 3.1(g), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, State, county, local or foreign) which (i)
relates to or challenges the legality, validity or enforceability of this
Agreement, the Registration Rights Agreement or the Shares (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under this Agreement or the
Registration Rights Agreement.
(h) No Default or Violation. The Company is not (i) in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, except such conflicts or defaults as do not have a Material
Adverse Effect, (ii) in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement or
the Registration Rights Agreement, (y) have a Material Adverse Effect or (z)
adversely impair the Company's ability or obligation to perform fully on a
timely basis its obligations under this Agreement or the Registration Rights
Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby except that the Company has
agreed at the Closing to pay to GEM, in consideration for its services in
connection with the sale of the Shares, an amount in cash equal to $20,000 and
to issue to GEM a warrant to purchase 400,000 shares of Common Stock.
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(j) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Shares under the Securities Act) which might subject the offering, issuance or
sale of the Shares to the registration requirements of Section 5 of the
Securities Act.
(l) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials, which are specified in Schedule 3.1(l) annexed hereto, being
collectively referred to herein as the "SEC Documents") on a timely basis, or
has received a valid extension of such time of filing. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise indicated in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal year-end audit adjustments. Since the
date of the financial statements included in the Company's last filed Quarterly
Report on Form 10-Q, there has been no event, occurrence or development that has
had a Material Adverse Effect which is not specifically disclosed in any of the
Disclosure Materials.
Section 3.2 Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase of the Shares by the
Purchaser hereunder has been duly authorized by all necessary action on the part
of the Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by the Purchaser or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
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(b) Investment Intent. The Purchaser is acquiring the Shares
and the Underlying Shares for its own account (and/or on behalf of managed
accounts who are purchasing solely for their own accounts for investment) for
investment purposes only and not with a view to or for distributing or reselling
such Shares or Underlying Shares or any part thereof or interest therein,
without prejudice, however, to the Purchaser's right, subject to the provisions
of this Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Shares or Underlying Shares under
an effective registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser (and any
account for which it is purchasing) was offered the Shares, it (and any account
for which it is purchasing) was, and at the date hereof, it (and any account for
which it is purchasing) is, and at the Closing Date, it (and any account for
which it is purchasing) will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares and,
at the present time, is able to afford a complete loss of such investment.
(f) Prohibited Transactions. The Shares to be purchased by the
Purchaser are not being acquired, directly or indirectly, with the assets of any
"employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the merits and risks of investing
in the Shares; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in the Common
Stock; and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the Shares and
to verify the accuracy and completeness of the information contained in the
Disclosure Materials.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Shares are being offered and sold, and the Underlying Shares are being
offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends, in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
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The Company acknowledges and agrees that the Purchaser makes
no representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in Article III herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. If the Purchaser should
decide to dispose of any of the Shares to be purchased by it hereunder (and upon
conversion thereof, any Underlying Shares), the Purchaser understands and agrees
that it may do so only (i) pursuant to an effective registration statement under
the Securities Act, (ii) to the Company or (iii) pursuant to an available
exemption from registration under the Securities Act. In connection with any
transfer of any Shares other than pursuant to an effective registration
statement or to the Company, the Company may require that the transferor of such
Shares provide to the Company an opinion of counsel experienced in the area of
United States securities laws selected by the transferor, the form and substance
of which opinion shall be, reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such Shares under the
Securities Act or any State securities laws.
The Purchaser agrees to the imprinting, so long as
appropriate, of the following legend on certificates representing the Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, THEY MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THESE SECURITIES AGREES THAT IT WILL
NOT RESELL, PLEDGE OR OTHERWISE TRANSFER THESE SECURITIES OR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, OR (B) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN
PURSUANT TO CLAUSE (A) OR (B) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY RULE 902 PROMULGATED UNDER THE SECURITIES ACT.
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The legend set forth above may be removed if and when the
Shares represented by such certificate or the Underlying Shares, as the case may
be, are disposed of pursuant to an effective registration statement under the
Securities Act or in the opinion of counsel to the Company experienced in the
area of United States securities laws such legend is no longer required under
applicable requirements of the Securities Act. The stock certificates
representing the Shares and the Underlying Shares shall also bear any other
legends required by applicable Federal or state securities laws, which legends
may be removed when, in the opinion of counsel to the Company experienced in the
applicable securities laws, such legends are no longer required under the
applicable requirements of such securities laws. The Company agrees that it will
provide the Purchaser, upon request, with a substitute stock certificate or
certificates, free from such legend at such time as such legend is no longer
applicable. The Purchaser agrees that, in connection with any transfer of Shares
or Underlying Shares by it pursuant to an effective registration statement under
the Securities Act, Purchaser will comply with all prospectus delivery
requirements of the Securities Act. The Company makes no representation,
warranty or agreement as to the availability of any exemption from registration
under the Securities Act with respect to any resale of Shares or Underlying
Shares.
Section 4.2 Stop Transfer Instruction. The Purchaser agrees
that the Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in this Agreement.
Section 4.2. Furnishing of Information. As long as the
Purchaser owns Shares or Underlying Shares, the Company will promptly furnish to
it all reports filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act (or if the Company is not at the time required to file reports
pursuant to such sections, annual and quarterly reports comparable to those
required by Section 13(a) or 15(d) of the Exchange Act).
Section 4.3. Notice of Certain Events. The Company shall (i)
advise the Purchaser promptly after obtaining knowledge thereof, and, if
requested by the Purchaser, confirm such advice in writing, of (A) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Shares or the Common Stock
for offering or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by any state securities commission or other regulatory
authority, or (B) any event that makes any statement of a material fact made in
the Disclosure Materials untrue or that requires the making of any additions to
or changes in the Disclosure Materials in order to make the statements therein,
in the light of the circumstances under which they are made, not misleading,
(ii) use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of the Shares or
the Common Stock under any state securities or Blue Sky laws, and (iii) if at
any time any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from qualification of
the Shares or the Common Stock under any such laws, use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
Section 4.4. Copies and Use of Disclosure. The Company shall
furnish the Purchaser, without charge, as many copies of the Disclosure
Materials, and any amendments or supplements thereto, as the Purchaser may
reasonably request. The Company consents to the use of the Disclosure Materials,
and any amendments and supplements thereto, by the Purchaser in connection with
resales of the Shares or the Underlying Shares other than pursuant to an
effective registration statement.
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Section 4.5. Modification to Disclosure Materials. If any
event shall occur as a result of which, in the reasonable judgment of the
Company or the Purchaser, it becomes necessary or advisable to amend or
supplement the Disclosure Materials in order to make the statements therein, in
the light of the circumstances at the time the Disclosure Materials were
delivered to the Purchaser, not misleading, or if it is necessary to amend or
supplement the Disclosure Materials to comply with applicable law, the Company
shall promptly prepare an appropriate amendment or supplement to the Disclosure
Materials (in form and substance reasonably satisfactory to the Purchaser) so
that (i) as so amended or supplemented the Disclosure Materials will not include
an untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to Purchaser, not misleading and (ii) the
Disclosure Materials will comply with applicable law.
Section 4.6. Blue Sky Laws. The Company shall cooperate with
the Purchaser in connection with the qualification of the Shares and the
Underlying Shares under the securities or Blue Sky laws of such jurisdictions as
the Purchaser may request and to continue such qualification at all times
through the third anniversary of the Closing Date; provided, however, that the
Company shall not be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified.
Section 4.7. Integration. The Company shall not, and shall use
its best efforts to ensure that no Affiliate shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares or the Underlying Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares or
Underlying Shares to the Purchaser.
Section 4.8. Furnishing of Rule 144A Materials. The Company
shall, for so long as any of the Shares or Underlying Shares remain outstanding
and during any period in which it is not subject to Section 13 or 15(d) of the
Exchange Act, make available to any registered holder of Shares or Underlying
Shares in connection with any sale thereof and any prospective purchaser of such
Shares or Underlying Shares from such Person, the following information in
accordance with Rule 144A(d)(4) under the Securities Act: a brief statement of
the nature of the business of the Company and the products and services it
offers and the Company's most recent audited balance sheet and profit and loss
and retained earnings statements, and similar audited financial statements for
such part of the two preceding fiscal years as the Company has been in
operation.
Section 4.9. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale of
the Shares or Underlying Shares other than the Disclosure Materials and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares or Underlying Shares by means of any
form of general solicitation or advertising.
Section 4.10. Subsequent Financial Statements. The Company
shall furnish to the Purchaser, promptly after they are filed with the
Commission, a copy of all financial statements for any period subsequent to the
period covered by the financial statements included in the Disclosure Materials.
Section 4.11. Right of First Refusal. (a) The Company shall
not directly or indirectly, without the prior consent of the Purchaser, offer,
sell, grant any option to purchase, or
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otherwise dispose (or announce any offer, sale, grant or any option to purchase
or other disposition) of any of its or its Affiliates equity or
equity-equivalent securities (a "Subsequent Sale") for a period of 90 days after
Closing Date, except (i) the granting of options to employees, officers and
directors under, and the issuance of shares upon exercise of options granted
under, any stock option plan heretofore or hereinafter adopted by the Company;
(ii) shares issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible preferred stock disclosed in
Schedule 3.1 and (iii) shares of Common Stock issued upon conversion of Shares
in accordance herewith, unless (A) the Company provides the Purchaser a written
notice (the "Subsequent Financing Notice") of its intention to effect such
Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing and the amount
of proceeds intended to be raised thereunder and (B) the Purchaser shall not
have notified the Company within forty-eight (48) hours of its receipt of the
Subsequent Financing Notice of its willingness to enter into good faith
negotiations to provide (or to cause its sole designee to provide) financing to
the Company on substantially the terms set forth in the Subsequent Financing
Notice. If the Purchaser shall fail to notify the Company of its intention to
enter into such negotiations within such forty-eight (48) hour period, the
Company may effect the Subsequent Financing substantially upon the terms set
forth in the Subsequent Financing Notice; provided, that the Company shall
provide the Purchaser with a second Subsequent Financing Notice, and the
Purchaser shall again have the right of first refusal set forth above in this
paragraph (a), if the Subsequent Financing subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 30 days after the date of the
initial Subsequent Financing Notice.
Section 4.12. Listing of Underlying Shares. The Company shall
take all steps necessary to cause the Underlying Shares to be approved for
listing in The Nasdaq SmallCap Market (or other national securities exchange or
market on which the Common Stock is listed) no later than the first day after
which shares may be converted hereunder by the Purchaser, and shall provide to
the Purchaser evidence of such listing.
Section 4.13. Conversion. Exhibit D attached hereto sets forth
the procedures with respect to the conversion of the Shares, including the forms
of conversion notice to be provided upon conversion.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.1 Conditions Precedent to Obligations of the
Purchaser. The obligation of the Purchaser to purchase the Shares is subject to
the satisfaction or waiver by the Purchaser, at or prior to the Closing, of each
of the following conditions:
(a) Legal Opinion. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich, counsel for the Company, substantially in the form of Exhibit C;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be
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true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing;
(d) No Material Adverse Effect. Since the date of the
financial statements included in the Company's last filed Quarterly Report on
Form 10-Q, no event which had a Material Adverse Effect shall have occurred
which is not disclosed in the Disclosure Materials;
(e) No Prohibitions. The purchase of and payment for the
Shares (and upon conversion thereof, the Underlying Shares) hereunder (i) shall
not be prohibited or enjoined (temporarily or permanently) by any applicable law
or governmental regulation and (ii) shall not subject the Purchaser to any
penalty, or in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation that would materially
reduce the benefits to the Purchaser of the purchase of the Shares or the
Underlying Shares (provided, however, that such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement);
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an Assistant
Secretary of the Company and certifying (i) that attached thereto is a true,
correct and complete copy of (A) the Company's Certificate of Incorporation, as
amended to the date thereof, (B) the Company's by-laws, as amended to the date
thereof, and (C) resolutions duly adopted by the Board of Directors of the
Company authorizing the execution and delivery of this Agreement and the
Registration Rights Agreement and the issuance and sale of the Shares and the
Underlying Shares and (ii) the incumbency of officers executing this Agreement
and the Registration Rights Agreement;
(g) Registration Rights Agreement. The Company shall have
executed the Registration Rights Agreement;
(h) No Suspensions of Trading in Common Stock. Trading in the
Common Stock shall not have been suspended by the Commission or the NASD or
other exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit dissemination
of material information regarding the Company);
(i) Required Approvals. All Required Approvals shall have been
obtained; and
(j) Delivery of Stock. The Company shall have delivered to the
Purchaser the stock certificate(s) representing the Shares, registered in the
name of the Purchaser, each in form satisfactory to the Purchaser.
Section 5.2 Conditions Precedent to Obligations of the
Company. The obligation of the Company to issue and sell the Shares hereunder is
subject to the satisfaction or waiver by the Company, at or to the Closing, of
each of the following conditions:
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(a) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by it at or prior to the
Closing; and
(c) No Prohibitions. The sale of the Shares (and upon
conversion thereof, the Underlying Shares) hereunder (i) shall not be prohibited
or enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Shares or the Underlying Shares to the
Purchaser (provided, however, that such regulation, law or onerous condition was
not in effect in such form at the date of this Agreement).
ARTICLE VI
TERMINATION
Section 6.1. Termination by Mutual Consent. This Agreement may
be terminated at any time prior to Closing by the mutual consent of the Company
and the Purchaser.
Section 6.2 Termination by the Company or the Purchaser. This
Agreement may be terminated prior to Closing by either the Company or the
Purchaser, by giving written notice of such termination to the other party, if:
(a) the Closing shall not have occurred by March 31,
1997; provided that the terminating party is not then in material
breach of its obligations under this Agreement in any manner that shall
have caused the failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law
or regulation that prohibits the consummation of the Closing or if the
consummation of the Closing would violate any non-appealable final
judgment, order, decree, ruling or injunction of any court of or
governmental authority having competent jurisdiction; or
(c) there shall have been an amendment to Regulation
D or an interpretive release promulgated or issued thereunder, which,
in the reasonable judgment of the terminating party, would materially
adversely affect the transactions contemplated hereby and by the
Registration Rights Agreement.
Section 6.3 Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving notice of such termination
to the Purchaser, if the Purchaser
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has materially breached any representation, warranty, covenant or agreement
contained in this Agreement or the Registration Rights Agreement and such breach
is not cured within five business days following receipt by the Purchaser of
notice of such breach.
Section 6.4 Termination by the Purchaser. This Agreement may
be terminated prior to Closing by the Purchaser, by giving notice of such
termination to the Company, if:
(a) the Company has breached any representation,
warranty, covenant or agreement contained in this Agreement or the
Registration Rights Agreement and such breach is not cured within five
business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the
financial statements included in the Company's last filed Quarterly
Report on Form 10-Q which could reasonably be expected to have a
Material Adverse Effect and which is not disclosed in the Disclosure
Materials; or
(c) trading in the Common Stock has been suspended by
the Commission or the NASD or other exchange or market on which the
Common Stock is listed or quoted (except for any suspension of trading
of limited duration solely to permit dissemination of material
information regarding the Company).
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each party shall pay the fees
and expenses of its advisers, brokers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement
except for the fee payable to GEM as provided in Section 3.1(i) hereof. The
Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Shares (and upon conversion thereof, the Underlying Shares)
pursuant hereto. The Purchaser shall be responsible for its own tax liability
that may arise as a result of the investment hereunder or the transactions
contemplated by this Agreement. Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated, the Company
shall pay (i) all costs, expenses, fees and all taxes incident to and in
connection with: (A) the preparation, printing and distribution of the
Disclosure Materials and all amendments and supplements thereto (including,
without limitation, financial statements and exhibits), and all preliminary and
final Blue Sky memoranda and all other agreements, memoranda, correspondence and
other documents prepared and delivered in connection herewith (B) the issuance
and delivery of the Shares and, upon conversion thereof, the Underlying Shares,
(C) the qualification of the Shares and, upon conversion thereof, the Underlying
Shares for offer and sale under the securities or Blue Sky laws of the several
states (including, without limitation, the fees and disbursements of the
Purchasers' counsel relating to such registration or qualification), (D)
furnishing such copies of the Disclosure Materials and all amendments and
supplements thereto, as may reasonably be requested for use in connection, with
resales of the Shares and, upon conversion thereof, the Underlying Shares, and
(E) the preparation of certificates for the Shares and, upon conversion thereof,
the Underlying Shares (including, without limitation, printing and engraving
thereof), (ii) all fees and expenses of the counsel and accountants
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of the Company and (iii) all expenses and listing fees in connection with the
application for quotation of the underlying Shares in the Nasdaq SmallCap
Market.
Section 7.2 Entire Agreement; Amendments. This Agreement,
together with the Exhibits, Annexes and Schedules hereto, and the Registration
Rights Agreement contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
Section 7.3 Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been received (a) upon hand delivery (receipt acknowledged) or
delivery by telex (with correct answer back received), telecopy or facsimile
(with transmission confirmation report) at the address or number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company:
Multicom Publishing, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: CEO, General Counsel
With copies to:
Multicom Publishing, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: CFO
If to the Purchaser:
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 7.4 Amendments; Waivers.. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by both the Company and the Purchaser, or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party
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to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
Section 7.5 Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 7.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Company nor the Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this Agreement.
Section 7.7 No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 7.8 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.
Section 7.9 Survival. The representations and warranties of
the Company and the Purchaser contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VII shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares hereunder.
Section 7.10 Counterpart. This Agreement may be executed in
two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
Section 7.11 Publicity. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
Section 7.12 Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
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Section 7.13 Remedies. In addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, the Purchaser will be entitled to specific performance of the
obligations of the Company under this Agreement and the Company will be entitled
to specific performance of the obligations of the Purchaser hereunder with
respect to the subsequent transfer of Shares and the Underlying Shares. Each of
the Company and the Purchaser agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
MULTICOM PUBLISHING, INC.
By:_________________________________________
Name:
Title:
Purchaser:
By:_________________________________________
Name:
Title:
No. of Shares to be Purchased_______________
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Exhibit D
[To be provided by Company]
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