EXHIBIT 10.21
BRIAZZ, INC.
SECURITIES PURCHASE AGREEMENT
June 18, 2002
TABLE OF CONTENTS
Page
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1. AGREEMENT TO SELL AND PURCHASE.............................................1
2. FEES AND WARRANT...........................................................1
3. CLOSING, DELIVERY AND PAYMENT..............................................2
3.1 Closing...........................................................2
3.2 Delivery..........................................................2
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................2
4.1 Organization, Good Standing and Qualification.....................2
4.2 Subsidiaries......................................................3
4.3 Capitalization; Voting Rights.....................................3
4.4 Authorization; Binding Obligations................................3
4.5 Liabilities.......................................................4
4.6 Agreements; Action................................................4
4.7 Obligations to Related Parties....................................4
4.8 Changes...........................................................5
4.9 Title to Properties and Assets; Liens, Etc........................6
4.10 Intellectual Property.............................................6
4.11 Compliance with Other Instruments.................................7
4.12 Litigation........................................................7
4.13 Tax Returns and Payments..........................................7
4.14 Employees.........................................................7
4.15 Registration Rights and Voting Rights.............................8
4.16 Compliance with Laws; Permits.....................................8
4.17 Environmental and Safety Laws.....................................8
4.18 Valid Offering....................................................9
4.19 Full Disclosure...................................................9
4.20 Insurance.........................................................9
4.21 SEC Reports.......................................................9
4.22 No Market Manipulation............................................9
4.23 Listing...........................................................9
4.24 No Integrated Offering...........................................10
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4.25 Stop Transfer....................................................10
4.26 Dilution.........................................................10
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........................10
5.1 Requisite Power and Authority....................................10
5.2 Investment Representations.......................................11
5.3 Purchaser Bears Economic Risk....................................11
5.4 Acquisition for Own Account......................................11
5.5 Purchaser Can Protect Its Interest...............................11
5.6 Accredited Investor..............................................11
5.7 Legends..........................................................11
5.8 No Shorting......................................................11
6. COVENANTS OF THE COMPANY..................................................12
6.1 Stop-Orders......................................................12
6.2 Listing..........................................................12
6.3 Market Regulations...............................................13
6.4 Reporting Requirements..........................................13
6.5 Use of Funds.....................................................13
6.6 Access to Facilities.............................................13
6.7 Taxes............................................................13
6.8 Insurance........................................................14
6.9 Intellectual Property............................................14
6.10 Properties.......................................................14
6.11 Confidentiality..................................................14
6.12 Required Approvals...............................................14
6.13 Reissuance of Securities.........................................15
6.14 Opinion..........................................................15
7. COVENANTS OF THE COMPANY AND PURCHASERS REGARDING INDEMNIFICATION.........15
7.1 Company Indemnification..........................................15
7.2 Purchaser's Indemnification......................................15
7.3 Procedures.......................................................15
8. CONVERSION OF CONVERTIBLE NOTE............................................16
8.1 Mechanics of Conversion..........................................16
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8.2 Mandatory Redemption.............................................17
8.3 Maximum Conversion...............................................17
8.4 Injunction - Posting of Bond.....................................17
8.5 Buy-In...........................................................
8.6 Optional Redemption..............................................18
8.7 Nasdaq Approval..................................................19
9. REGISTRATION RIGHTS.......................................................18
9.1 Registration Rights Granted......................................18
9.2 Registration Procedures..........................................20
9.3 Provision of Documents...........................................21
9.4 Non-Registration Events..........................................21
9.5 Expenses.........................................................22
9.6 Indemnification and Contribution.................................22
9.7 Termination......................................................22
10. OFFERING RESTRICTIONS.................................................... 24
11. SECURITY INTEREST.........................................................25
12. MISCELLANEOUS.............................................................25
12.1 Governing Law....................................................25
12.2 Survival.........................................................25
12.3 Successors and Assigns...........................................25
12.4 Entire Agreement.................................................26
12.5 Severability.....................................................26
12.6 Amendment and Waiver.............................................26
12.7 Delays or Omissions..............................................26
12.8 Notices..........................................................26
12.9 Attorneys' Fees..................................................26
12.10 Titles and Subtitles.............................................27
12.11 Counterparts.....................................................27
12.12 Broker's Fees....................................................27
12.13 Construction.....................................................27
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BRIAZZ, INC.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of June 18, 2002, by and among Briazz, Inc., a Washington corporation
(the "Company"), and Laurus Master Fund, Ltd. a Cayman Islands company (the
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale of a 14% Convertible Note in
an aggregate principal amount of $1,250,000 (the "Note"), convertible into
shares of the Company's common stock, no par value (the "Common Stock");
WHEREAS, the Company wishes to issue a warrant (the "Warrant") to the
Purchaser to purchase shares of the Company's Common Stock in connection with
Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and Warrant on the terms
and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
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:
1. AGREEMENT TO SELL AND PURCHASE. 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 the Purchaser, and the Purchaser hereby agrees to
purchase from the Company a Note in the amount of $1,250,000 convertible in
accordance with the terms thereof into shares of the Company's Common Stock. The
Note purchased on the Closing Date shall be known as the "Offering." The form of
Note is annexed hereto as Exhibit A. The Note will have a Maturity Date (as
defined in the Note) eighteen months from the date of issuance. Collectively,
the Note and Warrant (as defined in Section 2) and Common Stock issuable in
payment of the Note upon conversion of the Note and upon exercise of the Warrant
are referred to as the "Securities."
2. FEES AND WARRANT.
(a) The Company will issue and deliver to the Purchaser a
Warrant to purchase 250,000 shares of Common Stock in connection with the
Offering (the "Warrant") pursuant to Section 1 hereof. The Warrant must be
delivered on the Closing Date. A form of Warrant is annexed hereto as Exhibit B.
The per share "Purchase Price" of Common Stock as defined in the Warrants shall
be as set forth in the Warrant. All the representations, covenants,
warranties, undertakings, and indemnification, and other rights made or granted
to or for the benefit of the Purchaser by the Company are hereby also made and
granted in respect of the Warrant and shares of the Company's Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares").
(b) The Company shall reimburse the Purchaser for its reasonable
legal fees for services rendered to the Purchaser in preparation of this
Agreement and the Related Agreements, and expenses in connection with the
Purchaser's due diligence review of the Company and relevant matters. Amounts
required to be paid hereunder will be paid at the Closing and shall not exceed
$20,000.
(c) The Company will pay a cash fee in the amount of seven
percent (7%) of the aggregate gross purchase price to be paid to the Company
from the sale of Note in the Offering (the "Fund Management Fee") to Laurus
Capital Management, L.L.C., a Delaware limited liability company. The Fund
Management Fee must be paid on the Closing Date. The aforementioned Fund
Management Fee and legal fees will be payable at the Closing out of funds held
pursuant to a Funds Escrow Agreement to be entered into by the Company,
Purchaser and an Escrow Agent (the "Funds Escrow Agreement").
3. CLOSING, DELIVERY AND PAYMENT.
3.1 Closing. 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 Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Funds Escrow Agreement, at the Closing,
subject to the terms and conditions hereof, the Company will deliver to the
Escrow Agent, among other things, a Note in the form attached as Exhibit A
representing the principal amount of $1,250,000 and a Common Stock Purchase
Warrant in the form attached as Exhibit B in the Purchaser's name representing
250,000 Warrant Shares and the Purchaser will deliver to the Escrow Agent, among
other things, $1,250,000, by certified funds or wire transfer made payable to
the order of the Escrow Agent.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser as of the
date of this Agreement as set forth below.
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized and validly existing under the laws of the State of
Washington. The Company has the corporate power and authority to own and operate
its properties and assets, to execute and deliver this Agreement, the Warrant to
be issued in connection with this Agreement, the Funds Escrow Agreement, the
Security Agreement and all other agreements referred to herein (collectively,
the "Related Agreements"), to issue and sell the Note and the shares of Common
Stock issuable upon conversion of the Note (the "Note Shares"), to issue and
sell the Warrant and the Warrant Shares, and 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
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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 would not have a
material adverse effect on the Company or its business.
4.2 No Subsidiaries. The Company does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of March 31,
2002, consists of (i) 100,000,000 shares of Common Stock, no par value,
5,847,310 shares of which are issued and outstanding and 50,00,000 shares of
Preferred Stock, no par value, none of which are issued and outstanding.
(b) Other than (i) the shares reserved for issuance under the
Company's stock option plans, director option agreement and the Company's
employee stock purchase plan; and (ii) shares which may be granted pursuant to
this Agreement and the Related Agreements, 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.
(c) All issued and outstanding shares of the Company's Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable.
(d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Articles of Incorporation (the
"Charter"). The Note Shares and Warrant Shares have been duly and validly
reserved for issuance. When issued in compliance with the provisions of this
Agreement, the Note, the Warrant 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.
4.4 Authorization; Binding Obligations. 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 Note and Warrant has been taken or will be taken prior to
the Closing. The Agreement and the Related Agreements, when executed and
delivered, 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 remedies. The sale of the Note and
the subsequent conversion of the Note into Note Shares are not and will not be
subject to any preemptive rights or rights of first refusal that have not been
properly waived or complied with. The sale of the Warrant and the subsequent
exercise of the Warrant for Warrant Shares are
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not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with. The Note and the Warrant,
when executed and delivered in accordance with the terms of this Agreement, will
be valid and binding obligations of the Company, enforceable in accordance with
their respective terms.
4.5 Liabilities. Except as set forth in the SEC Reports (as defined
herein), the Company has no material liabilities and, to the best of its
knowledge, knows of no material contingent liabilities, except current
liabilities incurred in the ordinary course of business which have not been,
either in any individual case or in the aggregate, material.
4.6 Agreements; Action.
(a) Except as defined in the SEC Reports, 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 $500,000 (other than
obligations of, or payments to, the Company arising from leases, contracts of
cafe development or improvements, 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 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.
(b) Except as set forth in the SEC Reports, 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, 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) Except as set forth in the SEC Reports, 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.
4.7 Obligations to Related Parties. Except as set forth in the SEC
Reports, 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, (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. None of the officers,
directors or stockholders of
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the Company, or any members of their immediate families, are indebted to the
Company. Except as described above, 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 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. The Company is not a guarantor or indemnitor of
any indebtedness of any other person, firm or corporation.
4.8 Changes. Since December 31, 2001, 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 on such assets,
liabilities, financial condition, prospects or operations of the Company;
(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 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 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;
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(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.
4.9 Title to Properties and Assets; Liens, Etc. 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. The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
4.10 Intellectual Property.
(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. 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) 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.
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(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.
4.11 Compliance with Other Instruments. The Company is not in
violation or default of any term of the Charter or Bylaws, or of any provision
of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment, decree, order or writ.
The execution, delivery and performance of and compliance with this Agreement
and the Related Agreements, and the issuance and sale of Securities 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.
4.12 Litigation. Except as set forth in the SEC Reports, there is no
action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company that questions the validity
of this Agreement or the Related Agreements or the right of the Company to enter
into any of such agreements, or to consummate the transactions contemplated
hereby or thereby, or which might result, either individually or in the
aggregate, in any material adverse change in the assets, condition, affairs or
prospects of the Company, financially or otherwise, 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. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate.
4.13 Tax Returns and Payments. Except as set forth in the SEC Reports,
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. 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.
4.14 Employees. Except as set forth in the SEC Reports, 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. 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
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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. 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, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as set forth on
Schedule 4.15, 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.
4.16 Compliance with Laws; Permits. To its knowledge, the Company is
not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which violation would 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
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or financial
condition of the Company.
4.17 Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, 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.
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 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser 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.
4.19 Full Disclosure. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Note and Warrant, including all information the Company believes is
reasonably necessary to make such investment decision. Neither this Agreement,
the exhibits and schedules hereto, the Related Agreements nor any other document
delivered by the Company to Purchaser or its attorneys or agents in connection
herewith or therewith or with the transactions contemplated hereby or thereby,
contain any untrue statement of a material fact nor omit to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading. Any financial
projections and other estimates provided to the Purchaser by the Company were
based on the Company's experience in the industry and on assumptions of fact and
opinion as to future events which the Company, at the date of the issuance of
such projections or estimates, believed to be reasonable. As of the date hereof
no facts have come to the attention of the Company that would, in its opinion,
require the Company to revise or amplify in any material respect the assumptions
underlying such projections and other estimates or the conclusions derived
therefrom.
4.20 Insurance. The Company has general commercial, product liability,
fire and casualty insurance policies with coverage customary for companies
similarly situated to the Company.
4.21 SEC Reports. The Company has filed all proxy statements, reports
and other documents required to be filed by it under the Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 30, 2001 and (ii) its Proxy Statement
dated April 29, 2002 (collectively, the "SEC Reports"). Each SEC Report was 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 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.
4.22 No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the Common Stock of the Company to facilitate the sale or resale of any of the
Securities being offered hereby or affect the price at which any of the
Securities being offered hereby may be issued.
4.23 Listing. The Company's Common Stock is listed for trading on the
Nasdaq National Market and satisfies all requirements for the continuation of
such listing. The Company has not received any notice that its Common Stock will
be delisted from the Nasdaq
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National Market or that the Common Stock does not meet all requirements for the
continuation of such listing.
4.24 No Integrated Offering. 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 integrated with other
offerings.
4.25 Stop Transfer. 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.
4.26 Dilution. The number of shares of Common Stock issuable upon
conversion of the Note and exercise of the Warrant may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to
conversion or exercise of such securities. The Company understands the nature of
the Securities being sold hereby and recognize that they may have a potential
dilutive effect. The Board of Directors of the Company has concluded, in its
good faith business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue the
shares of Common Stock upon conversion of the Note and exercise of the Warrant
is binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
5.1 Requisite Power and Authority. Purchaser 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
action on Purchaser'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 Purchaser,
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) as limited by
general principles of equity that restrict the availability of equitable
remedies.
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5.2 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities
Act.
5.3 Purchaser Bears Economic Risk. Purchaser 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. Purchaser 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 is available.
5.4 Acquisition for Own Account. Purchaser is acquiring the Note and
Warrant and the Note Shares and the Warrant Shares for Purchaser's own account
for investment only, and not with a view towards their distribution.
5.5 Purchaser Can Protect Its Interest. Purchaser represents that by
reason of its, or of its management's, business and financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement or the Related Agreements.
5.6 Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
5.7 Legends.
(a) The Note and Note Shares shall bear substantially the
following legend until the Note and Note Shares are resold pursuant to an
effective registration statement filed with the SEC or are sold pursuant to Rule
144 under the Securities Act or may otherwise be removed pursuant to Rule 144(k)
under the Securities Act:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR, IF APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO BRIAZZ, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
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(b) The Note Shares and the Warrant Shares shall bear a legend
which shall be in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IF APPLICABLE, STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO BRIAZZ, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BRIAZZ, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
5.8 No Shorting. The Purchaser will not and will not cause any person
or entity to engage in "short sales" of the Company's Common Stock.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. The Company will use its best efforts to maintain the
listing of its Common Stock on the Pink Sheets, the NASD OTC Bulletin Board,
NASDAQ SmallCap
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Market, NASDAQ National Market, American Stock Exchange or New York Stock
Exchange (a "Principal Market"), and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company will provide the Purchaser copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market. The Company shall promptly file any
necessary notices with respect to the Offering and issuance of the Note and
Warrant with the Principal Market.
6.3 Market Regulations. 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 Purchaser
and promptly provide copies thereof to Purchaser.
6.4 Reporting Requirements. The Company will timely file with the SEC
all reports required to be filed pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit such termination.
6.5 Use of Funds. The Company agrees that it will use the proceeds of
the sale of the Note and Warrant for general corporate purposes only, in the
ordinary course of its business and consistent with past practice and, without
limiting the generality of the foregoing, shall not use such proceeds to make a
loan to any employee, officer, director or stockholder of the Company, to repay
any loan or other obligation of the Company or to repurchase or pay a dividend
on shares of Common Stock or other securities of the Company (in any such case,
regardless of whether such loan or payment was authorized by the Company's Board
of Directors prior to the date hereof), other than any such repurchase or
payment explicitly required, permitted or contemplated by the terms of this
Agreement or the other Related Agreements.
6.6 Access to Facilities. The Company will permit any representatives
designated by the Purchaser (or any transferee of the Purchaser), so long as
such person holds any Securities upon reasonable notice and during normal
business hours, at such person's expense and accompanied by a representative of
the Company, to (a) visit and inspect any of the properties of the Company, (b)
examine the corporate and financial records of the Company (unless such
examination is not permitted by federal, state or local law or by contract) and
(c) discuss the affairs, finances and accounts of any such corporations with the
directors, officers and independent accountants of the Company.
6.7 Taxes. The Company will promptly pay and discharge, or cause to
be paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the
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commencement of proceedings to foreclose any lien which may have attached as
security therefor.
6.8 Insurance. The Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
6.9 Intellectual Property. The Company shall maintain in full force
and effect its corporate existence, rights and franchises and all licenses and
other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
6.10 Properties. The Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
material adverse effect.
6.11 Confidentiality. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of the Purchaser,
unless expressly agreed to by the Purchaser or unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of such
requirement.
6.12 Required Approvals. For so long as at least 40% of the principal
amount of the Note is outstanding, the Company, without the prior written
consent of the Purchaser, which shall not be unreasonably withheld, shall not:
(a) directly or indirectly declare or pay any dividends or make
any distributions upon any of its capital stock or other equity securities (or
any securities directly or indirectly convertible into or exercisable or
exchangeable for equity securities);
(b) consent to or implement any termination, amendment,
modification, supplement or waiver of (a) the certificate or articles of
incorporation, bylaws, regulations or other constitutional documents of the
Company or any subsidiary or (b) any material contract to which it is a party
not in the ordinary course of business with Company obligations in excess of
$250,000 per year; provided, however, that such documents may be amended or
modified if and to the extent that such amendment or modification is not adverse
to the Purchaser and further, except as set forth in Section 10 hereof, that no
consent is required with respect to any future equity or debt financing of the
Company; or
(c) materially alter or change the scope of the business of the
Company.
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6.13 Reissuance of Securities. 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 the
Purchaser 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
Purchaser and broker, if any.
6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's legal
counsel in the form annexed hereto as Exhibit D. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Note and exercise of the Warrant.
7. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.
7.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend Purchaser, each of Purchaser'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
Purchaser 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 Purchaser relating hereto.
7.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company which results, arises out of or is based upon (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
7.3 Procedures. The procedures and limitations set forth in Section
9.6 shall apply to the indemnifications set forth in Sections 7.1 and 7.2 above.
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8. CONVERSION OF CONVERTIBLE NOTE.
8.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares are included
in an effective registration statement or are otherwise exempt from registration
when sold: (i) Upon the conversion of the Note or part thereof, the Company
shall, at its own cost and expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's transfer agent
shall issue stock certificates in the name of the Purchaser (or its nominee) or
such other persons as designated by the Purchaser and in such denominations to
be specified representing the number of Note Shares issuable upon such
conversion; and (ii) Provided that the Note Shares are included in an effective
registration statement or are otherwise exempt from registration, the Company
warrants that no instructions other than these instructions have been or will be
given to the transfer agent of the Company's Common Stock.
(b) Purchaser will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying or otherwise delivering
an executed and completed notice of the number of shares to be converted to the
Company (the "Notice of Conversion"). The Purchaser will not be required to
surrender the Note until the Purchaser receives a certificate or certificates,
as the case may be, representing the Note Shares or until the Note has been
fully satisfied. Each date on which a Notice of Conversion is telecopied or
delivered to the Company in accordance with the provisions hereof shall be
deemed a "Conversion Date." The Company will or will cause the transfer agent to
transmit the Company's Common Stock certificates representing the shares
issuable upon conversion of the Note (and a certificate representing the balance
of the Note not so converted, if requested by Purchaser) to the Purchaser via
express courier for receipt by such Purchaser within five business days after
receipt by the Company of the Notice of Conversion (the "Delivery Date"). In
lieu of delivering physical certificates, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Holder, the Company shall use
commercially reasonably efforts to cause its transfer agent to electronically
transmit such shares to the Holder by crediting the account of the Holder's
prime broker with DTC through its Deposit Withdrawal Agent Commission system.
(c) The Company understands that a delay in the delivery of the
Note Shares in the form required pursuant to Section 8 hereof, or the Mandatory
Redemption Payment described in Section 8.2 hereof, beyond the Delivery Date or
Mandatory Redemption Payment Date (as defined in Section 8.2) could result in
economic loss to the Purchaser. As compensation to the Purchaser for such loss,
the Company agrees to pay late payments to the Purchaser for late issuance of
the Note Shares in the form required pursuant to Section 8 hereof upon
conversion of the Note in the amount equal to the greater of (i) $100 per
business day after the Delivery Date for each $20,000 Note principal being
converted or redeemed or (ii) the Purchaser's actual damages from such delayed
delivery. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand and, in the case of actual damages,
accompanied by reasonable documentation of the amount of such damages.
Furthermore, in addition to any other remedies which may be available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of the Note Shares by the Delivery Date or make
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payment by the Mandatory Redemption Payment Date, the Purchaser will be entitled
to revoke all or part of the relevant Notice of Conversion or rescind all or
part of the notice of Mandatory Redemption by delivery of a notice to such
effect to the Company whereupon the Company and the Purchaser shall each be
restored to their respective positions immediately prior to the delivery of such
notice.
(d) Nothing contained herein or in any document referred to
herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
amount permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to a Purchaser and thus refunded to
the Company.
8.2 Mandatory Redemption. If after receiving a valid Notice of
Conversion, the Company is unable to issue Note Shares within five (5) business
days of a Delivery Date, for any reason, then at the Purchaser's election, the
Company must pay to the Purchaser ten (10) days after receipt of written request
by the Purchaser ("Mandatory Redemption Payment Date") a sum of money determined
by multiplying the principal of the Note required to be converted and not so
converted by 130%, together with accrued but unpaid interest thereon ("Mandatory
Redemption Payment"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal and interest will be deemed paid and no longer
outstanding.
8.3 Maximum Conversion. The Purchaser shall not be entitled to
convert on a Conversion Date that amount of a Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Purchaser on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of this proviso
is being made on a Conversion Date, which would result in beneficial ownership
by the Purchaser of more than 4.99% of the outstanding shares of Common Stock of
the Company on such Conversion Date. For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. Subject to
the foregoing, a Purchaser shall not be limited to aggregate conversions of only
4.99%. A Purchaser may void the conversion limitation described in this Section
8.3 upon 75 days prior notice to the Company. Upon an Event of Default under the
Note, the conversion limitation in this Section 8.3 shall automatically become
null and void.
8.4 Injunction - Posting of Bond. In the event a Purchaser shall
elect to convert a Note or part thereof, the Company may not refuse conversion
for any reason, unless an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of said Note shall have been sought and
obtained and the Company posts a surety bond for the benefit of the Purchaser in
the amount of 130% of the amount of the Note, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Purchaser to the extent it obtains judgment.
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8.5 Optional Redemption. The Company will have the option of
redeeming the Note ("Optional Redemption") by paying to the Purchaser a sum of
money as follows:
from the Closing Date through 30 days after the Closing Date -
102%
from 31 days through 60 days after the Closing Date - 104%
from 61 days through 90 days after the Closing Date - 106%
from 91 days through 120 days after the Closing date -108%
from 121 days through 150 days after the Closing date -110%
from 151 days through 180 days after the Closing date -112%
after 180 days following the Closing Date - 125%
of the principal amount of the Note together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Purchaser
arising under this Agreement, Note or any other document delivered herewith
("Redemption Amount") outstanding on the day notice of redemption ("Notice of
Redemption) is given to a Purchaser ("Redemption Date"). Notwithstanding the
foregoing, if the implied return to the Purchaser based on the market price of
the Common Stock on any of the three days preceding the Redemption Date is
greater than the percentages set forth above, then the Redemption Amount shall
be increased to equal the implied return to the Purchaser had the Purchaser been
permitted to convert the principal amount of the Note into shares of Common
Stock at the relevant Conversion Price on the Redemption Date. A Notice of
Redemption may not be given in connection with any portion of Note for which
notice of conversion has been given by the Purchaser at any time before receipt
of a Notice of Redemption. The Redemption Amount must be paid in good funds to
the Purchaser no later than the seventh (7th) business day after the Redemption
Date ("Optional Redemption Payment Date"). In the event the Company fails to pay
the Redemption Amount by the Optional Redemption Payment Date, then the
Redemption Notice will be null and void and the Company will thereafter have no
further right to effect an Optional Redemption. A Notice of Redemption may be
given by the Company, provided no Event of Default, as described in the Note
shall have occurred or be continuing.
9. REGISTRATION RIGHTS.
9.1 Registration Rights Granted. The Company hereby grants the
following registration rights to the Purchaser.
(a) For a period commencing 90 days after the Closing Date, but
not later than four (4) years after the Closing Date (the "Request Date"), the
Company, upon a written request ("Request for Registration") therefore from the
Purchaser (the Note Shares and Warrant Shares issued or issuable upon conversion
of the Note or exercise of the Warrant issued hereunder, being, the "Registrable
Securities"), shall prepare and file with the SEC a registration statement under
the Securities Act covering the Registrable Securities which are the subject of
such request, unless the Company has given the Purchaser a Notice of
Registration and/or such Registrable Securities are the subject of an effective
registration statement. As a condition precedent to the Company's preparation
and filing of a registration statement, the Purchaser shall promptly provide the
Company with all such information as the Company
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reasonably requests. The obligation of the Company under this Section 9.1 shall
be limited to two registration statements.
(b) If the Company at any time proposes to register any of its
securities under the Act for sale to the public, whether for its own account or
for the account of other security holders or both, except with respect to
registration statements on Forms ▇-▇, ▇-▇ or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise subject to an effective registration
statement, the Company will give the Purchaser written notice ("Notice of
Registration") to cause such Registrable Securities to be included with the
securities to be covered by the registration statement proposed to be filed by
the Company. In the event that any registration pursuant to this Section 9.1(b)
shall be, in whole or in part, an underwritten public offering of Common Stock
of the Company, the number of shares of Registrable Securities to be included in
such an underwriting may be reduced by the managing underwriter if and to the
extent that the Company and the underwriter shall reasonably be of the opinion
that such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that the Company shall notify
the Purchaser in writing of any such reduction. Notwithstanding the forgoing
provisions, or Section 9.1(a) hereof, the Company may withdraw or delay or
suffer a delay of any registration statement referred to in Section 9.1(a) or
(b) without thereby incurring any liability to the Purchaser, so long as the
registration provisions are otherwise complied with by the Company.
(c) If, a Request for Registration is received by the Company
pursuant to Section 9.1(a) and the Company determines to proceed with the
preparation and filing of a registration statement under the Securities Act,
such Request for Registration shall be deemed to have been given pursuant to
Section 9.1(b) rather than Section 9.1(a), and the rights of the Purchaser
pursuant to such Request for Registration shall be governed by Section 9.1(b).
(d) The Company shall use its reasonable commercial efforts to
file a Form S-3 registration statement (or such other form that it is eligible
to use) in order to register the Registrable Securities for resale and
distribution under the Securities Act with the SEC within 45 days of the Closing
Date (the "Filing Date"), and use its reasonable commercial efforts to cause
such registration statement to be declared effective within 120 days of the
Filing Date (the "Effective Date"). The Company will register not less than a
number of shares of Common Stock in the aforedescribed registration statement
that is equal to the Warrant Shares and 200% of the Note Shares issuable at the
Conversion and Purchase Prices set forth in the Note and Warrant, respectively,
that would be in effect on the Closing Date or the date of filing of such
registration statement (employing the price which would result in the greater
number of Shares), assuming the conversion of 100% of the principal amount of
the Note which is then outstanding, and at least one share of Common Stock for
each common share issuable upon exercise of the Warrant. Such registration
statement will be promptly amended or additional registration statements will be
promptly filed by the Company as necessary to register additional Company Shares
to allow the public resale of all Common Stock included in and issuable by
virtue of the Registrable Securities. Unless required by agreements with the
Company's shareholders entered into prior to the date hereof, and set forth on
Schedule 9.1 hereto, no securities of the Company other than the Registrable
Securities will be included in the registration statement described in this
Section 9.1(d).
-19-
9.2 Registration Procedures. If and whenever the Company is required
by the provisions hereof to effect the registration of the Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), and promptly provide to
the Purchaser copies of all filings and SEC letters of comment;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of one year, and comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Purchaser's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Purchaser, and to each underwriter if any,
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as the Purchaser reasonably may
request to facilitate the public sale or disposition of the securities covered
by such registration statement;
(d) use its best efforts to register or qualify the Purchaser's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Purchaser and in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) immediately notify the Purchaser and each underwriter under
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
of which the Company has knowledge as a result of which the prospectus contained
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(g) make available for inspection by the Purchaser, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by the Purchaser
or underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
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available, non-confidential information reasonably requested by the seller,
underwriter, attorney, accountant or agent in connection with such registration
statement; and
(h) Black-out Period. Without limiting the provisions of Section
9.4, each holder of Registrable Securities agrees that, if so requested by the
Company, not to effect any offer or sale of shares pursuant to the Registration
Statement, or otherwise, or engage in any hedging or other transaction intended
to reduce or transfer the risk of ownership for any period deemed necessary (x)
by the Company or any underwriter in connection with the offering of Common
Stock pursuant to any demand registration rights granted to any other person or
to the offering of Common Stock by the Company for its own account or (y) by the
Company in connection with any proposal or plan by the Company to engage in any
material financing or material acquisition or disposition by the Company or any
subsidiary thereof of the capital stock or substantially all the assets of any
other person (other than in the ordinary course of business), any tender offer
or any merger, consolidation, corporate reorganization, strategic partnership
arrangement or restructuring or other similar transaction (each, a "Business
Combination") material to the Company and its subsidiaries taken as a whole. Any
period within the Effective Period during which the Company fails to keep the
Registration Statement effective and usable for resales of the Shares, or
requires pursuant to this subsection that the Holders not effect sales of shares
pursuant to the Registration Statement, is hereafter referred to as a
"Suspension Period." A Suspension Period shall commence on the date set forth in
a written notice by the Company to the Holders that the Registration Statement
is no longer usable for resales of shares or, in the case of a suspension
pursuant to this subsection the date specified in the notice delivered by the
Company pursuant to this subsection, and shall end on the date when each holder
of shares covered by the Registration Statement either receives the copies of
the supplemented or amended prospectus contemplated by herein or is advised in
writing by the Company that use of the prospectus or sales may be resumed.
9.3 Provision of Documents.
(a) In connection with each registration hereunder, the
Purchaser will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. In connection with each registration
pursuant to Section 9 covering an underwritten public offering, the Company and
the Purchaser agree to enter into a written agreement with the managing
underwriter in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
9.4 Non-Registration Events. The Company and the Purchaser agree that
the Purchaser will suffer damages if (i) the registration statement on Form S-3
or such other form as described in Section 9.1(d) is not filed on or before the
Filing Date or not declared effective on or before the sooner of the Effective
Date, or within five days of receipt by the Company of a communication from the
SEC that the registration statement described in Section 9.1(d) will not be
reviewed, or (ii) any registration statement described in Section 9.1(d) is
filed and declared effective but shall thereafter cease to be effective (without
being succeeded immediately by an additional registration statement filed and
declared effective) for a period of time which shall
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exceed 30 days in the aggregate per year but not more than 20 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) (each such event referred to in
this Section 9.4 is referred to herein as a "Non-Registration Event"), then, for
so long as such Non-Registration Event shall continue, the Company shall pay in
cash as Liquidated Damages to each holder of any Registrable Securities an
amount equal to one percent (1%) per month or part thereof during the pendency
of such Non-Registration Event of the principal of the Note issued in connection
with the Offering, whether or not converted, then owned of record by such holder
or issuable as of or subsequent to the occurrence of such Non-Registration
Event. Payments to be made pursuant to this Section shall be due and payable
immediately upon demand in immediately available funds. In the event a Mandatory
Redemption Payment is demanded from the Company by the holder pursuant to
Section 8.2 of this Agreement, then the Liquidated Damages described in this
Section 9.4 shall no longer accrue on the portion of the purchase price
underlying the Mandatory Redemption Payment, from and after the date the holder
receives the Mandatory Redemption Payment. It shall be deemed a Non-Registration
Event to the extent that all the Common Stock included in the Registrable
Securities and underlying the Securities is not included in an effective
registration statement as of and after the Effective Date at the conversion
prices in effect from and after the Effective Date.
9.5 Expenses. All expenses incurred by the Company in complying with
Section 9, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the NASD, transfer taxes, fees of transfer agents and registrars,
fees of, and disbursements incurred by, one counsel for the Purchaser, and costs
of insurance are called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any special counsel to the Purchaser beyond those
included in Registration Expenses, are called "Selling Expenses."
The Company will pay all Registration Expenses. All Selling
Expenses in connection with each registration statement under Section 9 shall be
borne by the Purchaser.
9.6 Indemnification.
(a) In the event of a registration of any Registrable Securities
under the Securities Act pursuant to Section 9, the Company will indemnify and
hold harmless the Purchaser, and its officers, directors and each other person,
if any, who controls the Purchaser within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Purchaser, 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 any registration statement
under which such Registrable Securities were registered under the Securities Act
pursuant to Section 9, 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
-22-
Purchaser, 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 any the Purchaser or any such person in writing
specifically for use in any such document and provided further, that the Company
shall not be liable in any such case to the extent that any such losses arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission in the final prospectus, if such untrue statement
or alleged untrue statement or omission or alleged omission is corrected in an
amendment or supplement to the final prospectus and such Holder thereafter fails
to deliver such final prospectus as so amended or supplemented prior to or
concurrently with the sale of the Registrable Securities covered by the
registration statement to the person asserting such losses after the Company had
furnished such Holder with a sufficient number of copies thereof in a manner and
at a time sufficient to permit delivery of the same by such Holder.
(b) In the event of a registration of the Registrable Securities
under the Securities Act pursuant to Section 9, the Purchaser 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 Section 9, 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 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 the
Purchaser 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 the Purchaser
specifically for use in any such document.
(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 9.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 9.6(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
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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 9.6(c)
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison with counsel so selected, 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.
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 Purchaser, or any controlling person of the Purchaser, makes a claim for
indemnification pursuant to this Section 9.6 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 9.6 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the
Purchaser or controlling person of the Purchaser in circumstances for which
indemnification is provided under this Section 9.6; then, and in each such case,
the Company and the Purchaser 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 Purchaser 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 Purchaser will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
9.7 Termination. The rights and obligations under this Section 9
(other than under Sections 9.6 and 9.7) shall automatically terminate upon the
earlier to occur of (a) the sale of all Registrable Securities by the Purchaser
and (b) the date on which the Registrable Securities shall have been outstanding
for five years. No holder shall have the right to request to include Registrable
Securities in any registration statement if (a) the Registrable Securities are
eligible for sale pursuant to Rule 144(k), or (b) the Registrable Securities are
eligible for sale pursuant to Rule 144 and the Purchaser owns Registrable
Securities in the amount of less than 1% of the Company's outstanding Common
Stock.
10. OFFERING RESTRICTIONS. Except as previously disclosed in the SEC
Reports or stock or stock options granted to employees or directors of the
Company; or equity or debt issued in connection with an acquisition of a
business or assets by the Company; or the issuance by the Company of stock in
connection with the establishment of a joint venture partnership or
-24-
licensing arrangement (these exceptions hereinafter referred to as the "Excepted
Issuances"), the Company will not issue any securities with a variable/floating
conversion feature which are or could be (by conversion or registration)
free-trading securities prior to the full repayment or conversion of the Note
(the "Exclusion Period"), except in the case where the proceeds from such
financing are used to pay in full the Company's obligations under the Note. This
restriction shall not prohibit the Company from issuing any equity, convertible
debt or other securities prior to the expiration of the Exclusion Period,
provided that such equity, convertible debt or other securities are restricted
securities when issued and remain restricted until the expiration of the
Exclusion Period. The provisions of this Section 10 shall automatically
terminate upon the full repayment or conversion of the Note.
11. SECURITY INTEREST. As a condition of Closing, the Company will grant
to the Purchaser a security interest in certain assets of the Company pursuant
to a Security Agreement. The Company will also execute all such documents
reasonably necessary to memorialize and further protect the security interest
described above. To the extent required by any bank or lender providing a loan
to the Company (each a "Bank" and together the "Banks"), the Purchaser agrees to
enter into a subordination agreement with respect to the security interest
herein as may reasonably be requested by any such Bank or Banks
12. MISCELLANEOUS.
12.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, 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 New York or in the federal courts located in
the state of New York. 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. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. 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 with 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 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby. 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 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of at least 100,000 shares of Common Stock or
$100,000 principal amount of the Securities from time to time.
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12.4 Entire Agreement. 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.
12.5 Severability. 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.
12.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the holders
of the Securities under the Agreement may be waived only with the written
consent of such holders of Securities. The rights of the holder of a Note may be
waived only with the written consent of the holder of such Note.
12.7 Delays or Omissions. 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, the Note or the
Related Agreements, by law or otherwise afforded to any party, shall be
cumulative and not alternative.
12.8 Notices. 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 confirmed telex or 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 and to the Purchaser at
the address set forth on the signature page hereto for such Purchaser, with a
copy in the case of the Purchaser to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, or at
such other address as the Company or the Purchaser may designate by ten days
advance written notice to the other parties hereto.
12.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such
-26-
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
12.10 Titles and Subtitles. 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.
12.11 Facsimile Signatures; Counterparts. 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.
12.12 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto 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, except as specified herein with respect to
the Purchaser. Each party hereto 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 12.12 being untrue.
12.13 Construction. 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.
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IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
BRIAZZ, INC. LAURUS MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ Grin
----------------------- -----------------------------------
Name: Name:
Title: Address: c/o Ironshore Corporate
Address: Services Ltd.
▇▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ P.O. Box 1234 G.T.,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
[Securities Purchase Agreement Signature Page]
LIST OF EXHIBITS
Form of Offering Convertible Note Exhibit A
Form of Warrant Exhibit B
Form of Opinion Exhibit C
EXHIBIT A
FORM OF CONVERTIBLE NOTE
A-1
EXHIBIT B
FORM OF WARRANT
B-1
EXHIBIT C
FORM OF OPINION
1. The Company is a corporation validly existing and in good standing
under the laws of the State of Washington and has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement and Related
Agreements. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization of the Agreement
and Related Agreements, and the performance of all obligations of the Company
thereunder at the Closing, and (ii) the authorization, sale, issuance and
delivery of the Securities pursuant to the Agreement and the Related Agreements
has been taken. The Note Shares and the Warrant Shares, when issued pursuant to
and in accordance with the terms of the Agreement and upon delivery, shall be
validly issued and outstanding, fully paid and non assessable.
3. The execution, delivery and performance of the Agreement, the Note or
the Related Agreements by the Company and the consummation of the transactions
contemplated by any thereof, will not, with or without the giving of notice or
the passage of time or both:
(a) Violate the provisions of the Charter or bylaws of the Company;
or
(b) To the best of such counsel's knowledge, violate any judgment,
decree, order or award of any court binding upon the Company.
4. The Agreement and Related Agreements constitute and the Note, upon
their issuance will constitute, valid and legally binding obligations of the
Company, and are enforceable against the Company in accordance with their
respective terms.
5. The sale of the Note and the subsequent conversion of the Note into
Note Shares are not and will not be subject to any preemptive rights or, to such
counsel's knowledge, rights of first refusal that have not been properly waived
or complied with. The sale of the Warrant and the subsequent exercise of the
Warrant for Warrant Shares are not and will not be subject to any preemptive
rights or, to such counsel's knowledge, rights of first refusal that have not
been properly waived or complied with.
6. Assuming the accuracy of the representations and warranties of the
Purchasers contained in the Agreement, the offer, sale and issuance of the
Securities will be exempt from the registration requirements of the Securities
Act, and will have been registered or qualified (or are exempt from registration
and qualification) under the registration, permit or qualification requirements
of all applicable state securities laws. To the best of such counsel's
knowledge, 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
C-1
buy and 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.
7. There is no action, suit, proceeding or investigation pending or, to
the best of such counsel's knowledge, currently threatened against the Company
that questions the validity of the Agreement or the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated thereby, or which might result, either individually or
in the aggregate, in any material adverse change in the assets, condition,
affairs or prospects of the Company, financially or otherwise, or any change in
the current equity ownership of the Company. To the best of such counsel's
knowledge, 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; nor is there any action, suit, proceeding or investigation by
the Company currently pending or which the Company intends to initiate.
C-2
DISCLOSURE SCHEDULE
Schedule 4.3(b)
Capitalization; Voting Rights
The Company has outstanding warrants to purchase the Company's common stock. The
warrants are described in Note 3to the Company's financial statements for the
quarter ended March 31, 2002.
Schedule 4.8
Changes
There have been no changes as described in Section 4.8, except those changes
that have been reported in the Company's public filings with the SEC since
December 31, 2001.
Schedule 4.15
Registration Rights and Voting Rights
The Company has granted registration rights pursuant to the Registration Rights
Agreement among the Company and certain of its shareholders dated August 15,
1997. This agreement was filed as exhibit 10.8 to the Company's Registration
Statement on Form S-1.
Schedule 4.23
Listing
The Company is not in compliance with the public float requirement for the
Nasdaq National Market.